INVESTOR RIGHTS AGREEMENT

 

This INVESTOR RIGHTS AGREEMENT is made and entered into on this 10th day of
February, 2013 (this “Agreement”) by and among Sentinel RE Investment Holdings
LP, a Delaware limited partnership (the “Investor”), Sentio Healthcare
Properties, Inc., a corporation organized under the laws of the State of
Maryland (the “Company”) and Sentio Healthcare Properties OP, L.P., a Delaware
limited partnership (the “Partnership,” and together with the Company, the
“Sentio Parties”).

 

RECITALS

 

WHEREAS, the Sentio Parties and the Investor are party to that certain
Securities Purchase Agreement of even date herewith (the “Securities Purchase
Agreement”), pursuant to which the Company may issue and sell to the Investor
the Series A Preferred Shares and/or the Series C Preferred Shares, and the
Partnership may issue and sell to the Investor the Series B Convertible
Preferred Units;

 

WHEREAS, a condition to the obligations of the Sentio Parties and the Investor
under the Securities Purchase Agreement is the execution and delivery of this
Agreement;

 

NOW, THEREFORE, in consideration for the Company’s and the Investor’s execution
and delivery of, and the performance of their respective obligations under the
Securities Purchase Agreement, the parties hereto, intending to be legally
bound, agree as follows:

 

Article I
DEFINITIONS

 

Section 1.1           Definitions.

 

The following definitions shall be applicable to the terms set forth below as
used in this Agreement:

 

“Common Units” will have the meaning ascribed to such term in the Form of
Amended Partnership Agreement.

 

“Consenting Holder” means the then-largest holder or group of Affiliated
holders, measured by number of shares, of the Series A Preferred Shares or the
Series C Preferred Shares, as applicable.

 

“Conversion Shares” will mean any Common Stock issued or issuable by the Company
upon exchange of Common Units (including Common Units issuable upon conversion
of any Preferred Units), in each case in accordance with the Form of Amended
Partnership Agreement.

 

 

 

 

“Extraordinary Dividend” means (i) any dividend or other distribution on shares
of Common Stock other than regular quarterly dividends on the Common Stock and
(ii) without limiting clause (i) of this definition, during any Term Out Period,
any dividends or other distributions on shares of Common Stock that would result
in aggregate cumulative dividends or other distributions on shares of Common
Stock in excess of $0.7515 per share per annum (adjusted as appropriate to
reflect any stock splits, stock dividends, combinations, reorganizations,
reclassifications or similar events following the date hereof) from the date
hereof through and including the date of such distribution or dividend; provided
that no dividend or distribution shall be an “Extraordinary Dividend” under this
clause (ii) if and to the extent such distribution or dividend is required to
permit the Company to continue to qualify as a REIT.

 

“Form of Amended Partnership Agreement” means that certain Second Amended and
Restated Limited Partnership Agreement of Sentio Healthcare Properties OP, L.P.,
in the form attached as Exhibit B to the Securities Purchase Agreement.

 

“Full Cooperation” means where, in addition to the cooperation otherwise
required by this Agreement, members of senior management of the Company
(including the chief executive officer and chief financial officer) fully
cooperate with the underwriter(s) in connection with all reasonable and
customary recommendations and requests of such underwriter(s), and make
themselves available upon reasonable notice to participate in due diligence
meetings or calls, “road-show” and other reasonable and customary marketing
activities in such locations (domestic and foreign) as recommended by the
underwriter(s).

 

“Listing” means the approval for trading of the Common Stock on any securities
exchange registered as a national securities exchange under Section 6 of the
Exchange Act.         

 

“Liquidation Event” means a transaction to sell, convey, or otherwise dispose of
all or substantially all of the Company’s assets (including by way of a series
of related sale transactions of individual assets) or merge with or into or
consolidate with any other corporation, limited liability company or other
entity (other than a wholly-owned Subsidiary), provided that this definition
shall not apply to a merger effected exclusively for the purpose of changing the
domicile of the Company.

 

“Outstanding Securities” means the aggregate value of the outstanding shares of
the Company’s capital stock and all of the Partnership Units of the Partnership.

 

“Partnership Units” will have the meaning ascribed to such term in the Form of
Amended Partnership Agreement.

 

“Permitted Transferee” means: (i) any Person that receives the Company’s capital
stock from the Investor or any Permitted Transferee upon the earliest to occur
of (A) the Aggregate Put Right being exercised, (B) the Put Exercise being
canceled and (C) the third anniversary of the Effective Date, or (ii) at any
time, (A) any Affiliate of the Investor, and (B) any shareholder, partner,
managing director, member, principal or retired partner of the Investor upon a
pro rata distribution by a partnership or a limited liability company to its
partners or members or otherwise upon the dissolution or liquidation of the
Investor.

 

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“Person” means any natural person, corporation, limited liability company,
trust, joint venture, association, company, partnership, governmental authority
or other entity.

 

“Preferred Stock Director” will mean any director appointed or nominated by the
Investor pursuant to Section 3.4 hereof and any other “Preferred Stock Director”
as such term is defined in the Articles Supplementary and the Series C Articles
Supplementary.

 

“Preferred Units” will have the meaning ascribed to such term in the Form of
Amended Partnership Agreement.

 

“Primary Offering Demand” will have the meaning ascribed to such term in Section
2.2(a) hereof.

 

“Primary Offering Securities” means Common Stock that are newly issued and sold
for the Company’s account in response to a Primary Offering Demand.

 

“Proportionate Percentage” means, as of any determination date and in respect of
any Person, a fraction, expressed as a percentage, equal to (x) the number of
shares of Common Stock then held by such Person divided by (y) the number of
shares of Common Stock then outstanding. Solely for purposes of this definition,
Common Stock will be deemed to be “held” by any Person or “outstanding”, in each
case, if such Common Stock would be held by such Person or outstanding after
giving effect to the conversion or exchange, in accordance with their terms, of
any and all securities then convertible or exchangeable, directly or indirectly,
into Common Stock (including, without limitation, the Series B Convertible
Preferred Units), but without giving effect to any limitations on such
conversion or exchange applicable as a result of the Aggregate Stock Ownership
Limit or the Common Stock Ownership Limit (as each such term is defined in the
Company’s charter) or any comparable limitations. Solely for purposes of
determining the Proportionate Percentage hereunder, each of the Preferred Shares
will be deemed convertible into shares of Common Stock at the Assumed Conversion
Rate (as such term is defined in the Articles Supplementary or the Series C
Articles Supplementary, as applicable).

 

“Prospectus” shall mean the prospectus included in any Registration Statement
(including a prospectus that discloses information previously omitted from a
prospectus filed as part of an effective Registration Statement in reliance upon
Rule 430A or Rule 430B promulgated under the Securities Act), as amended or
supplemented by any prospectus supplement, and all other amendments and
supplements to the prospectus, including post-effective amendments, and all
material incorporated by reference or deemed to be incorporated by reference in
such prospectus.

 

“Qualified Listing” means an initial Listing by the Company in which the average
daily price per share of Common Stock so listed for at least 15 of the first 30
consecutive trading days is in excess of $8 (adjusted as appropriate to reflect
any stock splits, stock dividends, combinations, reorganizations,
reclassifications or similar events following the date hereof).

 

“Redemption Price” will have the meaning assigned to such term in the Form of
Amended Partnership Agreement.

 

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“REIT Shares Amount” will have the meaning assigned to such term in the Form of
Amended Partnership Agreement.

 

“Registrable Securities” means, as of any date of determination, (i) Preferred
Shares, (ii) Conversion Shares and (iii) any other securities issued or issuable
with respect to any such shares by way of share split, share dividend,
distribution, recapitalization, merger, exchange, replacement or similar event
or otherwise, in each case, until such time as such Conversion Shares, Preferred
Shares or other securities, as applicable, have been disposed of in accordance
with the Registration Statement, or have been sold pursuant to Rule 144 under
the Securities Act.

 

“Registration Expenses” means all expenses incident to the Company’s performance
of or compliance with Article II, including, without limitation, all
registration and filing fees, all listing fees, all fees and expenses of
complying with securities or blue sky laws, FINRA fees, and printing expenses,
and the fees and disbursements of counsel for the Company and of the Company’s
independent public accountants, but excluding any brokerage commissions or
discounts, underwriting commissions, Investor’s counsel and underwriter counsel
fees (except blue sky), roadshow costs and similar fees and costs payable in
connection with an offer, sale or resale of Registrable Securities.

 

“Registration Statement” shall mean any registration statement of the Company
under the Securities Act which covers any of the Registrable Securities pursuant
to the provisions of this Agreement, including the Prospectus, amendments and
supplements to such registration statement, including post-effective amendments,
all exhibits and all materials incorporated by reference or deemed to be
incorporated by reference in such registration statement.

 

“Rule 144” means Rule 144 under the Securities Act, as amended from time to time
(or any successor statute).

 

“Term Out Period” will have the meaning assigned to such term in Section 6.1(d)
hereof.

 

“Term Out Period Change of Control” means, during the Term Out Period, (i) the
sale (whether by merger, recapitalization or other sale or business combination
transaction) of all or substantially all of the assets of the Company to any
Person (or group of Persons acting in concert), other than to the Investor or
its Affiliates; or (ii) a merger, recapitalization or other sale or business
combination transaction by the Company, the Company’s stockholders (other than
the Investor and its Affiliates) or any of their respective Affiliates, to a
Person (or group of Persons acting in concert) of equity interests that results
in any Person (or group of Persons acting in concert), other than the Investor
or its Affiliates, owning more than 50% of the equity interests or voting power
of the Company (or any resulting company after a business combination) or
acquiring the ability to appoint a majority of the Board.

 

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“Underwriters’ Maximum Number” means the maximum number of Registrable
Securities that an underwriter will offer for sale in an Underwritten Offering
before such number will adversely affect the price of such offering.

 

Section 1.2           Additional Definitions.   In addition to the foregoing,
capitalized terms used in this Agreement and not otherwise defined in this
Article I shall have the meanings so given to such terms herein. Capitalized
terms used but not defined herein will have the meanings ascribed to such terms
in the Securities Purchase Agreement.

 

Article II
REGISTRATION RIGHTS

 

Section 2.1           Demand Registration.

 

(a)          Subject to the provisions hereof, at any time on or after the four
(4) year anniversary of the Effective Date, the Investor shall have the right to
require the Company to file a Registration Statement registering for the offer,
sale and distribution of all or part of their Registrable Securities under the
Securities Act (a “Demand Registration”) by delivering a written request
therefor to the Company (i) specifying the number of Registrable Securities to
be included in such registration, (ii) specifying the intended method of
disposition thereof, including whether pursuant to an Underwritten Offering (as
defined below), and (iii) containing all information about the Investor required
to be included in such Registration Statement in accordance with applicable law.
The date upon which the Investor delivers such request shall be referred to
herein as a “Demand Date.” As soon as practicable after the Demand Date, the
Company shall use reasonable best efforts to effect such registration
(including, without limitation, appropriate qualification under applicable blue
sky or other state securities laws and appropriate compliance with applicable
regulations issued under the Securities Act and any other governmental
requirements or regulations) of the Registrable Securities that the Company has
been so requested to register; provided, however, that (A) the Investor shall
not make a request for a Demand Registration unless the Registrable Securities
requested to be so registered (i) would reasonably be expected to result in
aggregate gross cash sale proceeds in excess of $20,000,000 (without regard to
any underwriting discount or commission) or (ii) comprise at least 10% of the
Outstanding Securities prior to the applicable Demand Date, and (B) the Investor
will not be entitled to require the Company to effect more than five (5) Demand
Registrations in the aggregate under this Agreement. Notwithstanding the
foregoing, the limitation set forth in proviso (A) above will not apply so long
as the Investor requests a Demand Registration for all of the Registrable
Securities it holds at the time of the request.

 

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(b)          The offering of the Registrable Securities pursuant to such Demand
Registration may be in the form of an underwritten public offering (an
“Underwritten Offering”). In such case, (i) the Company, with the written
consent of the Investor (not to be unreasonably withheld) may designate the
managing underwriter(s), investment banker(s) and manager(s) of the Underwritten
Offering (including in any Shelf Offering) and (ii) the Company shall (together
with the Investor) enter into an underwriting agreement in customary form for
underwriting agreements for firm commitment offerings of equity securities with
the managing underwriter(s) proposing to distribute their securities through
such Underwritten Offering, which underwriting agreement shall have
indemnification provisions in substantially the form as set forth in Section 2.9
of this Agreement; provided, that (i) the Investor shall not be required to make
any representations and warranties to, or agreements with, any underwriter in a
registration other than customary representations, warranties and agreements and
(ii) the liability of the Investor in respect of any indemnification,
contribution or other obligation of the Investor arising under such underwriting
agreement (a) shall be limited to losses arising out of or based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
such Registration Statement, any such preliminary Prospectus, final Prospectus,
summary Prospectus, amendment or supplement, incorporated document or other such
disclosure document or other document or report, in reliance upon and in
conformity with information furnished to the Company by or on behalf of the
Investor expressly for inclusion therein and (b) shall not in any event, absent
fraud or intentional misrepresentation, exceed an amount equal to the net
proceeds to the Investor (after deduction of all underwriters’ discounts and
commissions) from the disposition of the Registrable Securities disposed of by
the Investor pursuant to such Underwritten Offering. The Investor may not
participate in any such Underwritten Offering unless the Investor agrees to sell
its Registrable Securities on the basis provided in such underwriting agreement
and completes and executes all questionnaires, powers of attorney, indemnities
and other documents reasonably required under the terms of such underwriting
agreement.

 

(c)          If, in connection with an Underwritten Offering, the managing
underwriter(s) advise the Company that in its or their good faith opinion the
number of securities proposed to be included in such registration exceeds the
Underwriters’ Maximum Number, then the Company will be obligated and required to
include in such Underwritten Offering only that number of Registrable Securities
requested by the Investor to be included in such registration that does not
exceed such Underwriters’ Maximum Number pro rata among the holders of
Registrable Securities that have requested to participate in such Demand
Registration on the basis of the percentage of the Registrable Securities
requested to be included in such Registration Statement by such holders. No
Common Stock held by any Person other than Registrable Securities held by the
Investor shall be included in a Demand Registration without the prior written
consent of the holders of a majority in interest of the Registrable Securities.

 

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(d)          A registration will not be deemed to have been effected as a Demand
Registration unless the Registration Statement relating thereto (i) covers all
Registrable Securities specified in the applicable Demand Registration request
for sale in accordance with the intended method or methods of distribution
specified in such Demand Registration, subject to the underwriter cutbacks
described in Section 2.1(c) (but only if the Underwriters’ Maximum Number
represents at least 75% of the Registrable Securities so specified), (ii) has
been declared effective by the Commission, (iii) is maintained effective for the
period required pursuant to this Agreement and (iv) the Company has complied in
all material respects with its obligations under this Agreement with respect
thereto; provided, however, that if, after it has become effective, (A) such
Registration Statement or the related offer, sale or distribution of Registrable
Securities thereunder is or becomes the subject of any stop order, injunction or
other order or requirement of the Commission or any other governmental or
administrative agency, or if any court prevents or otherwise limits the sale of
the Registrable Securities pursuant to the registration (but only if such stop
order, injunction or other order or requirement did not result from a statement
or alleged statement in or omission or alleged omission from such Registration
Statement, any preliminary Prospectus, final Prospectus or summary Prospectus
contained therein, or any amendment or supplement thereto, if such statement or
alleged statement or omission or alleged omission was made in reliance upon and
in conformity with information specifically furnished to the Company by the
Investor for incorporation therein), and in each case less than all of the
Registrable Securities covered by the effective Registration Statement are
actually sold by the Investor pursuant to the Registration Statement, or (B) if,
in the case of an Underwritten Offering, the Company fails to provide Full
Cooperation, then such registration will be deemed not to have been effected for
purposes of clause (B) of the proviso to Section 2.1(a). If (i) a registration
requested pursuant to this Section 2.1 is deemed not to have been effected as a
Demand Registration or (ii) the registration requested pursuant to this Section
2.1 does not remain continuously effective until at least 75% of the Registrable
Securities covered by the effective Registration Statement have been sold, then
such Demand Registration request shall not count as a Demand Registration
request for the purposes of clause (B) of the proviso to Section 2.1(a) and the
Company shall continue to be obligated to effect a Demand Registration pursuant
to this Section 2.1 of the Registrable Securities included in such registration.
In circumstances not including the events described in the immediately two
preceding sentences of this Section 2.1(d), the Investor shall be permitted
voluntarily to withdraw all or any part of its Registrable Securities from a
Demand Registration at any time prior to the commencement of marketing of such
Demand Registration, provided that such registration nonetheless shall count as
a Demand Registration for purposes of clause (B) of the proviso to Section
2.1(a).

 

(e)          The Investor shall be permitted to abandon or withdraw all or any
part of their shares from a Demand Registration, in which event the Company
shall abandon or withdraw such Registration Statement; provided, that such
Demand Registration underlying such abandonment or withdrawal shall not be
deemed to be a Demand Notice for purposes of clause (B) of the proviso to
Section 2.1(a) if (a) such withdrawal or abandonment is requested prior to the
filing of the applicable Registration Statement or in response to a material
adverse change regarding the Company or a material adverse change in the
financial markets generally or (b) the Investor reimburses the Company for the
documented out-of-pocket Registration Expenses incurred by the Company in
connection with such Demand Registration prior to the date of such abandonment
or withdrawal.

 

Section 2.2           Primary Offering Demand Right.

 

(a)          Subject to the provisions hereof, at any time the Investor (i) has
the right to require a Demand Registration in accordance with the provisions of
Section 2.1 hereof, and (ii) holds Partnership Units that would be exchangeable
for Registrable Securities but for limits imposed upon such exchange due to
restrictions on the ownership and transfer of Company Common Stock set forth in
Article VI of the Charter, Investor shall have the right to require the Company
to file a Registration Statement registering for the offer, sale and
distribution of (A) Primary Offering Securities, or (B) both Primary Offering
Securities and Registrable Securities (each such demand described in clause (A)
or (B), a “Primary Offering Demand”) by delivering a written request therefor to
the Company (x) specifying the number of Primary Offering Securities and the
number of Registrable Securities, if any, to be included in such registration,
(y) specifying whether the intended method of disposition thereof is pursuant to
an Underwritten Offering, and (z) containing all information about the Investor
required to be included in such Registration Statement in accordance with
applicable law. The date upon which the Investor delivers such request shall be
referred to herein as a “Primary Offering Demand Date.”

