Exhibit 10.1

 

PURCHASE AGREEMENT

 

This Purchase Agreement (the “Agreement”) is made as of May 30, 2019 by and
among Medalist Diversified REIT, Inc., a Maryland corporation (the “Company”)
and the sole general partner of Medalist Diversified Holdings L.P., a Delaware
limited partnership (the “Operating Partnership,” and together with the Company,
the “Transaction Entities”), and Virginia Birth-Related Neurological Injury
Compensation Program (the “Purchaser”).

 

IN CONSIDERATION of the mutual covenants contained in this Agreement, the
Company and the Purchaser agree as follows:

 

SECTION 1.         Authorization and Sale of Common Stock

 

1.1.        Authorization of Sale of the Shares; Contribution to Operating
Partnership. Subject to the terms and conditions of this Agreement, the Company
has authorized the sale (the “Sale”) of up to [270,833] shares (the “Shares”) of
the Company’s common stock, $0.01 per share (the “Common Stock”). The Shares
shall be sold at one closing of the Sale (the “Closing”). The Sale is being made
pursuant to the offering terms set forth in the Company’s Confidential Private
Placement Memorandum dated May 30, 2019, as may be amended and/or supplemented
from time to time and including all exhibit and appendices thereto
(collectively, the “Memorandum”). Concurrently with or immediately following the
Closing, the Company will contribute the net proceeds of the Sale to the
Operating Partnership in exchange for a number of OP Units of partnership
interest in the Operating Partnership (the “OP Units”) that is equivalent to the
number of Shares sold to the Purchaser.

 

1.2.        Closing. The date and time of the Closing (the "Closing Date") shall
be 10:00 a.m., New York City time, on the date hereof (or such other date and
time as is mutually agreed to by the Company and the Purchaser) after
notification of satisfaction (or waiver) of the conditions to the Closing set
forth in Sections 5 and 6 below, at the offices of Sichenzia Ross Ference LLP,
1185 6th Avenue, New York, New York 10036. The Closing may also be undertaken
remotely by electronic transfer of Closing documentation.

 

1.3.        Purchase Price. The aggregate purchase price for the Shares shall be
$1,299,998.40 (the “Purchase Price”) at a purchase price of $4.80 per Share.

 

SECTION 2.         Form of Payment; Delivery. On the Closing Date, (i) the
Purchaser will have paid the Purchase Price for the Shares by Federal Funds wire
transfer to the escrow account (the “Escrow Account”) established by the Company
and Aegis Capital Corp. (the “Placement Agent”) for such purposes under the
escrow agreement (the “Escrow Agreement”) to be entered into among the Company,
the Placement Agent, and an escrow agent selected by the Company and the
Placement Agent, (ii) the Purchase Price will be released from the Escrow
Account in accordance with instructions to be executed by the Company and the
Placement Agents and the terms of the Escrow Agreement; and (iii) the Company
shall deliver to the Purchaser one or more stock certificates evidencing the
Shares, in each case duly executed on behalf of the Company and registered in
the name of the Purchaser or its designee.

 

SECTION 3.         Representations and Warranties of the Company

 

The Company represents and warrants to the Purchaser as of the Closing Date as
follows:

 

3.1.         Except as set forth in the Memorandum, there are no actions, suits,
proceedings or investigations pending or, to the best of the Company’s
knowledge, threatened against the Company or any of its properties before or by
any court or arbitrator or any government body, agency or official in which
there is a reasonable likelihood (in the judgment of the company) of an adverse
decision that (a) could have a material adverse effect on the assets,
properties, condition, financial or otherwise, or in the results of operations,
business affairs or business prospects (as described in the Memorandum) of the
Transaction Entities and their Subsidiaries (as defined below) considered as a
whole (a “Material Adverse Effect”) or (b) could impair the ability of the
Company to perform in any material respect its obligations under this Agreement.

 

 

 

 

3.2.         Each complete or partial statement, report, prospectus filed
pursuant to Rule 424 under the Securities Act of 1933, as amended (the
“Securities Act”), Current Report on Form 8-K, Definitive Proxy Statement,
Annual Report on Form 10-K, or Quarterly Report on Form 10-Q, included as an
Appendix to the Memorandum is a true and complete copy of or excerpt from such
document (the “Commission Documents”) as filed by the Company with the
Securities and Exchange Commission (the “Commission”). The Company has filed all
the documents that the Company was required to file with the Commission under
Sections 13, 14(a) and 15(d) of the Securities Exchange Act of 1934, as amended
(the “Exchange Act”), since the date on which its last Annual Report on Form
10-K was filed. As of their respective filing dates, the Commission Documents
complied in all material respects with the requirements of the Exchange Act or
the Securities Act, as applicable. Neither the Memorandum nor any of the
Commission Documents as of their respective dates contained any untrue statement
of a material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements made therein, in light of the
circumstances under which they were made, not misleading.

 

3.3.         Except as disclosed in the Memorandum, since March 31, 2019, there
has been no material change in the business, prospects, financial condition, net
worth or results of operations of the Company, other than changes occurring in
the ordinary course of business which changes have not, individually or in the
aggregate, had a Material Adverse Effect.

 

3.4.         The financial statements of the Company, and Medalist Properties 8,
LLC, including all notes and schedules thereto, included in the Memorandum
present fairly the financial position of such entities and, with respect to the
Company, its Subsidiaries (as defined below), if any, at the dates indicated and
the statement of operations, stockholders’ equity and cash flows of, or such
other permitted financial statements for, such entities and, with respect to the
Company, its Subsidiaries, if any, for the periods specified, and related
schedules and notes thereto, and the unaudited financial information filed with
the Commission included as part of the Memorandum, have been prepared in
conformity with generally accepted accounting principles, consistently applied
throughout the periods involved. The statements of revenues and certain expenses
included in the Memorandum, together with the related notes, comply with Rule
8-06 of Regulation S-X and present fairly in all material respects the revenue
and certain expenses of each of Hanover Square North LLC and Medalist Fund 1-A,
LLC (Franklin Square) for the periods specified; said financial statements have
been prepared in conformity with GAAP applied on a consistent basis throughout
the periods involved and comply with the Commission’s rules and guidelines with
respect thereto. The pro forma financial statements and the related notes
thereto included in the Memorandum present fairly the information shown therein,
have been prepared in all material respects in accordance with the Commission’s
rules and guidelines with respect to pro forma financial statements and have
been properly compiled on the bases described therein, and subject to such rules
and guidelines, the Company believes the assumptions used in the preparation
thereof are reasonable and the adjustments used therein are appropriate to give
effect to the transactions and circumstances referred to therein. Except as
included therein, no historical or pro forma financial statements or supporting
schedules are required to be included or incorporated by reference in the
Commission Documents under the Securities Act or and the published rules and
regulations promulgated thereunder (the “Rules”). All disclosures contained in
the Memorandum regarding “non-GAAP financial measures” (as such term is defined
by the rules and regulations of the Commission) comply in all material respects
with Regulation G of the Exchange Act, and Item 10 of Regulation S-K of the
Securities Act, to the extent applicable.

 

3.5.         Cherry Bekaert LLP (the “Auditor”) whose reports are filed with the
Commission as a part of the Commission Documents, are and, during the periods
covered by their reports, were, to the knowledge of the Transaction Entities,
independent public accountants as required by the Securities Act and the Rules.

 

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3.6.         The Company has been duly organized and is validly existing as a
corporation in good standing under the laws of the State of Maryland and has
corporate power and authority to own, lease, and operate its properties and to
conduct its business as described in the Memorandum and to enter into and
perform its obligations under this Agreement the Operating Partnership Agreement
(as defined below) and the Management Agreement dated as of March 15, 2016 (the
“Management Agreement”); by and between the Company and Medalist Fund Manager,
Inc., a Virginia corporation (the “Manager”); and the Company is duly qualified
as a foreign corporation to transact business and is in good standing in each
other jurisdiction in which such qualification is required, whether by reason of
the ownership or leasing of property or the conduct of business, except for such
jurisdictions where the failure to so qualify individually or in the aggregate
would not have a Material Adverse Effect.

