Apollo Commercial Real Estate Finance, Inc 8-K, filed Jul 20, 2021
Apollo Commercial Real Estate Finance, Inc. (ARI)
About this 8-K
Apollo Commercial Real Estate Finance, Inc filed this 8-K on July 20, 2021, reporting on events of July 14, 2021.
Items reported
- Item 3.02: Unregistered sale of equity
- Item 3.03: Change to shareholders' rights
- Item 5.03: Charter or bylaw amendment, or fiscal year change
- Item 9.01: Financial statements and exhibits
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 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 (see General Instruction A.2. below):
| 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 Symbol(s) |
Name of each exchange on which registered | ||
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 3.02. | Unregistered Sales of Equity Securities. |
On July 14, 2021, Apollo Commercial Real Estate Finance, Inc. (the “Company”) entered into an exchange agreement (the “Exchange Agreement”) with QH RE Asset Company LLC, a limited liability company established in the Qatar Financial Centre (“QFC”), and DIC Holding II LLC, a limited liability company established in QFC, each wholly owned by a governmental authority of the state of Qatar (“Existing Holders”), pursuant to which, the Company issued 6,770,393 shares of the Company’s 7.25% Series B-1 Cumulative Redeemable Perpetual Preferred Stock, par value $0.01 per share (the “Series B-1 Preferred Stock”) with a liquidation preference of $25.00 per share, in exchange for 6,770,393 shares of the Company’s 8.00% Fixed-to-Floating Series B Cumulative Redeemable Perpetual Preferred Stock, par value $0.01 per share (the “Series B Preferred Stock”) with a liquidation preference of $25.00 per share (the “Exchange”). Following completion of the Exchange on July 15, 2021, the Company had 6,770,393 shares of its Series B-1 Preferred Stock and no shares of its Series B Preferred Stock outstanding.
The issuance of the shares of the Series B-1 Preferred Stock to the Existing Holders in exchange for the shares of the Series B Preferred Stock was exempt from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), pursuant to Section 3(a)(9), as the Series B-1 Preferred Stock was exchanged by the Company with the Existing Holders in a transaction where no commission or other remuneration was paid or given directly or indirectly for soliciting such exchange.
The Existing Holders are entitled to the benefits of a registration rights agreement with respect to the Series B-1 Preferred Stock (the “Registration Rights Agreement”), by and between the Company, on the one hand, and the Existing Holders, on the other hand, dated July 14, 2021, which will require the Company to, among other things, use commercially reasonable efforts to file with the Securities and Exchange Commission on or before the date that is 180 days after the date of the Exchange Agreement, a resale shelf registration statement providing for the resale of the Series B-1 Preferred Stock.
The preceding description is qualified in its entirety by reference to the Registration Rights Agreement, a copy of which is attached as Exhibit 10.1 to this Current Report on Form 8-K and is incorporated herein by reference.
| Item 3.03 | Material Modifications to Rights of Security Holders. |
On July 14, 2021, the Company filed with the State Department of Assessments and Taxation of Maryland (the “SDAT”) Articles Supplementary (the “Articles Supplementary”) to its charter, classifying and designating 6,770,393 shares of its authorized capital stock as shares of the Series B-1 Preferred Stock. A description of the material terms of the Series B-1 Preferred Stock, as contained within the Articles Supplementary, is set forth below. Capitalized terms not defined herein shall have the meaning set forth in the Articles Supplementary.
| Securities | 6,770,393 shares of 7.25% Series B-1 Cumulative Redeemable Perpetual Preferred Stock, $0.01 par value per share. So long as any shares of Series B-1 Preferred Stock are outstanding, the approval of two-thirds of the votes entitled to be cast by the holders of outstanding shares of Series B-1 Preferred Stock is required to issue additional shares of Series B-1 Preferred Stock. | |
| Dividends | Holders of the Series B-1 Preferred Stock will be entitled to receive cumulative cash dividends at a rate of 7.25% per annum of the $25.00 liquidation preference per share of Series B-1 Preferred Stock (equivalent to an annual amount of $1.8125 per share of Series B-1 Preferred Stock). Dividends on the Series B-1 Preferred Stock will be payable quarterly in arrears on or about the 15th day of January, April, July and October of each year. The first dividend on the Series B-1 Preferred Stock is payable on October 15, 2021. | |
| No Maturity | The Series B-1 Preferred Stock has no stated maturity date and, except as set forth below under “Change of Control Redemption,” the Company is not required to repurchase or redeem the Series B-1 Preferred Stock. Accordingly, shares of Series B-1 Preferred Stock will remain outstanding indefinitely, unless the Company decides to redeem them or, under certain circumstances where a “Change of Control” has occurred, as described under “Change of Control” below. The Company is not required to set aside funds to redeem the Series B-1 Preferred Stock. | |
| Ranking |
The Series B-1 Preferred Stock will, with respect to rights to receive dividends and to participate in distributions or payments upon liquidation, dissolution or winding up of the Corporation, rank (a) senior to the Company’s common stock and any other class or series of junior stock the Company may authorize or issue in the future, if any, (b) on parity with any class or series of stock the Company may issue in the future that, pursuant to the terms thereof, ranks on parity with the Series B-1 Preferred Stock as to the payment of dividends and amounts upon liquidation, dissolution or winding up of the Company and (c) junior to any class or series of stock the Company may authorize or issue in the future that, pursuant to the terms thereof, rank senior to the Series B-1 Preferred Stock as to the payment of dividends or amounts upon liquidation, dissolution or winding up of the Company. | |
| Optional Redemption |
Except in instances relating to preservation of the Company’s qualification as a real estate investment trust for U.S. federal income tax purposes, the Company may not voluntarily redeem the Series B-1 Preferred Stock prior to July 15, 2026. On and after July 15, 2026, the Company may, at its option, redeem the Series B-1 Preferred Stock, in whole, at any time, or in part, from time to time, for cash at a redemption price of $25.00 per share, plus any accrued and unpaid dividends (whether or not declared) to, but not including, the date of redemption (unless the applicable redemption date is after the record date fixed for a Series B-1 Preferred Stock dividend and prior to the corresponding dividend payment date, in which case no additional amount for such accrued and unpaid dividend will be included in the redemption price). Any partial redemption will be selected pro rata or by any other equitable method the Company may choose acting reasonably.
To the extent that the Company has exercised its optional redemption right relating to the Series B-1 Preferred Stock before the applicable conversion date, holders of Series B-1 Preferred Stock will not be permitted to exercise the conversion right described below in respect of any shares called for redemption. | |
| Change of Control Redemption |
Upon the occurrence of a Change of Control (as defined below), the Company will be obligated to redeem the Series B-1 Preferred Stock in whole if the holders of a majority of the shares of Series B-1 Preferred Stock outstanding on the date of the Change of Control elect to cause the Company to redeem the outstanding shares of Series B-1 Preferred Stock, subject to any shares that may be converted as described in “Conversion Rights” below, as soon as practicable and in any event within 120 days after the first date on which such Change of Control has occurred for cash at a redemption price of $25.00 per share, plus any accrued and unpaid dividends (whether or not declared) to, but not including, the redemption date (unless such redemption date is after the record date fixed for a Series B-1 Preferred Stock dividend and prior to the corresponding dividend payment date, in which case no additional amount for such accrued and unpaid dividend will be included in the redemption price).
A “Change of Control” is when the following have occurred:
(a) (1) the acquisition by any person, including any syndicate or group deemed to be a “person” under | |
| stock entitling that person to exercise more than 50% of the total voting power of all shares of the Company’s capital stock entitled to vote generally in elections of directors (except that such person will be deemed to have beneficial ownership of all securities 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
(2) following the closing of any transaction referred to in (a)(1) above, neither the Company nor the acquiring or surviving entity has a class of common securities (or American Depository Receipts representing such common securities) listed on the New York Stock Exchange (the “NYSE”), the NYSE MKT (the “NYSE MKT” or the NASDAQ Stock Market (“NASDAQ”), or listed or quoted on an exchange or quotation system that is a successor to the NYSE, the NYSE MKT or the NASDAQ (an “Ownership Change of Control”); or
(b) if ACREFI Management, LLC or an affiliate of Apollo Global Management, LLC is no longer the external manager of the Company. | ||
| Conversion Rights |
Upon the occurrence of an Ownership Change of Control, each holder of Series B-1 Preferred Stock will have the right to convert some or all of such holder’s Series B-1 Preferred Stock into a number of shares of the Company’s common stock, per share of Series B-1 Preferred Stock, equal to the quotient obtained by dividing (i) the sum of the $25.00 liquidation preference plus the amount of any accrued and unpaid dividends (whether or not declared) to, but not including, the date fixed for conversion (unless the conversion date is after the record date fixed for a Series B-1 Preferred Stock dividend and prior to the corresponding Series B-1 Preferred Stock dividend payment date, in which case no additional amount for such accrued and unpaid dividend will be included in this sum) by (ii) the Common Stock Price (as defined below); provided, however, that in no event will the total number of shares of the Company’s common stock to be issued upon conversion (when taken together with any common stock purchased by the Purchaser (as defined in that certain Purchase Agreement by and between the Company and the Purchaser, dated September 18, 2015)) exceed the number of shares that would be permitted to be issued to the Purchaser upon conversion of the Series B-1 Preferred Stock in the absence of a stockholder vote taken in advance of the issuance of the Series B-1 Preferred Stock under Item 312.00 of the Listed Company Manual of the NYSE, as reasonably determined by the Company’s Board of Directors or a committee thereof (such limitation is referred to the “NYSE Conversion Limitation”).
The “Common Stock Price” will be:
(i) if the consideration to be received in connection with the transaction that resulted in the Ownership Change of Control by holders of the Common Stock is solely cash, the amount of cash consideration per share of Common Stock;
(ii) if the consideration to be received in the Ownership Change of Control by holders of Common Stock is other than solely cash, including cash, other securities or other property or assets (or any combination thereof), a holder of Series B-1 Preferred Stock shall be entitled to receive upon conversion of such shares of Series B-1 Preferred Stock the average of the closing prices per share of Common Stock on the ten consecutive trading days immediately preceding, but not including, the effective date of the Ownership Change of Control; and | |
| (iii) if there is not a readily determinable closing price for the Common Stock or other consideration, the fair market value of the common stock or such other consideration, as determined in good faith by the Board of Directors or a committee thereof (the “Alternative Conversion Consideration,” and the Common Stock Conversion Consideration or the Alternative Conversion Consideration, as may be applicable to an Ownership Change of Control, shall be referred to herein as the “Conversion Consideration”).
If, upon the occurrence of an Ownership Change of Control, a holder of Series B-1 Preferred Stock exercises such holder’s right to convert some or all of such holder’s Series B-1 Preferred Stock into the Company’s common stock, but the NYSE Conversion Limitation operates to limit the number of shares of the Company’s common stock that the Company may issue to any such holder upon such conversion, the Series B-1 Preferred Stock that may be converted in accordance with the NYSE Conversion Limitation shall be so converted into shares of the Company’s common stock in accordance with Articles Supplementary for the Series B-1 Preferred Stock, while the balance of such shares of Series B-1 Preferred Stock shall be redeemed for cash at a redemption price equal to the price that would be paid if such remaining shares of Series B-1 Preferred Stock were redeemed as set forth under “Change of Control Redemption.”
If the Company has provided an optional redemption notice with respect to some or all of the Series B-1 Preferred Stock, holders of any Series B-1 Preferred Stock that the Company has called for redemption pursuant to its optional redemption right will not be permitted to exercise their conversion right in respect of any of their shares of Series B-1 Preferred Stock that have been called for redemption, and any share of Series B-1 Preferred Stock subsequently called for redemption that has been tendered for conversion will be redeemed on the applicable date of redemption instead of converted on the conversion date. | ||
| Liquidation Preference |
If the Company liquidates, dissolves or winds up, holders of the Series B-1 Preferred Stock will have the right to receive $25.00 per share, plus an amount per share equal to accrued and unpaid dividends (whether or not earned or declared) to, but not including, the date of payment, before any payments are made to holders of the Company’s common stock or other junior securities. | |
| Voting Rights |
Holders of the Series B-1 Preferred Stock will generally have no voting rights. However, if dividends on the Series B-1 Preferred Stock are in arrears for six quarterly dividend periods (whether or not consecutive), the holders of the Series B-1 Preferred Stock (and the holders of any other class or series of parity preferred stock upon which like voting rights have been conferred and are exercisable (voting together as a single class)) will have the right to elect two directors until the Company pays (or declares and sets aside for payment) all dividends that are then in arrears. In addition, so long as any shares of Series B-1 Preferred Stock are outstanding, the affirmative vote of at least two-thirds of the votes entitled to be cast by holders of outstanding shares of Series B-1 Preferred Stock (and the holders of any other class or series of parity preferred stock upon which like voting rights have been conferred and are exercisable (voting together as a single class)) is required for the Company to authorize, create or increase the authorized number of any class or series of senior equity securities or, subject to certain exceptions, to amend its charter (including the Articles Supplementary) in a manner that materially and adversely affects the rights of the Series B-1 Preferred Stock. | |
| So long as any shares of Series B-1 Preferred Stock are outstanding, the approval of two-thirds of the votes entitled to be cast by the holders of outstanding shares of Series B-1 Preferred Stock is required to issue additional shares of Series B-1 Preferred Stock.
So long as (i) any shares of Series B-1 Preferred Stock remain outstanding and (ii) at least two-thirds of the outstanding shares of Series B-1 Preferred Stock are held by the Existing Holders or their affiliates, the holders of shares of Series B-1 Preferred Stock will have the exclusive right to vote on any amendment to the charter of the Company (the “Charter”) on which holders of Series B-1 Preferred Stock are entitled to vote pursuant to Section 6(d) of the Articles Supplementary and that would alter only the contract rights, as expressly set forth in the Charter, of the Series B-1 Preferred Stock, and the holders of any other class(es) or series of stock of the Company will not be entitled to vote on such an amendment. |
The preceding description is qualified in its entirety by reference to the Articles Supplementary, a copy of which is attached as Exhibit 3.1 to this Current Report on Form 8-K and is incorporated herein by reference.
| Item 5.03 | Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year. |
On July 14, 2021, the Company filed Articles Supplementary with the SDAT designating the preferences, conversion and other rights, voting powers, restrictions, limitations on dividends and other distributions, qualifications and terms and conditions of redemption of the Series B-1 Preferred Stock. The Articles Supplementary were effective upon filing. The information about the Articles Supplementary under Item 3.03 of this Current Report on Form 8-K, including the summary description of the preferences, conversion and other rights, voting powers, restrictions, limitations on dividends and other distributions, qualifications and terms and conditions of redemption of the Series B-1 Preferred Stock, is incorporated herein by reference. A copy of the Articles Supplementary is filed as Exhibit 3.1 to this Current Report on Form 8-K and is incorporated herein by reference.
| Item 9.01. | Financial Statements and Exhibits. |
(d) Exhibits.