 

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(b)          As soon as practicable after the Primary Offering Demand Date, the
Company shall use reasonable best efforts to effect such registration
(including, without limitation, appropriate qualification under applicable blue
sky or other state securities laws and appropriate compliance with applicable
regulations issued under the Securities Act and any other governmental
requirements or regulations) of the Primary Offering Securities and Registrable
Securities that the Company has been so requested to register; provided,
however, that (i) the Investor shall not make a request for a Primary Offering
Demand for an offering amount that is reasonably expected to result in aggregate
gross cash sale proceeds (without regard to any underwriting discount or
commission) (A) greater than the aggregate value of the Registrable Securities
and Partnership Units held by the Investor at the time of such Primary Offering
Demand Date, or (B) less than the lesser of (x) $20,000,000 of Registrable
Securities and Partnership Units and (y) 10% of the Outstanding Securities prior
to the applicable Demand Date, and (ii) any Primary Offering Demand made by the
Investor and effected by the Company in accordance with the provisions of this
Agreement will be counted to reduce by one the total number of Demand
Registrations to which the Investor is entitled in accordance with Section
2.1(a) hereof. Notwithstanding the foregoing, the limitation set forth in
proviso (B) above will not apply so long as the Investor requests a Primary
Offering Demand for all of the Registrable Securities and Partnership Units it
holds at the time of the request.

 

(c)          The offering of the Primary Offering Securities and Registrable
Securities, if any, pursuant to such Primary Offering Demand may be in the form
of an Underwritten Offering. In such case, (i) the Company, with the consent of
the Investor (not to be unreasonably withheld), may designate the managing
underwriter(s), investment banker(s) and manager(s) of the Underwritten Offering
(including in any Shelf Offering) and (ii) the Company shall (together with the
Investor if Registrable Securities are to be Registered) enter into an
underwriting agreement in customary form for underwriting agreements for firm
commitment offerings of equity securities with the managing underwriter(s)
proposing to distribute their securities through such Underwritten Offering,
which underwriting agreement shall have indemnification provisions in
substantially the form as set forth in Section 2.9 of this Agreement; provided,
that (i) the Investor shall not be required to make any representations and
warranties to, or agreements with, any underwriter in a registration other than
customary representations, warranties and agreements and (ii) the liability of
the Investor in respect of any indemnification, contribution or other obligation
of the Investor arising under such underwriting agreement shall be limited to
losses arising out of or based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in such Registration Statement,
any such preliminary Prospectus, final Prospectus, summary Prospectus, amendment
or supplement, incorporated document or other such disclosure document or other
document or report, in reliance upon and in conformity with information
furnished to the Company by or on behalf of the Investor expressly for inclusion
therein. The Investor may not participate in any such Underwritten Offering
unless the Investor agrees to sell its Registrable Securities, if any, on the
basis provided in such underwriting agreement and completes and executes all
questionnaires, powers of attorney, indemnities and other documents reasonably
required under the terms of such underwriting agreement.

 

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(d)          If, in connection with an Underwritten Offering made in response to
a Primary Offering Demand, the managing underwriter(s) advise the Company that
in its or their good faith opinion the number of securities proposed to be
included in such registration exceeds the Underwriters’ Maximum Number, then the
Company will be obligated and required to include in such Underwritten Offering
only that number of Primary Offering Securities and Registrable Securities
requested by the Investor to be included in such registration that does not
exceed such Underwriters’ Maximum Number pro rata among the holders of
Registrable Securities that have requested to participate in such Demand
Registration on the basis of the percentage of the Registrable Securities
requested to be included in such Registration Statement by such holders.

 

(e)          A registration will not be deemed to have been effected as a
Primary Offering Demand unless the Registration Statement relating thereto (i)
covers all Primary Offering Securities and, if applicable, Registrable
Securities specified in the applicable Demand Registration request for sale in
accordance with the intended method or methods of distribution specified in such
Demand Registration, subject to the underwriter cutbacks described in Section
2.2(d) (but only if the Underwriters’ Maximum Number represents at least 75% of
the Primary Offering Securities and, if applicable, Registrable Securities so
specified) (ii) has been declared effective by the Commission (iii) is
maintained effective for the period required pursuant to this Agreement and (iv)
the Company has complied in all material respects with its obligations under
this Agreement with respect thereto; provided, however, that if, after it has
become effective, (A) such Registration Statement or the related offer, sale or
distribution of Primary Offering Securities or Registrable Securities thereunder
is or becomes the subject of any stop order, injunction or other order or
requirement of the Commission or any other governmental or administrative
agency, or if any court prevents or otherwise limits the sale of the Primary
Offering Securities or Registrable Securities pursuant to the registration (but
only if such stop order, injunction or other order or requirement did not result
from a statement or alleged statement in or omission or alleged omission from
such Registration Statement, any preliminary Prospectus, final Prospectus or
summary Prospectus contained therein, or any amendment or supplement thereto, if
such statement or alleged statement or omission or alleged omission was made in
reliance upon and in conformity with information specifically furnished to the
Company by the Investor for incorporation therein), and in each case less than
all of the Primary Offering Securities or Registrable Securities covered by the
effective Registration Statement are actually sold by the Investor pursuant to
the Registration Statement, or (B) if, in the case of an Underwritten Offering,
the Company fails to provide Full Cooperation, then such registration will be
deemed not to have been effected for purposes of clause (ii) of the proviso to
Section 2.2(b). If (i) a registration requested pursuant to this Section 2.2 is
deemed not to have been effected as a Primary Offering Demand or (ii) in the
event Registrable Securities are registered pursuant to the Primary Offering
Demand, the registration requested pursuant to this Section 2.2 does not remain
continuously effective until at least 75% of the Registrable Securities covered
by the effective Registration Statement have been sold, then such Demand
Registration request shall not count as a Demand Registration request for the
purposes of clause (B) of the proviso to Section 2.1(a) and the Company shall
continue to be obligated to effect a Primary Offering Demand pursuant to this
Section 2.2 of the Primary Offering Securities and Registrable Securities
included in such registration. In circumstances not including the events
described in the immediately two preceding sentences of this Section 2.2(e), the
Investor shall be permitted voluntarily to withdraw all or any part of its
Registrable Securities from a Primary Offering Demand at any time prior to the
commencement of marketing of such Primary Offering Demand, provided that such
registration nonetheless shall count as a Primary Offering Demand for purposes
of clause (ii) of the proviso to Section 2.2(b).

 

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(f)          If any of the Partnership Units underlying a Primary Offering
Demand are Preferred Units, then such Primary Offering Demand will be deemed to
be an election by Investor to convert such Preferred Units into Common Units in
accordance with the Form of Amended Partnership Agreement at the Applicable
Conversion Price (as defined in the Form of Amended Partnership Agreement) in
effect on the Primary Offering Demand Date, conditioned upon the Company
effecting such Primary Offering Demand in accordance with Section 2.2(e) hereof.

 

(g)          Upon effecting the sale of the Primary Offering Securities in
respect of a Primary Offering Demand, the Company will contribute the net
proceeds received from such sale to the Partnership in exchange for Common Units
as provided in the Form of Amended Partnership Agreement. The Partnership will
use such contributed proceeds from the Company to redeem Common Units held by
the Investor (including Common Units received by Investor upon conversion of
Investor’s Preferred Units in accordance with Section 2.2(f) hereof) at a price
per Common Unit equal to the REIT Shares Amount applicable to such Common Unit,
multiplied by the price per share of the Primary Offering Securities sold in
connection with the Primary Offering Demand (net of any underwriting discounts
and commissions attributable to the sale of such Primary Offering Securities).

 

(h)          The Investor shall be permitted to abandon or withdraw all or any
part of their shares from a Demand Registration, in which event the Company
shall abandon or withdraw such Registration Statement; provided that such Demand
Registration underlying such abandonment or withdrawal shall not be deemed to be
a Demand Notice for purposes of clause (B) of the proviso to Section 2.1(a) if
such withdrawal or abandonment is requested prior to the effectiveness of the
Registration Statement and either in response to a material adverse change
regarding the Company or a material adverse change in the financial markets
generally.

 

Section 2.3           Piggyback Registration.

 

(a)          At any time after the Effective Date, if (and on each occasion
that) the Company proposes to register any of its securities under the
Securities Act (other than pursuant to Section 2.1) for the account of any of
itself or its security holders and whether or not an underwritten offering (each
such registration not withdrawn or abandoned prior to the effective date thereof
being herein referred to as a “Piggyback Registration”), the Company shall give
written notice to the Investor promptly, but in no event later than ten (10)
Business Days prior to the anticipated filing date.

 

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(b)          Subject to the provisions contained in Section 2.3(a) and Section
2.3(c) and in the last sentence of this Section 2.3(b), the Company will be
obligated and required to include in each Piggyback Registration such
Registrable Securities as requested in a written notice from the Investor
delivered to the Company no later than five (5) Business Days following delivery
of the notice from the Company specified in Section 2.3(a). The Investor shall
be permitted to withdraw all or any part of their shares from any Piggyback
Registration at any time on or before the effective date of such Piggyback
Registration, except as otherwise provided in any written agreement with the
Company’s underwriter(s) establishing the terms and conditions under which the
Investor would be obligated to sell such securities in such Piggyback
Registration. The Company may terminate or withdraw any Piggyback Registration
prior to the effective date of such Registration Statement, whether or not the
Investor has elected to include Registrable Securities in such registration.

 

(c)          If a Piggyback Registration is an Underwritten Offering on behalf
of a holder of Company securities other than the Investor, and the managing
underwriter(s) advise the Company that in its or their good faith opinion the
number of securities proposed to be included in such registration exceeds the
Underwriters’ Maximum Number, then the Company shall be obligated and required
to include in such Underwritten Offering only that number of Registrable
Securities requested by the Investor to be included in such registration that
does not exceed such Underwriters’ Maximum Number, which shall be allocated as
follows (i) first, the number of securities requested to be included therein by
the holder(s) originally requesting such registration, (ii) second, the number
of Registrable Securities requested to be included therein by the Investor pro
rata among such holders on the basis of the percentage of Registrable Securities
requested to be included in such Registration Statement by such holders and
(iii) third, any other securities that have been requested to be so included by
any other Person.

 

(d)          In any Piggyback Registration that is an Underwritten Offering, the
Company shall have the right to select the managing underwriter(s) for such
registration.

 

(e)          Notwithstanding the provisions of this Section 2.3, the Investor
shall not be entitled to register Registrable Securities in a Piggyback
Registration if the Company proposes to register any of its securities under the
Securities Act in connection with:

 

(i)          the issuance of securities to employees, consultants, officers or
directors of the Company pursuant to any stock option, stock purchase or stock
bonus plan, agreement or arrangement on Form S-4, Form S-8 or any similar or
successor forms thereto;

 

(ii)         the issuance of securities pursuant to the acquisition of another
business entity or business segment of any such entity by the Company by merger,
purchase of assets or other reorganization; or

 

(iii)        the issuance of securities to existing holders of Common Stock
under the Company’s dividend reinvestment program.

 

11

 

 

(f)          The Company shall not grant to any Person the right to request the
Company to register any shares of Company securities in a Piggyback Registration
unless such rights are consistent with the provisions of this Section 2.3.

 

Section 2.4           Registration Expenses.

 

The Company shall pay all of the Registration Expenses in connection with
registrations pursuant to this Article II, including all (a) registration and
filing fees and expenses, including, without limitation, those related to
filings with the Commission, stock exchange or trading system, (b) fees and
expenses of compliance with state securities or blue sky laws (including
reasonable fees and disbursements of counsel (including counsel for the
underwriters) in connection with blue sky qualifications of the Registrable
Securities), (c) reasonable processing, duplicating and printing expenses,
including expenses of printing Prospectuses reasonably requested by the
Investor, (d) of the Company’s internal expenses (including, without limitation,
all salaries and expenses of its officers and employees performing legal or
accounting duties, the expense of any liability insurance and the expense of any
annual audit or quarterly review), (e) fees and expenses incurred in connection
with listing the Primary Offering Securities and Registrable Securities, as
applicable, for trading on a national securities exchange, (f) fees and expenses
in connection with the preparation of the Registration Statement and related
documents covering the Primary Offering Securities and Registrable Securities,
as applicable, (g) fees and expenses, if any, incurred with respect to any
filing with FINRA, (h) any documented out-of-pocket expenses of the
underwriter(s) incurred with the approval of the Company, (i) the cost of
providing any CUSIP or other identification numbers for the Primary Offering
Securities and Registrable Securities, as applicable, (j) fees and expenses and
disbursements of counsel for the Company and the underwriters and fees and
expenses for independent certified public accountants retained by the Company
(including, without limitation, the expenses of any comfort letters or costs
associated with the delivery by independent certified public accountants of a
comfort letter or comfort letters requested), (k) fees and expenses of any
special experts retained by the Company and the underwriters in connection with
such registration, (l) fees and expenses of the underwriters customarily paid by
issuers or sellers of securities and (m) reasonable and documented fees and
expenses of one firm of counsel for the Investor in connection with each Demand
Registration, Piggyback Registration or Shelf Offering (“Investor’s Counsel”).
Other than as provided in the foregoing sentence, the Company will have no
obligation to pay any out-of-pocket expenses of the Investor relating to the
registrations effected pursuant to this Agreement. Notwithstanding the
foregoing, Investor and any Permitted Transferees, as applicable, will be
responsible for any underwriting discounts and commissions attributable to the
sale of Registrable Securities registered in accordance with this Agreement,
with such discounts and commissions allocated pro rata on the basis of the
number of Registrable Securities so registered by such Investor or Permitted
Transferee. The obligation of the Company to bear the expenses described in this
Section 2.4 and to pay or reimburse the Investor for the expenses described in
this Section 2.4 shall apply irrespective of whether the Registration Statement
is filed or becomes effective or any sales of Primary Offering Securities or
Registrable Securities ultimately take place.

 

12

 

 

Section 2.5           Registration Procedures.

 

In the case of each registration effected by the Company pursuant to this
Agreement, the Company shall keep the Investor advised in writing as to the
initiation of each registration and as to the completion thereof. In connection
with any such registration:

 

(a)          The Company will, as soon as reasonably practicable after its
receipt of the request for registration under Section 2.1(a), prepare and file
with the Commission a Registration Statement, and use reasonable best efforts to
cause such Registration Statement to become and remain effective until the
completion of the distribution contemplated thereby. Notwithstanding the
foregoing, such Registration Statement must be filed, if the Company is then
eligible for a Form S-3 (which, unless the Investor requests otherwise, shall be
(i) filed pursuant to Rule 415 under the Securities Act and (ii) if the Company
is a Well-Known Seasoned Issuer at the time of filing such Registration
Statement with the Commission, designated by the Company as an Automatic Shelf
Registration Statement (as defined in Rule 405 under the Securities Act) or any
similar or successor short-form registration (“Short-Form Registrations”) or, if
the Company is not then eligible for such Short-Form Registration, on Form S-11
or any similar or successor long-form registration (“Long-Form Registrations”)
as soon as reasonably practicable after delivery of the Demand Registration
request but, in any event, the Company shall be required to make the initial
filing of the Registration Statement in connection with such Demand Registration
within 60 days, in the case of a Long-Form Registration, or 30 days, in the case
of a Short-Form Registration, following receipt of such Demand Notice.

 

(b)          The Company will (i) promptly prepare and file with the Commission
such amendments and post-effective amendments to each Registration Statement as
may be necessary to keep such Registration Statement effective for as long as
such registration is required to remain effective pursuant to the terms hereof,
(ii) cause the Prospectus to be supplemented by any required Prospectus
supplement, and, as so supplemented, to be filed pursuant to Rule 424 under the
Securities Act, and (iii) comply with the provisions of the Securities Act
applicable to it with respect to the disposition of all Primary Offering
Securities and Registrable Securities, as applicable, covered by such
Registration Statement during the applicable period in accordance with the
intended methods of disposition by the Investor set forth in such Registration
Statement or supplement to the Prospectus.

 

13

 

 

(c)          The Company will, at least ten (10) days prior to filing a
Registration Statement or at least five (5) days prior to filing a Prospectus or
any amendment or supplement to such Registration Statement or Prospectus,
including documents that would be incorporated or deemed to be incorporated
therein by reference, furnish to (i) the Investor, (ii) Investor’s Counsel and
(iii) each underwriter of the Primary Offering Securities and Registrable
Securities, as applicable, covered by such Registration Statement, copies of
such Registration Statement, Prospectus and each amendment or supplement as
proposed to be filed, together with any exhibits or other documents that would
be incorporated or deemed to be incorporated thereto, which documents will be
subject to reasonable review and comment by each of the foregoing Persons within
three (3) days after receipt, and, if requested by such counsel, provide such
counsel reasonable opportunity to participate in the preparation of such
Registration Statement and each Prospectus included therein and such other
opportunities to conduct a reasonable investigation within the meaning of the
Securities Act, including reasonable access to the Company’s books and records,
officers, accountants and other advisors. Thereafter, the Company shall furnish
to the Investor, Investor’s Counsel and the underwriter(s), if any, such number
of copies of such Registration Statement, each amendment and supplement thereto
(in each case including all exhibits thereto and documents incorporated by
reference therein), the Prospectus included in such Registration Statement
(including each preliminary Prospectus) and such other documents or information
as the Investor, Investor’s Counsel or the underwriter(s) may reasonably request
in order to facilitate the disposition of the Primary Offering Securities and
Registrable Securities, as applicable, in accordance with the plan of
distribution set forth in the Prospectus included in the Registration Statement;
provided, however, that notwithstanding the foregoing, if the Company intends to
file any Prospectus, Prospectus supplement or Prospectus sticker that does not
make any material changes in the documents already filed, then Investor’s
Counsel will be afforded such opportunity to review such documents prior to
filing consistent with the time constraints involved in filing such document,
but in any event no less than one (1) day. The Company shall not file any such
Registration Statement or Prospectus or any amendments or supplements thereto
(including such documents that, upon filing, would be incorporated or deemed to
be incorporated by reference therein) with respect to a Demand Registration to
which the holders of a majority of the Registrable Securities covered by such
Registration Statement, their counsel, or the managing underwriters, if any,
shall reasonably object, in writing, on a timely basis, unless, in the opinion
of the Company’s counsel, such filing is necessary to comply with applicable
law.

