Exhibit 10.1

 

BLUEROCK RESIDENTIAL GROWTH REIT, INC.

 

Up to $150,000,000 of Units, consisting of 150,000 Shares of Series B Redeemable
Preferred Stock, par value $.01 per share, and Warrants to Purchase 3,000,000
shares of Class A Common Stock

 

DEALER MANAGER AGREEMENT

 

December 17, 2015

 

Bluerock Capital Markets, LLC

17900 Skypark Circle, Suite 260

Irvine, California 92614

 

Ladies and Gentlemen:

 

Bluerock Residential Growth REIT, Inc. a Maryland corporation (the “Company”),
has proposed to offer for public sale (the “Offering”) a maximum of $150,000,000
of Units, consisting of 150,000 Shares of Series B Redeemable Preferred Stock,
$0.01 par value per share (the “Series B Redeemable Preferred Stock”), and
Warrants to purchase 3,000,000 Shares of Class A Common Stock (the “Warrants,”
and together with the Series B Redeemable Preferred Stock, the “Units”). Each
Unit consists of (i) one share of Series B Redeemable Preferred Stock, with a
liquidation preference of $1,000 per share, and (ii) one Warrant to purchase 20
shares of Class A common stock, $0.01 par value per share (each a “Class A
Share”). The Units are to be issued and sold to the public on a “best efforts”
basis through you (the “Dealer Manager”) as the managing dealer and the
broker-dealers participating in the Offering (the “Participating
Broker-Dealers”) at a price of $1,000.00 per Unit.  The price at which Units
will be offered and sold is subject in certain circumstances to discounts based
upon certain categories of purchasers.  

 

The Company is the sole general partner of Bluerock Residential Holdings, L.P.,
a Delaware limited partnership that serves as the Company’s operating
partnership subsidiary (the “Operating Partnership”).  The Company and the
Operating Partnership hereby jointly and severally agree with you, the Dealer
Manager, as follows:

 

1.             Representations and Warranties of the Company and the Operating
Partnership.

 

The Company and the Operating Partnership hereby jointly and severally represent
and warrant to the Dealer Manager and each Participating Broker-Dealer with whom
the Dealer Manager has entered into or will enter into a Participating
Broker-Dealer Agreement (the “Participating Broker-Dealer Agreement”)
substantially in the form attached as Exhibit A to this Agreement, as of the
date hereof and at all times during the Offering Period, as that term is defined
in Section 5.1 below (provided that, to the extent such representations and
warranties are given only as of a specified date or dates, the Company and the
Operating Partnership only make such representations and warranties as of such
date or dates as follows):

 

1.1        Compliance with Registration Requirements.  A registration statement
on Form S-3 (Registration No. 333-200359), including a preliminary prospectus,
for the registration of the Units has been prepared by the Company in accordance
with applicable requirements of the Securities Act of 1933, as amended (the
“Securities Act”), and the applicable rules and regulations of the Securities
and Exchange Commission (the “Commission”) promulgated thereunder (the
“Securities Act Regulations”), and was initially filed with the Commission on
November 19, 2014 and first declared effective by the Commission on December 19,
2014 (the “Registration Statement”).  The Company has prepared and filed such
amendments thereto, if any, and such amended prospectuses, if any, as may have
been required to the date hereof and will file such additional amendments and
supplements thereto as may hereafter be required.  As used in this Agreement,
the term “Registration Statement” means the Registration Statement, as amended
through the date hereof, except that, if the Company files any post-effective
amendments to the Registration Statement, “Registration Statement” shall refer
to the Registration Statement as so amended by the last post-effective amendment
declared effective; the term “Effective Date” means the applicable date upon
which the Registration Statement or any post-effective amendment thereto is or
was first declared effective by the Commission; the term “Prospectus” means the
base prospectus, as amended or supplemented, on file with the Commission at the
Effective Date of the Registration Statement (including financial statements,
exhibits and all other documents related thereto filed as a part thereof or
incorporated therein), except that if the base prospectus is amended or
supplemented after the Effective Date in respect of the offering of the Units
and the Class A Common Stock issuable upon exercise of the Warrants (and
collectively, the “Offered Securities”); the term “Prospectus” shall refer to
the base prospectus as amended or supplemented to date, collectively with any
prospectus filed pursuant to either Rule 424(b) or 424(c) of the Securities Act
Regulations in respect of the Offering and the Offered Securities (each a
“Takedown Supplement”), from and after the date on which it shall have been
filed with the Commission; the term “preliminary Prospectus” as used herein
shall mean a preliminary prospectus related to the Units as contemplated by Rule
430 or Rule 430A of the Securities Act Rules and Regulations included at any
time as part of the Registration Statement; and the term “Filing Date” means the
applicable date upon which the base prospectus or any Takedown Supplement is
filed with the Commission. As of the date hereof, the Commission has not issued
any stop order suspending the effectiveness of the Registration Statement and no
proceedings for that purpose have been instituted or are pending before or
threatened by the Commission under the Securities Act.

 

 

 

 

The Registration Statement and the Prospectus, and any further amendments or
supplements thereto, will, as of the applicable Effective Date or Filing Date,
as the case may be, comply in all material respects with the Securities Act and
the Securities Act Regulations; the Registration Statement does not, and any
amendments thereto will not, in each case as of the applicable Effective Date,
contain an untrue statement of material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein not misleading; and the Prospectus does not, and any amendment or
supplement thereto will not, as of the applicable Filing Date, contain an untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; provided, however,
that the Company and the Operating Partnership make no warranty or
representation with respect to any statement contained in the Registration
Statement or the Prospectus, or any amendments or supplements thereto, made in
reliance upon and in conformity with information furnished in writing to the
Company by the Dealer Manager or any Participating Broker-Dealer expressly for
use in the Registration Statement or the Prospectus, or any amendments or
supplements thereto.