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 thereunto duly authorized.
| Apollo Commercial Real Estate Finance, Inc. | ||||
| By: | /s/ Stuart A. Rothstein | |||
| Name: | Stuart A. Rothstein | |||
| Title: | President and Chief Executive Officer | |||
Date: July 20, 2021
Exhibit 3.1
APOLLO COMMERCIAL REAL ESTATE FINANCE, INC.
ARTICLES SUPPLEMENTARY
7.25% SERIES B-1 CUMULATIVE REDEEMABLE PERPETUAL PREFERRED STOCK
Apollo Commercial Real Estate Finance, Inc., a Maryland corporation (the “Corporation”), hereby certifies to the State Department of Assessments and Taxation of Maryland (the “SDAT”) that:
FIRST: Under the authority vested in the Board of Directors of the Corporation (the “Board of Directors”) pursuant to Section 6.3 of Article VI of the charter of the Corporation (the “Charter”), the Board of Directors and a duly-authorized committee thereof (the “Pricing Committee”) have classified and designated 6,770,393 of the authorized but unissued shares of preferred stock, $0.01 par value per share, of the Corporation as shares of a separate class of preferred stock, designated as 7.25% Series B-1 Cumulative Redeemable Perpetual Preferred Stock, with the preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends and other distributions, qualifications, and terms and conditions of redemption set forth herein, which upon any restatement of the Charter, shall become a part of Article VI of the Charter, with any necessary or appropriate changes to the enumeration of sections or subsections hereof. Capitalized terms used and not otherwise defined herein have the meanings set forth in the Charter.
7.25% Series B-1 Cumulative Redeemable Perpetual Preferred Stock
1. Designation and Number. A class of preferred stock, designated as the “7.25% Series B-1 Cumulative Redeemable Perpetual Preferred Stock” (the “Series B-1 Preferred Stock”), is hereby established. The par value of the Series B-1 Preferred Stock is $0.01 per share. The number of shares of Series B-1 Preferred Stock shall be 6,770,393.
2. Ranking. The Series B-1 Preferred Stock will, with respect to rights to receive dividends and to participate in distributions or payments upon liquidation, dissolution or winding up of the Corporation, rank (a) senior to the common stock, $0.01 par value per share, of the Corporation (the “Common Stock”) and any other class or series of stock the Corporation may now or hereafter authorize or issue, the terms of which provide that such stock ranks, as to the payment of dividends or amounts upon liquidation, dissolution or winding up of the Corporation, junior to the Series B-1 Preferred Stock (together with the Common Stock, “Junior Stock”), (b) on parity with any class or series of stock the Corporation may authorize or issue in the future that, pursuant to the terms thereof, ranks on parity with the Series B-1 Preferred Stock as to the payment of dividends and amounts upon liquidation, dissolution or winding up of the Corporation (“Parity Stock”) and (c) subject to compliance with Section 6(d) hereof, junior to any class or series of stock the Corporation may authorize or issue in the future that, pursuant to the terms thereof, rank senior to the Series B-1 Preferred Stock as to the payment of dividends or amounts upon liquidation, dissolution or winding up of the Corporation (“Senior Stock”).
3. Dividends.
(a) Holders of the then outstanding shares of Series B-1 Preferred Stock shall be entitled to receive, when, as and if authorized by the Board of Directors and declared by the Corporation, out of funds legally available for payment of dividends, cumulative cash dividends, at a rate of 7.25% per annum of the $25.00 Liquidation Preference (as defined below) per share of Series B-1 Preferred Stock (equivalent to an annual amount of $1.8125 per share of Series B-1 Preferred Stock).
(b) Dividends on each outstanding share of Series B-1 Preferred Stock shall be cumulative from and including July 15, 2021 (the “Series B-1 Original Issue Date”) and shall be payable (i) for the period from the Series B-1 Original Issue Date to, but not including, October 15, 2021, on October 15, 2021, and (ii) for each subsequent quarterly distribution period commencing on each October 15, January 15, April 15 and July 15 and ending on and including the day before the first day of the next succeeding distribution period, quarterly in equal amounts in arrears on the 15th day of each January, April, July and October, commencing on January 15, 2022 (each such day being hereinafter called a “Series B-1 Dividend Payment Date”) at the then applicable annual rate; provided, however, that if any Series B-1 Dividend Payment Date falls on any day other than a Business Day (as hereinafter defined), the
dividend that would otherwise have been payable on such Series B-1 Dividend Payment Date may be paid on the next succeeding Business Day with the same force and effect as if paid on such Series B-1 Dividend Payment Date, and no interest or other sums shall accrue on the amount so payable from such Series B-1 Dividend Payment Date to such next succeeding Business Day. Each dividend is payable to holders of record as they appear on the stock transfer records of the Corporation at the close of business on the record date, not exceeding 30 days preceding the applicable Series B-1 Dividend Payment Date, as shall be fixed by the Board of Directors. Notwithstanding any provision to the contrary contained herein, (i) the dividend payable on each share of Series B-1 Preferred Stock outstanding on any Series B-1 Dividend Record Date shall be equal to the dividend paid with respect to each other share of Series B-1 Preferred Stock that is outstanding on such Series B-1 Dividend Record Date and (ii) dividends shall accumulate from the Series B-1 Original Issue Date or, if later, the most recent Series B-1 Dividend Payment Date to which full cumulative dividends have been paid, whether or not in any such dividend period or periods there shall be funds legally available for the payment of such dividends, whether the Corporation has earnings or whether such dividends are authorized. No interest, or sum of money in lieu of interest, shall be payable in respect of any dividend payment or payments on the Series B-1 Preferred Stock that may be in arrears. Holders of the Series B-1 Preferred Stock shall not be entitled to any dividends, whether payable in cash, property or stock, in excess of full cumulative dividends, as herein provided, on the Series B-1 Preferred Stock. Dividends payable on the Series B-1 Preferred Stock for any period greater or less than a full dividend period will be computed on the basis of a 360-day year consisting of twelve 30-day months. Dividends payable on the Series B-1 Preferred Stock for each full dividend period will be computed by dividing the applicable annual dividend rate by four. After full cumulative distributions on the Series B-1 Preferred Stock have been paid, the holders of Series B-1 Preferred Stock will not be entitled to any further distributions with respect to that dividend period.
(c) No dividends on the Series B-1 Preferred Stock shall be authorized by the Board of Directors or declared, paid or set apart for payment 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, payment or setting apart for payment or provides that such authorization, declaration, payment or setting apart for payment would constitute a breach thereof, or a default thereunder, or if such authorization declaration, payment or setting apart for payment shall be restricted or prohibited by law, except distributions required to preserve the Corporation’s qualification as a REIT.
(d) So long as any shares of Series B-1 Preferred Stock are outstanding, no dividends or other distributions, except as described in the immediately following sentence, shall be declared and paid or set apart for payment on any class or series of Parity Stock for any period unless full cumulative dividends have been declared and paid or are contemporaneously declared and paid or declared and a sum sufficient for the payment thereof set apart for such payment on the Series B-1 Preferred Stock for all prior full dividend periods provided, however, that the foregoing shall not prevent the purchase or other acquisition by the Corporation of shares of its stock pursuant to (A) a purchase or exchange offer made on the same terms to holders of all outstanding shares of Series B-1 Preferred Stock and all classes and series of Parity Stock or (B) Article VII of the Charter or Section 8, below. When dividends are not paid in full or a sum sufficient for such payment is not set apart, as aforesaid, all dividends declared upon the Series B-1 Preferred Stock and all dividends declared upon any other series or class or classes of Parity Stock shall be declared and paid ratably in proportion to the respective amounts of dividends accumulated and unpaid on the Series B-1 Preferred Stock and such Parity Stock.
(e) So long as any shares of Series B-1 Preferred Stock are outstanding, no dividends or other distributions (other than dividends or distributions paid solely in Junior Stock, or in options, warrants or rights to subscribe for or purchase Junior Stock, or distributions required to preserve the Corporation’s qualification as a REIT) shall be paid or set apart for payment or made upon any Junior Stock, nor shall any Junior Stock be redeemed, purchased or otherwise acquired (other than a redemption, purchase or other acquisition of shares of Common Stock made for purposes of and in compliance with requirements of an employee incentive or benefit plan of the Corporation or any subsidiary, a conversion into or exchange for Junior Stock or options, warrants or rights to subscribe for or purchase Junior Stock or pursuant to the terms of Article VII of the Charter or Section 8 hereof), for any consideration (or any monies to be paid to or made available for a sinking fund for the redemption of any such shares) by the Corporation, directly or indirectly, unless in each case full cumulative dividends on all outstanding shares of Series B-1 Preferred Stock shall have been paid or set apart for payment for all past full dividend periods.
- 2 -
(f) Any dividend payment made on the Series B-1 Preferred Stock shall first be credited against the earliest accumulated but unpaid dividend due with respect to such shares which remains payable.
(g) Without prejudice to any rights of the holders of the Series B-1 Preferred Stock hereunder, in determining whether a distribution (other than upon voluntary or involuntary liquidation, dissolution or winding up of the Corporation) by dividend, redemption or otherwise 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 holders of the Series B-1 Preferred Stock whose preferential rights upon dissolution are superior to those receiving the distribution.
(h) Except as provided herein, the Series B-1 Preferred Stock shall not be entitled to participate in the earnings or assets of the Corporation.
(i) As used herein, the term “Business Day” shall mean any day, other than a Saturday or Sunday, that is neither a legal holiday nor a day on which banking institutions in New York, New York are authorized or required by law, regulation or executive order to close.
(j) As used herein, the term “Date of Determination” means the second Business Day immediately preceding the applicable Series B-1 Dividend Payment Date.
4. Liquidation Preference.
In the event of any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, before any payment or distribution of the assets of the Corporation shall be made to or set apart for the holders of shares of any class or series of Junior Stock ranking, as to amounts upon liquidation, dissolution or winding up of the Corporation, junior to the Series B-1 Preferred Stock (other than dividends or distributions paid solely in Junior Stock, or in options, warrants or rights to subscribe for or purchase Junior Stock), the holders of the Series B-1 Preferred Stock shall be entitled to receive $25.00 per share (the “Liquidation Preference”) plus an amount per share equal to all accumulated and unpaid dividends (whether or not earned or declared) thereon to, but not including, the date of final distribution to such holders of Series B-1 Preferred Stock; and such holders of the Series B-1 Preferred Stock shall not be entitled to any further payment upon the liquidation, dissolution or winding up of the Corporation. If, upon any such liquidation, dissolution or winding up of the Corporation, the assets of the Corporation, or proceeds thereof, distributable among the holders of the Series B-1 Preferred Stock shall be insufficient to pay in full the preferential amount aforesaid and liquidating payments on the outstanding shares of Series B-1 Preferred Stock and any class or series of Parity Stock, then such assets, or the proceeds thereof, shall be distributed among the holders of Series B-1 Preferred Stock and any such class or series of Parity Stock ratably in accordance with the respective amounts that would be payable on such Series B-1 Preferred Stock and any such class or series of Parity Stock if all amounts payable thereon were paid in full. For the purposes of this Section 4, none of (i) a consolidation or merger of the Corporation with one or more entities, (ii) a statutory stock exchange by the Corporation or (iii) a sale or transfer of all or substantially all of the Corporation’s assets shall be deemed to be a liquidation, dissolution or winding up, voluntary or involuntary, of the Corporation. After payment of the full amount of the liquidating distributions to which they are entitled pursuant to this Section 4, the holders of Series B-1 Preferred Stock will have no right or claim to any of the remaining assets of the Corporation.
5. Redemption.
(a) Except as otherwise permitted by Article VII of the Charter and paragraph (c) and Section 8 below, the Series B-1 Preferred Stock shall not be redeemable by the Corporation prior to July 15, 2026. On and after July 15, 2026, the Corporation, at its option, upon giving notice as provided below, may redeem the Series B-1 Preferred Stock, in whole, at any time, or in part, from time to time, for cash at a redemption price of $25.00 per share, plus (subject to Section 5(d)(i), below) any accumulated and unpaid dividends on the Series B-1 Preferred Stock (whether or not declared), to, but not including, the redemption date (the “Optional Redemption Right”).
- 3 -
(b) Within 15 days following the occurrence of a Change of Control (as defined herein), the Corporation shall provide to holders of Series B-1 Preferred Stock at their addresses as they appear on the Corporation’s stock transfer records notice of the occurrence of the Change of Control (a “Change of Control Notice”). Each notice shall state the following: (i) a description of the events constituting the Change of Control, including identifying whether the Change of Control is an Ownership Change of Control and, in the event of an Ownership Change of Control, the resulting Change of Control Conversion Right (as defined below); (ii) the date of the Change of Control; and (iii) in the event of an Ownership Change of Control: (A) the last date on which the holders of Series B-1 Preferred Stock may exercise their Change of Control Conversion Right, which shall be the Change of Control Conversion Date (as defined below); (B) the method and period for calculating the Common Stock Price (as defined below); (C) the Change of Control Conversion Date; (D) 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 Series B-1 Preferred Stock pursuant to Section 5(a), the holder will not be able to convert any shares of Series B-1 Preferred Stock called for redemption and such shares of Series B-1 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; (E) if applicable, the type and amount of Alternative Conversion Consideration (as defined below) entitled to be received per share of Series B-1 Preferred Stock; (F) if applicable, the name and address of the paying agent and the conversion agent; (G) the procedures that the holders of Series B-1 Preferred Stock must follow to exercise the Change of Control Conversion Right; and (H) the last date on which holders of Series B-1 Preferred Stock may withdraw shares surrendered for conversion and the procedures that such holders must follow to effect such a withdrawal. A failure to give the notice referred to in the first sentence of this paragraph (b) or any defect in such notice or in its mailing shall not affect the validity of the proceedings for the conversion of any shares of Series B-1 Preferred Stock except as to the holder to whom notice was defective or not given.
(c) Upon written notice by the holders of a majority of the shares of Series B-1 Preferred Stock outstanding on the date of the Change of Control, no later than (i) in the case of a Manager Change of Control, 15 days following delivery by the Corporation of the Change of Control Notice referred to above and (ii) in the case of an Ownership Change of Control, prior to the Change of Control Conversion Date, the Corporation will be obligated to redeem the Series B-1 Preferred Stock, in whole (subject to any partial exercise of the Change of Control Conversion Right pursuant to Section 9), as soon as practicable and in any event within 120 days after the first date on which the Change of Control has occurred (the “Change of Control Redemption Right”), for cash at a redemption price of $25.00 per share, plus (subject to Section 5(d)(i), below) any accumulated and unpaid dividends on the Series B-1 Preferred Stock (whether or not declared), to, but not including, the redemption date.
