Exhibit 10.3

 

SUBSCRIPTION ESCROW AGREEMENT

 

THIS SUBSCRIPTION ESCROW AGREEMENT dated as of December 17, 2015 (this
“Agreement”), is entered into among Bluerock Capital Markets, LLC (the “Dealer
Manager”), Bluerock Residential Growth REIT, Inc. (the “Company”) and UMB Bank,
National Association, a national banking association, as escrow agent (the
“Escrow Agent”).

 

WHEREAS, the Company intends to raise cash funds from Investors (as defined
below) pursuant to a public offering (the “Offering”) of not more than 150,000
units consisting of (i) 150,000 shares of Series B Redeemable Preferred Stock,
and (ii) warrants to purchase up to 3,000,000 shares of Class A common stock,
par value $0.01 per share, of the Company (collectively, the “Securities”),
pursuant to the registration statement on Form S-3 of the Company (No. 333-
200359) (as amended, the “Offering Document”) a copy of which is attached as
Exhibit A hereto.

 

WHEREAS, the Escrow Agent is willing to accept appointment as escrow agent only
for the express duties set forth herein.

 

NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants
and agreements contained herein, the parties hereto, intending to be legally
bound, hereby agree as follows:

 

1.          Proceeds to be Escrowed. On or before the date the Offering Document
is declared effective by the Securities and Exchange Commission (the “SEC”), the
Company shall establish an escrow account with the Escrow Agent to be invested
in accordance with Section 7 hereof entitled “ESCROW ACCOUNT FOR THE BENEFIT OF
INVESTORS OF UNITS OF BLUEROCK RESIDENTIAL GROWTH REIT INC” (including such
abbreviations as are required for the Escrow Agent’s systems) (the “Escrow
Account”). All checks, wire transfers and other funds received from subscribers
of Securities (“Investors”) in payment for the Securities (“Investor Funds”)
will be delivered to the Escrow Agent within one business day following the day
upon which such Investor Funds are received by the Company or its agents, and
shall, upon receipt by the Escrow Agent, be retained in escrow by the Escrow
Agent and invested as stated herein. During the term of this Agreement, the
Company or its agents shall cause all checks received by and made payable to it
for payment for the Securities to be endorsed in favor of the Escrow Agent and
delivered to the Escrow Agent for deposit in the Escrow Account.

 

The Escrow Agent shall have no duty to make any disbursement, investment or
other use of Investor Funds until and unless it has good and collected funds. If
any checks deposited in the Escrow Account are returned or prove uncollectible
after the funds represented thereby have been released by the Escrow Agent, then
the Company shall promptly reimburse the Escrow Agent for any and all costs
incurred for such, upon request, and the Escrow Agent shall deliver the returned
checks to the Company. The Escrow Agent shall be under no duty or responsibility
to enforce collection of any check delivered to it hereunder.

 

2.          Investors. Investors will be instructed by the Dealer Manager or any
soliciting dealers retained by the Dealer Manager (the “Soliciting Dealers”) to
remit the purchase price in the form of checks (hereinafter “instruments of
payment”) payable to the order of, or funds wired in favor of, “UMB BANK,
NATIONAL ASSOCIATION, ESCROW AGENT FOR BLUEROCK RESIDENTIAL GROWTH REIT, INC.”
Any checks made payable to a party other than the Escrow Agent shall be returned
to the Dealer Manager or Soliciting Dealer that submitted the check. By 12:00
p.m. (EST) the next business day after receipt of instruments of payment from
the Offering, the Company or the Dealer Manager shall furnish the Escrow Agent
with a list of the Investors who have paid for the Securities showing the name,
address, tax identification number, the amount of Securities subscribed for
purchase and the amount paid. The information comprising the identity of
Investors shall be provided to the Escrow Agent in substantially the format set
forth in the “List of Investors” attached hereto as Exhibit B.