 

1.2        Documents Incorporated by Reference. The documents incorporated or
deemed to be incorporated by reference in the Prospectus (if any), at the time
they are hereafter filed with the Commission, will comply in all material
respects with the requirements of the Securities Exchange Act of 1934, as
amended (the “Exchange Act”), and the rules and regulations promulgated
thereunder (the “Exchange Act Rules and Regulations”), and, when read together
with the other information in the Prospectus, at the time the Registration
Statement became effective and as of the applicable Effective Date of each
post-effective amendment to the Registration Statement, did not and will not
include an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.

 

1.3        Compliance with the Securities Act, Etc. (i) On (A) each applicable
Effective Date, (B) the date of the preliminary Prospectus, (C) the date of the
Prospectus, and (D) the date any supplement to the Prospectus is filed with the
Commission, the Registration Statement, the Prospectus and any amendments or
supplements thereto, as applicable, have complied, and will comply, in all
material respects with the Securities Act, the Securities Act Rules and
Regulations, the Exchange Act and the Exchange Act Rules and Regulations, as
applicable; and (ii) the Registration Statement does not, and any amendment
thereto will not, in each case as of the applicable Effective Date, include any
untrue statement of material fact or omit to state any material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, and the Prospectus
does not, and any amendment or supplement thereto will not, as of the applicable
filing date, include 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 therein, in light of the circumstances under which they are made, not
misleading; provided, however, that the foregoing provisions of this Section
1.3 will not extend to any statements contained in, incorporated by reference in
or omitted from the Registration Statement, the Prospectus or any amendment or
supplement thereto that are based upon written information furnished to the
Company by the Dealer Manager expressly for use therein.

 

1.4        Securities Matters. There has not been (i) any request by the
Commission for any further amendment to the Registration Statement or the
Prospectus or for any additional information, (ii) any issuance by the
Commission of any stop order suspending the effectiveness of the Registration
Statement or the institution or, to the Company’s knowledge, threat of any
proceeding for that purpose, or (iii) any notification with respect to the
suspension of the qualification of the Units for sale in any jurisdiction or any
initiation or, to the Company’s knowledge, threat of any proceeding for such
purpose. The Company is in compliance in all material respects with all federal
and state securities laws, rules and regulations applicable to it and its
activities, including, without limitation, with respect to the Offering and the
sale of the Units.

 

 

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1.5        Good Standing of the Company and the Operating Partnership.  The
Company is a corporation duly organized and validly existing under the laws of
the State of Maryland, and is in good standing with the State Department of
Assessments and Taxation of Maryland, with full power and authority to conduct
its business as described in the Prospectus and to enter into this Agreement and
to perform the transactions contemplated hereby; this Agreement has been duly
authorized, executed and delivered by the Company and is a legal, valid and
binding agreement of the Company enforceable against the Company in accordance
with its terms, except as enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors’
rights generally, and by general equitable principles, and except to the extent
that the enforceability of the indemnity provisions and the contribution
provisions contained in Sections 7 and 8 of this Agreement, respectively, may be
limited under applicable securities laws.

 

The Operating Partnership is a limited partnership duly organized, validly
existing and in good standing under the laws of the State of Delaware, with full
power and authority to conduct its business as described in the Prospectus and
to enter into this Agreement and to perform the transactions contemplated
hereby; as of the date hereof the Company is the sole general partner of the
Operating Partnership; this Agreement has been duly authorized, executed and
delivered by the Operating Partnership and is a legal, valid and binding
agreement of the Operating Partnership enforceable against the Operating
Partnership in accordance with its terms, except as enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors’ rights generally, and by general equitable principles, and
except to the extent that the enforceability of the indemnity provisions and the
contribution provisions contained in Sections 7 and 8 of this Agreement,
respectively, may be limited under applicable securities laws.

 

Each of the Company and the Operating Partnership has qualified to do business
and is in good standing in every jurisdiction in which the ownership or leasing
of its properties or the nature or conduct of its business, as described in the
Prospectus, requires such qualification, except where the failure to do so would
not have a material adverse effect on the condition, financial or otherwise,
results of operations or cash flows of the Company and the Operating Partnership
taken as a whole (a “Material Adverse Effect”).

 

1.6        Authorization of Series B Redeemable Preferred Stock and Warrants.
Series B Redeemable Preferred Stock and Warrants have been duly authorized and,
when issued and sold as contemplated by the Prospectus and upon payment therefor
as provided in this Agreement and the Prospectus, will be validly issued, fully
paid and nonassessable and will conform to the description thereof contained in
the Prospectus. The Class A Shares issuable on exercise of the Warrants or in
redemption of the Series B Redeemable Preferred Stock have been duly authorized
and, when issued and sold (in the case of the Warrants) as contemplated by the
Prospectus, will be validly issued, fully paid and nonassessable and will
conform to the description thereof contained in the Prospectus.

 

1.7        Absence of Defaults and Conflicts.  The Company is not in violation
of its charter or its bylaws and the execution and delivery of this Agreement,
the issuance, sale and delivery of the Units or the Class A Shares issuable on
exercise of the Warrants, the consummation of the transactions herein
contemplated and compliance with the terms of this Agreement by the Company will
not violate the terms of or constitute a breach or default under: (a) its
charter or bylaws; or (b) any indenture, mortgage, deed of trust, lease, or
other material agreement to which the Company is a party or to which its
properties are bound; or (c) any law, rule or regulation applicable to the
Company; or (d) any writ, injunction or decree of any government, governmental
instrumentality or court, domestic or foreign, having jurisdiction over the
Company except, in the cases of clauses (b), (c) and (d), for such violations or
defaults that, individually or in the aggregate, would not result in a Material
Adverse Effect.