A “Change of Control” will be deemed to have occurred at such time after the Series B-1 Original Issue Date when the following have occurred:
(i) (A) 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 series of purchases, mergers or other acquisition transactions of shares of the Corporation’s capital stock entitling that person to exercise more than 50% of the total voting power of all shares of the Corporation’s capital stock entitled to vote generally in elections of directors (except that such person will be deemed to have beneficial ownership of all securities 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
(B) following the closing of any transaction referred to in clause (i) above, neither the Corporation nor the acquiring or surviving entity, as applicable, has a class of common securities (or American Depositary Receipts representing such common securities) listed on the New York Stock Exchange (the “NYSE”), the NYSE MKT (the “NYSE MKT”) or the NASDAQ Stock Market (“NASDAQ”), or listed or quoted on an exchange or quotation system that is a successor to the NYSE, the NYSE MKT or the NASDAQ (an “Ownership Change of Control”); or
(ii) ACREFI Management, LLC or an affiliate of Apollo Global Management, LLC is no longer the external manager of the Corporation (a “Manager Change of Control”).
(d) The following provisions set forth the general procedures applicable to redemptions pursuant to the Optional Redemption Right and the Change of Control Redemption Right:
- 4 -
(i) Upon any redemption date applicable to Series B-1 Preferred Stock, the Corporation shall pay on each share of Series B-1 Preferred Stock to be redeemed any accumulated and unpaid dividends (whether or not declared), to, but not including, the redemption date, unless a redemption date falls after a record date fixed for payment of any distribution on the Series B-1 Preferred Stock and prior to the corresponding Series B-1 Dividend Payment Date, in which case, each holder of shares of Series B-1 Preferred Stock at the close of business on such record date shall be entitled to the distribution payable on such shares of Series B-1 Preferred Stock on the corresponding Series B-1 Dividend Payment Date (and not on the applicable redemption date), notwithstanding the redemption of such Series B-1 Preferred Stock prior to such Series B-1 Dividend Payment Date. Except as provided above, the Corporation shall make no payment or allowance for unpaid dividends, whether or not in arrears, on any shares of Series B-1 Preferred Stock called for redemption.
(ii) If full cumulative dividends on the Series B-1 Preferred Stock have not been paid or declared and set apart for payment for all full prior dividend periods, the Corporation may not purchase, redeem or otherwise acquire less than all of the outstanding shares of Series B-1 Preferred Stock and any class or series of Parity Stock other than in exchange for Junior Stock or Parity Stock or in exchange for options, warrants or rights to subscribe for or purchase any Junior Stock or Parity Stock; provided, however, that the foregoing shall not prevent the purchase or other acquisition by the Corporation of shares of its stock pursuant to (A) a purchase or exchange offer made on the same terms to holders of all outstanding shares of Series B-1 Preferred Stock and all classes and series of Parity Stock or (B) Article VII of the Charter or Section 8, below.
(iii) On and after the date fixed for redemption, provided that the Corporation has made available at the office of the registrar and transfer agent (or the bank or trust company selected pursuant to Section 5(d)(vi) below) for the Series B-1 Preferred Stock a sufficient amount of cash to effect the redemption of shares of Series B-1 Preferred Stock called for redemption, dividends will cease to accrue on such shares of Series B-1 Preferred Stock, such shares shall no longer be deemed to be outstanding and all rights of the holders of such shares as holders of Series B-1 Preferred Stock shall cease except the right to receive the cash payable upon such redemption, without interest from the date of such redemption.
(iv) A notice of redemption (which may be contingent upon the occurrence of a future event) shall be mailed, postage prepaid, not less than 30 days nor more than 60 days prior to the redemption date, addressed to the holders of record of the Series B-1 Preferred Stock at their addresses as they appear on the Corporation’s stock transfer records. 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 shares of Series B-1 Preferred Stock except as to the holder to whom notice was defective or not given. In addition to any information required by law or by the applicable rules of any exchange upon which the Series B-1 Preferred Stock may be listed or admitted to trading, each notice shall state: (A) the redemption date; (B) the redemption price; (C) the number of shares of Series B-1 Preferred Stock to be redeemed and, if fewer than all the shares of Series B-1 Preferred Stock held by such holder are to be redeemed, the number of such shares of Series B-1 Preferred Stock to be redeemed from such holder; (D) the place or places where the shares of Series B-1 Preferred Stock are to be surrendered for payment of the redemption price therefor, together with the certificates, if any, representing such shares and any other documents required in connection with the redemption; (E) whether the shares of Series B-1 Preferred Stock are called for redemption pursuant to the Optional Redemption Right or the Change of Control Redemption Right; (F) in the event shares of Series B-1 Preferred Stock are called for redemption pursuant to the Optional Redemption Right and an Ownership Change of Control has occurred, that the holders of shares of Series B-1 Preferred Stock called for redemption pursuant to the Optional Redemption Right will not be entitled to convert such shares of Series B-1 Preferred Stock in connection with the Ownership Change of Control, and that each share of Series B-1 Preferred Stock tendered for conversion that is selected for redemption, prior to the Change of Control Conversion Date, will be redeemed on the related date of redemption instead of converted on the Change of Control Conversion Date; and (G) that dividends on the shares of Series B-1 Preferred Stock to be redeemed will cease to accrue on such redemption date except as otherwise provided herein.
(v) If fewer than all the outstanding shares of the Series B-1 Preferred Stock are to be redeemed pursuant to the Optional Redemption Right, the shares to be redeemed shall be selected pro rata (as nearly as practicable without creating fractional shares) or by any other equitable method the Corporation may choose acting reasonably. If fewer than all the outstanding shares of the Series B-1 Preferred Stock are to be redeemed pursuant to the Change of Control Redemption Right as the result of a partial exercise of the Change of Control Conversion Right pursuant to Section 9, all the outstanding shares of the Series B-1 Preferred Stock that are not converted pursuant to exercise of the Change of Control Conversion Right shall be redeemed.
- 5 -
(vi) At its election, the Corporation, prior to a redemption date, may irrevocably set aside and deposit the redemption price (including, subject to Section 5(d)(i), all accumulated and unpaid dividends to, but not including, the redemption date) of the Series B-1 Preferred Stock so called for redemption with a bank or trust company, in which case the redemption notice to holders of the Series B-1 Preferred Stock to be redeemed shall (A) state the date of such deposit, (B) specify the office of such bank or trust company as the place of payment of the redemption price and (C) require such holders to surrender the certificates representing such shares, if any, at such place on or about the date fixed in such redemption notice (which may not be later than the redemption date) against payment of the redemption price (including, subject to Section 5(d)(i), all accumulated and unpaid dividends to the redemption date). Subject to applicable unclaimed property laws, any monies so deposited which remain unclaimed by the holders of the Series B-1 Preferred Stock at the end of two years after the redemption date may be returned by such bank or trust company to the Corporation.
6. Voting Rights. Except as otherwise set forth herein, the Series B-1 Preferred Stock shall not have any voting rights, and the consent or approval of the holders thereof shall not be required for the taking of any corporate action. In any matter in which the holders of Series B-1 Preferred Stock are entitled to vote, each holder of Series B-1 Preferred Stock shall be entitled to cast one vote per share of Series B-1 Preferred Stock held by such holder, except that, when voting together as a single class with the holders of other classes or series of stock, each holder of Series B-1 Preferred Stock shall be entitled to cast one vote for each $25.00 of liquidation preference (excluding amounts with respect to accumulated and unpaid dividends) of shares of Series B-1 Preferred Stock held by such holder.
(a) If and whenever six quarterly dividends (whether or not consecutive) payable on the Series B-1 Preferred Stock are in arrears, whether or not declared, the number of directors of the Corporation will be increased automatically by two (unless the number of directors of the Corporation has previously been so increased pursuant to the terms of any class or series of Parity Stock upon which like voting rights have been conferred and are exercisable (any such other class or series, the “Voting Preferred Stock”) and with which the holders of Series B-1 Preferred Stock are entitled to vote together as a single class in the election of such directors) and the holders of Series B-1 Preferred Stock and the holders of any class or series of Voting Preferred Stock with which the holders of Series B-1 Preferred Stock are entitled to vote together as a single class in the election of Preferred Stock Directors, voting together as a single class, will have the right to elect two directors of the Corporation (the “Preferred Stock Directors”) at any annual meeting of stockholders or properly called special meeting of the holders of the Series B-1 Preferred Stock, until all such dividends and dividends for the then current quarterly period on the Series B-1 Preferred Stock have been paid or declared and set aside for payment. Whenever all such dividends on the shares of Series B-1 Preferred Stock then outstanding have been paid in full or declared and set apart for payment in full, and full dividends on the shares of Series B-1 Preferred Stock then outstanding for the then-current quarterly dividend period have been paid in full or declared and set apart for payment in full, then the right of the holders of the Series B-1 Preferred Stock to elect the two Preferred Stock Directors will cease and, unless there remain outstanding shares of Voting Preferred Stock of any class or series for which the right to vote in the election of Preferred Stock Directors remains exercisable, the terms of office of the Preferred Stock Directors will terminate automatically and the number of directors of the Corporation will be reduced accordingly and automatically; provided, however, that the right of the holders of the Series B-1 Preferred Stock to elect Preferred Stock Directors will again vest if and whenever dividends are in arrears for six new quarterly periods, as described above. If the rights of holders of shares of Series B-1 Preferred Stock to elect Preferred Stock Directors have terminated in accordance with this Section 6(a) after any record date for the determination of holders of shares of Series B-1 Preferred Stock entitled to vote in any election of Preferred Stock Directors but before the closing of the polls in such election, holders of shares of Series B-1 Preferred Stock outstanding as of such record date shall not be entitled to vote in such election of Preferred Stock Directors. In no event shall the holders of Series B-1 Preferred Stock be entitled to nominate or elect an individual as a director, and no individual shall be qualified to be nominated for election or to serve as a director, if such individual’s service as a director would cause the Corporation to fail to satisfy a requirement relating to director independence of any national securities exchange on which any class or series of the Corporation’s stock is listed.
(b) Preferred Stock Directors shall be elected by a plurality of the votes cast in the election of such directors, and each Preferred Stock Director will serve until the next annual meeting of the Corporation’s stockholders and until his or her successor is duly elected and qualifies, or until such Preferred Stock Director’s term of office
- 6 -
terminates earlier in accordance with Section 6(a). A holder of Series B-1 Preferred Stock will be entitled to cast one vote in the election of Preferred Stock Directors, for as many individuals as there are Preferred Stock Directors to be elected, for each share of Series B-1 Preferred Stock held by such holder (or, if voting together as a single class with the holders of any Voting Preferred Stock, for each $25.00 of liquidation preference, excluding amounts with respect to accumulated and unpaid dividends, of shares of Series B-1 Preferred Stock held by such holder). Any Preferred Stock Director may be removed at any time by, and may be removed only by, the affirmative vote of the holders of a majority of the votes entitled to be cast in the election of Preferred Stock Directors, generally. At any time that holders of Series B-1 Preferred Stock are entitled to vote in the election of Preferred Stock Directors, holders of Series B-1 Preferred Stock shall be entitled to vote in the election of a successor to fill a vacancy on the Board of Directors that results from the removal of a Preferred Stock Director.
(c) At any time that holders of outstanding shares of Series B-1 Preferred Stock are entitled to elect Preferred Stock Directors pursuant to Section 6(a) and two Preferred Stock Directors are not then serving, upon the written request of the holders of record of at least 10% of the aggregate outstanding shares of Series B-1 Preferred Stock and Voting Preferred Stock of all classes and series with which the holders of Series B-1 Preferred Stock are entitled to vote together as a single class with respect to the election of Preferred Stock Directors, the secretary of the Corporation shall call a special meeting of stockholders of the Corporation for the purpose of electing Preferred Stock Directors, unless such request is received less than 90 days before the date fixed for the next annual meeting of the Corporation’s stockholders, in which case, the Preferred Stock Directors may be elected at such annual meeting or, at the option of the Corporation, at a separate special meeting.
(d) So long as any shares of Series B-1 Preferred Stock are outstanding, the approval of two-thirds of the votes entitled to be cast by the holders of outstanding shares of Series B-1 Preferred Stock and the holders of all outstanding shares of Parity Stock of any class or series upon which like voting rights have been conferred and with which holders of Series B-1 Preferred Stock are entitled to vote together as a single class on such matters, voting together as a single class, is required (i) to amend, alter or repeal any provisions of the Charter (including these Articles Supplementary), whether by merger, consolidation or otherwise, to affect materially and adversely the voting powers, rights or preferences of the Series B-1 Preferred Stock unless, in connection with any such amendment, alteration or repeal, the Series B-1 Preferred Stock remains outstanding without the terms thereof being materially and adversely changed or is converted into or exchanged for equity securities of the surviving entity having preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends and other distributions, qualifications and terms and conditions of redemption that are substantially similar to those of the Series B-1 Preferred Stock prior to such amendment, alteration or repeal (taking into account that the Corporation may not be the surviving entity), or (ii) to authorize, create, or increase the authorized number of shares of any class or series of stock having constituting Senior Stock, provided that, in each case of clauses (i) and (ii), if such amendment does not affect equally the rights, preferences, privileges or voting powers of the Series B-1 Preferred Stock and one or more classes or series of Parity Stock with which holders of Series B-1 Preferred Stock are entitled to vote together as a single class, the consent of the holders of at least two-thirds of the outstanding shares of the Series B-1 Preferred Stock shall be required to approve such amendment. So long as any shares of Series B-1 Preferred Stock are outstanding, the approval of two-thirds of the votes entitled to be cast by the holders of outstanding shares of Series B-1 Preferred Stock is required to issue additional shares of Series B-1 Preferred Stock. Notwithstanding anything contrary contained herein, the voting powers, rights or preferences of the Series B-1 Preferred Stock shall not be deemed to be materially and adversely affected by, and the holders of shares of Series B-1 Preferred Stock shall not be entitled to vote with respect to, any (A) amendment to the Charter increasing or decreasing the total number of authorized shares of stock of all classes and series, Common Stock, Preferred Stock without further designation as to class or series, Series B-1 Preferred Stock or any other class or series of Parity Stock or Junior Stock, (B) issuance of shares of any class or series of Parity Stock or Junior Stock or (C) classification or reclassification of authorized but unissued shares of Series B-1 Preferred Stock or any classification or reclassification of shares of any class or series of Parity Stock or Junior Stock. So long as (I) any shares of Series B-1 Preferred Stock remain outstanding and (II) at least two-thirds of the outstanding shares of Series B-1 Preferred Stock are held by the Persons to whom the shares of Series B-1 Preferred Stock are issued on the Series B-1 Original Issue Date or their affiliates, the holders of shares of Series B-1 Preferred Stock will have the exclusive right to vote on any amendment to the Charter on which holders of Series B-1 Preferred Stock are entitled to vote pursuant to Section 6(d) above and that would alter only the contract rights, as expressly set forth in the Charter, of the Series B-1 Preferred Stock, and the holders of any other class(es) or series of stock of the Corporation will not be entitled to vote on such an amendment.