 

 

 

  

When a Soliciting Dealer’s internal supervisory procedures are conducted at the
site at which the subscription agreement and check were initially received by
Soliciting Dealer from the subscriber, such Soliciting Dealer shall transmit the
subscription agreement and check for the purchase of Securities to the Escrow
Agent by the end of the next business day following receipt of the check and
subscription agreement for the purchase of Securities. When, pursuant to such
Soliciting Dealer’s internal supervisory procedures, such Soliciting Dealer’s
final internal supervisory procedures are conducted at a different location (the
“Final Review Office”), such Soliciting Dealer shall transmit the check and
subscription agreement to the Final Review Office by the end of the next
business day following Soliciting Dealer’s receipt of the subscription agreement
and check for the purchase of Securities. The Final Review Office will, by the
end of the next business day following its receipt of the subscription agreement
and check for the purchase of Securities, forward both the subscription
agreement and check to the Escrow Agent. If any subscription agreement for the
purchase of Securities solicited by a Soliciting Dealer is rejected by the
Dealer Manager or the Company, then the subscription agreement and check for the
purchase of Securities will be returned to the rejected subscriber within ten
business days from the date of rejection.

 

All Investor Funds deposited in the Escrow Account shall not be subject to any
liens or charges by the Company or the Escrow Agent, or judgments or creditors’
claims against the Company, until and unless released to the Company as
hereinafter provided. The Company understands and agrees that the Company shall
not be entitled to any Investor Funds on deposit in the Escrow Account and no
such funds shall become the property of the Company, or any other entity except
as released to the Company pursuant to Section 3. The Escrow Agent will not use
the information provided to it by the Company for any purpose other than to
fulfill its obligations as Escrow Agent hereunder. The Company and the Escrow
Agent will treat all Investor information as confidential. The Escrow Agent
shall not be required to accept any Investor Funds which are not accompanied by
the information on the List of Investors.

 

3.          Disbursement of Funds. Once the Offering has closed, the Company
shall notify the Escrow Agent of the same in writing. Further, if the Minimum
Amount has not been sold on or prior to the Termination Date, the Company shall
notify the Escrow Agent in writing of such. Additionally, at the end of the
third business day following the Termination Date (as defined in Section 4), the
Escrow Agent shall notify the Company of the amount of the Investor Funds
received. The Escrow Agent agrees that funds in the Escrow Account shall not be
released to the Company until and unless the Escrow Agent receives written
instructions to release the funds from the Company’s Chief Executive Officer,
President or Chief Accounting Officer.

 

If the Company notifies the Escrow Agent in writing that the Minimum Amount has
not been sold prior to the Termination Date, the Escrow Agent shall, promptly
following the Termination Date, but in no event more than 30 days after the
Termination Date, refund to each Investor by check, funds deposited in the
Escrow Account, or shall return the instruments of payment delivered to Escrow
Agent if such instruments have not been processed for collection prior to such
time, directly to each Investor at the address provided on the List of
Investors. Included in the remittance shall be a proportionate share of the
income earned in the account allocable to each Investor’s investment in
accordance with the terms and conditions specified herein, except that in the
case of Investors who have not provided an executed Form W-9 or substitute Form
W-9 (or the applicable substitute Form W-8 for foreign investors), the Escrow
Agent shall withhold the applicable percentage of the earnings attributable to
those Investors in accordance with Internal Revenue Service (“IRS”) regulations.
Notwithstanding the foregoing, the Escrow Agent shall not be required to remit
any payments until funds represented by such payments have been collected by the
Escrow Agent.

 

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If the Escrow Agent receives written notice from the Company that the Company
intends to reject an Investor’s subscription, the Escrow Agent shall pay to the
applicable Investor, within a reasonable time not to exceed ten business days
after receiving notice of the rejection, by first class United States Mail at
the address provided on the List of Investors, or at such other address as shall
be furnished to the Escrow Agent by the Investor in writing, all collected sums
paid by the Investor for Securities and received by the Escrow Agent, together
with the interest earned on such Investor Funds (determined in accordance with
the terms and conditions specified herein).

 

4.          Term of Escrow. The “Termination Date” shall be the earliest of: (a)
the close of business on December 19, 2017 as such date may be extended until
June 17, 2018 upon written notice to the Escrow Agent by the Company; (b) the
date that all funds held in the Escrow Account are distributed to the Company or
to Investors pursuant to Section 3 and the Company has informed the Escrow Agent
in writing to close the Escrow Account; (c) the date all the Securities are
sold; (d) the date the Escrow Agent receives written notice from the Company
that it is abandoning the sale of the Securities; and (e) the date the Escrow
Agent receives notice from the Securities and Exchange Commission or any other
federal or state regulatory authority that a stop or similar order has been
issued with respect to the Offering Document and has remained in effect for at
least 20 days. After the Termination Date the Company and its agents shall not
deposit, and the Escrow Agent shall not accept, any additional amounts
representing payments by prospective Investors.