 

The Operating Partnership is not in violation of its certificate of limited
partnership or its partnership agreement and the execution and delivery of this
Agreement, the consummation of the transactions herein contemplated and
compliance with the terms of this Agreement by the Operating Partnership will
not violate the terms of or constitute a breach or default under: (a) its
certificate of limited partnership or; (b) its partnership agreement; or (c) any
indenture, mortgage, deed of trust, lease, or other material agreement to which
the Operating Partnership is a party or to which its properties are bound; or
(d) any law, rule or regulation applicable to the Operating Partnership; or (e)
any writ, injunction or decree of any government, governmental instrumentality
or court, domestic or foreign, having jurisdiction over the Operating
Partnership except, in the cases of clauses (b), (c), (d) and (e), for such
violations or defaults that, individually or in the aggregate, would not result
in a Material Adverse Effect.

 

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1.8        REIT Compliance.  The Company is organized in a manner that conforms
with the requirements for qualification as a real estate investment trust
(“REIT”) under the Internal Revenue Code of 1986, as amended (the “Code”), and
the Company’s intended method of operation, as set forth in the Prospectus,
would enable it to meet the requirements for taxation as a REIT under the
Code.  The Operating Partnership will be treated as a partnership for federal
income tax purposes and not as a corporation or association taxable as a
corporation.

 

1.9        No Operation as an Investment Company.  The Company is not and does
not currently intend to conduct its business so as to be, an “investment
company” as that term is defined in the Investment Company Act of 1940, as
amended, and the rules and regulations thereunder, and it will exercise
reasonable diligence to ensure that it does not become an “investment company”
within the meaning of the Investment Company Act of 1940.

 

1.10        Absence of Further Requirements.  As of the date hereof, no filing
with, or consent, approval, authorization, license, registration, qualification,
order or decree of any court, governmental authority or agency is required for
the performance by the Company or the Operating Partnership of their respective
obligations under this Agreement or in connection with the issuance and sale by
the Company of the Units, except such as may be required under the Securities
Act, Securities Act Regulations, the Exchange Act, the Exchange Act Rules and
Regulations, the rules of the Financial Industry Regulatory Authority (“FINRA”)
or applicable state securities laws or where the failure to obtain such consent,
approval, authorization, license, registration, qualification, order or decree
of any court, governmental authority or agency would not have a Material Adverse
Effect.

 

1.11        Absence of Proceedings.  Unless otherwise described in the
Prospectus, there are no actions, suits or proceedings pending or, to the
knowledge of the Company or the Operating Partnership, threatened against either
the Company or the Operating Partnership at law or in equity or before or by any
federal or state commission, regulatory body or administrative agency or other
governmental body, domestic or foreign, which would have a Material Adverse
Effect.

 

1.12        Financial Statements.  The financial statements of the Company
included in the Registration Statement and the Prospectus including without
limitation those financial statements incorporated by reference to the Company’s
reports filed pursuant to the Exchange Act, together with the related notes,
present fairly the financial position of the Company, as of the date specified,
in conformity with generally accepted accounting principles applied on a
consistent basis and in conformity with Regulation S-X of the Commission.  No
other financial statements or schedules are required by Form S-3 or under the
Securities Act Regulations to be included in the Registration Statement, the
Prospectus or any preliminary prospectus.

 

1.13      [Reserved].

 

1.14      Independent Accountants. BDO USA, LLP, an independent registered
public accounting firm, or such other independent accounting firm that has
audited and is reporting upon any financial statements included or to be
included in the Registration Statement or the Prospectus or any amendments or
supplements thereto, shall be as of the applicable Effective Date or Filing
Date, and shall have been during the periods covered by their report included in
the Registration Statement or the Prospectus or any amendments or supplements
thereto, independent public accountants with respect to the Company within the
meaning of the Securities Act and the Securities Act Regulations.

 

1.15      No Material Adverse Change in Business.  Since the respective dates as
of which information is provided in the Registration Statement and the
Prospectus or any amendments or supplements thereto, except as otherwise stated
therein, (a) there has been no material adverse change in the condition,
financial or otherwise, or in the earnings or business affairs of the Company or
the Operating Partnership, whether or not arising in the ordinary course of
business, and (b) there have been no transactions entered into by the Company or
the Operating Partnership which could reasonably result in a Material Adverse
Effect.

 

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1.16      Material Agreements.  There are no contracts or other documents
required by the Securities Act or the Securities Act Regulations to be described
in or incorporated by reference into the Registration Statement or the
Prospectus or to be filed as exhibits to the Registration Statement which have
not been accurately described in all material respects in the Prospectus or
incorporated or filed as required.  Each document incorporated by reference into
the Registration Statement or the Prospectus complied, as of the date filed, in
all material respects with the requirements as to form of the Exchange Act, and
the Exchange Act Rules and Regulations.

 

1.17      Reporting and Accounting Controls.  Each of the Company and the
Operating Partnership has implemented controls and other procedures that are
designed to ensure that information required to be disclosed by the Company in
supplements to the Prospectus and amendments to the Registration Statement under
the Securities Act and the Securities Act Regulations, the reports that it files
or submits under the Exchange Act and the Exchange Act Rules and Regulations and
the reports and filings that it is required to make under the applicable state
securities laws in connection with the Offering are recorded, processed,
summarized and reported, within the time periods specified in the applicable
rules and forms and is accumulated and communicated to the Company’s management,
including its chief executive officer and chief financial officer, or persons
performing similar functions, as appropriate to allow timely decisions regarding
required disclosure; and the Company makes and keeps books, records and accounts
which, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the Company and the Operating Partnership.  The
Company and the Operating Partnership maintain a system of internal accounting
controls sufficient to provide reasonable assurances that (a) transactions are
executed in accordance with management’s general or specific authorization; (b)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain accountability for assets; (c) access to assets is permitted only in
accordance with management’s general or specific authorization; and (d) the
recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.  To the Company’s knowledge, neither the Company nor the Operating
Partnership, nor any employee or agent thereof, has made any payment of funds of
the Company or the Operating Partnership, as the case may be, or received or
retained any funds, and no funds of the Company, or the Operating Partnership,
as the case may be, have been set aside to be used for any payment, in each case
in material violation of any law, rule or regulation applicable to the Company
or the Operating Partnership.