 

(d)          The Company will promptly notify the Investor of any stop order
issued or threatened by the Commission or the initiation of any proceedings for
that purpose and, if entered, use reasonable best efforts to prevent the entry
of such stop order or to remove it as soon as reasonably possible.

 

(e)          On or prior to the date on which the Registration Statement is
declared effective, the Company shall use reasonable best efforts to register or
qualify such Primary Offering Securities and Registrable Securities, as
applicable, under such other securities or blue sky laws of such jurisdictions
as the Investor reasonably requests and do any and all other lawful acts and
things which may be reasonably necessary or advisable to enable the Company,
with respect to Primary Offering Securities, and the Investor, with respect to
Registrable Securities, to consummate the disposition in such jurisdictions of
such Primary Offering Securities and Registrable Securities, and use reasonable
best efforts to keep each such registration or qualification (or exemption
therefrom) effective during the period which the Registration Statement is
required to be kept effective pursuant to this Agreement; provided that the
Company will not be required to (i) qualify generally to do business in any
jurisdiction where it would not otherwise be required to qualify but for this
subsection (e), (ii) subject itself to taxation in any such jurisdiction or
(iii) consent to general service of process in any such jurisdiction. The
Company will use its reasonable best efforts to lift any suspension of the
qualification (or exemption from qualification) of any of the Registrable
Securities for sale in any jurisdiction at the earliest date reasonably
practicable.

 

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(f)          The Company will notify the Investor, Investor’s Counsel and the
underwriter(s) promptly and (if requested by any such Person) confirm such
notice in writing, (i) when a Prospectus or any Prospectus supplement or
post-effective amendment has been filed and, with respect to a Registration
Statement or any post-effective amendment, when the same has become effective,
(ii) of any request by the Commission or any other federal or state governmental
authority for amendments or supplements to a Registration Statement or
Prospectus or for additional information to be included in any Registration
Statement or Prospectus or otherwise, (iii) of the issuance by any state
securities commission or other regulatory authority of any order suspending the
qualification or exemption from qualification of any of the Primary Offering
Securities and Registrable Securities, as applicable, under state securities or
blue sky laws or the initiation of any proceedings for that purpose, (iv) of the
happening of any event that requires the making of any changes in a Registration
Statement or related Prospectus or any document incorporated or deemed to be
incorporated by reference therein so that they will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements in the Registration Statement
and Prospectus not misleading in light of the circumstances in which they were
made (which notice shall notify the selling holders only of the occurrence of
such an event and shall provide no additional information regarding such event
to the extent such information would constitute material non-public
information); and, as promptly as practicable thereafter, prepare and file with
the Commission and furnish a supplement or amendment to such Registration
Statement or Prospectus or any document incorporated or deemed to be
incorporated therein by reference, or file any other required document, so that,
as thereafter delivered to the purchasers of such Primary Offering Securities
and Registrable Securities, as applicable, such document will not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading, (v) if at any time the Company has reason to believe
that the representations and warranties of the Company contained in any
agreement (including any underwriting agreement) cease to be true and correct
and (vi) of the receipt by the Company of any notification with respect to the
suspension of the qualification or exemption from qualification of any of the
Registrable Securities for sale in any jurisdiction, or the initiation or
threatening of any proceeding for such purpose. The Investor hereby agrees to
keep any disclosures under clause (iv) above confidential until such time as a
supplement or amendment is filed.

 

(g)          The Company, during the period when the Prospectus is required to
be delivered under the Securities Act, promptly will file all documents required
to be filed with the SEC pursuant to Section 13(a), 13(c), 14 or 15(d) of the
Exchange Act.

 

15

 

 

(h)          The Company shall provide a transfer agent and registrar for the
Primary Offering Securities and Registrable Securities, as applicable, not later
than the effective date of such Registration Statement and shall cooperate with,
and cause the Company’s transfer agent to cooperate with, the selling holders of
Registrable Securities and the underwriters, if any, to facilitate the timely
settlement of any offering or sale of Registrable Securities, including the
preparation and delivery of certificates (not bearing any legends) or book-entry
(not bearing stop transfer instructions) representing Registrable Securities to
be sold after receiving written representations from each holder of such
Registrable Securities that the Registrable Securities represented by the
certificates so delivered by such holder will be transferred in accordance with
the Registration Statement and, in connection therewith, if reasonably required
by the Company’s transfer agent, the Company shall promptly after the
effectiveness of the Registration Statement cause an opinion of counsel as to
the effectiveness of any Registration Statement to be delivered to and
maintained with its transfer agent, together with any other authorizations,
certificates and directions required by the transfer agent which authorize and
direct the transfer agent to issue such Registrable Securities without
restriction upon sale by the holder of such shares of Registrable Securities
under the Registration Statement.

 

(i)          The Company otherwise shall use its reasonable best efforts to
comply with all applicable rules and regulations of the Commission.

 

(j)          If requested by the managing underwriters, if any, or the Investor,
promptly include in a Prospectus supplement or post-effective amendment such
information as the managing underwriters, if any, and such holders may
reasonably request in order to permit the intended method of distribution of
such securities and make all required filings of such Prospectus supplement or
such post-effective amendment as soon as practicable after the Company has
received such request; provided, however, that the Company shall not be required
to take any actions under this Section 2.5(j) that are not, in the opinion of
counsel for the Company, in compliance with applicable law.

 

(k)          Furnish or make available to the Investor, its counsel and each
managing underwriter, if any, without charge, at least one conformed copy of the
Registration Statement, the Prospectus and Prospectus supplements, if
applicable, and each post-effective amendment thereto, including financial
statements (but excluding schedules, all documents incorporated or deemed to be
incorporated therein by reference, and all exhibits, unless requested in writing
by such holder, counsel or underwriter); provided that the Company may furnish
or make available any such documents in electronic format.

 

(l)          Deliver to the Investor, its counsel, and the underwriters, if any,
without charge, as many copies of the Prospectus or Prospectuses (including each
form of Prospectus) and each amendment or supplement thereto as such Persons may
reasonably request from time to time in connection with the distribution of the
Registrable Securities; provided that, with the consent of the selling holder of
Registrable Securities, the Company may furnish or make available any such
documents in electronic format; and the Company hereby consents to the use of
such Prospectus and each amendment or supplement thereto by the Investor and the
underwriters, if any, in connection with the offering and sale of the
Registrable Securities covered by such Prospectus and any such amendment or
supplement thereto.

 

(m)          Prior to the effective date of the Registration Statement relating
to the Registrable Securities, provide a CUSIP number for the Registrable
Securities.

 

(n)          Subject only to official notice of issuance, cause all shares of
Registrable Securities covered by such Registration Statement to be listed on a
national securities exchange if shares of the particular class of Registrable
Securities are at that time listed on such exchange, as the case may be, prior
to the effectiveness of such Registration Statement.

 

16

 

 

(o)          Enter into such agreements (including underwriting agreements in
form, scope and substance as is customary in underwritten offerings and such
other documents reasonably required under the terms of such underwriting
agreements, including customary legal opinions and auditor “comfort” letters)
and take all such other actions reasonably requested by the Investor (including
those reasonably requested by the managing underwriters, if any) to expedite or
facilitate the disposition of such Registrable Securities, including, to the
extent required hereunder, Full Cooperation.

 

(p)          In connection with a customary due diligence review, make available
for inspection by a representative of the Investor, any underwriter
participating in any such disposition of Registrable Securities, if any, and any
counsel or accountants retained by the Investor, at the offices where normally
kept, during reasonable business hours, all financial and other records,
pertinent corporate documents and properties of the Company and its
subsidiaries, and cause the officers, directors and employees of the Company and
its subsidiaries to supply all information and participate in customary due
diligence sessions in each case reasonably requested by any such representative,
underwriter, counsel or accountant in connection with such Registration
Statement.

 

(q)          Cooperate with the Investor and each underwriter or agent
participating in the disposition of such Registrable Securities and their
respective counsel in connection with any filings required to be made with the
FINRA, including the use reasonable best efforts to obtain FINRA’s pre-clearance
or pre-approval of the Registration Statement and applicable Prospectus upon
filing with the Commission.

 

(r)          For purposes of Section 2.5(a) and Section 2.5(b), the period of
distribution of Primary Offering Securities and Registrable Securities, as
applicable, in a firm commitment underwritten public offering shall be deemed to
extend until each underwriter has completed the distribution of all securities
purchased by it, and the period of distribution of Primary Offering Securities
and Registrable Securities in any other registration shall be deemed to extend
until such securities cease to be Primary Offering Securities or Registrable
Securities, as applicable (as evidenced, upon the Investor’s request, by an
opinion of counsel of the Company reasonably satisfactory to the Investor) or
such shorter period upon which all Investors with Registrable Securities
included in such Registration Statement have notified the Company that such
Registrable Securities have been sold (provided, however, that such period shall
be extended for a period of time equal to the period the holder of Registrable
Securities refrains from selling any securities included in such Registration
Statement at the request of the Company or an underwriter of the Company
pursuant to the provisions of this Agreement).

 

17

 

 

Section 2.6           Investor’s Obligations.

 

The Company may require the Investor to promptly furnish in writing to the
Company such information regarding the distribution of the Primary Offering
Securities and Registrable Securities, as applicable, as the Company may from
time to time reasonably request and such other information as may be legally
required in connection with such registration, including all such information as
may be requested by the Commission. Investor agrees that, notwithstanding the
provisions of Section 2.7 hereof, upon receipt of any written notice from the
Company of the happening of any event of the kind described in Section 2.5(f)
hereof, the Investor will forthwith discontinue disposition of Registrable
Securities pursuant to the Registration Statement covering such Registrable
Securities until the Investor’s receipt of the copies of the supplemented or
amended Prospectus contemplated by Section 2.5(f) hereof or until it is advised
in writing by the Company that the use of the applicable Prospectus may be
resumed, and, if so directed by the Company, the Investor will deliver to the
Company all copies, other than permanent file copies then in the Investor’s
possession and retained solely in accordance with record retention policies
then-applicable to the Investor, of the most recent Prospectus covering such
Registrable Securities at the time of receipt of such notice. In the event the
Company shall give such notice, the Company shall extend the period during which
such Registration Statement shall be maintained effective by the number of days
during the period from and including the date of the giving of notice pursuant
to Section 2.5(f) hereof to the date when the Company shall make available to
the Investor a Prospectus supplemented or amended to conform with the
requirements Section 2.5(f).

 

Section 2.7           Blackout Provisions.

 

(a)          Notwithstanding anything in this Agreement to the contrary, by
delivery of written notice to the Investor (a “Suspension Notice”) stating which
one or more of the following limitations shall apply to the addressee of such
Suspension Notice, the Company may (i) postpone effecting a registration under
this Agreement, or (ii) require such addressee to refrain from disposing of
Registrable Securities under the registration, in either case for a period of no
more than forty-five (45) consecutive days from the delivery of such Suspension
Notice (which period may not be extended or renewed). The Company may postpone
effecting a registration or apply the limitations on dispositions specified in
clause (ii) of this Section 2.7(a) if (x) the Board, in good faith, determines
that such registration or disposition would materially impede, delay or
interfere with any material transaction then pending or proposed to be
undertaken by the Company or any of its subsidiaries, or (y) the Company in good
faith determines that the Company is in possession of material non-public
information the disclosure of which during the period specified in such notice
the Board, in good faith, reasonably believes would not be in the best interests
of the Company; provided that (i) the Company may not take any actions pursuant
to this Section 2.7(a) for a period of time in excess of ninety (90) days in the
aggregate in any twelve (12)-month period and, (ii) the application of such
limitations shall not prevent the Investor from making a demand under Section
2.1 or electing to participate in any Piggyback Registration under Section 2.3
or relieve the Company from its obligation to file (but not its obligation to
cause to be declared effective) a Registration Statement pursuant to this
Agreement and (iii) the application of such limitations shall not apply to the
Investor in any Piggyback Registration under Section 2.3 to the extent the
Company has waived such limitations with respect to any registered offering of
Registrable Securities for its own account or for the account of any other
Person, which offering gives rise to such Piggyback Registration.

 

(b)          If the Company shall take any action pursuant to clause (ii) of
Section 2.7(a) in a period during which the Company shall be required to cause a
Registration Statement to remain effective under the Securities Act and the
Prospectus to remain current, such period shall be extended for such Person by
one (1) day beyond the end of such period for each day that, pursuant to Section
2.7(a), the Company shall require such Person to refrain from disposing of
Registrable Securities owned by such Person.

 

18

 

 

Section 2.8           Exchange Act Registration.

 

The Company will use its reasonable best efforts to timely file with the
Commission such information as the Commission may require under Section 13(a) or
Section 15(d) of the Exchange Act, and the Company shall use its reasonable best
efforts to take all action as may be required as a condition to the availability
of Rule 144 or Rule 144A under the Securities Act with respect to its Common
Stock. The Company shall furnish to any holder of Registrable Securities
forthwith upon request (i) a written statement by the Company as to its
compliance with the reporting requirements of Rule 144 and Rule 144A under the
Securities Act, and of the Exchange Act, (ii) a copy of the most recent annual
or quarterly report of the Company and (iii) such other reports and documents as
a holder may reasonably request in availing itself of any rule or regulation of
the Commission allowing a holder to sell any such Registrable Securities without
registration to the extent that such reports or documents are not publicly
available on the Commission’s Electronic Data Gathering, Analysis and Retrieval
system or any successor system thereto. Certificates evidencing Registrable
Securities shall not contain any legend at such time as the Investor has
provided reasonable evidence to the Company (including any customary broker’s or
selling stockholder’s letters but expressly excluding an opinion of counsel
other than with respect to clauses (d) or (e) below), that (a) there has been a
sale of such Registrable Securities pursuant to an effective Registration
Statement, (b) there has been a sale of such Registrable Securities pursuant to
Rule 144 (assuming the transferor is not an affiliate of the Company), (c) such
Registrable Securities are then eligible for sale under Rule 144(b)(i), (d) in
connection with a sale, assignment or other transfer (other than under Rule
144), upon request of the Company, the Investor provides the Company with an
opinion of counsel to the Investor, in a reasonably acceptable form, to the
effect that such sale, assignment or transfer of the Registrable Securities may
be made without registration under the applicable requirements of the Securities
Act or (e) such legend is not required under applicable requirements of the
Securities Act (including controlling judicial interpretations and
pronouncements issued by the Commission). Following such time as restrictive
legends are not required to be placed on certificates representing Registrable
Securities pursuant to the preceding sentence, the Company will, no later than
three (3) Business Days following the delivery by the Investor to the Company or
the Company’s transfer agent of a certificate representing Registrable
Securities containing a restrictive legend and the foregoing evidence (and
opinion if applicable), deliver or cause to be delivered to the Investor a
certificate representing such Registrable Securities that is free from all
restrictive and other legends or credit the balance account of the Investor’s or
the Investor’s nominee with the Depository Trust Company (“DTC”) (if DTC is then
offered by the Company and its transfer agent) with a number of shares of Common
Stock equal to the number of shares of Common Stock represented by the
certificate so delivered by the Investor.

 

19

 

 

Section 2.9           Indemnification.

 

(a)          Indemnification by the Company. The Company will indemnify, defend
and hold harmless the Investor, each Affiliate of the Investor, each member,
manager, partner, shareholder or equity owner of the Investor or such Affiliate,
and each officer, director, trustee, employee, representative, agent and advisor
of and to any of the foregoing, and each Person, if any, who controls the
Investor within the meaning of Section 15 of the Securities Act or Section 20(a)
of the Exchange Act and each member, manager, partner, shareholder or equity
owner of the such controlling Person, and each officer, director, trustee,
employee, representative, agent and advisor of and to any of the foregoing, each
underwriter, if any, and each Person, if any, who controls such underwriter
within the meaning of Section 15 of the Securities Act or Section 20(a) of the
Exchange Act (each, an “Investor Indemnified Party”) from and against all
losses, claims, damages, settlements, liabilities, expenses, costs (including
reasonable costs of defense and investigation and all attorneys’ fees),
judgments, fines, penalties and charges (“Damages”) to which the Investor and
each such other Person may become subject under the Securities Act or otherwise,
but only insofar as such Damages (or proceedings in respect thereof) arise out
of, or are based upon, any untrue statement or alleged untrue statement of a
material fact contained in any Registration Statement or Prospectus of the
Company (or any amendment or supplement thereto) or any preliminary Prospectus
of the Company or other document incident to any such registration,
qualification, or compliance, or arise out of, or are based upon, any omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading in light of
the circumstances in which they were made or any violation by the Company of the
Securities Act, the Exchange Act, any state securities law, or any rule or
regulation thereunder applicable to the Company, except insofar as the same are
based upon information furnished to the Company by an Investor Indemnified Party
expressly for use therein.

 

In addition to the indemnity contained herein, the Company will reimburse the
Investor Indemnified Parties promptly upon demand (with accompanying
presentation of documentary evidence) for all legal and other costs and expenses
reasonably incurred by the Investor or such Investor Indemnified Parties in
investigating, defending against, or preparing to defend against any such Loss
or claim, action, suit or proceeding with respect to which it is entitled to
indemnification.