 

3.7.         The Operating Partnership has been duly formed and is validly
existing as a limited partnership in good standing under the laws of the State
of Delaware, is duly qualified to do business and is in good standing as a
foreign limited partnership in each jurisdiction in which its ownership or lease
of property and other assets or the conduct of its business requires such
qualification, except where the failure to so qualify will not have a Material
Adverse Effect, and has all power and authority necessary to own or hold its
properties and other assets, to conduct the business in which it is engaged and
to enter into and perform its obligations under this Agreement. The Company is
the sole general partner of the Operating Partnership. The Agreement of Limited
Partnership of the Operating Partnership, in the form filed as an exhibit to the
Company’s Annual Report on Form 10-K (the “Operating Partnership Agreement”), is
in full force and effect, and the aggregate percentage interests of the Company
and the limited partners in the Operating Partnership are as set forth in the
Memorandum.

 

3.8.         Each “significant subsidiary” of the Company (as such term is
defined in Rule 1-02 of Regulation S-X) (each a “Subsidiary” and, collectively,
the “Subsidiaries”) has been duly organized and is validly existing in good
standing under the laws of the jurisdiction of its incorporation or
organization, has corporate or similar power and authority to own, lease and
operate its properties and to conduct its business as described in the
Memorandum and is duly qualified to transact business and is in good standing in
each jurisdiction in which such qualification is required, whether by reason of
the ownership or leasing of property or the conduct of business, except where
the failure to so qualify or to be in good standing would not result in a
Material Adverse Effect. Except as otherwise disclosed in the Memorandum, all of
the issued and outstanding capital stock or equity interests of each Subsidiary
has been duly authorized and validly issued, is fully paid and non-assessable
and is owned by the Company, directly or through subsidiaries, free and clear of
any material security interest, mortgage, pledge, lien, encumbrance, claim or
equity. None of the outstanding shares of capital stock or equity interests of
any Subsidiary was issued in violation of the preemptive or similar rights of
any securityholder of such Subsidiary. The only Subsidiaries of the Company are
the subsidiaries listed on Exhibit 21.1 to the Company’s Annual Report on Form
10-K.

 

3.9.         The authorized, issued and outstanding shares of capital stock of
the Company are as set forth in the Memorandum. The outstanding shares of
capital stock of the Company have been duly authorized and validly issued and
are fully paid and non-assessable. None of the outstanding shares of capital
stock of the Company was issued in violation of the preemptive or other similar
rights of any securityholder of the Company. Except as disclosed in the
Memorandum: (i) other than with respect to (x) the OP Units disclosed in the
Memorandum, (y) the warrants issued to Moloney Securities Co., Inc. disclosed in
the Memorandum (the “Warrants”) and (z) any shares reserved pursuant to the
Company’s equity incentive plan as disclosed in the Memorandum, no shares of
capital stock of the Company are reserved for any purpose, (ii) except for the
OP Units described in the Memorandum, there are no outstanding securities
convertible into or exchangeable for any shares of capital stock of the Company,
and, (iii) except for the Warrants, there are no outstanding options, rights
(preemptive or otherwise) or warrants to purchase or subscribe for shares of
capital stock or any other securities of the Company.

 

3.10.      The outstanding OP Units of the Operating Partnership have been duly
authorized for issuance by the Operating Partnership and the Company as its
general partner and were validly issued. Except as disclosed in the Memorandum,
no OP Units are reserved for any purpose and there are no outstanding securities
convertible into or exchangeable for any OP Units and no outstanding options,
rights (preemptive or otherwise) or warrants to purchase or subscribe for OP
Units or other securities of the Operating Partnership. The terms of the OP
Units conform in all material respects to statements and descriptions related
thereto contained in the Memorandum.

 

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3.11.      All necessary corporate action has been duly and validly taken by
each of the Transaction Entities to authorize the execution, delivery and
performance of this Agreement and the issuance and sale of the Shares by the
Company. This Agreement has been duly authorized, executed and delivered by each
of the Transaction Entities.

 

3.12.      (i) The Operating Partnership Agreement has been duly and validly
authorized, executed and delivered by the Company and the Operating Partnership
(and, to the knowledge of the Transaction Entities, by each other party thereto)
and is a valid and binding agreement of the Company and the Operating
Partnership (and, to the knowledge of the Transaction Entities, of each other
party thereto), enforceable against the Company and the Operating Partnership
(and, to the knowledge of the Transaction Entities, against each other party
thereto) in accordance with its terms; (ii) each of the agreements filed as
exhibits to the Commission Documents relating to the acquisition of: (1) 3940
East Franklin Boulevard, Gastonia, North Carolina 28056 (“Franklin Square”); (2)
7802 National Service Road, Greensboro, North Carolina (“Greensboro Hampton
Inn”); and (3) 7230 Bell Creek Road, Mechanicsville, Virginia 23111 (“Hanover
Square”, and collectively with Franklin Square and Greensboro Hampton Inn, each
an “Acquired Property” and collectively the “Acquired Properties”); and (4) 1310
Tiger Boulevard, Clemson, South Carolina 29631, has been duly authorized,
executed and delivered by the Company and the Operating Partnership, and is a
valid and binding agreement, enforceable against the Company and the Operating
Partnership in accordance with its terms, and neither of the Transaction
Entities has any reason to believe that any of the aforementioned acquisition
agreements have not been duly and validly authorized by all other parties
thereto; and (iii) the Management Agreement, has been duly authorized, executed
and delivered by the Company (and, to the knowledge of Transaction Entities, by
the Manager) and constitutes a valid and binding agreement of the Company,
enforceable against the Company (and, to the knowledge of Transaction Entities,
against the Manager) in accordance with its terms; except in the case of each
agreement described in this Section 3.12, as enforceability may be limited by
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and similar laws relating to or affecting creditors’ rights and
remedies generally, and subject, as to enforceability, to general principles of
equity and, with respect to equitable relief, the discretion of the court before
which any proceeding therefor may be brought (regardless of whether enforcement
is sought in a proceeding at law or in equity), and with respect to
indemnification thereunder, except as rights may be limited by applicable law or
policies underlying such law.

 

3.13.      The Shares to be purchased by the Purchaser have been duly authorized
for issuance and sale to the Purchaser pursuant to this Agreement, and when the
Shares have been issued and delivered by the Company pursuant to this Agreement
against payment of the consideration set forth herein, such Shares will be
validly issued and fully paid and non-assessable; and the issuance of the Shares
is not subject to the preemptive or other similar rights of any security holder
of the Company. The Common Stock conforms in all material respects to all
statements relating thereto contained in the Memorandum and such description
conforms in all material respects to the rights set forth in the instruments
defining the same; and no holder of the Shares will be subject to personal
liability by reason of being such a holder. The certificates, if any, to be used
to evidence the Shares will, at the Closing Date, be in due and proper form and
will comply in all material respects with all applicable legal requirements, the
requirements of the charter and bylaws of the Company.

 

3.14.      Each of the Transaction Entities and each of their Subsidiaries, if
any, has all requisite corporate power and authority, and all necessary
authorizations, approvals, consents, orders, licenses, certificates and permits
of and from all governmental or regulatory bodies or any other person or entity
(collectively, the “Permits”), to own, lease and license its assets and
properties (including the Acquired Properties) and conduct its business, all of
which are valid and in full force and effect, except where the lack of such
Permits, individually or in the aggregate, would not have a Material Adverse
Effect. Each of the Transaction Entities and each of their Subsidiaries, if any,
have fulfilled and performed in all material respects all of their respective
obligations with respect to such Permits and no event has occurred that allows,
or after notice or lapse of time would allow, revocation or termination thereof
or results in any other material impairment of the rights of such entity
thereunder. Except as may be required under the Securities Act, state and
foreign Blue Sky laws and the rules of the Financial Industry Regulatory
Authority (“FINRA”), no other Permits are required to enter into, deliver and
perform the obligations of the Transaction Entities under this Agreement and for
the Company to issue and sell the Shares.