- 7 -
(e) Holders of Series B-1 Preferred Stock shall not be entitled to vote if, at or prior to the time when the act with respect to which such vote would otherwise be required shall be effected, all outstanding Series B-1 Preferred Stock shall have been redeemed or called for redemption upon proper notice and sufficient funds shall have been deposited in trust or made available at the office of the registrar and transfer agent for the Series B-1 Preferred Stock to effect such redemption.
7. Information Rights. During any period in which the Corporation is not subject to Section 13 or 15(d) of the Exchange Act, and any shares of Series B-1 Preferred Stock are outstanding, the Corporation will use its best efforts to (i) transmit by mail (or other permissible means under the Exchange Act) to all holders of Series B-1 Preferred Stock, as their names and addresses appear in the record books of the Corporation 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 pursuant to Section 13 or 15(d) of the Exchange Act if the Corporation were subject thereto (other than any exhibits that would have been required) and (ii) promptly, upon request, supply copies of such reports to any prospective holder of Series B-1 Preferred Stock. The Corporation will use its best efforts to mail (or otherwise provide) the information to the holders of Series B-1 Preferred Stock within 15 days after the respective dates by which a periodic report on Form 10-K or Form 10-Q, as the case may be, in respect of such information would have been required to be filed with the Securities and Exchange Commission if the Corporation were subject to Section 13 or 15(d) of the Exchange Act, in each case, based on the dates on which the Corporation would be required to file such periodic reports if the Corporation were a “non-accelerated filer” within the meaning of the Exchange Act.
8. Restrictions on Ownership and Transfer.
(a) Definitions. For the purposes of this Section 8, all capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the Charter. The following terms shall have the following meanings:
(i) ”Series B-1 Charitable Beneficiary” shall mean one or more beneficiaries of the Series B-1 Trust as determined pursuant to Section 8(c)(vi), provided that each such organization must be described in Section 501(c)(3) of the Code and contributions to each such organization must be eligible for deduction under each of Sections 170(b)(1)(A), 2055 and 2522 of the Code.
(ii) ”Series B-1 Excepted Holder” shall mean a Person for whom a Series B-1 Excepted Holder Limit is created by the Board of Directors pursuant to Section 8(i).
(iii) ”Series B-1 Excepted Holder Limit” shall mean for each Series B-1 Excepted Holder, the limit established by the Board of Directors pursuant to Section 8(i), which limit may be expressed, in the discretion of the Board of Directors, as a percentage and/or number of shares of Series B-1 Preferred Stock, provided that the affected Series B-1 Excepted Holder agrees to comply with the requirements established by the Board of Directors pursuant to Section 8(i) and subject to adjustment pursuant to Section 8(i).
(iv) ”Series B-1 Initial Date” shall mean the Series B-1 Original Issue Date.
(v) ”Series B-1 Prohibited Owner” shall mean, any Person who, but for the provisions of Section 8(b), would Beneficially Own or Constructively Own shares of Series B-1 Preferred Stock, and if appropriate in the context, shall also mean any Person who would have been the record owner of the shares that the Series B-1 Prohibited Owner would have so owned.
(vi) ”Series B-1 Preferred Stock Ownership Limit” shall mean not more than 9.8% (in value or in number of shares, whichever is more restrictive, and subject to adjustment from time to time by the Board of Directors in accordance with Section 8(i)(iv)) of the outstanding shares of Series B-1 Preferred Stock of the Corporation, excluding any such outstanding shares of Series B-1 Preferred Stock which are not treated as outstanding for U.S. federal income tax purposes. Notwithstanding the foregoing, for purposes of determining the percentage ownership of Series B-1 Preferred Stock by any Person, shares of Series B-1 Preferred Stock that are treated as Beneficially Owned or Constructively Owned by such Person shall be deemed to be outstanding. The number and value of outstanding shares of Series B-1 Preferred Stock of the Corporation shall be determined by the Board of Directors in good faith, which determination shall be conclusive for all purposes hereof.
- 8 -
(vii) ”Series B-1 Trust” shall mean any trust provided for in Section 8(c) below.
(viii) ”Series B-1 Trustee” shall mean the Person unaffiliated with the Corporation and a Series B-1 Prohibited Owner, that is appointed by the Corporation to serve as trustee of the Series B-1 Trust.
(b) Restriction on Ownership and Transfers. In addition to the restrictions on ownership and transfer applicable to the Series B-1 Preferred Stock pursuant to Article VII of the Charter:
(i) During the period commencing on the Series B-1 Initial Date and prior to the Restriction Termination Date, but subject to Section 8(l), (1) no Person, other than a Series B-1 Excepted Holder, shall Beneficially Own or Constructively Own shares of Series B-1 Preferred Stock in excess of the Series B-1 Preferred Stock Ownership Limit and (2) no Series B-1 Excepted Holder shall Beneficially Own or Constructively Own shares of Series B-1 Preferred Stock in excess of the Series B-1 Excepted Holder Limit for such Series B-1 Excepted Holder.
(ii) If any Transfer of shares of Series B-1 Preferred Stock occurs that, if effective, would result in any Person Beneficially Owning or Constructively Owning shares of Series B-1 Preferred Stock in violation of Section 8(b)(i), (A) then that number of shares of Series B-1 Preferred Stock, the Beneficial Ownership or Constructive Ownership of which otherwise would cause such Person to violate such provision (rounded up to the nearest whole share) shall be automatically transferred to a Series B-1 Trust for the benefit of a Series B-1 Charitable Beneficiary, as described in Section 8(c), effective as of the close of business on the Business Day prior to the date of such Transfer, and such Person shall acquire no rights in such shares; and (B) if the transfer to the Series B-1 Trust described in clause (A) of this sentence would not be effective for any reason to prevent the violation of Section 8(b)(i), then the Transfer of that number of shares of Series B-1 Preferred Stock that otherwise would cause any Person to violate such provisions shall be void ab initio, and the intended transferee shall acquire no rights in such shares of Series B-1 Preferred Stock.
(c) Transfers of Series B-1 Preferred Stock to a Series B-1 Trust.
(i) Upon any purported Transfer or other event described in Section 8(b)(ii) that would result in a transfer of shares of Series B-1 Preferred Stock to a Series B-1 Trust, such shares of Series B-1 Preferred Stock shall be deemed to have been transferred to the Series B-1 Trustee in his capacity as trustee of a Series B-1 Trust for the exclusive benefit of one or more Series B-1 Charitable Beneficiaries. Such transfer to the Series B-1 Trustee shall be deemed to be effective as of the close of business on the Business Day prior to the purported Transfer or other event that results in the transfer to the Series B-1 Trust pursuant to Section 8(b)(ii). The Series B-1 Trustee shall be appointed by the Corporation and shall be a Person unaffiliated with the Corporation and any Series B-1 Prohibited Owner. Each Series B-1 Charitable Beneficiary shall be designated by the Corporation as provided in Section 8(c)(vi).
(ii) Shares of Series B-1 Preferred Stock held by the Series B-1 Trustee shall be issued and outstanding shares of Series B-1 Preferred Stock of the Corporation. The Series B-1 Prohibited Owner shall have no rights in the shares held by the Series B-1 Trustee. The Series B-1 Prohibited Owner shall not benefit economically from ownership of any shares held in trust by the Series B-1 Trustee, shall have no rights to dividends or other distributions and shall not possess any rights to vote or other rights attributable to the shares held in the Series B-1 Trust.
(iii) The Series B-1 Trustee shall have all voting rights and rights to dividends or other distributions with respect to shares of Series B-1 Preferred Stock held in the Series B-1 Trust, which rights shall be exercised for the exclusive benefit of the Series B-1 Charitable Beneficiary. Any dividend or other distribution paid prior to the discovery by the Corporation that the shares of Series B-1 Preferred Stock have been transferred to the Series B-1 Trustee shall be paid by the recipient of such dividend or other distribution to the Series B-1 Trustee upon demand and any dividend or other distribution authorized but unpaid shall be paid when due to the Series B-1 Trustee. Any dividend or other distribution so paid to the Series B-1 Trustee shall be held in trust for the Series B-1 Charitable Beneficiary. The Series B-1 Prohibited Owner shall have no voting rights with respect to shares held in the Series B-
- 9 -
1 Trust and, subject to Maryland law, effective as of the date that the shares of Series B-1 Preferred Stock have been transferred to the Series B-1 Trust, the Series B-1 Trustee shall have the authority (at the Series B-1 Trustee’s sole and absolute discretion) (A) to rescind as void any vote cast by a Series B-1 Prohibited Owner prior to the discovery by the Corporation that the shares of Series B-1 Preferred Stock have been transferred to the Series B-1 Trustee and (B) to recast such vote in accordance with the desires of the Series B-1 Trustee acting for the benefit of the Series B-1 Charitable Beneficiary; provided, however, that if the Corporation has already taken irreversible corporate action, then the Series B-1 Trustee shall not have the authority to rescind and recast such vote. Notwithstanding the provisions of this Section 8, until the Corporation has received notification that shares of Series B-1 Preferred Stock have been transferred into a Series B-1 Trust, the Corporation shall be entitled to rely on its share transfer and other stockholder records for purposes of preparing lists of stockholders entitled to vote at meetings, determining the validity and authority of proxies and otherwise conducting votes of stockholders.
(iv) Within 20 days of receiving notice from the Corporation that shares of Series B-1 Preferred Stock have been transferred to the Series B-1 Trust, the Series B-1 Trustee of the Series B-1 Trust shall sell the shares held in the Series B-1 Trust to a person or persons, designated by the Series B-1 Trustee, whose ownership of the shares will not violate the ownership limitations set forth in Section 8(b)(i). Upon such sale, the interest of the Series B-1 Charitable Beneficiary in the shares sold shall terminate and the Series B-1 Trustee shall distribute the net proceeds of the sale to the Series B-1 Prohibited Owner and to the Series B-1 Charitable Beneficiary as provided in this Section 8(c)(iv). The Series B-1 Prohibited Owner shall receive the lesser of (A) the price paid by the Series B-1 Prohibited Owner for the shares or, if the event causing the shares to be held in the Series B-1 Trust did not involve a purchase of such shares of Series B-1 Preferred Stock at Market Price, the Market Price of such shares on the day of the event causing the shares to be held in the Series B-1 Trust and (B) the price per share received by the Series B-1 Trustee (net of any commissions and other expenses of sale) from the sale or other disposition of the shares held in the Series B-1 Trust. The Series B-1 Trustee shall reduce the amount payable to the Series B-1 Prohibited Owner by the amount of dividends and other distributions which have been paid to the Series B-1 Prohibited Owner and are owed by the Series B-1 Prohibited Owner to the Series B-1 Trustee pursuant to Section 8(c)(iii). Any net sales proceeds in excess of the amount payable to the Series B-1 Prohibited Owner shall be immediately paid to the Series B-1 Charitable Beneficiary. If, prior to the discovery by the Corporation that shares of Series B-1 Preferred Stock have been transferred to the Series B-1 Trustee, such shares are sold by a Series B-1 Prohibited Owner, then (A) such shares shall be deemed to have been sold on behalf of the Series B-1 Trust and (B) to the extent that the Series B-1 Prohibited Owner received an amount for such shares that exceeds the amount that such Series B-1 Prohibited Owner was entitled to receive pursuant to this Section 8(c)(iv), such excess shall be paid to the Series B-1 Trustee upon demand.
(v) Shares of Series B-1 Preferred Stock transferred to the Series B-1 Trustee shall be deemed to have been offered for sale to the Corporation, or its designee, at a price per share equal to the lesser of (A) the price per share paid in the transaction that resulted in such transfer to the Series B-1 Trust (or, if the event which resulted in the Transfer to the Series B-1 Trust did not involve a purchase of such shares at Market Price, the Market Price of such shares on the day of the event that resulted in the transfer of such Series B-1 Preferred Stock to the Series B-1 Trust) and (B) the Market Price on the date the Corporation, or its designee, accepts such offer. The Corporation may reduce the amount payable to the Series B-1 Trustee by the amount of dividends and other distributions which have been paid to the Series B-1 Prohibited Owner and are owed by the Series B-1 Prohibited Owner to the Series B-1 Trustee pursuant to Section 8(c)(iii) and may pay the amount of such reduction to the Series B-1 Trustee for the benefit of the Series B-1 Charitable Beneficiary. The Corporation shall have the right to accept such offer until the Series B-1 Trustee has sold the shares held in the Series B-1 Trust pursuant to Section 8(c)(iv). Upon such a sale to the Corporation, the interest of the Series B-1 Charitable Beneficiary in the shares sold shall terminate and the Series B-1 Trustee shall distribute the net proceeds of the sale to the Series B-1 Prohibited Owner.
(vi) By written notice to the Series B-1 Trustee, the Corporation shall designate one or more nonprofit organizations to be the Series B-1 Charitable Beneficiary of the interest in the Series B-1 Trust such that the shares of Series B-1 Preferred Stock held in the Series B-1 Trust would not violate the restrictions set forth in Section 8(b)(i) in the hands of such Series B-1 Charitable Beneficiary. Neither the failure of the Corporation to make such designation nor the failure of the Corporation to appoint the Series B-1 Trustee before the automatic transfer provided for in Section 8(b)(ii) shall make such transfer ineffective, provided that the Corporation thereafter makes such designation and appointment.
- 10 -
(d) Remedies For Breach. If the Board of Directors or any duly authorized committee thereof, or other designees if permitted by the MGCL, shall at any time determine in good faith that a Transfer or other event has taken place that results in a violation of Section 8(b)(i) or that a Person intends or has attempted to acquire or may acquire Beneficial Ownership or Constructive Ownership of any shares of Series B-1 Preferred Stock in violation of Section 8(b)(i) (whether or not such violation is intended), the Board of Directors or such committee thereof, or other designees if permitted by the MGCL, shall take such action as it deems or they deem advisable, in its or their sole and absolute discretion, to refuse to give effect to or to prevent such Transfer or other event, including, without limitation, causing the Corporation to redeem shares of Series B-1 Preferred Stock, refusing to give effect to such Transfer or other event on the books of the Corporation or instituting proceedings to enjoin such Transfer or other event; provided, however, that any Transfer or attempted Transfer or other event in violation of Section 8(b)(i) shall automatically result in the transfer to the Series B-1 Trust described above, and, where applicable, such Transfer (or other event) shall be void ab initio as provided above irrespective of any action (or non action) by the Board of Directors or committee thereof.