 

1.18      Material Relationships.  No relationship, direct or indirect, exists
between or among the Company, on the one hand, and the directors, officers,
security holders of the Company, the Operating Partnership, or their respective
affiliates, on the other hand, which is required to be described in the
Prospectus and which is not so described.

 

1.19      Possession of Licenses and Permits.  The Company possesses adequate
permits, licenses, approvals, consents and other authorizations (collectively,
“Governmental Licenses”) issued by the appropriate federal, state, local and
foreign regulatory agencies or bodies necessary to conduct the business now
operated by it, except where the failure to obtain such Governmental Licenses,
singly or in the aggregate, would not have a Material Adverse Effect; the
Company is in compliance with the terms and condition of all such Governmental
Licenses, except where the failure to so comply would not, singly or in the
aggregate, have a Material Adverse Effect; all of the Governmental Licenses are
valid and in full force and effect, except where the invalidity of such
Governmental Licenses to be in full force and effect would not have a Material
Adverse Effect; and, as of the date hereof, the Company has not received any
notice of proceedings relating to the revocation or modification of any such
Governmental Licenses which, singly or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, would result in a Material Adverse
Effect.

 

1.20      Subsidiaries.  Each “significant subsidiary” of the Company (as such
term is defined in Rule 1-02 of Regulation S-X) and each other entity in which
the Company holds a direct or indirect ownership interest that is material to
the Company (each a “Subsidiary” and, collectively, the “Subsidiaries”) has been
duly organized or formed and is validly existing as a corporation, partnership,
limited liability company or similar entity in good standing under the laws of
the jurisdiction of its incorporation or organization, has power and authority
to own, lease and operate its properties and to conduct its business as
described in the Prospectus and is duly qualified to transact business and is in
good standing in each jurisdiction in which such qualification is required,
whether by reason of the ownership or leasing of property or the conduct of
business, except where the failure to be so qualified would not reasonably be
expected to have a Material Adverse Effect.  The only direct Subsidiaries of the
Company as of the date of the Registration Statement or the most recent
amendment to the Registration Statement, as applicable, are the Subsidiaries
described or identified in the Registration Statement or such amendment to the
Registration Statement.

 

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1.21      Possession of Intellectual Property.  The Company and the Operating
Partnership own or possess, have the right to use or can acquire on reasonable
terms, adequate patents, patent rights, licenses, inventions, copyrights,
know-how (including trade secrets and other unpatented and/or unpatentable
proprietary or confidential information, systems or procedures), trademarks,
service marks, trade names or other intellectual property (collectively,
“Intellectual Property”) necessary to carry on the business now operated by the
Company and the Operating Partnership, respectively, except where the failure to
have such ownership or possession would not, singly or in the aggregate, have a
Material Adverse Effect.  Unless otherwise disclosed in the Prospectus, neither
the Company nor the Operating Partnership has received any notice or is not
otherwise aware of any infringement of or conflict with asserted rights of
others with respect to any Intellectual Property or of any facts or
circumstances which would render any Intellectual Property invalid or inadequate
to protect the interest of the Company and/or the Operating Partnership therein,
and which infringement or conflict (if the subject of any unfavorable decision,
ruling or finding) or invalidity or inadequacy, singly or in the aggregate,
would result in a Material Adverse Effect.

 

1.22     Advertising and Sales Materials.  All advertising and supplemental
sales literature prepared or approved by the Company or BRG Manager, LLC, a
Delaware limited liability company that serves as the Company’s manager pursuant
to the terms of the Management Agreement, as amended (the “Manager”), whether
designated solely for “broker-dealer use only” or otherwise, to be used or
delivered by the Company, the Manager or the Dealer Manager in connection with
the Offering (the “Authorized Sales Materials”), will not contain any untrue
statement of material fact or omit to state a material fact required to be
stated therein, in light of the circumstances under which they were made and in
conjunction with the Prospectus delivered therewith, not
misleading.  Furthermore, all such Authorized Sales Materials will have received
all required regulatory approval, which may include, but is not limited to, the
Commission and state securities agencies, as applicable, prior to use, except
where the failure to obtain such approval would not, individually or in the
aggregate, result in a Material Adverse Effect.

 

1.23      Compliance with Privacy Laws and the USA PATRIOT Act.  The Company
complies in all material respects with applicable privacy provisions of the
Gramm-Leach-Bliley Act of 1999 (the “GLB Act”) and applicable provisions of the
Uniting and Strengthening America by Providing Appropriate Tools Required to
Intercept and Obstruct Terrorism Act (USA PATRIOT Act) of 2001, as amended (the
“USA PATRIOT Act”).

 

1.24     Good and Marketable Title to Assets.  Except as otherwise disclosed in
the Prospectus:

 

(a)         the Company and its Subsidiaries have good and insurable or good,
valid and insurable title (either in fee simple or pursuant to a valid leasehold
interest) to all properties and assets described in the Prospectus as being
owned or leased, as the case may be, by them and to all properties reflected in
the Company’s most recent consolidated financial statements included in the
Prospectus, and neither the Company nor any of its Subsidiaries has received
notice of any claim that has been or may be asserted by anyone adverse to the
rights of the Company or any Subsidiary with respect to any such properties or
assets (or any such lease) or affecting or questioning the rights of the Company
or any such Subsidiary to the continued ownership, lease, possession or
occupancy of such property or assets, except for such claims that could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect;

 

(b)          there are no liens, charges, encumbrances, claims or restrictions
on or affecting the properties and assets of the Company or any of its
Subsidiaries which would reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect;