 

5.          Duty and Liability of the Escrow Agent. The sole duty of the Escrow
Agent shall be to receive Investor Funds and hold them subject to release, in
accordance herewith, and the Escrow Agent shall be under no duty to determine
whether the Company or any Dealer Manager is complying with requirements of this
Agreement, the Offering or applicable securities or other laws in tendering the
Investor Funds to the Escrow Agent. No other agreement entered into between the
parties, or any of them, shall be considered as adopted or binding, in whole or
in part, upon the Escrow Agent notwithstanding that any such other agreement may
be referred to herein or deposited with the Escrow Agent or the Escrow Agent may
have knowledge thereof, including specifically but without limitation the
Offering Document or any other document related to the Offering (including the
subscription agreement and exhibits thereto), and the Escrow Agent’s rights and
responsibilities shall be governed solely by this Agreement. The Escrow Agent
shall not be responsible for or be required to enforce any of the terms or
conditions of the Offering Document or any other document related to the
Offering (including the subscription agreement and exhibits thereto) or other
agreement between the Company and any other party. The Escrow Agent may
conclusively rely upon and shall be protected in acting upon any statement,
certificate, notice, request, consent, order or other document believed by it to
be genuine and to have been signed or presented by the proper party or parties.
The Escrow Agent shall have no duty or liability to verify any such statement,
certificate, notice, request, consent, order or other document, and its sole
responsibility shall be to act only as expressly set forth in this Agreement.
Concurrent with the execution of this Agreement, the Company and the Dealer
Manager shall each deliver to the Escrow Agent an authorized signers form in the
form of Exhibit C or Exhibit C-1 to this Agreement, as applicable. The Escrow
Agent shall be under no obligation to institute or defend any action, suit or
proceeding in connection with this Agreement unless first indemnified to its
satisfaction. The Escrow Agent may consult counsel of its own choice with
respect to any question arising under this Agreement and the Escrow Agent shall
not be liable for any action taken or omitted in good faith upon advice of such
counsel. The Escrow Agent shall not be liable for any action taken or omitted by
it in good faith except to the extent that a court of competent jurisdiction
determines that the Escrow Agent’s gross negligence or willful misconduct was
the primary cause of loss. The Escrow Agent is acting solely as escrow agent
hereunder and owes no duties, covenants or obligations, fiduciary or otherwise,
to any other person by reason of this Agreement, except as otherwise stated
herein, and no implied duties, covenants or obligations, fiduciary or otherwise,
shall be read into this Agreement against the Escrow Agent.  If any disagreement
between any of the parties to this Agreement, or between any of them and any
other person, including any Investor, resulting in adverse claims or demands
being made in connection with the matters covered by this Agreement, or if the
Escrow Agent is in doubt as to what action it should take hereunder, the Escrow
Agent may, at its option, refuse to comply with any claims or demands on it, or
refuse to take any other action hereunder, so long as such disagreement
continues or such doubt exists, and in any such event, the Escrow Agent shall
not be or become liable in any way or to any person for its failure or refusal
to act, and the Escrow Agent shall be entitled to continue so to refrain from
acting until (a) the rights of all interested parties shall have been fully and
finally adjudicated by a court of competent jurisdiction, or (b) all differences
shall have been adjudged and all doubt resolved by agreement among all of the
interested persons, and the Escrow Agent shall have been notified thereof in
writing signed by all such persons. Notwithstanding the foregoing, the Escrow
Agent may in its discretion obey the order, judgment, decree or levy of any
court, whether with or without jurisdiction and the Escrow Agent is hereby
authorized in its sole discretion to comply with and obey any such orders,
judgments, decrees or levies. If any controversy should arise with respect to
this Agreement the Escrow Agent shall have the right, at its option, to
institute an interpleader action in any court of competent jurisdiction to
determine the rights of the parties. IN NO EVENT SHALL THE ESCROW AGENT BE
LIABLE, DIRECTLY OR INDIRECTLY, FOR ANY SPECIAL, INDIRECT OR CONSEQUENTIAL
LOSSES OR DAMAGES OF ANY KIND WHATSOEVER (INCLUDING WITHOUT LIMITATION LOST
PROFITS), EVEN IF THE ESCROW AGENT HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH
LOSSES OR DAMAGES AND REGARDLESS OF THE FORM OF ACTION. The parties hereto agree
that the Escrow Agent has no role in the preparation of the Offering Documents
(including the subscription agreement and exhibits thereto) and makes no
representations or warranties with respect to the information contained therein
or omitted therefrom. The Escrow Agent shall have no obligation, duty or
liability with respect to compliance with any federal or state securities,
disclosure or tax laws concerning the Offering Documents or any other document
related to the Offering (including the subscription agreement and exhibits
thereto) or the issuance, offering or sale of the Securities. The Escrow Agent
shall have no duty or obligation to monitor the application and use of the
Investor Funds once transferred to the Company, that being the sole obligation
and responsibility of the Company.