 

20

 

 

(b)          Indemnification by the Investor. With regard to the registration of
Primary Offering Securities or Registrable Securities under the Securities Act,
the Investor will indemnify, defend and hold harmless, to the fullest extent
permitted by law, severally and not jointly with any other holders of
Registrable Securities, the Company, each Affiliate of the Company, each member,
manager, partner, shareholder or equity owner of the Company or such Affiliate,
and each officer, director, trustee, employee, representative, agent and advisor
of and to any of the foregoing, and each Person, if any, who controls the
Company within the meaning of Section 15 of the Securities Act or Section 20(a)
of the Exchange Act and each member, manager, partner, shareholder or equity
owner of the such controlling Person, and each officer, director, trustee,
employee, representative, agent and advisor of and to any of the foregoing, each
underwriter, if any, and each Person, if any, who controls such underwriter
within the meaning of Section 15 of the Securities Act or Section 20(a) of the
Exchange Act (each, a “Company Indemnified Party” and together with the Investor
Indemnified Party, an “Indemnified Party”) from and against all Damages to which
the Company and each such other Person may become subject resulting from any
untrue statement or alleged untrue statement of a material fact contained in any
Registration Statement or Prospectus of the Company (or any amendment or
supplement thereto) or any preliminary Prospectus of the Company or other
document incident to any such registration, qualification, or compliance, or
arising out of, or based upon, any omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances in which they
were made, if such statement or alleged statement or omission or alleged
omission was made in reliance upon and in conformity with information furnished
to the Company by the Investor for incorporation therein, but only to the extent
that such untrue statements or omissions are based solely upon information
regarding the Investor furnished to the Company by the Investor expressly for
use therein, or to the extent that such information relates to the Investor or
the Investor’s proposed method of distribution of Registrable Securities and was
reviewed and expressly approved in writing by the Investor expressly for use in
the Registration Statement under which any Registrable Securities held by the
Investor were registered under the Securities Act, any preliminary Prospectus,
final Prospectus or summary Prospectus contained therein, or any amendment or
supplement thereto.

 

In addition to the indemnity contained herein, the Investor will reimburse the
Company Indemnified Parties promptly upon demand (with accompanying presentation
of documentary evidence) for all legal and other costs and expenses reasonably
incurred by the Company or such Company Indemnified Parties in investigating,
defending against, or preparing to defend against any such claim, action, suit
or proceeding with respect to which it is entitled to indemnification.

 

The obligations of the Investor under this Section 2.9(b) shall not apply to
amounts paid in settlement of any such Damages (or actions in respect thereof)
if such settlement is effected without the consent of such holder (which consent
shall not be unreasonably withheld). Furthermore, the liability of the Investor
under this Section 2.9(b) shall be limited to the net proceeds received by the
Investor from the Partnership in redemption of Common Units pursuant to Section
2.2(g) hereof with respect to such Registration Statement and from the sale of
Registrable Securities covered by such Registration Statement.

 

21

 

 

(c)          Conduct of Indemnification Proceedings. Promptly after an
Indemnified Party receives notice of a claim or the commencement of an action
for which the Indemnified Party intends to seek indemnification under Section
2.9(a) or Section 2.9(b), as applicable, the Indemnified Party will notify the
indemnifying party in writing of the claim or commencement of the action, suit
or proceeding; provided, however, that delay or failure to notify the
indemnifying party will not relieve the indemnifying party from liability under
Section 2.9(a) or Section 2.9(b), as applicable, except to the extent it has
been materially prejudiced by the failure to give notice. The indemnifying party
will be entitled to participate in the defense of any claim, action, suit or
proceeding as to which indemnification is being sought, and, unless in the
Indemnified Party’s reasonable judgment a conflict of interest between such
indemnified and indemnifying parties may exist in respect of such claim, the
indemnifying party may (but will not be required to) assume the defense against
the claim, action, suit or proceeding with counsel satisfactory to the
Indemnified Party. After an indemnifying party notifies an Indemnified Party
that the indemnifying party wishes to assume the defense of a claim, action,
suit or proceeding, the indemnifying party will not be liable for any legal or
other expenses incurred by the Indemnified Party in connection with the defense
against the claim, action, suit or proceeding unless (i) the indemnifying party
agrees to pay such expenses or (ii) the indemnifying party fails promptly to
assume, or in the event of a conflict of interest, cannot assume, the defense of
such claim or proceeding or fails to employ counsel reasonably satisfactory to
such Indemnified Party in any such proceeding, in which case, the indemnifying
party will pay the reasonable fees and expenses of separate counsel for the
Indemnified Parties; provided that, the indemnifying party shall not, in
connection with any one such claim or proceeding or separate but substantially
similar or related claims or proceedings in the same jurisdiction, arising out
of the same general allegations or circumstances, be liable for the fees and
expenses of more than one firm of attorneys (together with appropriate local
counsel) at any time for all of the Indemnified Parties. Each Indemnified Party,
as a condition to receiving indemnification as provided in Section 2.9(a) or
Section 2.9(b), as applicable, will cooperate in all reasonable respects with
the indemnifying party in the defense of any action or claim as to which
indemnification is sought. No indemnifying party will be liable for any
settlement of any action effected without its prior written consent. No
indemnifying party will, without the prior written consent of the Indemnified
Party (which consent will not be unreasonably withheld), effect any settlement
of a pending or threatened action with respect to which an Indemnified Party is,
or is informed that it may be, made a party and for which it would be entitled
to indemnification, unless the settlement includes an unconditional release of
the Indemnified Party from all liability and claims which are the subject matter
of the pending or threatened action. All fees and expenses of the Indemnified
Party (including reasonable fees and expenses to the extent incurred in
connection with investigating or preparing to defend such proceeding in a manner
not inconsistent with this Section 2.8) shall be paid to the Indemnified Party,
as incurred, promptly upon receipt of written notice thereof to the indemnifying
party (regardless of whether it is ultimately determined that an indemnifying
party is not entitled to indemnification hereunder, provided that the
indemnifying party may require such Indemnified Party to undertake to reimburse
all such fees and expenses to the extent it is finally, judicially determined
that such Indemnified Party is not entitled to indemnification under this
Section 2.9.

 

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(d)          Contribution. If the indemnification provided for in this
Section 2.9 shall for any reason be held by a court to be unavailable to an
Indemnified Party under Sections 2.9(a) or 2.9(b) hereof in respect of any
Damages, or any action in respect thereof, then, in lieu of the amount paid or
payable under Sections 2.9(a) or 2.9(b) hereof, the Indemnified Party and the
indemnifying party under Sections 2.9(a) or 2.9(b) hereof shall contribute to
the aggregate Damages (including legal or other expenses reasonably incurred in
connection with investigating the same), (i) in such proportion as shall be
appropriate to reflect the relative faults of the Company, on the one hand, and
the Investor, on the other hand, in connection with the actions, statements or
omissions that resulted in such Damages as well as any other relevant equitable
considerations. The relative fault of such indemnifying party, on the one hand,
and the Indemnified Party, on the other hand, shall be determined by reference
to, among other things, whether any action in question, including any untrue or
alleged untrue statement of material fact or omission or alleged omission to
state a material fact, has been made (or omitted) by, or relates to information
supplied by, such indemnifying party or Indemnified Party, and the parties’
relative intent, knowledge, access to information and opportunity to correct or
prevent any such action, statement or omission. The parties hereto agree that it
would not be just and equitable if contribution pursuant to this Section 2.9
were determined by pro rata allocation or by any other method of allocation that
does not take account of the equitable considerations referred to in the
immediately preceding sentence. Notwithstanding the provisions of this Section
2.9, an indemnifying party that is a selling holder of the Registrable
Securities shall not be required to contribute any amount in excess of the
amount that such indemnifying party has otherwise been, or would otherwise be,
required to pay pursuant to Section 2.9(b) by reason of such untrue or alleged
untrue statement or omission or alleged omission. No Person guilty of fraudulent
misrepresentation (within the meaning of the Securities Act) shall be entitled
to contribution from any Person who was not guilty of such fraudulent
misrepresentation. In addition, no Person shall be obligated to contribute
hereunder any amounts in payment for any settlement of any action or claim,
effected without such Person’s written consent, which consent shall not be
unreasonably withheld.

 

Section 2.10         Lock-Up Agreements.

 

The Investor and the Company agree that, in connection with an Underwritten
Offering in respect of which Registrable Securities are being sold (including
with respect to a Shelf Offering pursuant to Section 2.11 hereof),, or in
connection with any other public offering of Common Stock by the Company, if
requested by the underwriter(s), it will enter into customary “lock-up”
agreements pursuant to which it will agree not to, directly or indirectly, sell,
offer to sell, grant any option for the sale of, or otherwise dispose of, any
Common Stock or any securities convertible or exchangeable into Common Stock
(subject to customary exceptions), other than any issuance of Common Stock upon
conversion of Preferred Shares, for a period not to exceed ninety (90) days from
the effective date of the Registration Statement pertaining to such Registrable
Securities or from such other date as may be requested by the underwriter(s).
The Company further agrees that, in connection with an Underwritten Offering in
respect of which Registrable Securities are being sold, if requested by the
managing underwriter(s), it will cause its directors and executive officers and
any holders of securities (other than Registrable Securities) participating in
such offering, not to, directly or indirectly, sell, offer to sell, grant any
option for the sale of, or otherwise dispose of, any Common Stock or any
securities convertible or exchangeable into Common Stock (subject to customary
exceptions), for a period not to exceed ninety (90) days from the effective date
of the Registration Statement pertaining to such Registrable Securities or from
such other date as may be requested by the underwriter(s).

 

Section 2.11         Shelf-Take Downs.

 

At any time that a shelf Registration Statement covering Registrable Securities
is effective, if the Investor delivers a notice to the Company (a “Take-Down
Notice”) stating that it intends to sell all or part of its Registrable
Securities included by it on the shelf Registration Statement (a “Shelf
Offering”), then, the Issuer shall amend or supplement the shelf Registration
Statement as may be necessary in order to enable such Registrable Securities to
be distributed pursuant to the Shelf Offering.

 

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Section 2.12         Termination of Registration Rights.

 

The registration rights granted under Article II of this Agreement shall
terminate on the date that the Investor no longer beneficially owns (a) any
Registrable Securities or (b) any Partnership Units that are exchangeable for
Registrable Securities or that would be exchangeable for Registrable Securities
but for limits imposed upon such exchange due to restrictions on the ownership
and transfer of Company Common Stock set forth in Article VI of the Charter;
provided, however, that the provisions set forth in Section 2.4 and Section 2.9
shall survive such termination.

 

Section 2.13         Assignment; Binding Effect.

 

The registration rights and obligations provided in Article II of this Agreement
may be assigned in whole or in part by the Investor or its Permitted Transferees
to a Permitted Transferee without the consent of the Company. Such assignment
shall be effective upon receipt by the Company of (a) written notice from the
Investor certifying that the transferee is a Permitted Transferee, stating the
name and address of the Permitted Transferee and identifying the amount of
Registrable Securities with respect to which the rights under this Agreement are
being transferred, and (b) a written agreement from the Permitted Transferee to
be bound by the terms of this Article II (and all correlary terms set forth in
Article I and Article VII) Agreement as an “Investor” and a “Permitted
Transferee”. Upon receipt of the documents referenced in clauses (a) and (b) of
this Section 2.13, the Permitted Transferee shall thereafter be deemed to be an
“Investor” and a “Permitted Transferee” for all purposes of Article II of this
Agreement.

 

Article III
COVENANTS OF THE COMPANY

 

Section 3.1           Financial Information and Inspection Rights.

 

The Company covenants and agrees with the Investor that so long as Investor or a
Permitted Transferee holds $20,000,000 or more of the aggregate liquidation
preference amount of Series B Convertible Preferred Units (each such Person, a
“Major Holder”), and in each case to the extent permissible in accordance with
applicable provisions of Regulation FD under the Exchange Act:

 

24

 

 

(a)          if the Company no longer is required to file periodic reports with
the Commission pursuant to the Exchange Act, the Company will deliver to the
Major Holder financial statements, including notes and schedules thereto, and
other information in substantially similar form to the financial statements and
other information required to be filed by Form 10-Q and Form 10-K of the
Exchange Act and within the time periods required under the Exchange Act;
provided, however, that (i) such annual and quarterly reports on Form 10-K and
Form 10-Q will not be required to comply with Regulation G under the Exchange
Act or Item 10(e) of Regulation S-K with respect to any “non-GAAP” financial
information contained therein or Rule 3-10 or Rule 3-16 of Regulation S-X, (ii)
the Company will not be required to comply with Sections 302, 906 and 404 of the
Sarbanes-Oxley Act of 2002 or otherwise furnish any information, certificates or
reports required by Items 307 or 308 of Regulation S-K and (iii) the Company
will include the information regarding director, trustee and management
compensation required under the Exchange Act to be included in a public
company’s quarterly and year-end reports, including the compensation discussion
and analysis, summary compensation table and other information required by Part
III of Form 10-K.

 

(b)          as soon as practicable after the end of each month of each fiscal
year, and in any event, within thirty (30) days after the end of each month of
each fiscal year the Company will furnish to the Major Holder a balance sheet
and related statements of income and, on a quarterly basis, cash flows showing
the financial condition of the Company on a consolidated basis, unaudited but
prepared in accordance with GAAP using US standards consistently applied (except
that such unaudited statements are not required to contain the required
footnotes and year-end adjustments), such balance sheet to be as of the end of
such month, such statements of income to be for such month and for the period
from the beginning of the fiscal year to the end of such month and such
statements of cash flow to be for such quarter and for the period from the
beginning of the fiscal year to the end of such quarter;

 

(c)          as soon as practicable prior to the start of each fiscal year, and
in any event, at least thirty (30) days prior to the start of each fiscal year
of the Company, the Company will furnish to the Major Holder monthly capital and
operating expense budgets, cash flow projections and income and loss projections
for the next fiscal year, all itemized in reasonable detail and, promptly after
preparation, any revisions to any of the foregoing;

 

(d)          at the time of delivery of the quarterly and monthly financial
statements pursuant to Section 3.1(a) and Section 3.1(b) hereof, furnish to the
Major Holder a management narrative report explaining all significant variances
from forecasts;

 

(e)          promptly (but in no event later than ten (10) days) following
receipt by the Company, furnish to the Major Holder each audit response letter
disclosing pending or threatened litigation or unasserted claims or assessments
considered to be probable of assertion and any accountant's management letter
and other written report submitted to the Company by its independent auditors in
connection with an annual or interim audit of the books of the Company;

 

(f)          promptly, from time to time, furnish to the Major Holder such other
information regarding the business, prospects, financial condition, operations,
property or affairs of the Company as Investor reasonably may request;

 

(g)          within ten (10) days after receipt thereof, provide the Major
Holder with a copy of any notification relating to the Company's default under
any loan agreement, lease or material contract; and

 

25

 

 

(h)          Promptly furnish to the Major Holder (i) board information packages
(which will include meeting agendas), at the time they are distributed to
members of the Board, and (ii) information directly related to the Investor’s
investment in the Company as reasonably requested by the Major Holder.
Notwithstanding the foregoing, the Company reserves the right not to provide
information if the Board reasonably determines that delivery of such information
(i) would jeopardize the attorney-client privilege between the Company and its
counsel, (ii) would violate any fiduciary obligations of the Board under
applicable law or (iii) involves a transaction in which the Major Holder has a
direct conflict of interest, unless, in the case of this clause (iii), such
Major Holder confirms, orally or in writing, that such Major Holder will not
provide any such information relating to a conflict of interest to those
individuals primarily responsible for the Major Holder’s decisions in respect of
such conflict of interest).

 

Section 3.2           Certain Negative Covenants.

 

So long as any Series A Preferred Shares, Series C Preferred Shares or (solely
in the case of clauses (s) and (t) of this Section 3.2) any Conversion Shares
are outstanding, the Company covenants and agrees with the Investor that,
without the prior approval of the Consenting Holder, the Company and its
Subsidiaries will not:

 

(a)          except in connection with a SRP reinstated in accordance with
Section 5.13 of the Securities Purchase Agreement, and subject to the
limitations in Section 5.13 of the Securities Purchase Agreement, redeem or
repurchase any equity security ranking junior to the Series A Preferred Shares
or Series C Preferred Shares, as applicable;

 

(b)          enter into any material transaction with (i) any of its directors,
officers, employees or other Affiliates, (ii) any holder of more than five
percent (5%) of the outstanding capital stock of any class or series of capital
stock of the Company, or (iii) any member of the family of any such Person, or
any corporation, partnership, trust or other entity in which any such Person, or
member of the family of any such Person, is a director, officer, trustee,
partner or holder of more than five percent (5%) of the outstanding capital
stock thereof;

 

(c)          materially alter or modify the Company’s or its Subsidiaries’
principal line of business;

 

(d)          enter into any agreement or arrangement that would restrict the
Company's performance of, conflict with, or result in a breach under the
Securities Purchase Agreement or the Related Documents or otherwise limit the
rights of the Investor or any Permitted Transferee under the Securities Purchase
Agreement or Related Documents;

 

(e)          declare, pay or set aside for payment any Extraordinary Dividend on
shares of Common Stock other than in connection with a Liquidation Event, and
then only to the extent any such Extraordinary Dividend does not constitute a
preferential dividend by the Company under IRC sec. 562(c);

 

26

 

 

(f)           incur new Indebtedness other than: (i) for property-level mortgage
refinancing, provided that (A) the resulting mortgage debt for such property
will not exceed 60% loan to value (“LTV”) of such property, (B) the resulting
mortgage debt for such property will not cause the Company’s overall leverage to
exceed 60% LTV, (C) the resulting mortgage debt for such property will not have
recourse (other than bad boy carve-outs) to any entity or asset other than the
specific single property securing the mortgage and its single-asset special
purpose entity, except that recourse is permitted if and only if it is on a
short-term basis (reasonably expected to be refinanced in less than 12 months)
and the total recourse to the Company does not exceed $15 million; or (ii) for
Approved Acquisitions in accordance with criteria set forth in Section 6.3(g) of
the Securities Purchase Agreement.