 

(c)          no person or entity, including, without limitation, any tenant
under any of the leases pursuant to which the Company or any of its Subsidiaries
leases (as a lessor) any of its properties (whether directly or indirectly
through other partnerships, limited liability companies, business trusts, joint
ventures or otherwise) has an option or right of first refusal or any other
right to purchase any of such properties, except for such options, rights of
first refusal or other rights to purchase which, individually or in the
aggregate, are not material with respect to the Company and its subsidiaries
considered as one enterprise;

 

Page 6 of 21

 

 

(d)         to the Company’s knowledge, each of the properties of the Company or
any of its Subsidiaries has access to public rights of way, either directly or
through insured easements, except where the failure to have such access would
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect;

 

(e)          to the Company’s knowledge, each of the properties of the Company
or any of its Subsidiaries is served by all public utilities necessary for the
current operations on such property in sufficient quantities for such
operations, except where failure to have such public utilities could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect;

 

(f)          to the knowledge of the Company, each of the properties of the
Company or any of its Subsidiaries complies with all applicable codes and zoning
and subdivision laws and regulations, except for such failures to comply which
could not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect;

 

(g)          all of the leases under which the Company or any of its
Subsidiaries hold or use any real property or improvements or any equipment
relating to such real property or improvements are in full force and effect,
except where the failure to be in full force and effect could not, individually
or in the aggregate, reasonably be expected to have a Material Adverse Affect,
and neither the Company nor any of its Subsidiaries is in default in the payment
of any amounts due under any such leases or in any other default thereunder and
the Company knows of no event which, with the passage of time or the giving of
notice or both, could constitute a default under any such lease, except such
defaults that could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect;

 

(h)         to the knowledge of the Company, there is no pending or threatened
condemnation, zoning change, or other proceeding or action that could in any
manner affect the size of, use of, improvements on, construction on or access to
the properties of the Company or any of its Subsidiaries, except such
proceedings or actions that could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect; and

 

(i)          neither the Company nor any of its Subsidiaries nor any lessee of
any of the real property improvements of the Company or any of its Subsidiaries
is in default in the payment of any amounts due or in any other default under
any of the leases pursuant to which the Company or any of its subsidiaries
leases (as lessor) any of its real property or improvements (whether directly or
indirectly through partnerships, limited liability companies, joint ventures or
otherwise), and the Company knows of no event which, with the passage of time or
the giving of notice or both, would constitute such a default under any of such
leases, except such defaults as could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.

 

1.25      Registration Rights.  Except as otherwise disclosed in the Prospectus,
there are no persons, other than the Company, with registration or other similar
rights to have any securities of the Company or the Operating Partnership
registered pursuant to the Registration Statement or otherwise registered by the
Company under the Securities Act, or included in the Offering contemplated
hereby.

 

1.26      Taxes.  The Company and the Operating Partnership have filed all
federal, state and foreign income tax returns which have been required to be
filed on or before the due date (taking into account all extensions of time to
file), and has paid or provided for the payment of all taxes indicated by said
returns and all assessments received by the Company and each of its Subsidiaries
to the extent that such taxes or assessments have become due, except where the
Company is contesting such assessments in good faith and except for such taxes
and assessments the failure of which to pay would not reasonably be expected to
have a Material Adverse Effect.

 

1.27      Authorized Use of Trademarks.  Any required consent and authorization
has been obtained for the use of any trademark or service mark in any
advertising and supplemental sales literature or other materials delivered by
the Company to the Dealer Manager or approved by the Company for use by the
Dealer Manager and, to the Company’s knowledge, its use does not constitute the
unlicensed use of intellectual property.

 

Page 7 of 21

 

 

2.             Covenants of the Company and the Operating Partnership.

 

The Company and the Operating Partnership hereby jointly and severally covenant
and agree with the Dealer Manager that:

 

2.1        Compliance with Securities Laws and Regulations.  The Company will:
(a) use commercially reasonable efforts to cause any subsequent amendments to
the Registration Statement thereto to become effective as promptly as possible;
(b) promptly advise the Dealer Manager of (i) the receipt of any comments of, or
requests for additional or supplemental information from, the Commission, (ii)
the time and date of any filing of any post-effective amendment to the
Registration Statement or any amendment or supplement to the Prospectus, and
(iii) the time and date that any post-effective amendment to the Registration
Statement becomes effective; (c) timely file every amendment or supplement to
the Registration Statement or the Prospectus that may be required by the
Commission or under the Securities Act; and (d) if at any time the Commission
shall issue any stop order suspending the effectiveness of the Registration
Statement, the Company will promptly notify the Dealer Manager and, to the
extent the Company determines such action is in the best interest of the
Company, use its commercially reasonable efforts to obtain the lifting of such
order at the earliest possible time.

 

2.2        Delivery of Registration Statement, Prospectus and Sales
Materials.  The Company will, at no expense to the Dealer Manager, furnish the
Dealer Manager with such number of printed copies of the Registration Statement,
including all amendments and exhibits thereto, and the Prospectus as the Dealer
Manager may reasonably request.  The Company will similarly furnish to the
Dealer Manager and others designated by the Dealer Manager as many copies as the
Dealer Manager may reasonably request in connection with the Offering of: (a)
the Prospectus in preliminary and final form and every form of supplemental or
amended Prospectus; and (b) the Authorized Sales Materials.

 

2.3        Blue Sky Qualifications.  If required, the Company will use
commercially reasonable efforts to qualify the Units and the Class A Shares
issuable upon exercise of the Warrants for offering and sale under the
securities or blue sky laws of such jurisdictions as the Dealer Manager and the
Company shall mutually agree upon and to make such applications, file such
documents and furnish such information as may be reasonably required for that
purpose. The Company will, at the Dealer Manager’s request, furnish the Dealer
Manager with a copy of such papers filed by the Company in connection with any
such qualification. The Company will promptly advise the Dealer Manager of the
issuance by such securities administrators of any stop order preventing or
suspending the use of the Prospectus or of the institution of any proceedings
for that purpose, and will use commercially reasonable efforts to obtain the
removal thereof as promptly as possible. The Dealer Manager will cause its
outside counsel to furnish it and the Company with a Blue Sky Survey dated as of
the initial Effective Date, which will be supplemented to reflect changes or
additions to the information disclosed in such survey.