 

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3.15.      The Company is not an “ineligible issuer,” as defined in Rule 405 of
the Rules, including (but not limited to) the Company or any other Subsidiary in
the preceding three years having been convicted of a felony or misdemeanor or
having been made the subject of a judicial or administrative decree or order as
described in Rule 405 of the Rules.

 

3.16.      Each of the Transaction Entities and each of their Subsidiaries owns
or possesses legally enforceable rights to use all patents, patent rights,
inventions, trademarks, trademark applications, trade names, service marks,
copyrights, copyright applications, licenses, know-how and other similar rights
and proprietary knowledge (collectively, “Intangibles”) necessary for the
conduct of its business. Neither of the Transaction Entities nor any Subsidiary
has received any notice of, or is not aware of, any infringement of or conflict
with asserted rights of others with respect to any Intangibles.

 

3.17.      (i) The Operating Partnership or a Subsidiary thereof has good and
marketable title (fee or, in the case of ground leases and as disclosed in the
Memorandum, leasehold) to Franklin Square, to an undivided 84% tenant-in- common
interest in Hanover Square (the “Hanover Square Interest”) and to an undivided
64% tenant-in-common interest in Greensboro Hampton Inn (the “GBHI Interest”),
free and clear of all mortgages, pledges, liens, claims, security interests,
restrictions or encumbrances of any kind, except such as (1) are described in
the Memorandum or (2) do not, singly or in the aggregate, materially affect the
value of such property and do not materially interfere with the use made and
proposed to be made of such property by the Transaction Entities or any of their
Subsidiaries; (ii) neither the Transaction Entities nor any of their
Subsidiaries owns any real property other than the properties described in the
Memorandum; (iii) each of the ground leases and subleases of real property, if
any, material to the business of the Transaction Entities and their
Subsidiaries, considered as one enterprise, and under which the Transaction
Entities or any of their Subsidiaries holds properties described in the
Memorandum, is in full force and effect, with such exceptions as are not
material and do not materially interfere with the use made or proposed to be
made of such real property by either of the Transaction Entities or any of their
Subsidiaries, and neither of the Transaction Entities nor any of their
Subsidiaries has any notice of any material claim of any sort that has been
asserted by any ground lessor or sublessor under a ground lease or sublease
threatening the rights of the Transaction Entities or any of their Subsidiaries
to the continued possession of the leased or subleased premises under any such
ground lease or sublease; (iv) all liens, charges, encumbrances, claims or
restrictions on any of the properties (including the Acquired Properties) and
the assets of a Transaction Entity or any of their Subsidiaries that are
required to be disclosed in the Memorandum are disclosed therein; (v) no tenant
under any of the leases at the Acquired Properties has a right of first refusal
to purchase the premises demised under such lease; (vi) each of the Acquired
Properties complies with all applicable codes, laws and regulations (including,
without limitation, building and zoning codes, laws and regulations and laws
relating to access to the Acquired Properties), except if and to the extent
disclosed in the Memorandum, and except for such failures to comply that would
not, singly or in the aggregate, reasonably be expected to have a Material
Adverse Effect; (vii) except if and to the extent disclosed in the Memorandum,
no Transaction Entity has knowledge of any pending or threatened condemnation
proceedings, zoning change or other proceeding or action that will materially
affect the use or value of any of the Acquired Properties; and (viii) the
mortgages and deeds of trust that encumber the Acquired Properties are not
convertible into equity securities of the entity owning such Acquired Property
and said mortgages and deeds of trust are not cross-defaulted or
cross-collateralized with any property other than other Acquired Properties.

 

3.18.      To the knowledge of the Transaction Entities, water, stormwater,
sanitary sewer, electricity and telephone service are all available at the
property lines of each Acquired Property over duly dedicated streets or
perpetual easements of record benefiting the applicable Acquired Property.

 

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3.19.      Subsequent to the respective dates as of which information is given
in the Memorandum: (i) there has not been any event which would reasonably be
expected to result in a Material Adverse Effect; (ii) neither of the Transaction
Entities nor any of their Subsidiaries has sustained any loss or interference
with its assets, businesses or properties (whether owned or leased) from fire,
explosion, earthquake, flood or other calamity, whether or not covered by
insurance, or from any labor dispute or any court or legislative or other
governmental action, order or decree which would reasonably be expected to
result in a Material Adverse Effect. Except as disclosed in the Memorandum,
since the date of the latest balance sheet included in the Memorandum, neither
of the Transaction Entities nor any of their Subsidiaries has (A) issued any
securities or incurred any liability or obligation, direct or contingent, for
borrowed money, except such liabilities or obligations incurred in the ordinary
course of business, (B) entered into any transaction not in the ordinary course
of business or (C) declared or paid any dividend or made any distribution on any
shares of its stock or redeemed, purchased or otherwise acquired or agreed to
redeem, purchase or otherwise acquire any shares of its capital stock.

 

3.20.      There is no document, contract or other agreement required to be
described in the Memorandum or to be filed as an exhibit to the Commission
Documents which is not described or filed as required by the Securities Act or
Rules. Each description of a contract, document or other agreement in the
Memorandum accurately reflects in all material respects the terms of the
underlying contract, document or other agreement. Each contract, document or
other agreement described in the Memorandum or filed as exhibits to the
Commission Documents is, or upon consummation of the Sale will be, in full force
and effect and is valid and enforceable by and against the Transaction Entities
or any of their Subsidiaries, as the case may be, in accordance with its terms,
except (i) such contracts or other agreements that have terminated or expired in
accordance with their terms as disclosed in the Memorandum, where the failure to
be in full force and effect and so valid and enforceable would not reasonably be
expected to result in a Material Adverse Effect, individually or in the
aggregate and (iii) as enforceability may be limited by applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and similar laws
relating to or affecting creditors’ rights and remedies generally, and subject,
as to enforceability, to general principles of equity and, with respect to
equitable relief, the discretion of the court before which any proceeding
therefor may be brought (regardless of whether enforcement is sought in a
proceeding at law or in equity), and with respect to indemnification thereunder,
except as rights may be limited by applicable law or policies underlying such
law. To the knowledge of the Transaction Entities, neither of the Transaction
Entities nor any of their Subsidiaries, is in default in the observance or
performance of any term or obligation to be performed by it under any such
agreement, and no event has occurred which with notice or lapse of time or both
would constitute such a default, in any such case which default or event,
individually or in the aggregate, would reasonably be expected to have a
Material Adverse Effect. No default exists, and no event has occurred which with
notice or lapse of time or both would constitute a default, in the due
performance and observance of any term, covenant or condition, by the
Transaction Entities or any of their Subsidiaries, if a Subsidiary is a party
thereto, of any other agreement or instrument to which it is a party or by which
it or its properties or business may be bound or affected which default or
event, individually or in the aggregate, would reasonably be expected to have a
Material Adverse Effect.

 

3.21.      The statistical and market related data included in the Memorandum
are based on or derived from sources that the Company believes to be reliable
and accurate. The Company had a reasonable basis for, and made in good faith,
each “forward-looking statement” (within the meaning of Section 27A of the Act
or Section 21E of the Exchange Act) contained or incorporated by reference in
the Memorandum.