 

(g)           effect any stock split, stock dividend, share exchange,
recapitalization, or other similar event, or effect a non-pro rata distribution,
in respect of any class of the Company’s capital stock or the capital stock of
any of the Company’s Subsidiaries (or any securities convertible, exchangeable
or exercisable therefor);

 

(h)          dismiss or appoint the chief executive officer of the Company (or,
if prior to the internalization of advisor, terminate, replace or modify the
existing advisor agreement);

 

(i)          other than in accordance with the terms of the Transition to
Internal Management Agreement, terminate, replace or amend the advisory
agreement dated as of January 1, 2013 between the Company and Sentio
Investments, LLC (the “Advisor”);

 

(j)          other than in accordance with the terms of the Transition to
Internal Management Agreement, materially change the compensation or benefits
paid to executive officers of the Company and its Subsidiaries (other than
changes made in the ordinary course of business consistent with the Company’s
past practice);

 

(k)          other than as specifically contemplated in the Securities Purchase
Agreement or Related Documents, allow any Person, or group of Affiliated
Persons, to increase their collective ownership of the Company’s capital stock
in excess of 9.9%;

 

(l)          grant any Person the right to designate, select or appoint members
of the Board (for avoidance of doubt, this provision shall not be interpreted to
restrict the rights of the Company’s stockholders to nominate, elect and remove
members of the Board in accordance with the Charter and applicable state law);

 

(m)          alter, change, amend or modify the preferences, conversion and
other rights, voting powers and consent rights, restrictions, limitations as to
dividends and other distributions, qualifications and terms and conditions of
redemption of the Preferred Shares or Preferred Units;

 

(n)          increase or decrease the authorized number of shares of Preferred
Shares or Preferred Units (except pursuant to the Securities Purchase Agreement
or Related Documents with respect to the Investor);

 

(o)          issue any additional Preferred Shares or Preferred Units (except
pursuant to the Securities Purchase Agreement or Related Documents with respect
to the Investor);

 

27

 

 

(p)          amend or modify the certificate of incorporation, including the
Articles Supplementary, by-laws or equivalent Organizational Documents of the
Company in a manner that affects the Investor or any Permitted Transferee in an
adverse manner as a holder of the Preferred Shares or Preferred Units;

 

(q)          create (by reclassification or otherwise) any new class or series
of capital stock having rights, preferences or privileges senior to, or on
parity with, in the case of the Company, the Preferred Stock, and in the case of
the Partnership, the Preferred Units;

 

(r)          other than as specifically provided in the Securities Purchase
Agreement, the Related Documents, the Articles Supplementary or the Series C
Articles Supplementary, increase the size of the Board unless such increase
results in a pro-rata increase in the number of directors designated by the
holders of the Series A Preferred Shares or Series C Preferred Shares, as
applicable;

 

(s)          permit, by action or omission, Title 3, Subtitle 7 of the Maryland
General Corporation Law (or any successor statute) to apply to any acquisition
by Investor any Permitted Transferee or any of their respective Affiliates of
any shares of Company Capital Stock contemplated or permitted to be so acquired
pursuant to the Securities Purchase Agreement, the Form of Amended Partnership
Agreement or the Related Documents (including, without limitation, Company
Capital Stock acquired, directly or indirectly, through exchange or conversion
of any of the Securities);

 

(t)          permit, by action or omission, any of the transactions contemplated
or permitted by the Securities Purchase Agreement, the Form of Amended
Partnership Agreement or the Related Documents to fail to be exempt from the
provisions of, or otherwise to result in the Investor, any Permitted Transferee
or any of their respective Affiliates becoming an Interested Stockholder as
defined in, Section 3-602 of the Maryland General Corporation Law (or any
successor statute);

 

(u)          without the prior approval of the Investor and its applicable
Affiliates, enter into any agreement binding or purporting to bind any of the
Investor, its Affiliates (other than the Company and its Subsidiaries), or any
of its and their directors, officers, employees, equityholders, managers,
members, general or limited partners, advisors, agents or other representatives;
and

 

28

 

 

(v)          until the five (5) year anniversary of the Effective Date, and
other than with respect to investments in Approved Acquisitions, enter into or
effect (A) any business combination transaction (including a merger, sale of
securities or sale of substantially all of the assets of such Person or a
business division thereof), (B) an acquisition or investment in assets not in
the ordinary course of business; or (C) a sale or other disposition of any of
the Company’s assets or securities not in the ordinary course of business; or
(D) the dissolution or liquidation, or voluntarily institution of any proceeding
seeking to adjudicate the Company bankrupt or insolvent, or seeking liquidation,
winding up, reorganization, protection or relief, under any law relating to
bankruptcy, insolvency, reorganization, protection or relief of debtors in
respect of the Company, or seeking the entry of an order for relief or the
appointment of a receiver, trustee or other similar official for the Company, in
the case of each of (A), (B) and (C), that would be material to the Company;
provided that, the Company may, prior to the five (5) year anniversary of the
Effective Date, initiate (or permit its subsidiaries to initiate) any of the
transactions or events set forth in this Section 3.2(v) without the prior
approval of the Consenting Holder if the Board elects to cause the Partnership
to redeem, by giving at least 30 days prior written notice to the holders of the
Preferred Shares and the Series B Convertible Preferred Units, all of the then
outstanding Series B Convertible Preferred Units at the Redemption Price, which
redemption shall occur simultaneously with, and be conditioned upon the closing
of, such transaction or event and the redemption of the Series A Preferred
Shares or the Series C Preferred Shares, as applicable, by the Company, at a
price per share equal to the Liquidation Preference thereof (as such term is
defined in the Articles Supplementary or the Series C Articles Supplementary, as
applicable), plus any accrued but unpaid dividends or distributions thereon.
Notwithstanding the foregoing, upon receipt of the Company’s redemption notice,
and at any time prior to the closing of the transaction giving rise to such
redemption right, the holder of the then outstanding Series B Convertible
Preferred Units and Permitted Transferees, as applicable, may elect to convert
all of their then outstanding Series B Convertible Preferred Units into Common
Units in accordance with Section 9.2(d)(v) of the Form of Amended Partnership
Agreement.

 

Section 3.3           Additional Negative Covenants. So long as any Series A
Preferred Shares are outstanding, the Company covenants and agrees with the
Investor and its Permitted Transferees that the Company or its Subsidiaries
will:

 

(a)          without the prior approval of the holders of the Consenting Holder,
not enter into or effect (i) any business combination transaction (including a
merger, sale of securities or sale of substantially all of the assets of such
Person), (ii) any Listing or (iii) any Liquidation Event until the five (5) year
anniversary of the Effective Date, subject to Strike Out provisions in
accordance with Section 7.1(e) of the Securities Purchase Agreement;

 

(b)          without the prior approval of the Consenting Holder, provided that
the Investor and its Permitted Transferees hold in the aggregate 30% of the
issued and outstanding equity interest in the Company (on an as-converted
basis), not take any action that would require shareholder consent (excluding
any Board elections);

 

(c)          require the repurchase of Series B Convertible Preferred Units,
Common Units (as defined in the Form of Amended Partnership Agreement), or
Series C Preferred Shares if a sale, acquisition, merger, consolidation or any
similar business combination transactions with another corporation or other
entity, Listing or a Liquidation Event commenced in accordance with Section 6.1
is initiated by the Investor but not approved by the Company’s stockholders, at
a repurchase price of the greater of (i) liquidation value of such securities
plus any accrued and unpaid dividends, and (ii) the distribution provisions as
set forth in the Organizational Documents of the Company or the Partnership, as
applicable; and

 

29

 

 

(d)          require the repurchase of Series B Convertible Preferred Units,
Common Units (as defined in the Partnership Agreement of the Partnership), or
Series C Preferred Shares if a sale, acquisition, merger, consolidation or any
similar business combination transactions with another corporation or other
entity, Listing or a Liquidation Event is approved by the Board but not approved
by the Company’s stockholders, at a repurchase price of the greater of (i)
liquidation value of such securities plus any accrued and unpaid dividends, and
(ii) the distribution provisions as set forth in the Organizational Documents of
the Company or the Partnership, as applicable.

 

Section 3.4           Board of Directors.

 

The Company covenants and agrees with the Investor that:

 

(a)          On the thirtieth day following the Effective Date, the Company
shall (A) set the size of the Board at nine (9) members and (B) prior to the
issuance of any Preferred Shares, (x) appoint to fill the newly created Board
seats two (2) directors designated by the Investor and (y) nominate at each
annual meeting of the Company’s shareholders, special meeting of the Company’s
shareholders called for the purpose of electing directors of the Company and at
any adjournment or postponement thereof (each, a “Shareholder Meeting”) two (2)
nominees for directors of the Company designated by the Investor.

 

(b)          At any time on or following the thirtieth day following the
Effective Date, the Investor may elect, by providing fifteen (15) days prior
written notice to the Company, to require the Company to set the size of the
Board at ten (10) members, and upon and after receipt of such notice the Company
shall (A) set the size of the Board at ten (10) members and (B) (x) thereafter
until the issuance of any Preferred Shares, appoint to fill the greater of three
seats and 30% (rounded up to the nearest whole number) of the Board those
directors designated by the Investor and (y) nominate at each Shareholder
Meeting nominees for directors of the Company designated by the Investor in
respect of the greater of three seats and 30% (rounded up to the nearest whole
number) of the Board.

 

(c)          Upon the issuance of any Preferred Shares to the Investor or its
Affiliates, the Preferred Stock Directors designated by the Investor pursuant to
Sections 3.4(a) or (b), as applicable, will be designated as the initial
Preferred Stock Directors as such term is defined in the Articles Supplementary
and the Series C Articles Supplementary. Upon and after the issuance of any
Preferred Shares, the Consenting Holder, on behalf of the holders of the
Preferred Shares, will thereafter be entitled to designate any and all Company
nominees for Preferred Stock Directors at any Shareholder Meeting.

 

(d)          Subject to compliance with applicable terms of the Charter and
Bylaws, the Company will take all actions as necessary to cause the Preferred
Stock Directors to be members of the Investment Committee of the Board.
Notwithstanding the foregoing, the Investor expressly acknowledges that the
Board retains the right to determine the size of the Investment Committee and
the Investor will have no right to require that Preferred Stock Directors
collectively constitute a majority of the members of the Investment Committee

 

(e)          The Company shall enter into an indemnification agreement
substantially in the form attached hereto as Exhibit A (a “Director
Indemnification Agreement”) with each Preferred Stock Director as of the date
such Preferred Stock Director becomes a member of the Board.

 

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(f)          In connection with the screening and review of any Person proposed
to be nominated as a Preferred Stock Director, neither the Company nor its
Subsidiaries shall have the right to require the Investor or its Permitted
Transferees to discuss any information pertaining to the control Persons or
limited partners of the Investor or its Affiliates. Subject to the foregoing,
the Investor shall provide, and shall cause any Preferred Stock Director to
provide, all information regarding the Preferred Stock Director reasonably
requested by the Company to the extent necessary to comply with all of its
disclosure and other reporting obligations under applicable Laws. The Preferred
Stock Directors shall be entitled to have their expenses reimbursed according to
the expense reimbursement standards and policies set forth for directors of the
Board from time to time by the Board or any committee thereof.

 

(g)          Subject to the rights of the shareholders of the Company to remove
a director for cause in accordance with applicable Law, and until such time as
the Investor holds only shares of Common Stock, during the term of this
Agreement the Investor will not take any action to remove any director (other
than a Preferred Stock Director), and at each annual meeting of the Company’s
shareholders, special meeting of the Company’s shareholders called for the
purpose of electing directors of the Company, and at any adjournment or
postponement thereof, Investor will vote all of its Series C Preferred Shares in
favor of the slate of director nominees nominated by the Board (other than a
Preferred Stock Director) in accordance with the provisions of this Section 3.4.

 

Section 3.5           Board Observation Rights; REOC Rights; VCOC Rights.

 

The Company covenants and agrees with the Investor and its Permitted Transferees
that:

 

(a)          The Consenting Holder shall have the right to designate one (1)
observer of the Board, which observer shall have no right to vote on any matter
that comes before the Board but shall have the right to receive all information
distributed to the members of the Board other than that determined by the Board
to be privileged. Any such designated observer who is not Affiliated with the
Consenting Holder shall execute a confidentiality and non-disclosure agreement
reasonably acceptable to the Company;

 

(b)          No observer of the Board shall have the right to vote on any matter
presented to the Board. The Company shall give each observer written notice of
each meeting of the Board thereof at the same time and in the same manner as the
members of the Board receive notice of such meetings (by electronic or other
means), and the Company shall permit the observer to attend as an observer of
all meetings of its Board. The observer shall be entitled to receive all written
materials and other information given to the directors in connection with such
meetings at the same time such materials and information are given to the
directors, and the observer shall keep such materials and information
confidential. If the Company proposes to take any action by written consent in
lieu of a meeting of its Board, the Company shall give written notice thereof to
the observer prior to the effective date of such consent. The Company shall
provide to the observer all written materials and other information given to the
directors in connection with such action by written consent at the same time
such materials and information are given to the directors, and the observer
shall keep such materials and information confidential. Notwithstanding the
foregoing, the Company reserves the right not to provide information and to
exclude the observer from any meeting or portion thereof if the Board reasonably
determines that delivery of such information (i) would jeopardize the
attorney-client privilege between the Company and its counsel, (ii) would
violate any fiduciary obligations of the Board under applicable law or (iii)
involves a transaction in which the Consenting Holder has a direct conflict of
interest, unless, in the case of this clause (iii), such Consenting Holder
confirms, orally or in writing, that such Consenting Holder will not provide any
such information relating to a conflict of interest to those individuals
primarily responsible for the Consenting Holder decisions in respect of such
conflict of interest); and

 

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(c)          At any time upon request to the Company by the Investor, any
Permitted Transferee or any of its or their Affiliates, the Company will, and
will cause the Partnership to, enter into a customary management rights letter
with any of the Investor, any Permitted Transferee or any of its or their
Affiliates that directly or indirectly has an interest in the Company or the
Partnership, that is intended to qualify as a “real estate operating company” (a
“REOC”) within the meaning of the U.S. Department of Labor plan assets
regulation (Section 2510.3-101, Part 2510 of Chapter XXV, Title 29 of the Code
of Federal Regulations) (each such Investor, Permitted Transferee and Affiliate
referred to as a “REOC Investor”), substantially in the form of Exhibit B hereto
(with appropriate modifications to reflect the identity of the REOC Investor).
In the event that a REOC Investor is an Affiliate of Investor, such Affiliate
shall be a third party beneficiary hereunder for purposes of this Section 3.5(c)
and shall have the right, power and authority to enforce the provisions of this
Section 3.5(c) as though such Affiliate was party to this Agreement.

 

(d)          At any time upon request to the Company or the Partnership by the
Investor, any Permitted Transferee or any of its or their Affiliates, the
Company will, and will cause the Partnership to, agree to enter into a customary
management rights letter with any of the Investor, any Permitted Transferee or
any of its or their Affiliates that directly or indirectly has an interest in
the Company or the Partnership, that is intended to qualify as a “venture
capital operating company” (as defined in the U.S. Department of Labor
regulation codified at 29 C.F.R. Section 2510.3-101) (each such Investor,
Permitted Transferee and Affiliate referred to as a “VCOC Investor”),
substantially in the form of Exhibit C hereto (with appropriate modifications
(i) to reflect the identity of the VCOC Investor and (ii) if and to the extent
required to permit the Company to continue to qualify as a REIT). In the event
that a VCOC Investor is an Affiliate of Investor, such Affiliate shall be a
third party beneficiary hereunder for purposes of this Section 3.5(d) and shall
have the right, power and authority to enforce the provisions of this Section
3.5(d) as though such Affiliate was party to this Agreement.

 

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Article IV

PREEMPTIVE RIGHTS

 

Section 4.1           Preemptive Rights.

 

(a)          If the Company proposes to issue or sell any Common Stock,
Preferred Shares, Preferred Stock or any other class of capital stock, or any
other securities, warrants, options or rights to acquire, convertible into or
exchangeable for any shares of capital stock of the Company or any of its
subsidiaries, or any security having a direct or indirect equity participation
in the Company or any of its subsidiaries (for purposes hereof, "New
Securities"), then the Company shall deliver written notice thereof to the
Investor setting forth the number, terms and purchase consideration (or if such
purchase consideration is not expressed in cash, the fair market value cash
equivalent thereof determined in good faith by the Board) of the New Securities
which the Company or such subsidiary proposes to issue and such other
information as the Investor may reasonably request in order to evaluate the
proposed issuance.

 

(b)          The Investor will, upon the receipt of such notice, have the right,
unless otherwise agreed in writing by the Investor in advance, to elect to
purchase, on the same terms and conditions (including consideration or the cash
equivalent thereof) as those offered to any proposed purchaser, that number of
New Securities determined by multiplying the aggregate number of New Securities
proposed to be issued by the Investor’s Proportionate Percentage; provided that,
if the Investor is unable to purchase it’s entire Proportionate Percentage of
New Securities as a result of the Aggregate Stock Ownership Limit or the Common
Stock Ownership Limit (as each such term is defined in the Company’s charter) or
any similar limitation, the Investor will be entitled to elect to purchase from
the Partnership, on substantially the same terms and conditions as those offered
to any proposed purchaser of the Company’s New Securities, an equivalent number
of securities of the Partnership having substantially equivalent terms
(including with respect to economic and voting power and preferences) as the
terms of the New Securities offered by the Company, pursuant to procedures
substantially identical to those set forth in Section 4.1(c) in respect of New
Securities.

 

(c)          The Investor may make such election by written notice to the
Company within fifteen (15) days of receipt of notice of any proposed issuance
of New Securities. The closing of the exercise of the Investor’s subscription
rights shall take place simultaneously with the closing of the sale of the New
Securities giving rise to such subscription right. If the Investor does not
elect to purchase its pro rata portion of New Securities within fifteen (15)
days of the date of the foregoing notice, this pro rata purchase right shall
terminate for such Investor with respect to the New Securities described in the
written notice delivered to that party, and the Company may, in its sole
discretion, sell within ninety (90) days after the Investor's receipt of the
notice of the proposed issuance of New Securities any or all of the New
Securities described in such written notice with respect to which the purchase
rights described above were not exercised, but only on the terms and conditions
set forth in such written notice to the Investor. Any New Securities offered or
sold by the Company after such ninety (90) day period must be reoffered to the
Investor pursuant to this Article IV.

 

(d)          The Investor may not assign its rights under this Article IV to any
Person or entity which is (i) not a Permitted Transferee and (ii) which is not
an "accredited investor" as defined in Regulation D under the Securities Act.
The election by the Investor not to exercise its subscription rights under this
Article IV in any one instance shall not affect its rights as to any subsequent
proposed issuance. Any sale of such securities by the Company or any of its
Subsidiaries without first giving the Investor the rights described in this
Article IV shall be void and of no force and effect.