 

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6.          Escrow Agent’s Fee. The Escrow Agent shall be entitled to
compensation for its services as stated in the fee schedule attached hereto as
Exhibit D, which compensation shall be paid by the Company. The fee agreed upon
for the services rendered hereunder is intended as full compensation for the
Escrow Agent’s services as contemplated by this Agreement; provided, however,
that if (a) the conditions for the disbursement of funds under this Agreement
are not fulfilled, (b) the Escrow Agent renders any material service not
contemplated in this Agreement, (c) there is any assignment of interest in the
subject matter of this Agreement, (d) there is any material modification hereof,
e) any material controversy arises hereunder, or (f) the Escrow Agent is made a
party to any litigation pertaining to this Agreement or the subject matter
hereof, then the Escrow Agent shall be reasonably compensated for such
extraordinary services and reimbursed for all costs and expenses, including
reasonable attorney’s fees, occasioned by any delay, controversy, litigation or
event, and the same shall be recoverable from the Company. The Company’s
obligations under this Section 6 shall survive the resignation or removal of the
Escrow Agent and the assignment or termination of this Agreement.

 

7.          Investment of Investor Funds. The Investor Funds shall be deposited
in the Escrow Account in accordance with Section 1 and held un-invested in the
Escrow Account, which shall be non-interest bearing.

 

8.          Notices. All notices, requests, demands, and other communications
under this Agreement shall be in writing and shall be deemed to have been duly
given (a) on the date of service if served personally on the party to whom
notice is to be given, (b) on the day of transmission if sent by facsimile/email
transmission bearing an authorized signature to the facsimile number/email
address given below, and written confirmation of receipt is obtained promptly
after completion of transmission, (c) on the day after delivery to Federal
Express or similar overnight courier or the Express Mail service maintained by
the United States Postal Service, or (d) on the fifth day after mailing, if
mailed to the party to whom notice is to be given, by first class mail,
registered or certified, postage prepaid, and properly addressed, return receipt
requested, to the party as follows:

 

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If to the Company:

 

Bluerock Residential Growth REIT, Inc.

712 Fifth Avenue, 9th Floor

New York, NY 10019

Attn: Michael L. Konig

 

With a copy to:

 

Kaplan Voekler Cunningham & Frank, PLC

1401 E. Cary St.

Richmond, VA 23219

Attn: Richard P. Cunningham, Jr., Esq.

 

If to the Dealer Manager:

 

Bluerock Capital Markets, LLC

17900 Sky Part Circle, Suite 260

Irvine, CA 92614

Attn: Paul Dunn

 

If to the Escrow Agent:

 

UMB Bank, National Association

Attn: Lara Stevens

Corporate Trust & Escrow Services

1010 Grand Blvd. 4th Floor

Mail Stop: 1020409

Kansas City, Missouri 64106

Telephone: (816) 860-3017

Fax: (816) 860-3029

Email: lara.stevens@umb.com

 

Any party may change its address for purposes of this Section by giving the
other party written notice of the new address in the manner set forth above.