(e) Notice of Restricted Transfer. Any Person who acquires or attempts or intends to acquire Beneficial Ownership or Constructive Ownership of shares of Series B-1 Preferred Stock that will or may violate Section 8(b)(i) or any Person who would have owned shares of Series B-1 Preferred Stock that resulted in a transfer to the Series B-1 Trust pursuant to the provisions of Section 8(b)(ii) shall immediately give written notice to the Corporation of such event or, in the case of such a proposed or attempted transaction, give at least 15 days prior written notice, and shall provide to the Corporation such other information as the Corporation may request in order to determine the effect, if any, of such Transfer on the Corporation’s qualification as a REIT.
(f) Owners Required To Provide Information. From the Series B-1 Initial Date until the Restriction Termination Date, each Person who is an owner of shares of Series B-1 Preferred Stock and each Person (including the stockholder of record) who is holding shares of Series B-1 Preferred Stock for a Beneficial Owner or Constructive Owner shall, within 30 days after the end of each taxable year, provide to the Corporation a completed questionnaire containing the information regarding its ownership of such shares, as set forth in the regulations (as in effect from time to time) of the U.S. Department of Treasury under the Code. In addition, each Person who is a Beneficial Owner or Constructive Owner of Series B-1 Preferred Stock and each Person (including the stockholder of record) who is holding shares of Series B-1 Preferred Stock for a Beneficial Owner or Constructive Owner shall, on demand, provide to the Corporation in writing such information as the Corporation may request in order to determine the effect, if any, of such stockholder’s actual and constructive ownership of Series B-1 Preferred Stock on the Corporation’s qualification as a REIT, and to ensure compliance with the Series B-1 Preferred Stock Ownership Limit or a Series B-1 Excepted Holder Limit.
(g) Remedies Not Limited. Subject to Section 5.7 of the Charter, nothing contained in this Section 8 (but subject to Section 8(l)) shall limit the authority of the Board of Directors to take such other action as it deems necessary or advisable to protect the Corporation and the interests of its stockholders in preserving the Corporation’s qualification as a REIT.
(h) Ambiguity. In the case of an ambiguity in the application of any of the provisions of this Section 8, including any definition contained in Section 8(a) or any defined term used in this Section 8 but defined in the Charter, the Board of Directors shall have the power to determine the application of the provisions of this Section 8 with respect to any situation based on the facts known to it. In the event this Section 8 requires an action by the Board of Directors and the Charter fails to provide specific guidance with respect to such action, the Board of Directors shall have the power to determine the action to be taken so long as such action is not contrary to the provisions of this Section 8. Absent a decision to the contrary by the Board of Directors (which the Board of Directors may make in its sole and absolute discretion), if a Person would have (but for the remedies set forth in Section 8(b)) acquired Beneficial Ownership or Constructive Ownership of shares of Series B-1 Preferred Stock in violation of Section 8(b)(i), such remedies (as applicable) shall apply first to the shares of Series B-1 Preferred Stock which, but for such remedies, would have been actually owned by such Person, and second to shares of Series B-1 Preferred Stock which, but for such remedies, would have been Beneficially Owned or Constructively Owned (but not actually owned) by such Person, pro rata among the Persons who actually own such shares of Series B-1 Preferred Stock based upon the relative number of the shares of Series B-1 Preferred Stock held by each such Person.
- 11 -
(i) Exceptions.
(i) Subject to Section 7.2.1(a)(ii) of the Charter, the Board of Directors, in its sole and absolute discretion, may exempt (prospectively or retroactively) a Person from the Series B-1 Preferred Stock Ownership Limit and may establish or increase a Series B-1 Excepted Holder Limit for such Person if: (A) the Board of Directors obtains such representations and undertakings from such Person as it may require in order to ascertain that such Person’s Beneficial Ownership or Constructive Ownership of such Shares will not violate Section 7.2.1(a)(ii) of the Charter; (B) such Person provides the Board of Directors with information including, to the extent required by the Board of Directors, representations and undertakings satisfactory to the Board of Directors in its reasonable discretion that demonstrates that such Person does not and will not Constructively Own an interest in a tenant of the Corporation (or a tenant of any entity directly or indirectly owned, in whole or in part, by the Corporation) that would cause the Corporation to Constructively Own more than a 9.9% interest (as set forth in Section 856(d)(2)(B) of the Code) in such tenant (for this purpose, in the Board of Director’s sole and absolute discretion, a tenant from whom the Corporation (or an entity directly or indirectly owned, in whole or in part, by the Corporation) derives (and is expected to continue to derive) a sufficiently small amount of revenue such that, in the opinion of the Board of Directors, rent from such tenant would not adversely affect the Corporation’s ability to qualify as a REIT shall not be treated as a tenant of the Corporation); and (C) such Person agrees that any violation or attempted violation of such representations or undertakings (or other action which is contrary to the restrictions contained in the Charter) may result in such shares of Series B-1 Preferred Stock being automatically transferred to a Series B-1 Charitable Trust in accordance with this Section 8.
(ii) Prior to granting any exception pursuant to Section 8(i)(i) above, the Board of Directors may (but is not obligated to) require a ruling from the Internal Revenue Service, or an opinion of counsel, in either case in form and substance satisfactory to the Board of Directors in its sole and absolute discretion, as it may deem necessary or advisable in order to determine or ensure the Corporation’s qualification as a REIT. Notwithstanding the receipt of any ruling or opinion, the Board of Directors may impose such conditions or restrictions as it deems appropriate in connection with granting such exception.
(iii) The Board of Directors may only reduce a Series B-1 Excepted Holder Ownership Limit for a Series B-1 Excepted Holder: (A) with the written consent of such Series B-1 Excepted Holder at any time, or (B) pursuant to the terms and conditions of the agreements and undertakings entered into with such Series B-1 Excepted Holder in connection with the establishment of the Series B-1 Excepted Holder Limit for that Series B-1 Excepted Holder. No Series B-1 Excepted Holder Limit with respect to a Person shall be reduced to a percentage that is less than the Series B-1 Preferred Stock Ownership Limit.
(iv) The Board of Directors may from time to time increase or decrease the Series B-1 Preferred Stock Ownership Limit; provided, however, that: (A) any decreased Series B-1 Preferred Stock Ownership Limit will not be effective for any Person whose percentage ownership of Series B-1 Preferred Stock is in excess of such decreased Series B-1 Preferred Stock Ownership Limit at the time such limit is decreased, until such time as such Person’s percentage of ownership of Series B-1 Preferred Stock equals or falls below the decreased Series B-1 Preferred Stock Ownership Limit, but any further acquisition of Series B-1 Preferred Stock in excess of such percentage of ownership of Series B-1 Preferred Stock will be in violation of the reduced Series B-1 Preferred Stock Ownership Limit; (B) the Series B-1 Preferred Stock Ownership Limit may not be increased if, after giving effect to such increase, five or fewer Persons who are considered individuals pursuant to Section 542 of the Code as modified by Section 856(h)(3) of the Code (taking into account all Series B-1 Excepted Holders) could Beneficially Own or Constructively Own, in the aggregate, more than 49.9% in value of the shares of Capital Stock then outstanding; and (C) prior to the modification of any of the ownership limitations, the Board of Directors may, in its sole and absolute discretion, require such opinions of counsel, affidavits, undertakings or agreements as it may deem necessary or advisable in order to determine or ensure the Corporation’s qualification as a REIT.
(v) Subject to Section 7.2.1(a)(ii) of the Charter, an underwriter which participates in a public offering or a private placement of Series B-1 Preferred Stock (or securities convertible into or exchangeable for Series B-1 Preferred Stock) may Beneficially Own or Constructively Own shares of Series B-1 Preferred Stock (or securities convertible into or exchangeable for Series B-1 Preferred Stock) in excess of the Series B-1 Preferred Stock Ownership Limit, but only to the extent necessary to facilitate such public offering or private placement.
- 12 -
(j) Legends. Each certificate for Series B-1 Preferred Stock, if certificated, or any written statement of information in lieu of a certificate delivered to a holder of uncertificated shares of Series B-1 Preferred Stock, may bear an appropriate legend stating all restrictions on ownership and transfer of the Series B-1 Preferred Stock. In lieu of such legend, each certificate or written statement of information delivered in lieu of a certificate, if any, may state that the Corporation will furnish a full statement about certain restrictions on ownership and transfer of the shares to a stockholder on request and without charge.
(k) Severability. If any provision of this Section 8 or any application of any such provision is determined to be invalid by any federal or state court having jurisdiction over the issues, the validity of the remaining provisions shall not be affected and other applications of such provision shall be affected only to the extent necessary to comply with the determination of such court.
(l) NYSE. Nothing in this Section 8 shall preclude the settlement of any transaction entered into through the facilities of the NYSE or any other national securities exchange or automated inter-dealer quotation system. The fact that the settlement of any transaction occurs shall not negate the effect of any other provision of this Section 8 and any transferee in such a transaction shall be subject to all of the provisions and limitations set forth in this Section 8.
9. Conversion Upon an Ownership Change of Control. The Series B-1 Preferred Stock is 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 an Ownership Change of Control, each holder of Series B-1 Preferred Stock will have the right to convert some or all of the shares of Series B-1 Preferred Stock held by such holder (the “Change of Control Conversion Right”) on the relevant Change of Control Conversion Date into a number of shares of Common Stock per share of Series B-1 Preferred Stock (the “Common Stock Conversion Consideration”) equal to the quotient obtained by dividing (i) the sum of (x) $25.00, plus (y) an amount equal to any accumulated and unpaid dividends (whether or not declared) to, but not including, the Change of Control Conversion Date, except if such Change of Control Conversion Date is after a record date fixed for a Series B-1 Preferred Stock dividend and prior to the corresponding Series B-1 Dividend Payment Date, in which case no amount for such accrued and unpaid dividend will be included in such sum, by (ii) the Common Stock Price (as defined herein) (such quotient, the “Conversion Rate”); provided, however, that in no event will the total number of shares of Common Stock to be issued upon conversion (when taken together with any shares of Common Stock previously issued to the applicable holder) exceed the number of shares of Common Stock that would be permitted to be issued upon conversion of the Series B-1 Preferred Stock in the absence of a shareholder vote taken in advance of the issuance of the Series B-1 Preferred Stock under Item 312.00 of the Listed Company Manual of the NYSE, as reasonably determined by the Board of Directors or a committee thereof (such limitation is referred to as the “NYSE Conversion Limitation”).
(b) If, upon the occurrence of an Ownership Change of Control, holders of any shares of Series B-1 Preferred Stock exercise their right to convert some or all of their Series B-1 Preferred Stock into Common Stock, but the NYSE Conversion Limitation operates to limit the number of shares of Common Stock that the Corporation may issue to such holders upon such conversion, the Series B-1 Preferred Stock that may be converted in accordance with the NYSE Conversion Limitation shall be so converted into shares of Common Stock in accordance with the preceding paragraph, while the balance of such shares of Series B-1 Preferred Stock shall be redeemed for cash at a redemption price equal to the price that would be paid if such remaining shares of Series B-1 Preferred Stock were redeemed pursuant to the Change of Control Redemption Right. If any shares of Series B-1 Preferred Stock that have been properly tendered for conversion into Common Stock pursuant to the Change of Control Conversion Right will instead be redeemed pursuant to the foregoing sentence, the shares to be so redeemed shall be selected pro rata (as nearly as practicable without creating fractional shares) among the holders thereof based on the number of shares tendered for conversion by each such holder or by any other equitable method the Corporation may choose acting reasonably. If the holders of Common Stock have the opportunity to elect the form of consideration to be received in connection with the transaction that resulted in the Ownership Change of Control, the Conversion Consideration will be the kind and amount of consideration actually received by holders of a majority of the shares of Common Stock that participated in such election (if electing between two types of consideration) or holders of a plurality of the shares of Common Stock that participated in such election (if electing between more than two types of consideration), as the case may be, and shall be subject to any limitations to which all holders of Common Stock are subject, including,
- 13 -
without limitation, pro rata reductions applicable to any portion of the consideration payable in connection with the transaction that resulted in the Ownership Change of Control. The “Common Stock Price” will be (i) if the consideration to be received in connection with the transaction that resulted in the Ownership Change of Control by holders of the Common Stock is solely cash, the amount of cash consideration per share of Common Stock, (ii) if the consideration to be received in the Ownership Change of Control by holders of Common Stock is other than solely cash, including cash, other securities or other property or assets (or any combination thereof) (the “Alternative Form Consideration”), a holder of Series B-1 Preferred Stock shall be entitled to receive upon conversion of such shares of Series B-1 Preferred Stock the average of the closing prices per share of Common Stock on the ten consecutive trading days immediately preceding, but not including, the effective date of the Ownership Change of Control, and (iii) if there is not a readily determinable closing price for the Common Stock or other consideration, the fair market value of the common stock or such other consideration, as determined in good faith by the Board of Directors or a committee thereof (the “Alternative Conversion Consideration,” and the Common Stock Conversion Consideration or the Alternative Conversion Consideration, as may be applicable to an Ownership Change of Control, shall be referred to herein as the “Conversion Consideration”).
The “Change of Control Conversion Date” shall be a Business Day specified by the Corporation in the Change of Control Notice provided in accordance with paragraph 5(b) hereof that is no less than 20 days nor more than 35 days after the date on which the Corporation gives such Change of Control Notice pursuant to paragraph 5(b) hereof.
(c) No fractional shares of Common Stock shall be issued upon the conversion of shares of Series B-1 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.
(d) The Corporation shall issue a press release for publication on the Dow Jones & Company, Inc., Business Wire, PR Newswire, Marketwire 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 paragraph (c) above to the holders of Series B-1 Preferred Stock.
(e) In order to exercise the Change of Control Conversion Right, a holder of Series B-1 Preferred Stock shall be required to deliver, on or before the close of business on the Change of Control Conversion Date, the certificates (if any) representing the shares of Series B-1 Preferred Stock to be converted, duly endorsed for transfer, together with a written conversion notice completed, to the transfer agent for the Series B-1 Preferred Stock. Such conversion notice shall state: (i) the relevant Change of Control Conversion Date; (ii) the number of shares of Series B-1 Preferred Stock to be converted; and (iii) that the shares of Series B-1 Preferred Stock are to be converted pursuant to the applicable provisions of the Series B-1 Preferred Stock. Notwithstanding the foregoing, if such procedures are applicable, such notice shall comply with applicable procedures of the Depository Trust Company (“DTC”).