 

2.4        [Reserved]

 

2.5        Material Disclosures.  If at any time when a Prospectus is required
to be delivered under the Securities Act any event occurs as a result of which,
in the opinion of the Company, the Prospectus would include an untrue statement
of a material fact or omits to state any material fact necessary to make the
statements therein, in light of the circumstances under which they are made, not
misleading, the Company will promptly notify the Dealer Manager thereof (unless
the information shall have been received from the Dealer Manager) and the Dealer
Manager and the Participating Broker-Dealers shall suspend the offering and sale
of the Units in accordance with Section 4.13 hereof until such time as the
Company, in its sole discretion (a) instructs the Dealer Manager to resume the
offering and sale of the Units and (b) has prepared any required supplemental or
amended Prospectus as shall be necessary to correct such statement or omission
and to comply with the requirements of the Securities Act.

 

2.6        Use of Proceeds.  The Company will apply the proceeds from the sale
of the Units as stated in the Prospectus in all material respects.

 

Page 8 of 21

 

 

2.7        Transfer Agent.  The Company will engage and maintain, at its
expense, a registrar and transfer agent for the Units.

 

3.            Payment of Expenses and Fees.

 

3.1        Company Expenses.  Subject to the limitations described below, the
Company agrees to pay all costs and expenses incident to the Offering, whether
or not the transactions contemplated hereunder are consummated or this Agreement
is terminated, including expenses, fees and taxes in connection with: (a) the
registration fee, the preparation and filing of the Registration Statement
(including, without limitation, financial statements, exhibits, schedules and
consents), the Prospectus, and any amendments or supplements thereto, and the
printing and furnishing of copies of each thereof to the Dealer Manager and to
Participating Broker-Dealers (including costs of mailing and shipment); (b) the
preparation, issuance and delivery of certificates, if any, for the Units and
the Series B Preferred Stock and Warrants compromising them, including any stock
or other transfer taxes or duties payable upon the sale of the Units; (c) all
fees and expenses of the Company’s legal counsel, independent public or
certified public accountants and other advisors; (d) filing for review by FINRA
of all necessary documents and information relating to the Offering and the
Units (including the reasonable legal fees and filing fees and other
disbursements of counsel relating thereto); (e) the fees and expenses of any
transfer agent or registrar for the Units and miscellaneous expenses referred to
in the Registration Statement; (f) all costs and expenses incident to the travel
and accommodation of the Manager’s personnel, in making road show presentations
and presentations to Participating Broker-Dealers and other broker-dealers and
financial advisors with respect to the offering of the Units; and (g) the
performance of the Company’s other obligations hereunder.  Notwithstanding the
foregoing, the Company shall not directly pay, or reimburse the Manager for, the
costs and expenses described in this Section 3.1 if the payment or reimbursement
of such expenses would cause the aggregate of the Company’s “organization and
offering expenses” as defined by FINRA Rule 2310 (including the Company expenses
paid or reimbursed pursuant to this Section 3.1, all items of underwriting
compensation including Dealer Manager expenses described in Section 3.2 and due
diligence expenses described in Section 3.3) to exceed 15% of the gross proceeds
from the sale of the Units.

 

3.2        Dealer Manager Expenses.  In addition to payment of the Company
expenses, the Company shall reimburse the Dealer Manager as provided in the
Prospectus for certain costs and expenses incident to the Offering, to the
extent permitted pursuant to prevailing rules and regulations of FINRA,
including expenses, fees and taxes incurred in connection with: (a) attendance
at broker-dealer sponsored conferences, educational conferences sponsored by the
Company, industry sponsored conferences and informational seminars; (b) legal
fees and expenses of counsel to the dealer manager; and (c) customary
promotional items; provided, however, that, no costs and expenses shall be
reimbursed by the Company pursuant to this Section 3.2 which would cause the
total underwriting compensation paid in connection with the Offering to exceed
10% of the gross proceeds from the sale of the Units, excluding reimbursement
of bona fide due diligence expenses as provided under Section 3.3.

 

3.3        Due Diligence Expenses.  In addition to reimbursement as provided
under Section 3.2, the Company shall also reimburse the Dealer Manager, and any
Participating Broker-Dealer, as appropriate, for reasonable bona fide due
diligence expenses incurred by the Dealer Manager or any Participating
Broker-Dealer; provided, however, that no due diligence expenses shall be
reimbursed by the Company pursuant to this Section 3.3 which would cause the
aggregate of  (a) all Company expenses described in Section 3.1, (b) all
underwriting compensation paid to the Dealer Manager and any Participating
Broker-Dealer and (c) the bona fide due diligence expenses reimbursed pursuant
to this Section 3.3 to exceed 15% of the gross proceeds from the sale of the
Units. Such due diligence expenses may include travel, lodging, meals and other
reasonable out-of-pocket expenses incurred by the Dealer Manager or any
Participating Broker-Dealer and their personnel when visiting the Company’s
offices or properties to verify information relating to the Company or its
properties.  The Dealer Manager or any Participating Broker-Dealer shall provide
a detailed and itemized invoice to the Company for any such due diligence
expenses.