 

3.22.      Neither of the Transaction Entities nor any of their Subsidiaries (i)
is in violation of its certificate or articles of incorporation, by-laws,
certificate of limited partnership, agreement of limited partnership,
certificate of formation, operating agreement or other organizational documents,
(ii) is in default under, and no event has occurred which, with notice or lapse
of time, or both, would constitute a default under, or result in the creation or
imposition of any lien, charge, mortgage, pledge, security interest, claim,
limitation on voting rights, equity, trust or other encumbrance, preferential
arrangement, defect or restriction of any kind whatsoever, upon, any property or
assets of the Transaction Entities or any of their Subsidiaries pursuant to, any
bond, debenture, note, indenture, mortgage, deed of trust, loan agreement or
other agreement or instrument to which it is a party or by which it is bound or
to which any of its properties or assets is subject or (iii) is in violation of
any statute, law, rule, regulation, ordinance, directive, judgment, decree or
order of any judicial, regulatory or other legal or governmental agency or body,
foreign or domestic, except (in the case of clauses (ii) and (iii) above) for
violations or defaults that could not (individually or in the aggregate)
reasonably be expected to have a Material Adverse Effect.

 

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3.23.      Neither the execution, delivery and performance of this Agreement by
the Transaction Entities nor the consummation of any of the transactions
contemplated hereby (including, without limitation, the issuance and sale by the
Company of the Shares) will give rise to a right to terminate or accelerate the
due date of any payment due under, or conflict with or result in the breach of
any term or provision of, or constitute a default (or an event which with notice
or lapse of time or both would constitute a default) under, or require any
consent or waiver under, or result in the execution or imposition of any lien,
charge or encumbrance upon any properties or assets of the Transaction Entities
or any of their Subsidiaries pursuant to the terms of: (i) any indenture,
mortgage, deed of trust or other agreement or instrument to which either of the
Transaction Entities or any of their Subsidiaries is a party or by which either
of the Transaction Entities or any of their Subsidiaries or any of their
properties or businesses is bound, or any franchise, license, permit, judgment,
decree, order, statute, rule or regulation applicable to either of the
Transaction Entities or any of their Subsidiaries, or (ii) violate any provision
of certificate or articles of incorporation, by-laws, certificate of limited
partnership, agreement of limited partnership, certificate of formation,
operating agreement or other organizational documents of either of the
Transaction Entities or any of their Subsidiaries, except (A) in the case of
clause (i) above, for violations or defaults that would not, individually or in
the aggregate, reasonably be expected to result in a Material Adverse Effect,
and (B) for such consents or waivers which have already been obtained and are in
full force and effect.

 

3.24.      No holder of any security of the Company has any right, which has not
been waived or satisfied prior to the date hereof, to demand registration of any
security owned by such holder for a period of 90 days after the date of this
Agreement.

 

3.25.      Except as disclosed in the Memorandum, there are no legal or
governmental proceedings pending to which either of the Transaction Entities or
any of their Subsidiaries is a party or of which any property of the Transaction
Entities or any of their Subsidiaries is the subject which, if determined
adversely to it could individually or in the aggregate have a Material Adverse
Effect; and, to the knowledge of the Transaction Entities, no such proceedings
are threatened or contemplated by governmental authorities or threatened by
others.

 

3.26.      Neither of the Transaction Entities or any of their Subsidiaries is
involved in any labor dispute or, to the knowledge of the Transaction Entities,
is any such dispute threatened, which dispute would reasonably be expected to
result in a Material Adverse Effect. Neither of the Transaction Entities is
aware of any existing or imminent labor disturbance by the employees of any of
its or its Subsidiaries, principal suppliers or contractors which would
reasonably be expected to result in a Material Adverse Effect. Neither of the
Transaction Entities is aware of any threatened or pending litigation between
either of the Transaction Entities or any of their Subsidiaries and any of its
executive officers which, if adversely determined, could have a Material Adverse
Effect and has no reason to believe that such officers will not remain in the
employment of the Transaction Entities or their Subsidiaries, as the case may
be.

 

3.27.      No transaction has occurred between or among either of the
Transaction Entities and any of their officers or directors, or five percent
stockholders or any affiliate or affiliates of any such officer or director or
five percent stockholders that is required to be described in and is not
described in the Memorandum.

 

3.28.      Neither of the Transaction Entities has taken, nor will it take,
directly or indirectly, any action designed to or which might reasonably be
expected to cause or result in, or which has constituted or which might
reasonably be expected to constitute, the stabilization or manipulation of the
price of the Common Stock or any other security of the Company to facilitate the
sale or resale of any of the Shares.

 

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3.29.      The Transaction Entities and their Subsidiaries have filed all
federal, state, local and foreign tax returns which are required to be filed
through the date hereof, which returns are true and correct in all material
respects or has received timely extensions thereof, and has paid all taxes shown
on such returns and all assessments received by it to the extent that the same
are material and have become due. There are no tax audits or investigations
pending, which if adversely determined would reasonably be expected to result in
a Material Adverse Effect; nor are there any material proposed additional tax
assessments against either of the Transaction Entities or their Subsidiaries.

 

3.30.      Neither of the Transaction Entities has taken any action designed to,
or likely to have the effect of, terminating the registration of the Common
Stock under the Exchange Act or the listing of the Common Stock on the NASDAQ
Capital Market, nor has either of the Transaction Entities received any
notification that the Commission or the NASDAQ Capital Market is contemplating
terminating such registration or listing. The Common Stock is registered
pursuant to Section 12(b) of the Exchange Act.

 

3.31.      The books, records and accounts of the Transaction Entities and their
Subsidiaries accurately and fairly reflect, in all material respects, the
transactions in, and dispositions of, the assets of, and the results of
operations of, the Transaction Entities and their Subsidiaries. The Transaction
Entities and their Subsidiaries maintain a system of internal accounting
controls sufficient to provide reasonable assurances that (i) transactions are
executed in accordance with management’s general or specific authorizations,
(ii) transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles and to
maintain asset accountability, (iii) access to assets is permitted only in
accordance with management’s general or specific authorization and (iv) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.

 

3.32.      Neither of the Transaction Entities is aware of (i) except as
described in the Memorandum, any material weakness or significant deficiency in
the design or operation of internal controls which could adversely affect the
Company’s ability to record, process, summarize and report financial data or any
material weaknesses in internal controls; or (ii) any fraud, whether or not
material, that involves management or other employees who have a role in the
Company’s internal controls.

 

3.33.      Except as described in the Memorandum and as preapproved in
accordance with the requirements set forth in Section 10A of the Exchange Act,
the Auditor has not been engaged by the Company to perform any “prohibited
activities” (as defined in Section 10A of the Exchange Act).

 

3.34.      Except as described in the Memorandum, there are no material
off-balance sheet arrangements (as defined in Item 303 of Regulation S-K) that
have or are reasonably likely to have a material current or future effect on the
Company’s financial condition, revenues or expenses, changes in financial
condition, results of operations, liquidity, capital expenditures or capital
resources.

 

3.35.      The Company is currently in compliance in all material respects with
all provisions of the Sarbanes-Oxley Act of 2002 and all rules and regulations
promulgated thereunder (the “Sarbanes-Oxley Act”) with which the Company is
required to comply. The Company has not, directly or indirectly, including
through any Subsidiary, extended credit, arranged to extend credit, or renewed
any extension of credit, in the form of a personal loan, to or for any executive
officer of the Company or the Operating Partnership, or to or for any family
member or affiliate of any director or executive officer of the Company or the
Operating Partnership.

 

3.36.      The Transaction Entities and their Subsidiaries and the Acquired
Properties (or Subsidiary thereof, if any) carry or are entitled to the benefits
of insurance, with financially sound and reputable insurers, in such amounts and
covering such risks as is generally maintained by companies of established
repute engaged in the same or similar business, and all such insurance is in
full force and effect. Neither of the Transaction Entities has any reason to
believe that it or any of their Subsidiaries will not be able (A) to renew, if
desired, its existing insurance coverage as and when such policies expire or (B)
to obtain comparable coverage from similar institutions as may be necessary or
appropriate to conduct its business as now conducted and at a cost that would
not result in a Material Adverse Effect. Neither of the Transaction Entities nor
any of their Subsidiaries nor any Acquired Property (or Subsidiary thereof) has
been denied any insurance coverage that it has sought or for which it has
applied. The Transaction Entities, directly or indirectly, have obtained title
insurance on the fee, tenant-in-common, or leasehold interests, as the case may
be, in each of the Acquired Properties, in an amount equal to no less than
eighty percent (80%) of the purchase price of each such Acquired Property.