 

33

 

 

(e)          Notwithstanding the provisions of this Article IV, the Company
shall not be required to first offer the New Securities to the Investor pursuant
to this Article IV if the New Securities are:

 

(i)          securities purchased under the Securities Purchase Agreement;

 

(ii)         securities issued upon conversion of the Series A Preferred Shares
or Series C Preferred Shares;

 

(iii)        securities issued pursuant to the bona fide acquisition of another
business entity or business segment of any such entity by the Company by merger,
purchase of assets or other reorganization;

 

(iv)         securities issued to employees, consultants, officers or directors
of the Company pursuant to any stock option, stock purchase or stock bonus plan,
agreement or arrangement approved by the Board;

 

(v)          securities issued to existing holders of Common Stock in a public
offering pursuant to a registration statement under the Securities Act under the
DRIP reinstated in accordance with Section 5.13 of the Securities Purchase
Agreement;

 

(vi)         securities issued in connection with any stock split, stock
dividend or recapitalization of the Company; or

 

(vii)        any right, option or warrant to acquire any security convertible
into the securities excluded from the definition of New Securities pursuant to
subsections (i) through (vii) above.

 

Article V
STANDSTILL

 

Section 5.1           Standstill

 

Investor agrees that, except as specifically provided in the Securities Purchase
Agreement or the Related Documents, for a period of three (3) years following
the Effective Date (the “Standstill Period”), the Investor will not (and
Investor will ensure that its Subsidiaries (and any Person acting on behalf of
or in concert with Investor or any Subsidiaries) will not), directly or
indirectly, without the prior written consent of the Company, (i) acquire, agree
to acquire, propose, seek or offer to acquire, or facilitate the acquisition or
ownership of, any securities or assets of the Company or any of its Subsidiaries
or Affiliates, any warrant or option to purchase such securities or assets, any
security convertible into any such securities, or any other right to acquire
such securities, (ii) enter, agree to enter, propose, seek or offer to enter
into or facilitate any merger, business combination, recapitalization,
restructuring or other extraordinary transaction involving the Company or any of
its Subsidiaries or Affiliates, (iii) make, or in any way participate or engage
in, any solicitation of proxies to vote, or seek to advise or influence any
Person with respect to the voting of, any voting securities of the Company, (iv)
form, join or in any way participate in a “group” (within the meaning of Section
13(d)(3) of the Exchange Act) with respect to any voting securities of the
Company, (v) call, request the calling of, or otherwise seek or assist in the
calling of a special meeting of the shareholders of the Company, (vi) disclose
any intention, plan or arrangement prohibited by, or inconsistent with, the
foregoing or (vii) advise, assist or encourage or enter into any discussions,
negotiations, agreements or arrangements with any third parties in connection
with the foregoing.  Nothing in this Section 5.1 will limit (x) the Investor’s
ability to vote or otherwise exercise rights under, or to transfer to any
Permitted Transferee, its Preferred Shares or Common Stock or (y) the ability of
any Preferred Stock Director to vote or otherwise exercise his or her fiduciary
duties as a member of the Board.

 

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Article VI
LIQUIDITY RIGHT

 

Section 6.1           Investor Liquidity Right

 

(a)          Commencing on July 1, 2017, the Investor may, in its sole
discretion, by providing written notice to the Company, elect to cause the
Company to obtain a Listing or to initiate a Liquidation Event (the “Investor
Liquidity Right”). Promptly upon receipt of notice of the exercise of the
Investor Liquidity Right, the Company shall use commercially reasonable efforts
to identify and evaluate strategic alternatives for executing such Listing or
Liquidation Event (as selected by Investor in its sole discretion).

 

(b)          In the event that the Investor elects to cause the Company to
initiate a Liquidation Event, any such Liquidation Event must include, at the
request of the Investor, customary tag-along sale rights for holders of the
Series A Preferred Shares (or Series C Preferred Shares, as applicable) and
holders of the Series B Convertible Preferred Units. The Series A Preferred
Shares (or Series C Preferred Shares) shall be entitled to receive proceeds from
such consummated Liquidation Event in accordance with the terms of the Articles
Supplementary (or, in the case of the Series C Preferred Shares, of the Series C
Articles Supplementary) and the Series B Convertible Preferred Units shall be
entitled to receive proceeds from such consummated Liquidation Event in
accordance with the terms of Section 5.6 of the Form of Amended Partnership
Agreement.

 

(c)          In the event that the Investor elects to cause the Company to
initiate a Liquidation Event and, upon the conclusion of a good faith evaluation
process consistent with the fulfillment of the Board’s fiduciary duties to the
holders of the Common Stock under applicable Law, either: (i) a majority of the
full Board does not conclude (after consultation with its financial advisor and
outside legal counsel) that such Liquidation Event is advisable because approval
of such Liquidation Event would reasonably be expected to violate the Board's
fiduciary duties to the holders of the Common Stock under applicable Law; or
(ii) the Company’s stockholders reject a Board approved Liquidation Event, then
the Company shall, at the Investor’s election, be required to redeem Investor’s
Preferred Shares in the Company at a price based upon the proceeds to which the
Investor would have been entitled if such Liquidation Event were consummated,
which, in the case of clause (i) above, shall be determined by (x) the amount of
any bona fide third party offer rejected by the majority of the full Board or
(y) in the absence of such bona fide third party offer, by an independent
investment bank selected by mutual agreement of the Company and the Investor.

 

35

 

 

(d)          Following the occurrence of a Qualified Listing and prior to the
60th day following the first trading day of such Listing, the Board may elect,
in its sole discretion, to terminate the Investor Liquidity Right; provided that
in connection with such termination, the Company and the Partnership will redeem
all of the outstanding Preferred Shares and Series B Convertible Preferred
Units, as applicable, held by the Investor and its Affiliates on the later to
occur of (i) the sixth anniversary of the Effective Date and (ii) the third
anniversary of the first trading day of the Qualified Listing (or, in each case,
if such day is not a Business Day, the first Business Day thereafter) (the
period beginning on the date of the Board’s election and ending on the required
redemption date, the “Term Out Period”), for a price in cash equal to the
applicable Liquidation Preference thereof (as such term is defined in the
Articles Supplementary, the Series C Articles Supplementary or the Form of
Amended Partnership Agreement, as applicable) together with any accrued and
unpaid dividends or distributions thereon. Notwithstanding the foregoing, if,
following any Qualified Listing and prior to the date of the redemption
contemplated by this Section 6.1(d), the Company fails to maintain continuously
a Listing, the Investor Liquidity Right will be immediately reinstated on the
same terms set forth in this Article VI as if no termination thereof had
occurred and the applicable Term Out Period will immediately expire. In
connection with a Term Out Period Change of Control, the Investor will have the
right, in its sole discretion, to cause the Company and the Partnership (or
their respective successors) to consummate the redemption contemplated by this
Section 6.1(d) concurrently with the consummation of such Term Out Period Change
of Control by giving written notice no less than ten business days prior to the
consummation of such Term Out Period Change of Control (or, if later, five
business days following the date upon which the terms of the applicable Term Out
Period Change of Control are provided to Investor). As promptly as reasonably
practicable after entering into a definitive agreement in respect of a Term Out
Period Change of Control, and in any event within five business days thereafter,
the Company will provide the Investor with written notice of such agreement and
a description of its material terms and, thereafter, such other information
about such Term Out Period Change of Control as Investor may reasonably request
in connection with its determination of whether to exercise the redemption
acceleration right set forth in this Section 6.1(d).

 

(e)          On and after delivery of notice of the exercise of the Investor
Liquidity Right to cause a Listing, the Investor will no longer have any right
to subsequently exercise any Investor Liquidity Right hereunder; provided that,
the Investor Liquidity Right will be immediately reinstated on the same terms
set forth in this Articlve VI as if no termination thereof had occurred if (i)
if the Listing so demanded by the exercise of such Investor Liquidity Right is
not consummated within the 90 day period following such exercise and the
Investor directs the Company in writing to abandon such proposed Listing or (ii)
the Company fails to maintain continuously such Listing.

 

36

 

 

Article VII
miscellaneous

 

Section 7.1           Specific Performance.

 

(a)          Each Party acknowledges and agrees that irreparable damage would
occur to the other parties hereunder in the event that any of the provisions of
this Agreement were not performed by such party in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that each
party will be entitled to an injunction or injunctions to prevent or cure
breaches of the provisions of this Agreement by any other party and to enforce
specifically the terms and provisions hereof and thereof this being in addition
to any other remedy to which the parties may be entitled by law or equity.

 

(b)          Each of the Sentio Parties and the Investor (i) hereby irrevocably
submits to the exclusive jurisdiction of the United States District Court and
other courts of the United States sitting in New York City in the State of New
York for the purposes of any suit, action or proceeding arising out of or
relating to this Agreement and (ii) hereby waives, and agrees not to assert in
any such suit, action or proceeding, any claim that it is not personally subject
to the jurisdiction of such court, that the suit, action or proceeding is
brought in an inconvenient forum or that the venue of the suit, action or
proceeding is improper. Each of the Sentio Parties and the Investor consents to
process being served in any such suit, action or proceeding by mailing a copy
thereof to such party at the address in effect for notices to it under this
Agreement and agrees that such service will constitute good and sufficient
service of process and notice thereof. Nothing in this Section 7.1(b) will
affect or limit any right to serve process in any other manner permitted by law.

 

(c)          EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY
ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT
ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY
WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT,
OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH PARTY CERTIFIES AND ACKNOWLEDGES
THAT (A) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF ANY LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (B) EACH PARTY
UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (C) EACH PARTY
MAKES THIS WAIVER VOLUNTARILY AND (D) EACH PARTY HAS BEEN INDUCED TO ENTER INTO
THIS AGREEMENT, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN
THIS SECTION 7.1(c).

 

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Section 7.2           Term.

 

Notwithstanding anything contained herein to the contrary, this Agreement shall
terminate, and all rights and obligations hereunder shall cease, upon the
earlier to occur of the termination of this Agreement as provided by applicable
Law or the occurrence of any of the following events:

 

(a)          The termination of the Securities Purchase Agreement if such
termination occurs prior to the first Closing Date thereunder; and

 

(b)          The date, following the first Closing Date under the Securities
Purchase Agreement upon which the neither the Investor nor any Permitted
Transferees hold any Series A Preferred Shares, Series C Preferred Shares,
Series B Convertible Preferred Units or Conversion Shares.

 

Section 7.3           Notices.

 

Any notice, demand, request, waiver or other communication required or permitted
to be given hereunder will be in writing and will be effective if delivered in
accordance with the provisions of Section 9.4 of the Securities Purchase
Agreement.

 

Section 7.4           Parties in Interest.  

 

All covenants and agreements contained in this Agreement, by or on behalf of any
of the parties executing this Agreement shall bind such parties, and shall bind
and inure to the benefit of the respective successors and permitted assigns of
the parties hereto whether so expressed or not; provided, however, that the
foregoing shall not in and of itself permit the assignment of the rights and
obligations hereunder or thereunder.

 

Section 7.5           Assignment.

 

Except as specifically provided herein, neither this Agreement nor any rights of
the Investor or the Sentio Parties hereunder may be assigned by either party to
any other Person without the prior written consent of the other party, and any
purported assignment without such consent will be void ab initio; provided that
the Investor and any Permitted Transferee may, without the prior written consent
of any other party, assign the rights and obligations attributable to Permitted
Transferees hereunder to any Permitted Transferee in connection with, and in
proportion to, any transfer of Securities thereto, effective upon receipt by the
Company of (a) written notice from the transferor certifying that the transferee
is a Permitted Transferee, stating the name and address of the Permitted
Transferee and identifying the amount of Registrable Securities with respect to
which the rights under this Agreement are being transferred, and (b) a written
agreement from the Permitted Transferee to be bound by the terms of this
Agreement as a Permitted Transferee hereunder.

 

Section 7.6           Governing Law.  

 

This Agreement will be governed by and construed in accordance with the internal
procedural and substantive laws of the State of New York, without giving effect
to the choice of law provisions of such state that would cause the application
of the laws of any other jurisdiction.

 

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Section 7.7           Entire Agreement.  

 

This Agreement, together with the Securities Purchase Agreement and the other
Related Documents, including all related schedules and exhibits, represents the
entire agreement of the parties with respect to the subject matter hereof, and
there are no promises, undertakings, representations or warranties by either
party relative to subject matter hereof not expressly set forth herein. No
provision of this Agreement may be amended other than by a written instrument
signed by all parties hereto.

 

Section 7.8           Waivers.

 

No waiver by any party of any default with respect to any provision, condition
or requirement of this Agreement will be deemed to be a continuing waiver in the
future or a waiver of any other provisions, condition or requirement hereof nor
will any delay or omission of any party to exercise any right hereunder in any
manner impair the exercise of any such right accruing to it thereafter. No
provision of this Agreement may be waived other than in a written instrument
signed by the party against whom enforcement of such waiver is sought.

 

Section 7.9            Counterparts. 

 

This Agreement may be executed in one or more counterparts (including by
facsimile or other electronic transmission), all of which will be considered one
and the same agreement and will become effective when one or more counterparts
have been signed by each of the parties and delivered to the other parties
(including by facsimile or other electronic transmission).

 

Section 7.10         Severability.  

 

The provisions of this Agreement are severable and, in the event that any court
of competent jurisdiction will determine that any one or more of the provisions
or part of the provisions contained in this Agreement will, for any reason, be
held to be invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability will not affect any other provision or part of a
provision of this Agreement, and this Agreement will be reformed and construed
as if such invalid or illegal or unenforceable provision, or part of such
provision, had never been contained herein, so that such provisions would be
valid, legal and enforceable to the maximum extent possible.

 

Section 7.11         Titles and Subtitles.  

 

The titles and subtitles used in this Agreement are for convenience only and are
not to be considered in construing or interpreting any term or provision of this
Agreement.

 

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Section 7.12         Pronouns.  

 

All pronouns used herein shall be deemed to refer to the masculine, feminine or
neuter gender as the context requires.

 

[Signatures appear on the following pages.]

 

40

 

  

IN WITNESS WHEREOF, the parties hereto have executed this Investor Rights
Agreement to be duly executed as of the day and year first above written.

 

    THE COMPANY           Sentio Healthcare Properties, Inc.           By: /s/
John Mark Ramsey     Name: John Mark Ramsey     Title: Chief Executive Officer

 

41

 

 

IN WITNESS WHEREOF, the parties hereto have executed this Investor Rights
Agreement to be duly executed as of the day and year first above written.

 

    THE PARTNERSHIP           Sentio Healthcare Properties OP, L.P.          
By: /s/ John Mark Ramsey     Name: John Mark Ramsey     Title: Chief Executive
Officer

 

42

 

 

IN WITNESS WHEREOF, the parties hereto have executed this Investor Rights
Agreement to be duly executed as of the day and year first above written.

 

    THE INVESTOR           SENTINEL RE INVESTMENT     HOLDINGS LP           By:
Sentinel RE Investment Holdings GP     LLC, as general partner           By: /s/
Billy Butcher     Name: Billy Butcher     Title: Vice President

 

43

 

 

EXHIBIT A

 

FORM OF DIRECTOR INDEMNIFICATION AGREEMENT

 

THIS INDEMNIFICATION AGREEMENT (“Agreement”) is made and entered into as of the
__ day of _______, 20__, by and between Sentio Healthcare Properties, Inc., a
Maryland corporation (the “Company”), and ____________ (“Indemnitee”).

 

WHEREAS, at the request of the Company, Indemnitee currently serves as a
director of the Company and may, therefore, be subjected to claims, suits or
proceedings arising as a result of his service; and

 

WHEREAS, as an inducement to Indemnitee to continue to serve as such director,
the Company has agreed to indemnify and to advance expenses and costs incurred
by Indemnitee in connection with any such claims, suits or proceedings; and

 

WHEREAS, the parties by this Agreement desire to set forth their agreement
regarding indemnification and advance of expenses;

 

NOW, THEREFORE, in consideration of the premises and the covenants contained
herein, the Company and Indemnitee do hereby covenant and agree as follows:

 

Section 1. Definitions. For purposes of this Agreement:

 

(a) “Applicable Legal Rate” means a fixed rate of interest equal to the
applicable federal rate for mid-term debt instruments as of the day that it is
determined that Indemnitee must repay any advanced expenses.

 

(b) “Change in Control” means a change in control of the Company occurring after
the Effective Date of a nature that would be required to be reported in response
to Item 6(e) of Schedule 14A of Regulation 14A (or in response to any similar
item on any similar schedule or form) promulgated under the Securities Exchange
Act of 1934, as amended (the “Exchange Act”), whether or not the Company is then
subject to such reporting requirement; provided, however, that, without
limitation, such a Change in Control shall be deemed to have occurred if, after
the Effective Date (i) any “person” (as such term is used in Sections 13(d) and
14(d) of the Exchange Act) is or becomes the “beneficial owner” (as defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the
Company representing 15% or more of the combined voting power of all of the
Company’s then-outstanding securities entitled to vote generally in the election
of directors without the prior approval of at least two-thirds of the members of
the Board of Directors in office immediately prior to such person’s attaining
such percentage interest; (ii) the Company is a party to a merger,
consolidation, sale of assets, plan of liquidation or other reorganization not
approved by at least two-thirds of the members of the Board of Directors then in
office, as a consequence of which members of the Board of Directors in office
immediately prior to such transaction or event constitute less than a majority
of the Board of Directors thereafter; or (iii) at any time, a majority of the
members of the Board of Directors are not individuals (A) who were directors as
of the Effective Date or (B) whose election by the Board of Directors or
nomination for election by the Company’s stockholders was approved by the
affirmative vote of at least two-thirds of the directors then in office who were
directors as of the Effective Date or whose election for nomination for election
was previously so approved.