 

4.             Representations, Warranties and Covenants of Dealer Manager.

 

The Dealer Manager hereby represents and warrants to, and covenants and agrees
with the Company and the Operating Partnership as of the date hereof and at all
times during the Offering Period as that term is defined below (provided that,
to the extent representations and warranties are given only as of a specified
date or dates, the Dealer Manager only makes such representations and warranties
as of such date or dates) as follows:

 

Page 9 of 21

 

 

4.1         Good Standing of the Dealer Manager.  The Dealer Manager is a
limited liability company duly organized and validly existing under the laws of
the Commonwealth of Massachusetts, with full power and authority to conduct its
business and to enter into this Agreement and to perform the transactions
contemplated hereby; this Agreement has been duly authorized, executed and
delivered by the Dealer Manager and is a legal, valid and binding agreement of
the Dealer Manager enforceable against the Dealer Manager in accordance with its
terms, except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors’ rights
generally, and by general equitable principles, and except to the extent that
the enforceability of the indemnity provisions and the contribution provisions
contained in Sections 7 and 8 of this Agreement, respectively, may be limited
under applicable securities laws.

 

4.2        Compliance with Applicable Laws, Rules and Regulations.  The Dealer
Manager represents to the Company that (i) it is a member of FINRA in good
standing, and (ii) it and its employees and representatives who will perform
services hereunder have all required licenses and registrations to act under
this Agreement.  With respect to its participation and the participation by each
Participating Broker-Dealer in the offer and sale of the Units (including,
without limitation any resales and transfers of Units), the Dealer Manager
agrees, and, by virtue of entering into the Participating Broker-Dealer
Agreement, each Participating Broker-Dealer shall have agreed, to comply with
any applicable requirements of the Securities Act and the Exchange Act,
applicable state securities or blue sky laws, and FINRA Rules, specifically
including, but not in any way limited to, NASD Conduct Rules 2130, 2340 and 2420
and FINRA Rules 2310 and 5141 therein.

 

4.3        AML Compliance.  The Dealer Manager represents to the Company that it
has established and implemented anti-money laundering compliance programs in
accordance with applicable law, including applicable FINRA Conduct Rules,
Exchange Act Regulations and the USA PATRIOT Act, specifically including, but
not limited to, Section 352 of the International Money Laundering Abatement and
Anti-Terrorist Financing Act of 2001 (the “Money Laundering Abatement Act,” and
together with the USA PATRIOT Act, the “AML Rules”) reasonably expected to
detect and cause the reporting of suspicious transactions in connection with the
offering and sale of the Units.  The Dealer Manager further represents that it
is currently in compliance with all AML Rules and will require each
Participating Broker-Dealer to comply with all AML Rules, specifically
including, but not limited to, the Customer Identification Program requirements
under Section 326 of the Money Laundering Abatement Act, and the Dealer Manager
hereby covenants to remain in compliance with such requirements, and to require
each Participating Broker-Dealer to remain in compliance with such requirements,
and shall, upon request by the Company, provide a certification to the Company
that, as of the date of such certification (i) each of the Dealer Manager’s and
each Participating Broker-Dealer’s AML Program is consistent with the AML Rules
and (ii) each of the Dealer Manager and each Participating Broker-Dealer is
currently in compliance with all AML Rules, specifically including, but not
limited to, the Customer Identification Program requirements under Section 326
of the Money Laundering Abatement Act.

 

4.4        Accuracy of Information.  The Dealer Manager represents and warrants
to the Company, the Operating Partnership and each person that signs the
Registration Statement that the information under the caption “Plan of
Distribution” in the Prospectus and all other information furnished to the
Company by the Dealer Manager in writing expressly for use in the Registration
Statement, any preliminary prospectus, the Prospectus, or any amendment or
supplement thereto, does 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 therein not misleading.

 

4.5        Suitability.  The Dealer Manager will offer Units, and in its
agreement with each Participating Broker-Dealer will require that the
Participating Broker-Dealer offer Units, only to Persons in the states in which
it is advised in writing by its counsel that the Units are qualified for sale or
that such qualification is not required. In offering Units, the Dealer Manager
will require that the Participating Broker-Dealer comply, with the provisions of
all applicable laws, rules and regulations relating to suitability of investors,
including without limitation the FINRA Conduct Rules. The Dealer Manager shall,
and each Participating Broker-Dealer shall agree to, maintain, for at least six
years or a period of time not less than that required in order to comply with
all applicable federal, state and other regulatory requirements, whichever is
later, a record of the information obtained to determine that an investor meets
the suitability standards imposed, if any, on the offer and sale of the Units
(both at the time of the initial subscription and at the time of any additional
subscriptions) and a representation of the investor that the investor is
investing for the investor’s own account or, in lieu of such representation,
information indicating that the investor for whose account the investment was
made met the suitability standards. Except to the extent that the Dealer Manager
makes any direct sales to investors, the Company agrees that the Dealer Manager
can satisfy its obligation by contractually requiring such information to be
maintained by the investment advisers or banks referred to in Section 3(b) of
the Participating Broker-Dealer Agreement.

 

Page 10 of 21

 

 

4.6        Recordkeeping.  The Dealer Manager agrees to comply, and to require
each Participating Broker-Dealer to comply, with the record keeping requirements
of the Exchange Act, including but not limited to, Rules 17a-3 and 17a-4
promulgated under the Exchange Act.  The Dealer Manager further agrees to keep,
and to require each Participating Broker-Dealer to keep, such records with
respect to each customer who purchases Units, the customer’s suitability and the
amount of Units sold, and to retain such records for such period of time as may
be required by the Commission, any state securities commission, FINRA or the
Company.