 

 8 

 

 

3.37.      Neither of the Transaction Entities expects to be a Passive Foreign
Investment Company (“PFIC”) within the meaning of Section 1297(a) of the United
States Internal Revenue Code, as amended (the “Code”), and the regulations and
published interpretations thereunder, for the year ending December 31, 2019, and
has no plan or intention to conduct its business in a manner that would be
reasonably expected to result in either of the Transaction Entities becoming a
PFIC in the future under current laws and regulations.

 

3.38.      Except as disclosed in the Memorandum: (i) to the knowledge of the
Transaction Entities, each of the Transaction Entities and each of their
Subsidiaries, if any, is in compliance in all material respects with all rules,
laws and regulation relating to the use, treatment, storage and disposal of
toxic substances and protection of health or the environment (“Environmental
Law”) which are applicable to its properties and business; (ii) neither of the
Transaction Entities or their Subsidiaries has received any notice from any
governmental authority or third party of an asserted claim under Environmental
Laws; (iii) each of Transaction Entities and their Subsidiaries has received all
permits, licenses or other approvals required of it under applicable
Environmental Laws to conduct its business and is in compliance in all material
respects with all terms and conditions of any such permit, license or approval;
(iv) to the knowledge of the Transaction Entities, no facts currently exist that
will require either of the Transaction Entities or their Subsidiaries to make
future material capital expenditures to comply with Environmental Laws; and (v)
no property which is or has been owned, leased or occupied by either of the
Transaction Entities or their Subsidiaries has been designated as a Superfund
site pursuant to the Comprehensive Environmental Response, Compensation of
Liability Act of 1980, as amended (42 U.S.C. Section 9601, et. seq.) (“CERCLA”),
or otherwise designated as a contaminated site under applicable state or local
law. Neither of the Transaction Entities nor their Subsidiaries has been named
as a “potentially responsible party” under CERCLA.

 

3.39.      Neither of the Transaction Entities is and, after giving effect to
the Offering, the sale of the Shares and the application of proceeds thereof as
described in the Memorandum, will be an “investment company” within the meaning
of the Investment Company Act of 1940, as amended.

 

3.40.      Neither of the Transaction Entities nor any other person associated
with or acting on behalf of the Transaction Entities including, without
limitation, any director, officer, agent or employee of the Transaction Entities
or their Subsidiaries, has, directly or indirectly, while acting on behalf of
the Transaction Entities or their Subsidiaries: (i) used any corporate funds for
unlawful contributions, gifts, entertainment or other unlawful expenses relating
to political activity; (ii) made any unlawful payment to foreign or domestic
government officials or employees or to foreign or domestic political parties or
campaigns from corporate funds; (iii) violated any provision of the Foreign
Corrupt Practices Act of 1977, as amended; or (iv) made any other unlawful
payment.

 

3.41.      The operations of the Transaction Entities and their Subsidiaries are
and have been conducted at all times in compliance with applicable financial
recordkeeping and reporting requirements of the Currency and Foreign
Transactions Reporting Act of 1970, as amended, the money laundering statutes of
all jurisdictions, the rules and regulations thereunder and any related or
similar rules, regulations or guidelines, issued, administered or enforced by
any governmental agency (collectively, the “Money Laundering Laws”) and no
action, suit or proceeding by or before any court or governmental agency,
authority or body or any arbitrator involving the Transaction Entities and their
Subsidiaries with respect to the Money Laundering Laws is pending, or to the
knowledge of the Transaction Entities, threatened.

 

 9 

 

 

3.42.      Neither of the Transaction Entities nor their Subsidiaries, nor, to
the knowledge of the Transaction Entities, any director, officer, agent,
employee or affiliate of the Transaction Entities or their Subsidiaries is
currently subject to any U.S. sanctions administered by the Office of Foreign
Assets Control of the U.S. Treasury Department (“OFAC”); and neither of the
Transaction Entities will directly or indirectly use the proceeds of the
Offering, or lend, contribute or otherwise make available such proceeds to its
Subsidiaries or any joint venture partner or other person or entity, for the
purpose of financing the activities of any person currently subject to any U.S.
sanctions administered by OFAC.

 

3.43.      Except as described in the Memorandum, the Company has not sold or
issued any shares of Common Stock during the six-month period preceding the date
of the Memorandum, including any sales pursuant to Rule 144A under, or
Regulation D or Regulation S of, the Securities Act, other than shares issued
pursuant to employee benefit plans, qualified stock options plans or other
employee compensation plans or pursuant to outstanding options, rights or
warrants.

 

3.44.      The Transaction Entities fulfilled their obligations, if any, under
the minimum funding standards of Section 302 of the U.S. Employee Retirement
Income Security Act of 1974 (“ERISA”) and the regulations and published
interpretations thereunder with respect to each “plan” as defined in Section
3(3) of ERISA and such regulations and published interpretations in which its
employees are eligible to participate and each such plan is in compliance in all
material respects with the presently applicable provisions of ERISA and such
regulations and published interpretations. No “Reportable Event” (as defined in
12 ERISA) has occurred with respect to any “Pension Plan” (as defined in ERISA)
for which the Company could have any liability.

 

3.45.      The statements in the Memorandum insofar as such statements summarize
legal matters, agreements, documents or proceedings discussed therein, are
accurate and fair summaries of such legal matters, agreements, documents or
proceedings in all material respects.

 

3.46.      The Company is organized in conformity with the requirements for
qualification and taxation as a real estate investment trust (“REIT”) under the
Code, and the Company’s proposed method of operation will enable it to continue
to qualify for taxation as a REIT under the Code. All statements regarding the
Company’s qualification and taxation as a REIT and descriptions of the Company’s
organization and proposed method of operation (inasmuch as they relate to the
ability of the Company’s qualification and taxation as a REIT) set forth in the
Memorandum are accurate and fair summaries of the legal or tax matters described
therein in all material respects.

 

3.47.      Except as described in the Memorandum, the Operating Partnership is
not currently prohibited, directly or indirectly, from paying any distributions
to the Company to the extent permitted by applicable law, from making any other
distribution on the Operating Partnership’s partnership interest, or from
repaying the Company for any loans or advances made by the Company to the
Operating Partnership.

 

3.48.      The net proceeds to be received by the Company from the sales of the
Shares hereunder will be used as described in the Memorandum.

 

3.49.      No Transaction Entity, nor any of its Subsidiaries or affiliates, nor
any person acting on its or their behalf, has engaged in any form of general
solicitation or general advertising (within the meaning of Regulation D) in
connection with the offer or sale of the Shares. The Company shall be
responsible for the payment of any placement agents’ fees, financial advisory
fees, or brokers' commissions (other than for Persons engaged by Purchaser or
its investment advisor) relating to or arising out of the transactions
contemplated hereby, including, without limitation, placement agent fees payable
to the Placement Agent and to Maxim Group LLC (the “Financial Advisor”) in
connection with the sale of the Shares. The Company shall pay, and hold
Purchaser harmless against, any liability, loss or expense (including, without
limitation, attorney's fees and out-of-pocket expenses) arising in connection
with any such claim. The Company acknowledges that it has engaged the Placement
Agent in connection with the sale of the Shares. Other than the Placement Agent
and the Financial Advisor, neither the Company nor any of its Subsidiaries has
engaged any placement agent or other agent in connection with the offer or sale
of the Shares.