(f) Holders of Series B-1 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 B-1 Preferred Stock; (ii) if certificated shares of Series B-1 Preferred Stock have been tendered for conversion, the certificate numbers of the certificates representing the withdrawn shares of Series B-1 Preferred Stock; and (iii) the number of shares of Series B-1 Preferred Stock, if any, which remain subject to the conversion notice. Notwithstanding the foregoing, if such procedures are applicable, the notice of withdrawal shall comply with applicable DTC procedures.
(g) Shares of Series B-1 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, but subject to the redemption of certain shares as contemplated by Section 9(b) as a result of the NYSE Conversion Limitation and 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 B-1 Preferred Stock pursuant to Section 5(a).
- 14 -
(h) The Corporation shall deliver the applicable Conversion Consideration no later than the third Business Day following the Change of Control Conversion Date.
(i) In connection with the exercise of any Change of Control Conversion Right, the Corporation will comply with all U.S. federal and state securities laws and stock exchange rules and DTC procedures in connection with any conversion of Series B-1 Preferred Stock into Common Stock. Notwithstanding anything to the contrary contained herein, no holder of Series B-1 Preferred Stock will be entitled to convert such Series B-1 Preferred Stock for Common Stock to the extent that receipt of such Common Stock would cause such holder (or any other person) to violate Section 7.2.1(a) of the Charter.
(j) If the Change of Control Conversion Date is after a record date fixed for a Series B-1 Preferred Stock dividend and prior to the corresponding Series B-1 Dividend Payment Date, the holders of Series B-1 Preferred Stock at the close of business on such record date will be entitled to receive the dividend payable on such shares on the corresponding Series B-1 Dividend Payment Date, notwithstanding the conversion of such shares prior to such Series B-1 Dividend Payment Date.
10. Record Holders. The Corporation and the transfer agent for the Series B-1 Preferred Stock may deem and treat the record holder of any Series B-1 Preferred Stock as the true and lawful owner thereof for all purposes, and neither the Corporation nor the transfer agent shall be affected by any notice to the contrary.
11. Acquisition by the Corporation of Shares of Series B-1 Preferred Stock. Any shares of Series B-1 Preferred Stock that shall at any time have been redeemed, repurchased or otherwise reacquired shall, after such redemption, repurchase or other reacquisition, have the status of authorized but unissued Preferred Stock, without further designation as to class or series until such shares are once more designated as part of a particular series by the Board.
SECOND: The shares of Series B-1 Preferred Stock have been classified and designated by the Board of Directors and a duly authorized committee thereof under the authority contained in Section 6.3 of Article VI of the Charter. These Articles Supplementary have been approved in the manner and by the vote required by law.
THIRD: These Articles Supplementary shall become effective at the time the SDAT accepts these Articles Supplementary for record.
FOURTH: The undersigned Chief Executive Officer and President of the Corporation acknowledges these Articles Supplementary to be the corporate act of the Corporation and, as to all matters or facts required to be verified under oath, the undersigned Chief Executive Officer and President of the Corporation 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.
- 15 -
IN WITNESS WHEREOF, the Corporation has caused these Articles Supplementary to be signed in its name and on its behalf by the Chief Executive Officer and President and attested to by its Chief Financial Officer, Treasurer and Secretary on this 14th day of July, 2021.
| APOLLO COMMERCIAL REAL ESTATE FINANCE, INC. | ||
| By: | /s/ Stuart A. Rothstein | |
| Name: Stuart A. Rothstein | ||
| Title: Chief Executive Officer and President | ||
| ATTEST: | ||
| By: | /s/ Jai Agarwal | |
| Name: Jai Agarwal | ||
| Title: Chief Financial Officer, Treasurer and Secretary | ||
[Signature Page to Articles Supplementary]
Exhibit 10.1
EXECUTION VERSION
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT, dated as of July 14, 2021, is made and entered into by and between Apollo Commercial Real Estate Finance, Inc., a Maryland corporation (the “Company”), and certain persons listed on Schedule 1 hereto (such persons, in their capacity as holders of Registrable Shares, the “Holders” and each a “Holder”).
RECITALS
WHEREAS, the Company desires to issue, and QH RE Asset Company LLC and DIC Holding II LLC (the “Existing Holders”) desire to collectively acquire 6,770,393 shares of 7.25% Series B-1 Cumulative Redeemable Perpetual Preferred Stock, $0.01 par value per share (the “Private Placement Shares”), in exchange for an equal number of shares of 8.00% Fixed-to-Floating Series B Cumulative Redeemable Perpetual Preferred Stock, $0.01 par value per share, that the Existing Holders currently own, upon the terms and conditions set forth in that certain Exchange Agreement, dated as of July 14, 2021 (the “Exchange Agreement”), relating to the Private Placement Shares;
WHEREAS, in order to induce the Existing Holders to purchase the Private Placement Shares from the Company, the Company has agreed to provide to the Holders the registration rights set forth in this Agreement; and
WHEREAS, the execution of this Agreement is a condition to the closing under the Exchange Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual promises and covenants contained in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:
Section 1. Definitions. As used in this Agreement, the following terms shall have the following meanings:
“Agreement” shall mean this Registration Rights Agreement as originally executed and as amended, supplemented or restated from time to time.
“Board” shall mean the Board of Directors of the Company.
“Business Day” shall mean any Monday, Tuesday, Wednesday, Thursday, and Friday that is not a day on which banking institutions in New York or other applicable places where such act is to occur are authorized or obligated by applicable law, regulation or executive order to close.
“Commission” shall mean the U.S. Securities and Exchange Commission.
“Common Stock” shall mean the Company’s common stock, $0.01 par value per share.
“Company” shall have the meaning set forth in the introductory paragraph hereof.
“Controlling Person” shall have the meaning set forth in Section 5(a) of this Agreement.
“Depositary” shall mean The Depository Trust Company, or any other depositary appointed by the Company, provided, however, that such depositary must have an address in the Borough of Manhattan, in the City of New York.
- 1 -
“End of Suspension Notice” shall have the meaning set forth in Section 3(b) of this Agreement.
“Exchange Act” shall mean the U.S. Securities Exchange Act of 1934, as amended (or any corresponding provision of succeeding law) and the rules and regulations thereunder.
“Exchange Agreement” shall have the meaning set forth in the Recitals hereof.
“Existing Holders” shall have the meaning set forth in the Recitals hereof.
“FINRA” shall mean the Financial Industry Regulatory Authority.
“Holder” shall mean each holder listed in Schedule 1 hereto, in his, her or its capacity as a holder of Registrable Shares and their direct and indirect transferees. For purposes of this Agreement, the Company may deem and treat the registered holder of a Registrable Share as the Holder and absolute owner thereof, unless notified to the contrary in writing by the registered Holder thereof.
“Liabilities” shall have the meaning set forth in Section 5(a)(i) of this Agreement.
“Person” shall mean any individual, partnership, corporation, limited liability company, joint venture, association, trust, unincorporated organization or other governmental or legal entity.
“Private Placement Shares” shall have the meaning set forth in the Recitals hereof.
“Prospectus” means the prospectus or prospectuses included in any Registration Statement (including without limitation, any prospectus subject to completion and a prospectus that includes any information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A promulgated under the Securities Act and any term sheet filed pursuant to Rule 434 under the Securities Act), as amended or supplemented by any prospectus supplement with respect to the terms of the offering of any portion of the Registrable Shares covered by such Registration Statement and by all other amendments and supplements to the prospectus, including post-effective amendments and all material incorporated by reference or deemed to be incorporated by reference in such prospectus or prospectuses.
“Registrable Shares” with respect to any Holder, shall mean at any time the Private Placement Shares; provided, however, that Registrable Shares shall cease to be Registrable Shares with respect to any Holder upon the earliest to occur of (A) when such Registrable Shares shall have been disposed of pursuant to a Registration Statement, (B) when all of such Holder’s Registrable Shares may be sold without restriction pursuant to Rule 144(b) under the Securities Act or (C) when such Holder’s Registrable Shares shall have ceased to be outstanding.
“Registration Expenses” shall mean (i) the fees and disbursements of counsel and independent public accountants for the Company incurred in connection with the Company’s performance of or compliance with this Agreement, including the expenses of any special audits or “comfort” letters required by or incident to such performance and compliance, and any premiums and other costs of policies of insurance obtained by the Company against liabilities arising out of the sale of any securities and (ii) all registration, filing and stock exchange fees, all fees and expenses of complying with securities or “blue sky” laws, all fees and expenses of custodians, transfer agents and registrars, all printing expenses, messenger and delivery expenses and any reasonable fees and disbursements of one common counsel and applicable local counsel for the Holders of Registrable Shares, as retained by Holders of a majority of the Registrable Shares to be included in any related Registration Statement; provided, however, that “Registration Expenses” shall not include any out-of-pocket expenses of the Holders,
- 2 -
transfer taxes, underwriting or brokerage commissions or discounts associated with effecting any sales of Registrable Shares that may be offered, which expenses shall be borne by each Holder of Registrable Shares on a pro rata basis with respect to the Registrable Shares so sold.
“Registration Statement” means any registration statement of the Company filed with the Commission under the Securities Act which covers any of the Registrable Shares pursuant to the provisions of this Agreement, including the Prospectus, amendments and supplements to such Registration Statement, including post-effective amendments, all exhibits and all materials incorporated by reference or deemed to be incorporated by reference in such Registration Statement.
“Securities Act” shall mean the U.S. Securities Act of 1933, as amended, and the rules and regulations thereunder.
“Selling Holders’ Counsel” shall mean counsel for the Holders that is selected by the Holders holding a majority of the Registrable Shares included in a Registration Statement and that is reasonably acceptable to the Company.
“Suspension Event” shall have the meaning set forth in Section 3(b) of this Agreement.
“Suspension Notice” shall have the meaning set forth in Section 3(a) of this Agreement.
“Underwritten Offering” shall mean a sale of securities of the Company to an underwriter or underwriters for reoffering to the public.
Section 2. Shelf Registration.
(a) The Company agrees to use commercially reasonable efforts to file, on or before the date that is 180 days after the date of this Agreement, with the Commission a Registration Statement for the resale of the Registrable Shares under the Securities Act for the offering to be made on a continuous basis pursuant to Rule 415 under the Securities Act. The Company will use commercially reasonable efforts to cause such Registration Statement to be declared effective by the Commission as soon as practicable after the filing thereof. The Registration Statement shall be on an appropriate form and the Registration Statement and any form of prospectus included therein (or prospectus supplement relating thereto) shall reflect the plan of distribution or method of sale as the Holders may from time to time notify the Company. All of the Registrable Shares of any Holder shall be included in the Registration Statement without any further action by any Holder.
(b) Effectiveness. The Company shall use commercially reasonable efforts to keep the Registration Statement continuously effective for the period beginning on the date on which the Registration Statement is declared or becomes effective and ending on the date that no Registrable Shares remain as Registrable Shares. During the period that the Registration Statement is effective, the Company shall supplement or make amendments to the Registration Statement, if required by the Securities Act or if reasonably requested by the Holders (whether or not required by the form on which the securities are being registered), including to reflect any specific plan of distribution or method of sale, and shall use its commercially reasonable efforts to have such supplements and amendments declared effective, if required, as soon as practicable after filing.
(c) Selection of Underwriters. If any offering pursuant to a Registration Statement is an Underwritten Offering, a majority-in-interest of the Holders participating in such Underwritten Offering shall have the right to select the managing underwriter or underwriters to administer any such offering, which managing underwriter or underwriters shall be reasonably acceptable to the Company.
- 3 -
Section 3. Black-Out Periods.
(a) Subject to the provisions of this Section 3, the Company shall be permitted, in limited circumstances, to suspend the use, from time to time, of the Prospectus that is part of a Registration Statement (and therefore suspend sales of the Registrable Shares under such Registration Statement), by providing written notice (a “Suspension Notice”) to the Selling Holders’ Counsel, if any, and the Holders and by issuing a press release, making a filing with the Commission or such other means that the Company reasonably believes to be a reliable means of communication, for such times as the Company reasonably may determine is necessary and advisable (but in no event for more than an aggregate of 90 days in any rolling 12-month period commencing on the date of this Agreement or more than 45 consecutive days, except as a result of a refusal by the Commission to declare any post-effective amendment to the Registration Statement effective after the Company has used all commercially reasonable efforts to cause the post-effective amendment to be declared effective by the Commission, in which case, the Company must terminate the black-out period immediately following the effective date of the post-effective amendment) if any of the following events shall occur: (i) a majority of the Board determines in good faith that (A) the offer or sale of any Registrable Shares would materially impede, delay or interfere with any proposed financing, offer or sale of securities, acquisition, corporate reorganization or other material transaction involving the Company, (B) after the advice of counsel, the sale of Registrable Shares pursuant to the Registration Statement would require disclosure of non-public material information not otherwise required to be disclosed under applicable law, and (C) (x) the Company has a bona fide business purpose for preserving the confidentiality of such transaction, (y) disclosure would have a material adverse effect on the Company or the Company’s ability to consummate such transaction, or (z) such transaction renders the Company unable to comply with Commission requirements, in each case under circumstances that would make it impractical or inadvisable to cause the Registration Statement (or such filings) to become effective or to promptly amend or supplement the Registration Statement on a post effective basis, as applicable; or (ii) a majority of the Board determines in good faith, upon the advice of counsel, that it is in the Company’s best interest or it is required by law, rule or regulation to supplement the Registration Statement or file a post-effective amendment to the Registration Statement in order to ensure that the prospectus included in the Registration Statement (1) contains the information required under Section 10(a)(3) of the Securities Act; (2) discloses any facts or events arising after the effective date of the Registration Statement (or of the most recent post-effective amendment) that, individually or in the aggregate, represents a fundamental change in the information set forth therein; or (3) discloses any material information with respect to the plan of distribution that was not disclosed in the Registration Statement or any material change to such information. Upon the occurrence of any such suspension, the Company shall use its commercially reasonable efforts to cause the Registration Statement to become effective or to promptly amend or supplement the Registration Statement on a post effective basis or to take such action as is necessary to make resumed use of the Registration Statement as soon as possible.