 

9.          Indemnification of Escrow Agent. The Company and the Dealer Managers
hereby agree to, jointly and severally, indemnify, defend and hold harmless the
Escrow Agent from and against, any and all losses, liabilities, costs, damages
and expenses, including, without limitation, reasonable counsel fees and
expenses, which the Escrow Agent may suffer or incur by reason of any action,
claim or proceeding brought against the Escrow Agent arising out of or relating
in any way to this Agreement or any transaction to which this Agreement relates
unless such loss, liability, cost, damage or expense is finally determined by a
court of competent jurisdiction to have been primarily caused by the gross
negligence or willful misconduct of the Escrow Agent. The terms of this Section
shall survive the termination of this Agreement and the resignation or removal
of the Escrow Agent.

 

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10.         Successors and Assigns. Except as otherwise provided in this
Agreement, no party hereto shall assign this Agreement or any rights or
obligations hereunder without the prior written consent of the other parties
hereto and any such attempted assignment without such prior written consent
shall be void and of no force and effect. This Agreement shall inure to the
benefit of and shall be binding upon the successors and permitted assigns of the
parties hereto. Any corporation or association into which the Escrow Agent may
be converted or merged, or with which it may be consolidated, or to which it may
sell or transfer all or substantially all of its corporate trust business and
assets as a whole or substantially as a whole, or any corporation or association
resulting from any such conversion, sale, merger, consolidation or transfer to
which the Escrow Agent is a party, shall be and become the successor Escrow
Agent under this Agreement and shall have and succeed to the rights, powers,
duties, immunities and privileges as its predecessor, without the execution or
filing of any instrument or paper or the performance of any further act.

 

11.         Governing Law; Jurisdiction. This Agreement shall be construed,
performed, and enforced in accordance with, and governed by, the internal laws
of the State of New York, without giving effect to the principles of conflicts
of laws thereof.

 

12.         Severability. If any provision of this Agreement is declared by any
court or other judicial or administrative body to be null, void, or
unenforceable, said provision shall survive to the extent it is not so declared,
and all of the other provisions of this Agreement shall remain in full force and
effect.

 

13.         Amendments; Waivers. This Agreement may be amended or modified, and
any of the terms, covenants, representations, warranties, or conditions hereof
may be waived, only by a written instrument executed by the parties hereto, or
in the case of a waiver, by the party waiving compliance. Any waiver by any
party of any condition, or of the breach of any provision, term, covenant,
representation, or warranty contained in this Agreement, in any one or more
instances, shall not be deemed to be nor construed as further or continuing
waiver of any such condition, or of the breach of any other provision, term,
covenant, representation, or warranty of this Agreement. The Company and the
Dealer Managers agree that any requested waiver, modification or amendment of
this Agreement shall be consistent with the terms of the Offering.

 

14.         Entire Agreement. This Agreement contains the entire agreement and
understanding among the parties hereto with respect to the escrow contemplated
hereby and supersedes and replaces all prior and contemporaneous agreements and
understandings, oral or written, with regard to such escrow.

 

15.         Section Headings. The section headings in this Agreement are for
reference purposes only and shall not affect the meaning or interpretation of
this Agreement.

 

16.         Counterparts. This Agreement may be executed (including by facsimile
transmission) with counterpart signature pages or in counterparts, each of which
shall be deemed an original, but all of which shall constitute the same
instrument. The parties hereto agree that the transactions described herein may
be conducted and related documents may be stored by electronic means. Copies,
telecopies, facsimilies, electronic files and other reproductions of original
executed documents shall be deemed to be authentic and valid counterparts of
such original documents for all purposes, including the filing of any claim,
action or suit in the appropriate court of law.

 

17.         Resignation. The Escrow Agent may resign upon 30 days’ advance
written notice to the parties hereto. If a successor escrow agent is not
appointed by the Company within the 30-day period following such notice, the
Escrow Agent may petition any court of competent jurisdiction to name a
successor escrow agent, or may interplead the Investor Funds with such court,
whereupon the Escrow Agent’s duties hereunder shall terminate.