 

 10 

 

 

3.50.      No Transaction Entity, its Subsidiaries, any of their affiliates, and
any person acting on their behalf has, directly or indirectly, made any offers
or sales of any security or solicited any offers to buy any security, under
circumstances that would require registration of the issuance of any of the
Shares under the Securities Act, whether through integration with prior
offerings or otherwise, or cause this offering of the Shares to require the
approval of the stockholders of the Company for purposes of the Securities Act
or any applicable stockholder approval provisions, including, without
limitation, under the rules and regulations of any exchange or automated
quotation system on which any of the Shares of the Company are listed or
designated for quotation. None of the Company, its Subsidiaries, their
affiliates or any Person acting on their behalf will take any action or steps
referred to in the preceding sentence that would require registration of the
issuance of any of the Shares under the Securities Act or cause the offering of
any of the Shares to be integrated with other offerings for purposes of any such
applicable stockholder approval provisions.

 

3.51.      With respect to the Shares to be offered and sold hereunder in
reliance on Rule 506(b) under the Securities Act ("Regulation D Securities"),
none of the Company, any of its predecessors, any affiliated issuer, any
director, executive officer, other officer of the Company participating in the
offering hereunder, any beneficial owner of 20% or more of the Company's
outstanding voting equity securities, calculated on the basis of voting power,
nor any promoter (as that term is defined in Rule 405 under the Securities Act)
connected with the Company in any capacity at the time of sale (each, an "Issuer
Covered Person" and, together, "Issuer Covered Persons") is subject to any of
the "Bad Actor" disqualifications described in Rule 506(d)(1)(i) to (viii) under
the Securities Act (a "Disqualification Event"), except for a Disqualification
Event covered by Rule 506(d)(2) or (d)(3). The Company has exercised reasonable
care to determine whether any Issuer Covered Person is subject to a
Disqualification Event. The Company has complied, to the extent applicable, with
its disclosure obligations under Rule 506(e), and has furnished to the Purchaser
a copy of any disclosures provided thereunder.

 

3.52.      The Company is not aware of any person (other than the Placement
Agent or the Financial Advisor) that has been or will be paid (directly or
indirectly) remuneration for solicitation of Purchaser or potential purchasers
in connection with the sale of any Regulation D Securities.

 

SECTION 4.         Representations, Warranties and Covenants of the Purchaser

 

4.1.       By subscribing, Purchaser acknowledges receipt of the Memorandum.
Execution of this Agreement by the Purchaser represents a binding and
irrevocable agreement, when accepted by the Company, to purchase from the
Company the Shares.

 

4.2.       The Purchaser represents and warrants to, and covenants with, the
Company that: (i) the Purchaser has all requisite right, power, authority and
capacity to enter into this Agreement and to consummate the transactions
contemplated hereby, and has taken all necessary action to authorize the
execution, delivery and performance of this Agreement; and (ii) when executed
and delivered by the Purchaser, this Agreement will constitute the legal, valid
and binding obligations of the Purchaser, enforceable in accordance with its
terms, except (a) as limited by applicable bankruptcy, insolvency,
reorganization, or similar laws relating to or affecting the enforcement of
creditors’ rights generally and (b) as limited by equitable principles
generally.

 

4.3.       The Purchaser represents and warrants to, and covenants with, the
Company that: (i) the Purchaser, taking into account the personnel and resources
it can practically bring to bear on the purchase of the Shares contemplated
hereby, is knowledgeable, sophisticated and experienced in making, and is
qualified to make, decisions with respect to investments in shares presenting an
investment decision like that involved in the purchase of the Shares, including
investments in securities issued by the company, and has requested, received,
reviewed and considered all information it deems relevant in making an informed
decision to purchase the Shares; (ii) the Purchaser is acquiring the number of
Shares set forth in Section 1.2 above in the ordinary course of its business and
for its own account solely for investment with no present intention of
distributing any of such Shares, and no arrangement or understanding exists with
any other person regarding the distribution of such Shares; (iii) the Purchaser
will not, directly or indirectly, offer, sell, pledge, transfer or otherwise
dispose of (or solicit any offers to buy, purchase or otherwise acquire or take
a pledge of) any of the Shares except in compliance with the Securities Act and
the Rules; (iv) the Purchaser has, in connection with its decision to purchase
the number of Shares set forth in Section 1.2 above, relied solely upon the
Memorandum and the documents attached as appendices thereto and the
representations and warranties of the Company contained herein; and (v) the
Purchaser is an “accredited investor” within the meaning of Rule 501 of
Regulation D promulgated under the Securities Act.

 

 11 

 

 

4.4.       The Purchaser represents and warrants to and covenants with the
Company that the Purchaser has not and will not engage in any short-sales of the
company’s Common Stock prior to the effectiveness of the Registration Statement,
except to the extent that any such short-sale is fully covered by shares of
Common Stock of the Company other than the Shares.

 

4.5.       Purchaser understands that nothing in the Memorandum, this Agreement
or any other materials presented to Purchaser in connection with the purchase
and sale of the Shares constitutes legal, tax or investment advice. Purchaser
has consulted such legal, tax and investment advisors as it, in its sole
discretion, has deemed necessary or appropriate in connection with its purchase
of the Shares.

 

SECTION 5.         Conditions to Closing of Purchaser

 

The Purchaser’s obligation to purchase the Shares at the Closing is, at the
option of the Purchaser, subject to fulfillment or waiver as of the Closing Date
of the following conditions:

 

5.1.       Representations. The representations and warranties made by the
Company in Section 3 hereof shall be true and correct in all material respects
when made, and shall be true and correct in all material respects on the Closing
Date with the same force and effect as if they had been made on and as of said
date.

 

5.2.       Covenants. All covenants, agreements and conditions contained in this
Agreement to be performed by the Company on or prior to the Closing Date shall
have been performed or complied with in all respects.

 

5.3        Deliveries. The Company shall have duly executed and delivered to the
Purchaser this Agreement, a copy of Transfer Agent Instructions authorizing the
issuance of the Shares which shall have been delivered to the Company’s transfer
agent, and the Shares.

 

5.4        Approvals. The Company shall have obtained all governmental,
regulatory or third party consents and approvals for the sale of the Shares.

 

SECTION 6.         Conditions to Closing of Company

 

The Company’s obligation to sell and issue the Shares at the Closing is, at the
option of the Company, subject to the fulfillment or waiver as of the Closing
Date of the following conditions:

 

6.1.       Representations. The representations made by the Purchaser in Section
4 hereof shall be true and correct when made, and shall be true and correct on
the Closing Date.

 

6.2.       Covenants. All covenants, agreements and conditions contained in this
Agreement to be performed by the Purchaser on or prior to the Closing Date shall
have been performed or complied with in all material respects.

 

6.3.       Payment. Purchaser shall have delivered the Purchase Price to the
Escrow Agent.

 

6.4        Executed Agreement. Purchaser shall have executed this Agreement and
delivered the same to the Company.

 

 12 

 

 

SECTION 7.         Registration of Shares

 

7.1.       Registration Requirements.

 

(a)            Beginning twelve (12) months following the Closing Date, the
Purchaser shall have the right to request that the Company file a registration
statement with the Commission on the appropriate registration form for all of
the Shares held by the Purchaser (a “Demand Registration Statement”), by
delivering a written request thereof to the Company (a “Demand Registration”).
The Company shall use its commercially reasonable efforts to cause the Demand
Registration Statement to become effective in accordance with the intended
method of distribution set forth in the written request delivered by the
Purchaser as expeditiously as possible, and the Company shall use its
commercially reasonable efforts to file such Demand Registration Statement
within 20 days of receipt of such request.