(b) In the case of an event that causes the Company to suspend the use of a Registration Statement as set forth in paragraph (a) above (a “Suspension Event”), the Company shall give a Suspension Notice to the Selling Holders’ Counsel, if any, and the Holders to suspend sales of the Registrable Shares and such notice shall state generally the basis for the notice and that such suspension shall continue only for so long as the Suspension Event or its effect is continuing and the Company is using its commercially reasonable efforts and taking all reasonable steps to terminate suspension of the use of the Registration Statement as promptly as possible. A Holder shall not effect any sales of the Registrable Shares pursuant to such Registration Statement (or such filings) at any time after it has received a Suspension Notice from the Company and prior to receipt of an End of Suspension Notice (as defined below). If so directed by the Company, each Holder will deliver to the Company (at the expense of the Company) all copies other than permanent file copies then in such Holder’s possession of the prospectus covering the Registrable Shares at the time of receipt of the Suspension Notice. The Holders
- 4 -
may recommence effecting sales of the Registrable Shares pursuant to the Registration Statement (or such filings) following further written notice to such effect (an “End of Suspension Notice”) from the Company, which End of Suspension Notice shall be given by the Company to the Holders and to the Selling Holders’ Counsel, if any, promptly following the conclusion of any Suspension Event and its effect.
(c) Notwithstanding any provision herein to the contrary, if the Company shall give a Suspension Notice with respect to any Registration Statement pursuant to this Section 3, the Company agrees that it shall extend the period of time during which such Registration Statement shall be maintained effective pursuant to this Agreement by the number of days during the period from the date of receipt by the Holders of the Suspension Notice to and including the date of receipt by the Holders of the End of Suspension Notice and provide copies of the supplemented or amended prospectus necessary to resume sales, with respect to each Suspension Event; provided that such period of time shall not be extended beyond the date that Private Placement Shares covered by such Registration Statement are no longer Registrable Shares.
Section 4. Registration Procedures.
(a) In connection with the filing of any Registration Statement as provided in this Agreement, the Company shall use commercially reasonable efforts to effect the registration pursuant to Section 2 and to cooperate with the selling Holders named in the Registration Statement to resell such Registrable Shares in accordance with the plan of distribution set forth therein, and the Company will, as expeditiously as reasonably practicable:
(i) prepare and file with the Commission the Registration Statement, within the relevant time period specified in Section 2, on the appropriate form under the Securities Act, which form (1) shall be selected by the Company, (2) shall be available for the registration and sale of the Registrable Shares by the selling Holders thereof, (3) shall comply as to form in all material respects with the requirements of the applicable form and include or incorporate by reference all financial statements required by the Commission to be filed therewith or incorporated by reference therein, and (4) shall comply in all respects with the requirements of Regulation S-T under the Securities Act, and otherwise comply with its obligations under Section 2;
(ii) prepare and file with the Commission such amendments and post-effective amendments to the Registration Statement as may be necessary under applicable law to keep such Registration Statement effective for the applicable period; and cause each prospectus to be supplemented by any required prospectus supplement, and as so supplemented to be filed pursuant to Rule 424 (or any similar provision then in force) under the Securities Act and comply with the provisions of the Securities Act, the Exchange Act and the rules and regulations thereunder applicable to them with respect to the disposition of all securities covered by the Registration Statement during the applicable period in accordance with the intended method or methods of distribution by the selling Holders thereof;
(iii) (1) notify each Holder of Registrable Shares, at least five Business Days after filing, that a Registration Statement with respect to the Registrable Shares has been filed and advising such Holders that the distribution of Registrable Shares will be made in accordance with any method or combination of methods legally available by the Holders of any and all Registrable Shares; (2) furnish to each Holder of Registrable Shares and to each underwriter of an Underwritten Offering of Registrable Shares, if any, without charge, as many copies of each prospectus, including each preliminary prospectus, and any amendment or supplement thereto
- 5 -
and such other documents as such Holder or underwriter may reasonably request, including financial statements and schedules in order to facilitate the public sale or other disposition of the Registrable Shares; and (3) hereby consent to the use of the prospectus or any amendment or supplement thereto by each of the selling Holders of Registrable Shares in connection with the offering and sale of the Registrable Shares covered by the prospectus or any amendment or supplement thereto;
(iv) (A) use its commercially reasonable efforts to register or qualify the Registrable Shares under all applicable state securities or “blue sky” laws of such jurisdictions as any Holder of Registrable Shares covered by a Registration Statement and each underwriter of an Underwritten Offering of Registrable Shares shall reasonably request by the time the applicable Registration Statement is declared effective by the Commission and (B) do any and all other acts and things which may be reasonably necessary or advisable to enable each such Holder and underwriter to consummate the disposition in each such jurisdiction of such Registrable Shares owned by such Holder; provided, however, that the Company shall not be required to (1) qualify as a foreign corporation or as a dealer in securities in any jurisdiction where it would not otherwise be required to qualify but for this Section 4(a)(iv), or (2) take any action which would subject it to general service of process or taxation in any such jurisdiction where it is not then so subject;
(v) notify promptly each Holder of Registrable Shares under a Registration Statement and the underwriters, if any, and, if requested by such Holder, confirm such advice in writing promptly at the address determined in accordance with Section 7(e) of this Agreement (1) when a Registration Statement has become effective and when any post-effective amendments and supplements thereto become effective, (2) of any request by the Commission or any state securities authority for post-effective amendments and supplements to a Registration Statement and prospectus or for additional information after the Registration Statement has become effective, (3) of the issuance by the Commission or any state securities authority of any stop order suspending the effectiveness of a Registration Statement or the initiation of any proceedings for that purpose, (4) if, between the effective date of a Registration Statement and the closing of any sale of Registrable Shares covered thereby, the representations and warranties of the Company contained in any underwriting agreement, securities sales agreement or other similar agreement, if any, relating to the offering cease to be true and correct in all material respects, (5) of the happening of any event or the discovery of any facts during the period a Registration Statement is effective as a result of which such Registration Statement or any document incorporated by reference therein contains any untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading or, in the case of the prospectus, contains any untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading (which information shall be accompanied by an instruction to suspend the use of the Registration Statement and the prospectus (such instruction to be provided in the same manner as a Suspension Notice) until the requisite changes have been made, at which time notice of the end of suspension shall be delivered in the same manner as an End of Suspension Notice), (6) of the receipt by the Company of any notification with respect to the suspension of the qualification of the Registrable Shares, for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose and (7) of the filing of a post-effective amendment to such Registration Statement;
(vi) furnish Selling Holders’ Counsel, if any, copies of any comment letters relating to the selling Holders received from the Commission or any other request by the Commission or any state securities authority for amendments or supplements to a Registration Statement and prospectus or for additional information relating to the selling Holders;
- 6 -
(vii) make every reasonable effort to obtain the withdrawal of any order suspending the effectiveness of a Registration Statement at the earliest possible moment;
(viii) furnish to each Holder of Registrable Shares, and each underwriter, if any, without charge, at least one conformed copy of the Registration Statement and any post-effective amendment thereto, including financial statements and schedules (without documents incorporated therein by reference and all exhibits thereto, unless requested) and such number of conformed copies thereof and any amendments thereto and any documents incorporated by reference therein, as such Holder of Registrable Shares or underwriter may reasonably request in order to facilitate the disposition of the Registrable Shares being sold by such Holder of Registrable Shares;
(ix) cooperate with the selling Holders and any underwriters to facilitate the timely preparation and delivery of certificates representing Registrable Shares to be sold under such registration and not bearing any restrictive legends; and enable such Registrable Shares to be in such denominations and registered in such names as the selling Holders or the underwriters, if any, may reasonably request at least three Business Days prior to the closing of any sale of Registrable Shares;
(x) upon the occurrence of any event or the discovery of any facts, as contemplated by Sections 4(a)(v)(5) and 4(a)(v)(6) hereof, as promptly as practicable after the occurrence of such an event, use its best efforts to prepare a supplement or post-effective amendment to the Registration Statement or the related prospectus or any document incorporated therein by reference or file any other required document so that, as thereafter delivered to the purchasers of the Registrable Shares, such prospectus will not contain at the time of such delivery any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, or will remain so qualified, as applicable. At such time as such public disclosure is otherwise made or the Company determines that such disclosure is not necessary, in each case to correct any misstatement of a material fact or to include any omitted material fact, the Company agrees promptly to notify each Holder of such determination and to furnish each Holder such number of copies of the prospectus as amended or supplemented, as such Holder may reasonably request;;
(xi) within a reasonable time prior to the filing of any Registration Statement, any prospectus, any amendment to a Registration Statement or amendment or supplement to a prospectus, provide copies of such document to the Selling Holders’ Counsel, if any, on behalf of such Holders, and make representatives of the Company as shall be reasonably requested by the Holders of Registrable Shares available for discussion of such document;
(xii) obtain a CUSIP number for the Registrable Shares not later than the effective date of a Registration Statement, and provide the Company’s transfer agent with printed certificates for the Registrable Shares, in a form eligible for deposit with the Depositary, in each case, to the extent necessary or applicable;
(xiii) enter into agreements (including underwriting agreements) and take all other customary appropriate actions in order to expedite or facilitate the disposition of such Registrable Shares whether or not an underwriting agreement is entered into and whether or not the registration is an underwritten registration:
- 7 -
(A) make such representations and warranties to the Holders of such Registrable Shares and the underwriters, if any, in form, substance and scope as are customarily made by issuers to underwriters in similar Underwritten Offerings as may be reasonably requested by them;
(B) obtain opinions of counsel to the Company and updates thereof (which counsel and opinions (in form, scope and substance) shall be reasonably satisfactory to any managing underwriter(s) and their counsel) addressed to the underwriters, if any (and in the case of an underwritten registration, each selling Holder), covering the matters customarily covered in opinions requested in Underwritten Offerings and such other matters as may be reasonably requested by the underwriter(s);
(C) obtain “comfort” letters and updates thereof from the Company’s independent registered public accounting firm (and, if necessary, any other independent certified public accountants of any subsidiary of the Company or of any business acquired by the Company for which financial statements are, or are required to be, included in the Registration Statement) addressed to the underwriter(s), if any, and use reasonable efforts to have such letter addressed to the selling Holders in the case of an underwritten registration (to the extent consistent with Statement on Auditing Standards No. 72 of the American Institute of Certified Public Accounts), such letters to be in customary form and covering matters of the type customarily covered in “comfort” letters to underwriters in connection with similar Underwritten Offerings;
(D) enter into a securities sales agreement with the Holders and an agent of the Holders providing for, among other things, the appointment of such agent for the selling Holders for the purpose of soliciting purchases of Registrable Shares, which agreement shall be in form, substance and scope customary for similar offerings;
(E) if an underwriting agreement is entered into, cause the same to set forth indemnification provisions and procedures substantially equivalent to the indemnification provisions and procedures set forth in Section 5 hereof with respect to the underwriters and all other parties to be indemnified pursuant to said Section or, at the request of any underwriters, in the form customarily provided to such underwriters in similar types of transactions; and
(F) deliver such documents and certificates as may be reasonably requested and as are customarily delivered in similar offerings to the Holders of a majority in principal amount of the Registrable Shares being sold and the managing underwriters, if any;
(xiv) make available for inspection by any underwriter participating in any disposition pursuant to a Registration Statement, Selling Holders’ Counsel and any accountant retained by a majority in principal amount of the Registrable Shares being sold, all financial and other records, pertinent corporate documents and properties or assets of the Company reasonably requested by any such persons, and cause the respective officers, directors, employees, and any other agents of the Company to supply all information reasonably requested by any such representative, underwriter, counsel or accountant in connection with a Registration Statement, and make such representatives of the Company available for discussion of such documents as shall be reasonably requested by the Company; provided, however, that the Selling Holders’ Counsel, if any, and the representatives of any underwriters will use commercially reasonable efforts, to the extent reasonably practicable, to coordinate the foregoing inspection and information gathering and to not materially disrupt the Company’s business operations;
- 8 -
(xv) a reasonable time prior to filing any Registration Statement, any prospectus forming a part thereof, any amendment to such Registration Statement, or amendment or supplement to such prospectus, provide copies of such document to the underwriter(s) of an Underwritten Offering of Registrable Shares; within five Business Days after the filing of any Registration Statement, provide copies of such Registration Statement to Selling Holders’ Counsel; make such changes in any of the foregoing documents prior to the filing thereof, or in the case of changes received from Selling Holders’ Counsel by filing an amendment or supplement thereto, as the underwriter or underwriters, or in the case of changes received from Selling Holders’ Counsel relating to the selling Holders or the plan of distribution of Registrable Shares, as Selling Holders’ Counsel, reasonably requests; not file any such document in a form to which any underwriter shall not have previously been advised and furnished a copy of or to which the Selling Holders’ Counsel, if any, on behalf of the Holders of Registrable Shares, or any underwriter shall reasonably object; not include in any amendment or supplement to such documents any information about the selling Holders or any change to the plan of distribution of Registrable Shares that would limit the method of distribution of the Registrable Shares unless Selling Holders’ Counsel has been advised in advance and has approved such information or change; and make the representatives of the Company available for discussion of such document as shall be reasonably requested by the Selling Holders’ Counsel, if any, on behalf of such Holders, Selling Holders’ Counsel or any underwriter;
(xvi) furnish to each Holder, if it has a due diligence defense under the Securities Act, and to each underwriter, if any, a signed counterpart, addressed to such Holder or underwriter, of (i) an opinion or opinions of counsel to the Company and (ii) if eligible under SAS 72, a comfort letter or comfort letters from the Company’s independent public accountants, each in customary form and covering such matters of the type customarily covered by opinions or comfort letters, as the case may be, as the Holders of a majority of the Registrable Shares included in such offering or the managing underwriter or underwriters therefor reasonably requests;
(xvii) use its commercially reasonable efforts to cause all Registrable Shares to be listed on any national securities exchange following the effective date of the Registration Statement, on the national securities exchange on which the Company’s Common Stock is then listed;
(xviii) otherwise comply with all applicable rules and regulations of the Commission and make available to its security holders, as soon as reasonably practicable, an earnings statement covering at least 12 months which shall satisfy the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder; which requirement will be deemed to be satisfied if the Company timely files complete and accurate information on Forms 10-K, 10-Q and 8-K under the Exchange Act and otherwise complies with Rule 158 under the Securities Act or any successor rule thereto;
(xix) cooperate and assist in any filings required to be made with the FINRA and in the performance of any due diligence investigation by any underwriter and its counsel (including any “qualified independent underwriter” that is required to be retained in accordance with the rules and regulations of the FINRA);
- 9 -
(xx) use its commercially reasonable efforts to support the marketing of the Registrable Shares (including by its officers, directors, or other relevant employees participating in “road shows” at the request of the Holders of Registrable Shares or the underwriters, if any) to the extent reasonably practicable taking into account the Company’s business needs and the requirements of the marketing process; and
(xxi) the Company may (as a condition to a Holder’s participation) require each Holder of Registrable Shares to furnish to the Company such information regarding the Holder and the proposed distribution by such Holder of such Registrable Shares as the Company may from time to time reasonably request in writing.