 

A-1

 

 

(c) “Corporate Status” means the status of a person as a present or former
director, officer, employee or agent of the Company or as a director, trustee,
officer, partner, manager, managing member, fiduciary, employee or agent of any
other foreign or domestic corporation, partnership, limited liability company,
joint venture, trust, employee benefit plan or other enterprise that such person
is or was serving in such capacity at the request of the Company. As a
clarification and without limiting the circumstances in which Indemnitee may be
serving at the request of the Company, service by Indemnitee shall be deemed to
be at the request of the Company: (i) if Indemnitee serves or served as a
director, trustee, officer, partner, manager, managing member, fiduciary,
employee or agent of any corporation, partnership, limited liability company,
joint venture, trust or other enterprise (1) of which a majority of the voting
power or equity interest is owned directly or indirectly by the Company or
(2) the management of which is controlled directly or indirectly by the Company,
or (ii) if, as a result of Indemnitee’s service to the Company or any of its
affiliated entities, Indemnitee is subject to duties by, or required to perform
services for, an employee benefit plan or its participants or beneficiaries,
including as a deemed fiduciary thereof.

 

(d) “Disinterested Director” means a director of the Company who is not and was
not a party to the Proceeding in respect of which indemnification and/or advance
of Expenses is sought by Indemnitee.

 

(e) “Effective Date” means the date set forth in the first paragraph of this
Agreement.

 

(f) “Expenses” means any and all reasonable and out-of-pocket attorneys’ fees
and costs, retainers, court costs, transcript costs, fees of experts, witness
fees, travel expenses, duplicating costs, printing and binding costs, telephone
charges, postage, delivery service fees, federal, state, local or foreign taxes
imposed on Indemnitee as a result of the actual or deemed receipt of any
payments under this Agreement, ERISA excise taxes and penalties and any other
disbursements or expenses incurred in connection with prosecuting, defending,
preparing to prosecute or defend, investigating, being or preparing to be a
witness in or otherwise participating in a Proceeding. Expenses shall also
include Expenses incurred in connection with any appeal resulting from any
Proceeding including, without limitation, the premium for, security for and
other costs relating to any cost bond supersedeas bond or other appeal bond or
its equivalent.

 

(g) “Independent Counsel” means a law firm, or a member of a law firm, that is
experienced in matters of corporation law and neither is, nor in the past five
years has been, retained to represent: (i) the Company or Indemnitee in any
matter material to either such party (other than with respect to matters
concerning Indemnitee under this Agreement or of other indemnitees under similar
indemnification agreements), or (ii) any other party to or participant or
witness in the Proceeding giving rise to a claim for indemnification or advance
of Expenses hereunder. Notwithstanding the foregoing, the term “Independent
Counsel” shall not include any person who, under the applicable standards of
professional conduct then prevailing, would have a conflict of interest in
representing either the Company or Indemnitee in an action to determine
Indemnitee’s rights under this Agreement.

 

A-2

 

 

(h) “Proceeding” means any threatened, pending or completed action, suit,
arbitration, alternate dispute resolution mechanism, investigation, inquiry,
administrative hearing or any other proceeding, whether brought by or in the
right of the Company or otherwise and whether of a civil (including intentional
or unintentional tort claims), criminal, administrative or investigative (formal
or informal) nature, including any appeal therefrom, except one pending or
completed on or before the Effective Date, unless otherwise specifically agreed
in writing by the Company and Indemnitee. If Indemnitee reasonably believes that
a given situation may lead to or culminate in the institution of a Proceeding,
such situation shall also be considered a Proceeding.

 

Section 2. Services by Indemnitee. Indemnitee will serve as a director of the
Company. However, this Agreement shall not impose any independent obligation on
Indemnitee or the Company to continue Indemnitee’s service to the Company. This
Agreement shall not be deemed an employment contract between the Company (or any
other entity) and Indemnitee.

 

Section 3. General. Subject to the limitations in Section 5, the Company shall
indemnify, and advance Expenses to, Indemnitee (a) as provided in this Agreement
and (b) as otherwise permitted by Maryland law in effect on the Effective Date
and as amended from time to time; provided, however, that no change in Maryland
law shall have the effect of reducing the benefits available to Indemnitee
hereunder based on Maryland law as in effect on the Effective Date. Subject to
the limitations in Section 5, the rights of Indemnitee provided in this
Section 3 shall include, without limitation, the rights set forth in the other
sections of this Agreement, including any additional indemnification permitted
by Section 2-418(g) of the Maryland General Corporation Law (the “MGCL”).

 

Section 4. Standard for Indemnification. Subject to the limitations in
Section 5, if, by reason of Indemnitee’s Corporate Status, Indemnitee is, or is
threatened to be, made a party to any Proceeding, the Company shall indemnify
Indemnitee against all judgments, penalties, fines and amounts paid in
settlement and all Expenses actually and reasonably incurred by Indemnitee or on
Indemnitee’s behalf in connection with any such Proceeding unless it is
established by clear and convincing evidence that (a) the act or omission of
Indemnitee was material to the matter giving rise to the Proceeding and (i) was
committed in bad faith or (ii) was the result of active and deliberate
dishonesty, (b) Indemnitee actually received an improper personal benefit in
money, property or services or (c) in the case of any criminal Proceeding,
Indemnitee had reasonable cause to believe that his conduct was unlawful.

 

Section 5. Certain Limits on Indemnification. Notwithstanding any other
provision of this Agreement (other than Section 6), Indemnitee shall not be
entitled to:

 

(a) indemnification for any loss or liability unless all of the following
conditions are met: (i) Indemnitee has determined, in good faith, that the
course of conduct that caused the loss or liability was in the best interests of
the Company; (ii) Indemnitee was acting on behalf of or performing services for
the Company; (iii) such loss or liability was not the result of gross negligence
or willful misconduct; and (iv) such indemnification is recoverable only out of
the Company’s net assets and not from the Company’s stockholders;

 

A-3

 

 

(b) indemnification for any loss or liability arising from an alleged violation
of federal or state securities laws unless one or more of the following
conditions are met: (i) there has been a successful adjudication on the merits
of each count involving alleged material securities law violations as to
Indemnitee; (ii) such claims have been dismissed with prejudice on the merits by
a court of competent jurisdiction as to Indemnitee; or (iii) a court of
competent jurisdiction approves a settlement of the claims against Indemnitee
and finds that indemnification of the settlement and the related costs should be
made, and the court considering the request for indemnification has been advised
of the position of the Securities and Exchange Commission and of the published
position of any state securities regulatory authority in which securities of the
Company were offered or sold as to indemnification for violations of securities
laws;

 

(c) indemnification hereunder if the Proceeding was one by or in the right of
the Company and Indemnitee is adjudged to be liable to the Company;

 

(d) indemnification hereunder if Indemnitee is adjudged to be liable on the
basis that personal benefit was improperly received in any Proceeding charging
improper personal benefit to Indemnitee, whether or not involving action in the
Indemnitee’s Corporate Status; or

 

(e) indemnification or advance of Expenses hereunder if the Proceeding was
brought by Indemnitee, unless: (i) the Proceeding was brought to enforce
indemnification under this Agreement, and then only to the extent in accordance
with and as authorized by Section 12 of this Agreement, or (ii) the Company’s
charter or Bylaws, a resolution of the stockholders entitled to vote generally
in the election of directors or of the Board of Directors or an agreement
approved by the Board of Directors to which the Company is a party expressly
provide otherwise.

 

Section 6. Court-Ordered Indemnification. Subject to the limitations in
Section 5(a) and (b), a court of appropriate jurisdiction, upon application of
Indemnitee and such notice as the court shall require, may order indemnification
of Indemnitee by the Company in the following circumstances:

 

(a) if such court determines that Indemnitee is entitled to reimbursement under
Section 2-418(d)(1) of the MGCL, the court shall order indemnification, in which
case Indemnitee shall be entitled to recover the Expenses of securing such
reimbursement; or

 

(b) if such court determines that Indemnitee is fairly and reasonably entitled
to indemnification in view of all the relevant circumstances, whether or not
Indemnitee (i) has met the standards of conduct set forth in Section 2-418(b) of
the MGCL or (ii) has been adjudged liable for receipt of an improper personal
benefit under Section 2-418(c) of the MGCL, the court may order such
indemnification as the court shall deem proper. However, indemnification with
respect to any Proceeding by or in the right of the Company or in which
liability shall have been adjudged in the circumstances described in
Section 2-418(c) of the MGCL shall be limited to Expenses.

 

A-4

 

 

Section 7. Indemnification for Expenses of an Indemnitee Who is Wholly or Partly
Successful. Subject to the limitations in Section 5, to the extent that
Indemnitee was or is, by reason of his Corporate Status, made a party to (or
otherwise becomes a participant in) any Proceeding and is successful, on the
merits or otherwise, in the defense of such Proceeding, Indemnitee shall be
indemnified for all Expenses actually and reasonably incurred by Indemnitee or
on Indemnitee’s behalf in connection therewith. If Indemnitee is not wholly
successful in such Proceeding but is successful, on the merits or otherwise, as
to one or more but less than all claims, issues or matters in such Proceeding,
the Company shall indemnify Indemnitee under this Section 7 for all Expenses
actually and reasonably incurred by Indemnitee or on Indemnitee’s behalf in
connection with each such claim, issue or matter, allocated on a reasonable and
proportionate basis. For purposes of this Section 7, and without limitation, the
termination of any claim, issue or matter in such a Proceeding by dismissal,
with or without prejudice, shall be deemed to be a successful result as to such
claim, issue or matter.

 

Section 8. Advance of Expenses for an Indemnitee. If, by reason of Indemnitee’s
Corporate Status, Indemnitee is, or is threatened to be, made a party to any
Proceeding, the Company shall, without requiring a preliminary determination of
Indemnitee’s ultimate entitlement to indemnification hereunder, advance all
reasonable Expenses incurred by or on behalf of Indemnitee in connection with
(a) such Proceeding which is initiated by a third party who is not a stockholder
of the Company or (b) such Proceeding which is initiated by a stockholder of the
Company acting in his capacity as such and for which a court of competent
jurisdiction specifically approves such advancement, and which relates to acts
or omissions with respect to the performance of duties or services on behalf of
the Company. Such advance or advances shall be made within ten days after the
receipt by the Company of a statement or statements requesting such advance or
advances from time to time, whether prior to or after final disposition of such
Proceeding and may be in the form of, in the reasonable discretion of Indemnitee
(but without duplication) (a) payment of such Expenses directly to third parties
on behalf of Indemnitee, (b) advancement to Indemnitee of funds in an amount
sufficient to pay such Expenses or (c) reimbursement to Indemnitee for
Indemnitee’s payment of such Expenses. Such statement or statements shall
reasonably evidence the Expenses incurred by Indemnitee and shall include or be
preceded or accompanied by a written affirmation by Indemnitee of Indemnitee’s
good faith belief that the standard of conduct necessary for indemnification by
the Company as authorized by law and by this Agreement has been met and a
written undertaking by or on behalf of Indemnitee, in substantially the form
attached hereto as Exhibit A or in such form as may be required under applicable
law as in effect at the time of the execution thereof, to reimburse the portion
of any Expenses advanced to Indemnitee, together with the Applicable Legal Rate
of interest thereon, relating to claims, issues or matters in the Proceeding as
to which it shall ultimately be established, by clear and convincing evidence,
that the standard of conduct has not been met by Indemnitee and which have not
been successfully resolved as described in Section 7 of this Agreement. To the
extent that Expenses advanced to Indemnitee do not relate to a specific claim,
issue or matter in the Proceeding, such Expenses shall be allocated on a
reasonable and proportionate basis. The undertaking required by this Section 8
shall be an unlimited general obligation by or on behalf of Indemnitee and shall
be accepted without reference to Indemnitee’s financial ability to repay such
advanced Expenses and without any requirement to post security therefor.

 

A-5

 

 

Section 9. Indemnification and Advance of Expenses as a Witness or Other
Participant. Subject to the limitations in Section 5, to the extent that
Indemnitee is or may be, by reason of Indemnitee’s Corporate Status, made a
witness or otherwise asked to participate in any Proceeding, whether instituted
by the Company or any other party, and to which Indemnitee is not a party,
Indemnitee shall be advanced all reasonable Expenses and indemnified against all
Expenses actually and reasonably incurred by Indemnitee or on Indemnitee’s
behalf in connection therewith within ten days after the receipt by the Company
of a statement or statements requesting any such advance or indemnification from
time to time, whether prior to or after final disposition of such Proceeding.
Such statement or statements shall reasonably evidence the Expenses incurred by
Indemnitee.

 

Section 10. Procedure for Determination of Entitlement to Indemnification.

 

(a) To obtain indemnification under this Agreement, Indemnitee shall submit to
the Company a written request, including therein or therewith such documentation
and information as is reasonably available to Indemnitee and is reasonably
necessary to determine whether and to what extent Indemnitee is entitled to
indemnification. Indemnitee may submit one or more such requests from time to
time and at such time(s) as Indemnitee deems appropriate in Indemnitee’s sole
discretion. The officer of the Company receiving any such request from
Indemnitee shall, promptly upon receipt of such a request for indemnification,
advise the Board of Directors in writing that Indemnitee has requested
indemnification.

 

(b) Upon written request by Indemnitee for indemnification pursuant to
Section 10(a) above, a determination, if required by applicable law, with
respect to Indemnitee’s entitlement thereto shall promptly be made in the
specific case: (i) if a Change in Control shall have occurred, by Independent
Counsel, in a written opinion to the Board of Directors, a copy of which shall
be delivered to Indemnitee, which Independent Counsel shall be selected by
Indemnitee and approved by the Board of Directors in accordance with
Section 2-418(e)(2)(ii) of the MGCL, which approval shall not be unreasonably
withheld; or (ii) if a Change in Control shall not have occurred, (A) by the
Board of Directors by a majority vote of a quorum consisting of Disinterested
Directors or, if such a quorum cannot be obtained, then by a majority vote of a
duly authorized committee of the Board of Directors consisting solely of one or
more Disinterested Directors, (B) if Independent Counsel has been selected by
the Board of Directors in accordance with Section 2-418(e)(2)(ii) of the MGCL
and approved by Indemnitee, which approval shall not be unreasonably withheld,
by Independent Counsel, in a written opinion to the Board of Directors, a copy
of which shall be delivered to Indemnitee or (C) if so directed by a majority of
the members of the Board of Directors, by the stockholders of the Company. If it
is so determined that Indemnitee is entitled to indemnification, payment to
Indemnitee shall be made within ten days after such determination. Indemnitee
shall cooperate with the person, persons or entity making such determination
with respect to Indemnitee’s entitlement to indemnification, including providing
to such person, persons or entity upon reasonable advance request any
documentation or information which is not privileged or otherwise protected from
disclosure and which is reasonably available to Indemnitee and reasonably
necessary to such determination in the discretion of the Board of Directors or
Independent Counsel if retained pursuant to clause (ii)(B) of this
Section 10(b). Any Expenses incurred by Indemnitee in so cooperating with the
person, persons or entity making such determination shall be borne by the
Company (irrespective of the determination as to Indemnitee’s entitlement to
indemnification) and the Company shall indemnify and hold Indemnitee harmless
therefrom.

 

A-6

 

 

(c) The Company shall pay the reasonable fees and expenses of Independent
Counsel, if one is appointed.

 

Section 11. Presumptions and Effect of Certain Proceedings.

 

(a) In making any determination with respect to entitlement to indemnification
hereunder, the person or persons or entity making such determination shall
presume that Indemnitee is entitled to indemnification under this Agreement if
Indemnitee has submitted a request for indemnification in accordance with
Section 10(a) of this Agreement, and the Company shall have the burden of proof
to overcome that presumption in connection with the making of any determination
contrary to that presumption.

 

(b) The termination of any Proceeding or of any claim, issue or matter therein,
by judgment, order, settlement or conviction, upon a plea of nolo contendere or
its equivalent, or entry of an order of probation prior to judgment, does not
create a presumption that Indemnitee did not meet the requisite standard of
conduct described herein for indemnification.

 

(c) The knowledge and/or actions, or failure to act, of any other director,
officer, employee or agent of the Company or any other director, trustee,
officer, partner, manager, managing member, fiduciary, employee or agent of any
other foreign or domestic corporation, partnership, limited liability company,
joint venture, trust, employee benefit plan or other enterprise shall not be
imputed to Indemnitee for purposes of determining any other right to
indemnification under this Agreement.

 

Section 12. Remedies of Indemnitee.

 

(a) If (i) a determination is made pursuant to Section 10(b) of this Agreement
that Indemnitee is not entitled to indemnification under this Agreement,
(ii) advance of Expenses is not timely made pursuant to Sections 8 or 9 of this
Agreement, (iii) no determination of entitlement to indemnification shall have
been made pursuant to Section 10(b) of this Agreement within 60 days after
receipt by the Company of the request for indemnification, (iv) payment of
indemnification is not made pursuant to Sections 7 or 9 of this Agreement within
ten days after receipt by the Company of a written request therefor, or
(v) payment of indemnification pursuant to any other section of this Agreement
or the charter or Bylaws of the Company is not made within ten days after a
determination has been made that Indemnitee is entitled to indemnification,
Indemnitee shall be entitled to an adjudication in an appropriate court located
in the State of Maryland, or in any other court of competent jurisdiction, of
Indemnitee’s entitlement to such indemnification or advance of Expenses.
Alternatively, Indemnitee, at Indemnitee’s option, may seek an award in
arbitration to be conducted by a single arbitrator pursuant to the Commercial
Arbitration Rules of the American Arbitration Association. Indemnitee shall
commence a proceeding seeking an adjudication or an award in arbitration within
180 days following the date on which Indemnitee first has the right to commence
such proceeding pursuant to this Section 12(a); provided, however, that the
foregoing clause shall not apply to a proceeding brought by Indemnitee to
enforce his rights under Section 7 of this Agreement. Except as set forth
herein, the provisions of Maryland law (without regard to its conflicts of laws
rules) shall apply to any such arbitration. The Company shall not oppose
Indemnitee’s right to seek any such adjudication or award in arbitration.