 

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18.         References to Escrow Agent. Other than the Offering Document, any of
the other documents related to the Offering (including the subscription
agreement and exhibits thereto) and any amendments thereof or supplements
thereto, no printed or other matter in any language (including, without
limitation, notices, reports and promotional material) which mentions the Escrow
Agent’s name or the rights, powers, or duties of the Escrow Agent shall be
issued by the Company or the Dealer Manager, or on the Company’s or the Dealer
Manager’s behalf, unless the Escrow Agent shall first have given its specific
written consent thereto. Notwithstanding the foregoing, any amendment or
supplement to the Offering Document or any other document related to the
Offering (including the subscription agreement and exhibits thereto) that
revises, alters, modifies, changes or adds to the description of the Escrow
Agent or its rights, powers or duties hereunder shall not be issued by the
Company or the Dealer Manager, or on the Company’s or the Dealer Manager’s
behalf, unless the Escrow Agent has first given specific written consent
thereto.

 

19.         Patriot Act Compliance. The Company shall provide to the Escrow
Agent upon the execution of this Agreement any documentation requested and any
information reasonably requested by the Escrow Agent to comply with the USA
Patriot Act of 2001, as amended from time to time.

 

[Signature page follows.]

 

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
the date and year first set forth above.

 

  BLUEROCK RESIDENTIAL GROWTH REIT, INC.         By: /s/ R. Ramin Kamfar   Name:
R. Ramin Kamfar   Title: President and CEO         BLUEROCK CAPITAL MARKETS, LLC
        By: /s/ Paul E. Dunn   Name: Paul Dunn   Title: Senior Managing Director
        UMB BANK, N.A., as Escrow Agent         By: /s/ Lara L. Stevens   Name:
Lara L. Stevens   Title: Vice President

 

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Exhibit A

 

Copy of Offering Document

 

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Exhibit B

 

List of Investors

 

Pursuant to the Escrow Agreement dated as of December 17, 2015, among Bluerock
Capital Markets, LLC, Bluerock Residential Growth REIT, Inc. (the “Company”),
and UMB Bank, National Association (the “Escrow Agent”), the Company or its
agent hereby certifies that the following Investors have paid money for the
purchase of shares of the Company’s units (“Securities”), and the money has been
deposited with the Escrow Agent:

 

1. Name of Investor:

Address:

Tax Identification Number:

Amount of Securities subscribed for:

Amount of money paid and deposited with Escrow Agent:

 

2. Name of Investor:

Address:

Tax Identification Number:

Amount of Securities subscribed for:

Amount of money paid and deposited with Escrow Agent:

 

Dated:           By:       Name:     Title:  

 

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Exhibit C

 

Certificate as to Authorized Signatures

 

The specimen signatures shown below are the specimen signatures of the
individuals who have been designated as Authorized Representatives of Bluerock
Residential Growth REIT, Inc. and are authorized to initiate and approve
transactions of all types for the above-mentioned account on behalf of Bluerock
Residential Growth REIT, Inc.

 

Name/Title Specimen Signature       /s/ R. Ramin Kamfar   Signature       /s/
Michael Konig   Signature       /s/ Jordan Ruddy   Signature           Signature

 

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Exhibit C-1

 

Certificate as to Authorized Signatures

 

The specimen signatures shown below are the specimen signatures of the
individuals who have been designated as Authorized Representatives of Bluerock
Capital Markets, LLC and are authorized to initiate and approve transactions of
all types for the above-mentioned account on behalf of Bluerock Capital Markets,
LLC.

 

Name/Title Specimen Signature     Paul Dunn /s/ Paul E. Dunn Senior Managing
Director Signature           Signature

 

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Exhibit D

 

ESCROW FEES AND EXPENSES

 

Acceptance Fee

 

  Draft/Review document, establish account $3,000    

Annual Fees

 

  Annual Escrow Agent $3,000     Transactional Fees   Outgoing Wire Transfers
$35 each Overnight Delivery/Mailings $16.50 each Expense Reimbursement* 6% of
Annual Fee

 

Acceptance will be payable at the initiation of the escrow. The annual fees and
transactional fees, if any, will be billed quarterly in arrears. Other fees and
expenses will be billed as incurred.

 

*In addition to the specified fees, all expenses related to the administration
of the Escrow Agreement, such as, but not limited to, travel, postage, shipping,
courier, telephone, facsimile, supplies, legal fees, accounting fees, etc., will
be reimbursable.

 

Fees specified are for the regular, routine services contemplated by the Escrow
Agreement, and any additional or extraordinary services, including, but not
limited to disbursements involving a dispute or arbitration, or administration
while a dispute, controversy or adverse claim is in existence, will be charged
based upon time required at the then standard hourly rate.

 

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