Each Holder agrees that, upon receipt of any notice from the Company of the happening of any event or the discovery of any facts of the type described in Section 4(a)(v) hereof, such Holder will forthwith discontinue disposition of Registrable Shares pursuant to a Registration Statement relating to such Registrable Shares until such Holder’s receipt of the copies of the supplemented or amended prospectus contemplated by Section 4(a)(v) hereof, and, if so directed by the Company, such Holder will deliver to the Company (at the Company’s expense) all copies in such Holder’s possession, other than permanent file copies then in such Holder’s possession, of the prospectus covering such Registrable Shares current at the time of receipt of such notice.
Section 5. Indemnification.
(a) Indemnification by the Company. The Company agrees to indemnify and hold harmless each Holder, and the respective officers, directors, managers, employees, representatives and agents of any such Person, and each Person (a “Controlling Person”), if any, who controls (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) any of the foregoing Persons, to the fullest extent permitted by applicable law, as follows:
(i) from and against any and all loss, liability, claim, damage, judgment, actions, other liabilities and expense whatsoever (the “Liabilities”), as incurred by any of them, arising out of or in connection with any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement (or any amendment or supplement thereto) pursuant to which Registrable Shares were registered under the Securities Act, including all documents incorporated therein by reference, or the omission or alleged omission therefrom of a material fact required to be stated therein or necessary to make the statements therein not misleading, or (ii) any untrue statement or alleged untrue statement of a material fact contained in any prospectus (or any amendment or supplement thereto) or the omission or alleged omission therefrom at such date of a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading;
(ii) from and against any and all Liabilities, as incurred, to the extent of the aggregate amount paid in settlement of any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or of any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission; provided that (subject to Section 5(d) below) any such settlement is effected with the written consent of the Company; and
(iii) from and against any and all legal or other expenses whatsoever, as incurred (including the fees and disbursements of counsel chosen by any indemnified party), reasonably incurred in investigating, preparing or defending against any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or
- 10 -
any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission, to the extent that any such expense is not paid under subparagraph (i) or (ii) above;
provided, however, that this indemnity agreement shall not apply to any Liabilities to the extent arising out of any untrue statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with written information furnished to the Company by the Holder expressly for use in a Registration Statement (or any amendment thereto) or any prospectus (or any amendment or supplement thereto).
(b) Indemnification by the Holders. Each Holder severally, but not jointly, agrees to indemnify and hold harmless the Company and the other selling Holders, and each of their respective officers, directors, managers, employees, representatives and agents, and each of their respective Controlling Persons, to the fullest extent permitted by applicable law, from and against any and all Liabilities described in the indemnity contained in Section 5(a) hereof, as incurred, but only with respect to untrue statements or omissions, or alleged untrue statements or omissions, made in the Registration Statement (or any amendment thereto) or any prospectus included therein (or any amendment or supplement thereto) in reliance upon and in conformity with written information with respect to such Holder furnished to the Company by such Holder expressly for use in the Registration Statement (or any amendment thereto) or such prospectus (or any amendment or supplement thereto); provided, however, that no such Holder shall be liable for any claims hereunder in excess of the amount of net proceeds (after deducting underwriters’ discounts and commissions) received by such Holder from the sale of Registrable Shares pursuant to such Registration Statement.
(c) Notices of Claims, etc. Each indemnified party shall give notice as promptly as reasonably practicable to each indemnifying party of any action or proceeding commenced against it in respect of which indemnity may be sought hereunder, but failure to so notify an indemnifying party shall not relieve such indemnifying party from any liability hereunder to the extent it is not materially prejudiced as a result thereof and in any event shall not relieve it from any liability which it may have otherwise than on account of this indemnity agreement. An indemnifying party may participate therein and, to the extent that it shall wish, assume the defense of such action, with counsel reasonably satisfactory to such indemnified party, assuming the payment of all fees and expenses; provided, however, that counsel to the indemnifying party shall not (except with the consent of the indemnified party) also be counsel to the indemnified party. Notwithstanding the indemnifying party’s rights in the immediately preceding sentence, the indemnified party shall have the right to employ its own counsel (in addition to any local counsel), and the indemnifying party shall bear the reasonable fees, costs, and expenses of such separate counsel if (a) the use of counsel chosen by the indemnifying party to represent the indemnified party would present such counsel with a conflict of interest; or (b) the indemnifying party shall authorize the indemnified party to employ separate counsel at the expense of the indemnifying party. In no event shall the indemnifying party or parties be liable for the fees and expenses of more than one counsel (in addition to any local counsel) separate from their own counsel for all indemnified parties in connection with any one action or separate but similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances. No indemnifying party shall, without the prior written consent of the indemnified parties, settle or compromise or consent to the entry of any judgment with respect to any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whosoever in respect of which indemnification or contribution could be sought under this Section 5 (whether or not the indemnified parties are actual or potential parties thereto), unless such settlement, compromise or consent (i) includes an unconditional release of each indemnified party from all liability arising out of such litigation, investigation, proceeding or claim and (ii) does not include a statement as to or an admission of fault, culpability or a failure to act by or on behalf of any indemnified party.
- 11 -
(d) Indemnification Payments. If at any time an indemnified party shall have requested an indemnifying party to reimburse the indemnified party for fees and expenses of counsel, such indemnifying party agrees that it shall be liable for any settlement of the nature contemplated by Section 5(a)(ii) effected without its written consent if (i) such settlement is entered into more than 45 days after receipt by such indemnifying party of the aforesaid request, (ii) such indemnifying party shall have received notice of the terms of such settlement at least 30 days prior to such settlement being entered into and (iii) such indemnifying party shall not have reimbursed such indemnified party in accordance with such request prior to the date of such settlement.
(e) Contribution. If the indemnification provided for in this Section 5 is for any reason unavailable to or insufficient to hold harmless an indemnified party in respect of any Liabilities referred to therein, then each indemnifying party shall contribute to the aggregate amount of such Liabilities incurred by such indemnified party, as incurred, in such proportion as is appropriate to reflect the relative fault of the Company on the one hand and the Holders on the other hand in connection with the statements or omissions which resulted in such Liabilities, as well as any other relevant equitable considerations.
The relative fault of the Company on the one hand and the Holders on the other hand shall be determined by reference to, among other things, whether any such untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by the Company or the Holders and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission.
The Company and the Holders agree that it would not be just and equitable if contribution pursuant to this Section 5 were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to above in this Section 5. The aggregate amount of Liabilities incurred by an indemnified party and referred to above in this Section 5 shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in investigating, preparing or defending against any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever based upon any such untrue or alleged untrue statement or omission or alleged omission.
No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation.
For purposes of this Section 5, each Person, if any, who controls a Holder within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, and each director, officer, manager, employee, and agent of any such Holder shall have the same rights to contribution as a Holder, and each director of the Company, and each Person, if any, who controls the Company within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act shall have the same rights to contribution as the Company.
Section 6. Termination; Survival. The rights of each Holder under this Agreement shall terminate upon the date that all of the Registrable Shares cease to be Registrable Shares. Notwithstanding the foregoing, the obligations of the parties under Section 5 of this Agreement shall remain in full force and effect following such time.
- 12 -
Section 7. Miscellaneous.
(a) Covenants Relating To Rule 144. For so long as the Company is subject to the reporting requirements of Section 13 or 15 of the Securities Act, the Company covenants that it will file the reports required to be filed by it under the Securities Act and Section 13(a) or 15(d) of the Exchange Act and the rules and regulations adopted by the Commission thereunder. If the Company ceases to be so required to file such reports, the Company covenants that it will upon the request of any Holder of Registrable Shares (a) make publicly available such information as is necessary to permit sales pursuant to Rule 144 under the Securities Act, (b) deliver such information to a prospective purchaser as is necessary to permit sales pursuant to Rule 144A under the Securities Act and it will take such further action as any Holder of Registrable Shares may reasonably request, and (c) take such further action that is reasonable in the circumstances, in each case to the extent required from time to time to enable such Holder to sell its Registrable Shares without registration under the Securities Act within the limitation of the exemptions provided by (i) Rule 144 under the Securities Act, as such Rule may be amended from time to time, (ii) Rule 144A under the Securities Act, as such rule may be amended from time to time, or (iii) any similar rules or regulations hereafter adopted by the Commission. Upon the request of any Holder of Registrable Shares, the Company will deliver to such Holder a written statement as to whether it has complied with such requirements and of the Securities Act and the Exchange Act, a copy of the most recent annual and quarterly report(s) of the Company, and such other reports, documents or stockholder communications of the Company, and take such further actions consistent with this Section 7(a), as a Holder may reasonably request in availing itself of any rule or regulation of the Commission allowing a Holder to sell any such Registrable Shares without registration.
(b) No Inconsistent Agreements. The Company has not entered into and the Company will not after the date of this Agreement enter into any agreement which is inconsistent with the rights granted to the Holders of Registrable Shares pursuant to this Agreement or otherwise conflicts with the provisions of this Agreement. The rights granted to the Holders hereunder do not and will not for the term of this Agreement in any way conflict with the rights granted to the holders of the Company’s other issued and outstanding securities under any such agreements.
(c) Expenses. All Registration Expenses incurred in connection with any Registration Statement shall be borne by the Company, whether or not any Registration Statement related thereto becomes effective.
(d) Amendments and Waivers. The provisions of this Agreement may be amended or waived at any time only by the written agreement of the Company and the Holders of a majority of the Registrable Shares; provided, however, that the provisions of this Agreement may not be amended or waived without the consent of the Holders of all the Registrable Shares adversely affected by such amendment or waiver if such amendment or waiver adversely affects a portion of the Registrable Shares but does not so adversely affect all of the Registrable Shares; provided, further, that the provisions of the preceding provision may not be amended or waived except in accordance with this sentence. Any waiver, permit, consent or approval of any kind or character on the part of any such Holders of any provision or condition of this Agreement must be made in writing and shall be effective only to the extent specifically set forth in writing. Any amendment or waiver effected in accordance with this paragraph shall be binding upon each Holder of Registrable Shares and the Company.
(e) Notices. Any notices, consents, waivers or other communications required or permitted to be given under the terms of this Agreement must be in writing and will be deemed to have been delivered: (i) upon receipt, when delivered personally; (ii) upon receipt, when sent by facsimile (provided confirmation of transmission is mechanically or electronically generated and kept on file by the sending party); or (iii) one Business Day after deposit with an overnight courier service, in each case properly addressed to the party to receive the same. The addresses and facsimile numbers for such communications shall be:
- 13 -
If to the Company:
Apollo Commercial Real Estate Finance, Inc.
c/o Apollo Global Management, LLC
9 West 57th Street, 43rd Floor
New York, New York 10019
Attention: John J. Suydam
Facsimile: 212-515-3251
with a copy (for informational purposes only) to:
Clifford Chance US LLP
31 West 52nd Street
New York, New York 10019
Attention: Andrew S. Epstein
Facsimile: 212-878-8375
(f) Successor and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors, assigns and transferees of each of the parties, including, without limitation and without the need for an express assignment, subsequent Holders; provided, however, that nothing herein shall be deemed to permit any assignment, transfer or other disposition of Registrable Shares in violation of the terms of the Exchange Agreement. If any transferee of any Holder shall acquire Registrable Shares, in any manner, whether by operation of law or otherwise, such Registrable Shares shall be held subject to all of the terms of this Agreement, and by taking and holding such Registrable Shares such person shall be conclusively deemed to have agreed to be bound by and to perform all of the terms and provisions of this Agreement, including the restrictions on resale set forth in this Agreement and, if applicable, the Exchange Agreement, and such person shall be entitled to receive the benefits hereof.
(g) Specific Enforcement. Without limiting the remedies available to the Holders, the Company acknowledges that any failure by the Company to comply with its obligations under Section 2 hereof may result in material irreparable injury to the Holders for which there is no adequate remedy at law, that it would not be possible to measure damages for such injuries precisely and that, in the event of any such failure, a Holder may obtain such relief as may be required to specifically enforce the Company’s obligations under Section 2 hereof.
(h) Counterparts. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement.
(i) Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof.
(j) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
(k) Arbitration. By mutual consent of the Company and the Holders made at the time of any dispute hereunder, which either party may grant or withhold in its sole discretion, any action or proceedings brought by a party to recover damages in respect of any disagreement or dispute in connection with this agreement may be submitted to and finally settled by arbitration in accordance with
- 14 -
the Rules of Arbitration of the International Chamber of Commerce before a panel of three arbitrators selected in accordance with such Rules. The site of any such arbitration shall be Manhattan, New York, New York or such other place as Company and Holders shall agree at the time, and the proceedings shall be conducted in the English language. Any such arbitration award obtained pursuant to this clause shall be final and binding on the parties. The parties undertake to carry out any award without delay and the parties agree that judgment upon any such award may be entered by any court having jurisdiction or having jurisdiction over the relevant party or its assets.
(l) Anti-Corruption Matters. The Company has not obtained or induced directly or indirectly through any party the procurement of the Existing Holders’ investment in the Private Placement Shares or any contract, consent, right, interest, privilege or other obligation or benefit related to Private Placement Shares or a favorable relationship with the Existing Holders or its affiliates through any violation of law or regulation applicable to the Company or its respective affiliates in any jurisdiction in which they carry on business, nor has it given or agreed to give to any Person, either directly or indirectly, any placement fee, introductory fee, arrangement fee, finder’s fee or any other fee, compensation, monetary benefit or any other benefit, gift, commission, gratification, bribe or kickback, whether described as a consultation fee or otherwise, with the object of obtaining or inducing the procurement of the Private Placement Shares or any contract, right, privilege or other obligation or benefit related to the Private Placement Shares.
(m) Severability. In the event that any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be affected or impaired thereby.
[SIGNATURE PAGE FOLLOWS]
- 15 -
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed as of the date first written above.
| APOLLO COMMERCIAL REAL ESTATE FINANCE, INC., a Maryland corporation | ||||
| By: | /s/ Stuart A. Rothstein | |||
| Name: | Stuart A. Rothstein | |||
| Title: | Chief Executive Officer and President | |||
| QH RE ASSET COMPANY LLC, a Qatar limited liability company | ||||
| By: | /s/ Ahmed Al-Hammadi | |||
| Name: | Ahmed Al-Hammadi | |||
| Title: | Director and Chairman | |||
| DIC Holding II LLC, a Qatar limited liability company | ||||
| By: | /s/ Abdulaziz Al-Sehlawi | |||
| Name: | Abdulaziz Al-Sehlawi | |||
| Title: | Director | |||
Registration Rights Agreement
SCHEDULE 1
HOLDERS
| Name of the Holder |
Number of Private Placement Shares Held |
Address of the Holder | ||||
| QH RE Asset Company LLC |
5,416,314 | |||||
| DIC Holding II LLC |
1,354,079 | |||||
Sch.1