 

A-7

 

 

(b) In any judicial proceeding or arbitration commenced pursuant to this
Section 12, Indemnitee shall be presumed to be entitled to indemnification or
advance of Expenses, as the case may be, under this Agreement and the Company
shall have the burden of proving that Indemnitee is not entitled to
indemnification or advance of Expenses, as the case may be. If Indemnitee
commences a judicial proceeding or arbitration pursuant to this Section 12,
Indemnitee shall not be required to reimburse the Company for any advances
pursuant to Section 8 of this Agreement until a final determination is made with
respect to Indemnitee’s entitlement to indemnification (as to which all rights
of appeal have been exhausted or lapsed). The Company shall, to the fullest
extent not prohibited by law, be precluded from asserting in any judicial
proceeding or arbitration commenced pursuant to this Section 12 that the
procedures and presumptions of this Agreement are not valid, binding and
enforceable and shall stipulate in any such court or before any such arbitrator
that the Company is bound by all of the provisions of this Agreement.

 

(c) If a determination shall have been made pursuant to Section 10(b) of this
Agreement that Indemnitee is entitled to indemnification, the Company shall be
bound by such determination in any judicial proceeding or arbitration commenced
pursuant to this Section 12, absent a misstatement by Indemnitee of a material
fact, or an omission of a material fact necessary to make Indemnitee’s statement
not materially misleading, in connection with the request for indemnification.

 

(d) In the event that Indemnitee is successful in seeking, pursuant to this
Section 12, a judicial adjudication of or an award in arbitration to enforce
Indemnitee’s rights under, or to recover damages for breach of, this Agreement,
Indemnitee shall be entitled to recover from the Company, and shall be
indemnified by the Company for, any and all Expenses actually and reasonably
incurred by him in such judicial adjudication or arbitration. If it shall be
determined in such judicial adjudication or arbitration that Indemnitee is
entitled to receive part but not all of the indemnification or advance of
Expenses sought, the Expenses incurred by Indemnitee in connection with such
judicial adjudication or arbitration shall be appropriately prorated.

 

(e) Interest shall be paid by the Company to Indemnitee at the maximum rate
allowed to be charged for judgments under the Courts and Judicial Proceedings
Article of the Annotated Code of Maryland for amounts which the Company pays or
is obligated to pay for the period (i) commencing with either the tenth day
after the date on which the Company was requested to advance Expenses in
accordance with Sections 8 or 9 of this Agreement or the 60th day after the date
on which the Company was requested to make the determination of entitlement to
indemnification under Section 10(b) of this Agreement, as applicable, and
(ii) ending on the date such payment is made to Indemnitee by the Company.

 

A-8

 

 

Section 13. Defense of the Underlying Proceeding.

 

(a) Indemnitee shall notify the Company promptly in writing upon being served
with any summons, citation, subpoena, complaint, indictment, request or other
document relating to any Proceeding which may result in the right to
indemnification or the advance of Expenses hereunder and shall include with such
notice a description of the nature of the Proceeding and a summary of the facts
underlying the Proceeding. The failure to give any such notice shall not
disqualify Indemnitee from the right, or otherwise affect in any manner any
right of Indemnitee, to indemnification or the advance of Expenses under this
Agreement unless the Company’s ability to defend in such Proceeding or to obtain
proceeds under any insurance policy is materially and adversely prejudiced
thereby, and then only to the extent the Company is thereby actually so
prejudiced.

 

(b) Subject to the provisions of the last sentence of this Section 13(b) and of
Section 13(c) below, the Company shall have the right to defend Indemnitee in
any Proceeding which may give rise to indemnification hereunder; provided,
however, that the Company shall notify Indemnitee of any such decision to defend
within 15 calendar days following receipt of notice of any such Proceeding under
Section 13(a) above. The Company shall not, without the prior written consent of
Indemnitee, which shall not be unreasonably withheld or delayed, consent to the
entry of any judgment against Indemnitee or enter into any settlement or
compromise which (i) includes an admission of fault of Indemnitee, (ii) does not
include, as an unconditional term thereof, the full release of Indemnitee from
all liability in respect of such Proceeding, which release shall be in form and
substance reasonably satisfactory to Indemnitee or (iii) would impose any
Expense, judgment, fine, penalty or limitation on Indemnitee. This Section 13(b)
shall not apply to a Proceeding brought by Indemnitee under Section 12 of this
Agreement.

 

(c) Notwithstanding the provisions of Section 13(b) above, if in a Proceeding to
which Indemnitee is a party by reason of Indemnitee’s Corporate Status,
(i) Indemnitee reasonably concludes, based upon an opinion of counsel approved
by the Company, which approval shall not be unreasonably withheld, that
Indemnitee may have separate defenses or counterclaims to assert with respect to
any issue which may not be consistent with other defendants in such Proceeding,
(ii) Indemnitee reasonably concludes, based upon an opinion of counsel approved
by the Company, which approval shall not be unreasonably withheld, that an
actual or apparent conflict of interest or potential conflict of interest exists
between Indemnitee and the Company, or (iii) if the Company fails to assume the
defense of such Proceeding in a timely manner, Indemnitee shall be entitled to
be represented by separate legal counsel of Indemnitee’s choice, subject to the
prior approval of the Company, which approval shall not be unreasonably
withheld, at the expense of the Company. In addition, if the Company fails to
comply with any of its obligations under this Agreement or in the event that the
Company or any other person takes any action to declare this Agreement void or
unenforceable, or institutes any Proceeding to deny or to recover from
Indemnitee the benefits intended to be provided to Indemnitee hereunder,
Indemnitee shall have the right to retain counsel of Indemnitee’s choice,
subject to the prior approval of the Company, which approval shall not be
unreasonably withheld, at the expense of the Company (subject to Section 12(d)
of this Agreement), to represent Indemnitee in connection with any such matter.

 

A-9

 

 

Section 14. Non-Exclusivity; Survival of Rights; Subrogation.

 

(a) The rights of indemnification and advance of Expenses as provided by this
Agreement shall not be deemed exclusive of any other rights to which Indemnitee
may at any time be entitled under applicable law, the charter or Bylaws of the
Company, any agreement or a resolution of the stockholders entitled to vote
generally in the election of directors or of the Board of Directors, or
otherwise. Unless consented to in writing by Indemnitee, no amendment,
alteration or repeal of this Agreement or of any provision hereof shall limit or
restrict any right of Indemnitee under this Agreement in respect of any action
taken or omitted by such Indemnitee in his Corporate Status prior to such
amendment, alteration or repeal, regardless of whether a claim with respect to
such action or inaction is raised prior or subsequent to such amendment,
alteration or repeal. No right or remedy herein conferred is intended to be
exclusive of any other right or remedy, and every other right or remedy shall be
cumulative and in addition to every other right or remedy given hereunder or now
or hereafter existing at law or in equity or otherwise. The assertion of any
right or remedy hereunder, or otherwise, shall not prohibit the concurrent
assertion or employment of any other right or remedy.

 

(b) In the event of any payment under this Agreement, the Company shall be
subrogated to the extent of such payment to all of the rights of recovery of
Indemnitee, who shall execute all papers required and take all action necessary
to secure such rights, including execution of such documents as are necessary to
enable the Company to bring suit to enforce such rights.

 

Section 15. Insurance.

 

(a) The Company will use its reasonable best efforts to acquire directors and
officers liability insurance, on terms and conditions deemed appropriate by the
Board of Directors, with the advice of counsel, covering Indemnitee or any claim
made against Indemnitee by reason of his Corporate Status and covering the
Company for any indemnification or advance of Expenses made by the Company to
Indemnitee for any claims made against Indemnitee by reason of his Corporate
Status. In the event of a Change in Control, the Company shall maintain in force
any and all directors and officers liability insurance policies that were
maintained by the Company immediately prior to the Change in Control for a
period of six years with the insurance carrier or carriers and through the
insurance broker in place at the time of the Change in Control; provided,
however, (i) if the carriers will not offer the same policy and an expiring
policy needs to be replaced, a policy substantially comparable in scope and
amount shall be obtained and (ii) if any replacement insurance carrier is
necessary to obtain a policy substantially comparable in scope and amount, such
insurance carrier shall have an AM Best rating that is the same or better than
the AM Best rating of existing insurance carrier; provided, further, however, in
no event shall the Company be required to expend in the aggregate in excess of
300% of the annual premium or premiums paid by the Company for directors and
officers liability insurance in effect on the date of the Change in Control. In
the event that 300% of the annual premium paid by the Company for such existing
directors and officers liability insurance is insufficient for such coverage,
the Company shall spend up to that amount to purchase such lesser coverage as
may be obtained with such amount.

 

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(b) Without in any way limiting any other obligation under this Agreement, the
Company shall indemnify Indemnitee for any payment by Indemnitee arising out of
the amount of any deductible or retention and the amount of any excess of the
aggregate of all judgments, penalties, fines, settlements and Expenses incurred
by Indemnitee in connection with a Proceeding over the coverage of any insurance
referred to in the previous sentence. The purchase, establishment and
maintenance of any such insurance shall not in any way limit or affect the
rights or obligations of the Company or Indemnitee under this Agreement except
as expressly provided herein, and the execution and delivery of this Agreement
by the Company and Indemnitee shall not in any way limit or affect the rights or
obligations of the Company under any such insurance policies. If, at the time
the Company receives notice from any source of a Proceeding to which Indemnitee
is a party or a participant (as a witness or otherwise), the Company has
director and officer liability insurance in effect, the Company shall give
prompt notice of such Proceeding to the insurers in accordance with the
procedures set forth in the respective policies.

 

Section 16. Coordination of Payments. The Company shall not be liable under this
Agreement to make any payment of amounts otherwise indemnifiable or payable or
reimbursable as Expenses hereunder if and to the extent that Indemnitee has
otherwise actually received such payment under any insurance policy, contract,
agreement or otherwise.

 

Section 17. Contribution. If the indemnification provided in this Agreement is
unavailable in whole or in part and may not be paid to Indemnitee for any
reason, other than for failure to satisfy the standard of conduct set forth in
Section 4 or due to the provisions of Section 5, then, with respect to any
Proceeding in which the Company is jointly liable with Indemnitee (or would be
if joined in such Proceeding), to the fullest extent permissible under
applicable law, the Company, in lieu of indemnifying and holding harmless
Indemnitee, shall pay, in the first instance, the entire amount incurred by
Indemnitee, whether for Expenses, judgments, penalties, and/or amounts paid or
to be paid in settlement, in connection with any Proceeding without requiring
Indemnitee to contribute to such payment, and the Company hereby waives and
relinquishes any right of contribution it may have at any time against
Indemnitee.

 

Section 18. Reports to Stockholders. To the extent required by the MGCL, the
Company shall report in writing to its stockholders the payment of any amounts
for indemnification of, or advance of Expenses to, Indemnitee under this
Agreement arising out of a Proceeding by or in the right of the Company with the
notice of the meeting of stockholders of the Company next following the date of
the payment of any such indemnification or advance of Expenses or prior to such
meeting.

 

Section 19. Duration of Agreement; Binding Effect.

 

(a) This Agreement shall continue until and terminate on the later of (i) the
date that Indemnitee shall have ceased to serve as a director, officer, employee
or agent of the Company or as a director, trustee, officer, partner, manager,
managing member, fiduciary, employee or agent of any other foreign or domestic
corporation, real estate investment trust, partnership, limited liability
company, joint venture, trust, employee benefit plan or other enterprise that
such person is or was serving in such capacity at the request of the Company and
(ii) the date that Indemnitee is no longer subject to any actual or possible
Proceeding (including any rights of appeal thereto and any Proceeding commenced
by Indemnitee pursuant to Section 12 of this Agreement).

 

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(b) The indemnification and advance of Expenses provided by, or granted pursuant
to, this Agreement shall be binding upon and be enforceable by the parties
hereto and their respective successors and assigns (including any direct or
indirect successor by purchase, merger, consolidation or otherwise to all or
substantially all of the business or assets of the Company), shall continue as
to an Indemnitee who has ceased to be a director, officer, employee or agent of
the Company or a director, trustee, officer, partner, manager, managing member,
fiduciary, employee or agent of any other foreign or domestic corporation,
partnership, limited liability company, joint venture, trust, employee benefit
plan or other enterprise that such person is or was serving in such capacity at
the request of the Company, and shall inure to the benefit of Indemnitee and
Indemnitee’s spouse, assigns, heirs, devisees, executors and administrators and
other legal representatives.

 

(c) The Company shall require and cause any successor (whether direct or
indirect by purchase, merger, consolidation or otherwise) to all, substantially
all or a substantial part, of the business and/or assets of the Company, by
written agreement in form and substance satisfactory to Indemnitee, expressly to
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform if no such succession had
taken place.

 

(d) The Company and Indemnitee agree that a monetary remedy for breach of this
Agreement, at some later date, may be inadequate, impracticable and difficult of
proof, and further agree that such breach may cause Indemnitee irreparable harm.
Accordingly, the parties hereto agree that Indemnitee may enforce this Agreement
by seeking injunctive relief and/or specific performance hereof, without any
necessity of showing actual damage or irreparable harm and that by seeking
injunctive relief and/or specific performance, Indemnitee shall not be precluded
from seeking or obtaining any other relief to which Indemnitee may be entitled.
Indemnitee shall further be entitled to such specific performance and injunctive
relief, including temporary restraining orders, preliminary injunctions and
permanent injunctions, without the necessity of posting bonds or other
undertakings in connection therewith. The Company acknowledges that, in the
absence of a waiver, a bond or undertaking may be required of Indemnitee by a
court, and the Company hereby waives any such requirement of such a bond or
undertaking.

 

Section 20. Severability. If any provision or provisions of this Agreement shall
be held to be invalid, illegal or unenforceable for any reason whatsoever:
(a) the validity, legality and enforceability of the remaining provisions of
this Agreement (including, without limitation, each portion of any Section,
paragraph or sentence of this Agreement containing any such provision held to be
invalid, illegal or unenforceable that is not itself invalid, illegal or
unenforceable) shall not in any way be affected or impaired thereby and shall
remain enforceable to the fullest extent permitted by law; (b) such provision or
provisions shall be deemed reformed to the extent necessary to conform to
applicable law and to give the maximum effect to the intent of the parties
hereto; and (c) to the fullest extent possible, the provisions of this Agreement
(including, without limitation, each portion of any Section, paragraph or
sentence of this Agreement containing any such provision held to be invalid,
illegal or unenforceable, that is not itself invalid, illegal or unenforceable)
shall be construed so as to give effect to the intent manifested thereby.

 

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Section 21. Identical Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall for all purposes be deemed to be an
original but all of which together shall constitute one and the same Agreement.
One such counterpart signed by the party against whom enforceability is sought
shall be sufficient to evidence the existence of this Agreement.

 

Section 22. Headings. The headings of the paragraphs of this Agreement are
inserted for convenience only and shall not be deemed to constitute part of this
Agreement or to affect the construction thereof.

 

Section 23. Modification and Waiver. No supplement, modification or amendment of
this Agreement shall be binding unless executed in writing by both of the
parties hereto. No waiver of any of the provisions of this Agreement shall be
deemed or shall constitute a waiver of any other provisions hereof (whether or
not similar) nor shall such waiver constitute a continuing waiver.

 

Section 24. Notices. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
(i) delivered by hand and receipted for by the party to whom said notice or
other communication shall have been directed, on the day of such delivery, or
(ii) mailed by certified or registered mail with postage prepaid, on the third
business day after the date on which it is so mailed:

 

  (a) If to Indemnitee, to the address set forth on the signature page hereto.

 

  (b) If to the Company, to:

 

Sentio Healthcare Properties, Inc.

189 South Orange Avenue, Suite 1700

Orlando, FL 32801

Attn: President

 

or to such other address as may have been furnished in writing to Indemnitee by
the Company or to the Company by Indemnitee, as the case may be.

 

Section 25. Governing Law. This Agreement shall be governed by, and construed
and enforced in accordance with, the laws of the State of Maryland, without
regard to its conflicts of laws rules.

 

[SIGNATURE PAGE FOLLOWS]

 

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

 

  SENTIO HEALTHCARE PROPERTIES, INC.         By:       Name:     Title:        
INDEMNITEE           Name:   Address:    

 

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Exhibit A to Director Indemnification Agreement

 

AFFIRMATION AND UNDERTAKING TO REPAY EXPENSES ADVANCED

 

To: The Board of Directors of Sentio Healthcare Properties, Inc.

 

Re: Affirmation and Undertaking

 

Ladies and Gentlemen:

 

This Affirmation and Undertaking is being provided pursuant to that certain
Indemnification Agreement, dated the     day of             , 20 , by and
between Sentio Healthcare Properties, Inc., a Maryland corporation (the
“Company”), and the undersigned Indemnitee (the “Indemnification Agreement”),
pursuant to which I am entitled to advance of Expenses in connection with
[Description of Proceeding] (the “Proceeding”).

 

Terms used herein and not otherwise defined shall have the meanings specified in
the Indemnification Agreement.

 

I am subject to the Proceeding by reason of my Corporate Status or by reason of
alleged actions or omissions by me in such capacity. I hereby affirm my good
faith belief that at all times, insofar as I was involved as an officer of the
Company, in any of the facts or events giving rise to the Proceeding, I (1) did
not act with bad faith or active or deliberate dishonesty, (2) did not receive
any improper personal benefit in money, property or services and (3) in the case
of any criminal proceeding, had no reasonable cause to believe that any act or
omission by me was unlawful.

 

In consideration of the advance of Expenses by the Company for reasonable
attorneys’ fees and related Expenses incurred by me in connection with the
Proceeding (the “Advanced Expenses”), I hereby agree that if, in connection with
the Proceeding, it is established that (1) an act or omission by me was material
to the matter giving rise to the Proceeding and (a) was committed in bad faith
or (b) was the result of active and deliberate dishonesty or (2) I actually
received an improper personal benefit in money, property or services or (3) in
the case of any criminal proceeding, I had reasonable cause to believe that the
act or omission was unlawful, then I shall promptly reimburse the portion of the
Advanced Expenses, together with the Applicable Legal Rate of interest thereon,
relating to the claims, issues or matters in the Proceeding as to which the
foregoing findings have been established.

 

IN WITNESS WHEREOF, I have executed this Affirmation and Undertaking on this
    day of             , 20            .

 

      Name:

 

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EXHIBIT B

 

FORM OF MANAGEMENT RIGHTS LETTER

 

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