 

(b)            Beginning six (6) months following the Closing Date, if the
Company proposes to file a registration statement under the Securities Act with
respect to any public offering of its Common Stock for its own account and/or
for the account of any other persons (a “Piggyback Registration Statement”),
then, as soon as practicable (but in no event less than 15 days prior to the
proposed date of filing such Piggyback Registration Statement), the Company
shall give written notice of such proposed filing to the Purchaser, and such
notice shall offer the Purchaser the opportunity to register under such
Piggyback Registration Statement all of the Shares held by the Purchaser as may
be requested in writing (a “Piggyback Registration”). The Company shall include
in such Piggyback Registration Statement all the Shares which are requested to
be included therein within 5 business days after the receipt of any such notice;
provided, however, that if, at any time after giving written notice of its
intention to register any securities and prior to the effective date of such
Piggyback Registration Statement, the Company shall determine for any legitimate
business reason not to register or to delay registration of such securities, the
Company may, at its election, give written notice of such determination to the
Purchaser and, thereupon, (i) in the case of a determination not to register,
shall be relieved of its obligation to register any Shares in connection with
such registration, without prejudice, however, to the rights of the Purchaser to
request that such registration be effected as a Demand Registration under
Section 7.1(a), and (ii) in the case of a determination to delay registering,
shall be permitted to delay registering any Shares, for the same period as the
delay in registering such other shares of Common Stock. No registration effected
under this Section 7.1(b) shall relieve the Company of its obligation to effect
any Demand Registration under Section 7.1(a).

 

(c)            A Demand Registration Statement or a Piggyback Registration
Statement, as applicable, may be referred to as the “Registration Statement” in
this Agreement.

 

(d)            The Company shall prepare and file with the Commission such
amendments and supplements to the Registration Statement and the prospectus used
in connection therewith as may be necessary to keep the Registration Statement
effective until all the Shares have been sold pursuant thereto, or until the
Purchaser is able to dispose of the Purchaser’s entire remaining ownership
interest in the Shares in a single transaction under Rule 144 without exceeding
the volume limitations under Rule 144(e) or would be able to so dispose of its
remaining ownership interest but for the fact that the Purchaser is an
“affiliate” of the issuer as such term is defined in Rule 144. For purposes of
this Agreement, references to Rule 144 shall include the provisions of any
successor or similar rule adopted under the Securities Act.

 

(e)            The Company shall furnish to the Purchaser with respect to the
Shares registered under the Registration Statement such number of copies of
prospectuses and preliminary prospectuses in conformity with the requirements of
the Securities Act and such other documents as the Purchaser may reasonably
request, in order to facilitate the public sale or other disposition of all or
any of the Shares by the Purchaser.

 

(f)            The Company shall file the documents required of the Company for
blue sky clearance in states specified in writing by the Purchaser, provided,
however, that the Company shall not be required to qualify to do business or
consent to service of process in any jurisdiction in which it is not now so
qualified or has not so consented.

 

 13 

 

 

(g)            With a view to making available to the Purchaser the benefits of
Rule 144 promulgated under the Securities Act and any other rule or regulation
of the Commission that may at any time permit the Purchaser to sell the Shares
to the public without registration, the Company hereby covenants and agrees, so
long as the Purchaser owns any Shares, to: (i) make and keep public information
available, as those terms are understood and defined in Rule 144; (ii) file with
the Commission in a timely manner all reports and other documents required of
the Company under the Securities Act and Exchange Act; and (iii) furnish to the
Purchaser (A) a written statement by the Company that it has complied with the
reporting requirements of the Securities Act and the Exchange Act, (B) a copy of
the most recent annual or quarterly report of the Company, and (C) such other
information as may be reasonably requested in order to avail the Purchaser of
any rule or regulation of the Commission that permits the selling of the Shares
without registration.

 

(h)            The Company shall bear all expenses in connection with the
procedures in paragraphs (a) through (g) of this Section 7.2 and the
registration of the Shares pursuant to the Registration Statement, other than
fees and expenses, if any, of counsel or other advisors to the Purchaser.

 

(i)            The Company understands that the Purchaser disclaims being an
underwriter, but the Purchaser being deemed an underwriter shall not relieve the
Company of any obligation it has hereunder.

 

7.2.       Transfer of Shares After Registration. The Purchaser agrees that it
will not effect any disposition of the Shares or its right to purchase the
Shares that would constitute a sale within the meaning of the Securities Act
except as contemplated in the Registration Statement.

 

7.3.       Indemnification. For the purposes of this Section 7.3:

 

(a)the term “Selling Shareholder” shall include the Purchaser and any affiliate
of such Purchaser;

 

(b)the term “Registration Statement” shall include any final prospectus,
exhibit, supplement or amendment included in or relating to the Registration
Statement referred to in Section 7.1; and

 

(c)(c) the term “untrue statement” shall include any untrue statement or alleged
untrue statement, or any omission or alleged omission to state in the
Registration Statement a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they are made, not misleading.

 

The Company agrees to indemnify and hold harmless each Selling Shareholder from
and against any losses, claims, damages or liabilities to which such Selling
Shareholder may become subject (under the Securities Act or otherwise) insofar
as such losses, claims, damages or liabilities (or actions or proceedings in
respect thereof) arise out of, or are based upon, any untrue statement of a
material fact contained in the Registration Statement on the effective date
thereof, or arise out of any failure by the Company to fulfill any undertaking
included in the Registration Statement and the Company will reimburse such
Selling Shareholder for any reasonable legal or other expenses reasonably
incurred in investigating, defending or preparing to defend any such action,
proceeding or claim, provided, however, that the Company shall not be liable in
any such case to the extent that such loss, claim, damage or liability arises
out of, or is based upon, an untrue statement made in such Registration
Statement in reliance upon and in conformity with written information furnished
to the Company by or on behalf of such Selling Shareholder for inclusion into
the Registration Statement, or the failure of such Selling Shareholder to comply
with the covenants and agreements contained in Sections 4.3 or 7.3 hereof
respecting sale of the Shares or any untrue statement in any prospectus that is
corrected in any subsequent prospectus that was delivered to the Purchaser prior
to the pertinent sale or sales by the Purchaser.

 

 14 

 

 

The Purchaser agrees to indemnify and hold harmless the Company (and each
person, if any, who controls the Company within the meaning of Section 15 of the
Securities Act, each officer of the Company who signs the Registration Statement
and each director of the Company) from and against any losses, claims, damages
or liabilities to which the Company (or any such officer, director or
controlling person) may become subject (under the Securities Act or otherwise),
insofar as such losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) arise out of, or are based upon, any failure to
comply with the covenants and agreements contained in Sections 4.3 or 7.3 hereof
respecting sale of the Shares, or any untrue statement of a material fact
contained in the Registration Statement on the effective date thereof if such
untrue statement was made in reliance upon and in conformity with written
information furnished by or on behalf of the Purchase for inclusion into the
Registration Statement provided, however, the Purchaser shall not be liable in
any such case to the extent that such loss, claim, damage or liability arises
out of, or is based upon, an untrue statement made in reliance upon and in
conformity with written information furnished by or on behalf of the Purchaser,
if such information is corrected and written notice of such correction is
delivered to the Company at least two business days prior to the pertinent sale
or sales. The Purchaser will reimburse the Company (or such officer, director or
controlling person, as the case may be) for any legal or other expenses
reasonably incurred in investing, defending or preparing to defend any such
action, proceeding or claim.

 

Promptly after receipt by any indemnified person of a notice of a claim or the
beginning of any action in respect of which indemnity is to be sought against an
indemnifying person pursuant to this Section 7.3, such indemnified person shall
notify the indemnifying person in writing of such claim or of the commencement
of such action, and, subject to the provisions hereinafter stated, in case any
such action shall be brought against an indemnified person and such indemnifying
person shall have been notified thereof, such indemnifying person shall be
entitled to participate therein, and, to the extent it shall wish, to assume the
defense thereof, with counsel reasonably satisfactory to such indemnified
person. After notice from the indemnifying person to such indemnified person of
its election to assume the defense thereof, such indemnifying person shall not
be liable to such indemnified person for any legal expenses subsequently
incurred by such indemnified person in connection with the defense thereof,
provided, however, that if there exists or shall exist a conflict of interest
that would make it inappropriate, in the opinion of counsel to the indemnified
person, for the same counsel to represent both the indemnified person and such
indemnifying person or any affiliate or associate thereof, the indemnified
person shall be entitled to retain its own counsel at the expense of such
indemnifying person; provided, however, that no indemnifying person shall be
responsible for the fees and expenses of more than one separate counsel for all
indemnified parties.

 

SECTION 8.         Restrictions on Transferability of Shares; Compliance with
Securities Act

 

8.1.       Transfer or Resale. Purchaser understands that except as provided in
Section 7 hereof: (i) the Shares have not been and are not being registered
under the Securities Act or any state securities laws, and may not be offered
for sale, sold, assigned or transferred unless (A) subsequently registered
thereunder, (B) Purchaser shall have delivered to the Company an opinion of
counsel, in a generally acceptable form, to the effect that such Shares to be
sold, assigned or transferred may be sold, assigned or transferred pursuant to
an exemption from such registration, or (C) Purchaser provides the Company with
reasonable assurance that such Shares can be sold, assigned or transferred
pursuant to Rule 144 or Rule 144A promulgated under the Securities Act, as
amended, (or a successor rule thereto) (collectively, "Rule 144"); (ii) any sale
of the Shares made in reliance on Rule 144 may be made only in accordance with
the terms of Rule 144 and further, if Rule 144 is not applicable, any resale of
the Shares under circumstances in which the seller (or the Person) through whom
the sale is made) may be deemed to be an underwriter (as that term is defined in
the Securities Act) may require compliance with some other exemption under the
Securities Act or the rules and regulations of the Commission thereunder; and
(iii) neither the Company nor any other person is under any obligation to
register the Shares under the Securities Act or any state securities laws or to
comply with the terms and conditions of any exemption thereunder.
Notwithstanding the foregoing, the Shares may be pledged in connection with a
bona fide margin account or other loan or financing arrangement secured by the
Shares and such pledge of Shares shall not be deemed to be a transfer, sale or
assignment of the Shares hereunder, and no Purchaser effecting a pledge of
Shares shall be required to provide the Company with any notice thereof or
otherwise make any delivery to the Company pursuant to this Agreement.

 

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8.2.       Restrictive Legend. Each certificate representing Shares shall bear
substantially the following legend (in addition to any legends required under
applicable state securities laws):

 

THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT AND
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THE
SHARES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
EXEMPTION THEREFROM.

 

The legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of the Shares upon which it is
stamped or issue to such holder by electronic delivery at the applicable balance
account at The Depository Trust Company following request of the Purchaser, if
(i) such Shares are registered for resale under the Securities Act, (ii) in
connection with a sale, assignment or other transfer, such holder provides the
Company with an opinion of counsel, in a generally acceptable form, to the
effect that such sale, assignment or transfer of the Shares may be made without
registration under the applicable requirements of the Securities Act, or (iii)
the Shares can be sold, assigned or transferred pursuant to Rule 144 or Rule
144A. The Company shall cause its counsel to promptly issue a legal opinion to
its transfer agent if required by the transfer agent, and/or to the Purchaser if
requested by the Purchaser, to effect the removal of the legend hereunder.

 

SECTION 9.         Miscellaneous

 

9.1.       Waivers and Amendments. The terms of this Agreement may be waived or
amended with the written consent of the Company and the Purchaser.

 

9.2.       Governing Law; Jurisdiction; Jury Trial. This Agreement shall be
governed in all respects by the laws of the Commonwealth of Virginia, without
regard to the conflict of laws rules thereof..

 

9.3.       Survival. The representations, warranties, covenants and agreements
made in this Agreement shall survive any investigation made by the Company or
the Purchaser and the Closing. The provisions of Section 7.3 are not intended to
limit, and shall not limit, any other remedies which either party hereto may
have for the breach by the other of any such representation, warranty, covenant,
or agreement.

 

9.4.       Successors and Assigns. This Agreement may not be assigned by the
Purchaser without the written consent of the Company.

 

9.5.       Entire Agreement. This Agreement constitutes the full and entire
understanding and agreement between the parties with regard to the subjects
thereof.

 

9.6.       Notices, etc. All notices and other communications required or
permitted under this Agreement shall be in writing and may be sent by personal
delivery, overnight delivery service, or U.S. mail, in which event it may be
mailed by first-class, certified or registered, postage prepaid. All such
notices and communications must be addressed, (i) if to the Company, Medalist
Diversified REIT, Inc., 11 S. 12th Street, Suite 401, Richmond, Virginia 23219,
Attention: Thomas E. Messier, with a copy to Kaplan Voekler Cunningham & Frank
PLC 1401 East Cary Street, Richmond, Virginia 23219, Attention: Thomas Voekler,
and (ii) if to the Purchaser, Virginia Birth-Related Neurological Injury
Compensation Program, 7501 Boulders View Dr., Suite 210, Richmond, VA 23225,
Attention: Candace Thomas.

 

9.7.       Severability of This Agreement. If any provision of this Agreement
shall be judicially determined to be invalid, illegal, or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.

 

9.8.       Titles and Subtitles. The titles of the paragraphs and subparagraphs
of this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.

 

9.9.       Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.

 

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9.10.      Further Assurances. Each party to this Agreement shall do and perform
or cause to be done and performed all such further acts and things and shall
execute and deliver all such other agreements, certificates, instruments and
documents as the other party hereto may reasonably request in order to carry out
the intent and accomplish the purposes of this Agreement and the consummation of
the transactions contemplated hereby.

 

9.11.      Expenses. The Company and Purchaser shall bear its own expenses
incurred on its behalf with respect to this Agreement and the transactions
contemplated hereby, including fees of legal counsel.

The foregoing Agreement is hereby executed as of the date first above written.

 

9.12.      Disclosure of Transactions and Other Material Information. On or
before the Disclosure Time (as defined below), the Company shall issue a press
release and file a Current Report on Form 8-K, in each case, reasonably
acceptable to the Placement Agent, describing the terms of the transactions
contemplated by this Agreement in the form required by the Exchange Act and
attaching this Agreement (and all schedules and exhibits to this Agreement) (
the "8-K Filing"). In addition, the Company hereby covenants and agrees that it
shall include in the 8-K Filing any information that constitutes, or could
reasonably be expected to constitute, material, nonpublic information regarding
the Transaction Entities received by the Purchaser from the Transaction
Entities, their Subsidiaries, or any of their respective officers, directors,
affiliates, employees or agents. As used herein, "Disclosure Time" means, (i) if
this Agreement is signed on a day that is not a trading day or after 9:00 a.m.
(New York City time) and before midnight (New York City time) on any trading
day, 9:01 a.m. (New York City time) on the trading day immediately following the
date hereof, unless otherwise instructed as to an earlier time by the Placement
Agents, or (ii) if this Agreement is signed between midnight (New York City
time) and 9:00 a.m. (New York City time) on any trading day, no later than 9:01
a.m. (New York City time) on the date hereof, unless otherwise instructed as to
an earlier time by the Placement Agents.

 

 

[Signature Page Follows]

 

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

 

 

  MEDALIST DIVERSIFIED REIT, INC.           By: /s/ Thomas E. Messier   Name:
Thomas E. Messier   Title: Chief Executive Officer           MEDALIST
DIVERSIFIED HOLDINGS, L.P.   By: Medalist Diversified REIT, Inc., its General
Partner       By: /s/ Thomas E. Messier   Name: Thomas E. Messier   Title: Chief
Executive Officer

 

Agreed to and confirmed       Virginia Birth-Related Neurological Injury
Compensation Program     By: /s/ Candace Thomas   Name: Candace Thomas   Title:
Deputy Director