 

4.7         Customer Information.  The Dealer Manager shall:

 

(a)          abide by and comply with (i) the privacy standards and requirements
of the GLB Act; (ii) the privacy standards and requirements of any other
applicable federal or state law; and (iii) its own internal privacy policies and
procedures, each as may be amended from time to time;

 

(b)          refrain from the use or disclosure of nonpublic personal
information (as defined under the GLB Act) of all customers who have opted out
of such disclosures except as necessary to service the customers or as otherwise
necessary or required by applicable law; and

 

(c)          determine which customers have opted out of the disclosure of
nonpublic personal information by periodically reviewing and, if necessary,
retrieving an aggregated list of such customers from the Participating
Broker-Dealers (the “List”) to identify customers that have exercised their
opt-out rights.  In the event either party uses or discloses nonpublic personal
information of any customer for purposes other than servicing the customer, or
as otherwise required by applicable law, that party will consult the List to
determine whether the affected customer has exercised his or her opt-out
rights.  Each party understands that it is prohibited from using or disclosing
any nonpublic personal information of any customer that is identified on the
List as having opted out of such disclosures.

 

4.8        Resale of Series B Redeemable Preferred Stock and Warrants .  The
Dealer Manager agrees, and each Participating Broker-Dealer shall have agreed,
to comply with any applicable requirements with respect to its and each
Participating Broker-Dealer’s participation in any resales or transfers of the
Series B Redeemable Preferred Stock or the Warrants.  In addition, the Dealer
Manager agrees, and each Participating Broker-Dealer shall have agreed, that
should it or they assist with the resale or transfer of the Series B Redeemable
Preferred Stock or the Warrants, it and each Participating Broker-Dealer will
fully comply with all applicable FINRA rules and any other applicable federal or
state laws.

 

4.9        [Reserved]

 

4.10      Distribution of Prospectuses.  The Dealer Manager is familiar with
Rule 15c2-8 under the Exchange Act, relating to the distribution of preliminary
and final Prospectuses, and confirms that it has complied and will comply
therewith.

 

4.11      Authorized Sales Materials.  The Dealer Manager shall use and
distribute in conjunction with the offer and sale of any Units only the
Prospectus and the Authorized Sales Materials.

 

4.12      Materials for Broker-Dealer Use Only.  The Dealer Manager represents
and warrants to the Company that it will not use any sales literature not
authorized and approved by the Company or use any “broker-dealer use only”
materials with members of the public in connection with offers or sales of the
Units.

 

4.13      Suspension or Termination of Offering.  The Dealer Manager agrees, and
will require that each of the Participating Broker-Dealers agree, to suspend or
terminate the offering and sale of the Units upon request of the Company at any
time and to resume offering and sale of the Units upon subsequent request of the
Company.

 

Page 11 of 21

 

  

5.            Sale of Units.

 

5.1        Exclusive Appointment of Dealer Manager.  The Company hereby appoints
the Dealer Manager as its exclusive agent and managing dealer during the period
commencing with the date hereof and ending on the termination date of the
Offering (the “Termination Date”) described in the Prospectus (the “Offering
Period”) to solicit, and to cause Participating Broker-Dealers to solicit,
purchasers of the Units at the purchase price to be paid in accordance with, and
otherwise upon the other terms and conditions set forth in, the Prospectus, and
the Dealer Manager agrees to use its best efforts to procure purchasers of the
Units during the Offering Period.  The Units offered and sold through the Dealer
Manager under this Agreement shall be offered and sold only by the Dealer
Manager and, at the Dealer Manager’s sole option, by any Participating
Broker-Dealers whom the Dealer Manager may retain, each of which shall be
members of FINRA in good standing, pursuant to an executed Participating
Broker-Dealer Agreement with such Participating Broker-Dealer.  The Dealer
Manager hereby accepts such agency and agrees to use its best efforts to sell
the Units on said terms and conditions.

 

5.2         Compensation.

 

(a)      Selling Commissions.  Subject to volume discounts and other special
circumstances described in or otherwise provided in the “Plan of Distribution”
section of the Prospectus or this Section 5.2, the Company will pay to the
Dealer Manager selling commissions in the amount up to 7.0% of the gross
proceeds of the Units sold, which commissions may be reallowed in whole or in
part to the Participating Broker-Dealer who sold the Units giving rise to such
commissions, as described more fully in the Participating Broker-Dealer
Agreement entered into with such Participating Broker-Dealer; provided, however,
that no commissions described in this clause (a) shall be payable in respect of
the purchase of Units sold: (i) through an investment advisor representative who
is paid on a fee-for-service basis by the investor; (ii) by a Participating
Broker-Dealer (or such Participating Broker-Dealer’s registered representative),
in its individual capacity, or by a retirement plan of such Participating
Broker-Dealer (or such Participating Broker-Dealer’s registered representative),
or (iii) by an officer, director or employee of the Company, the Manager or
their respective affiliates.

 

(b)      Dealer Manager Fee.  The Company will pay to the Dealer Manager a
dealer manager fee in the amount of 3.0% of the gross proceeds from the sale of
the Units (the “Dealer Manager Fee”), a portion of which may be reallowed to
Participating Broker-Dealers (as described more fully in the Participating
Broker-Dealer Agreement entered into with such Participating Broker-Dealer),
which reallowance, if any, shall be determined by the Dealer Manager in its
discretion based on factors including, but not limited to, the number of shares
sold by such Participating Broker-Dealer, the assistance of such Participating
Broker-Dealer in marketing the Offering, and the extent to which similar fees
are reallowed to participating broker-dealers in similar offerings being
conducted during the Offering Period.

 

 

5.3        Obligations to Participating Broker-Dealers.  The Company will not be
liable or responsible to any Participating Broker-Dealer for direct payment of
commissions or any reallowance of the Dealer Manager Fee to such Participating
Broker-Dealer, it being the sole and exclusive responsibility of the Dealer
Manager for payment of commissions or any reallowance of the Dealer Manager Fee
to Participating Broker-Dealers.  Notwithstanding the above, the Company, in its
sole discretion, may act as agent of the Dealer Manager by making direct payment
of commissions or reallowance of the Dealer Manager Fee to such Participating
Broker-Dealers without incurring any liability therefor.

 

6.             Submission of Orders.

 

Each Investor desiring to purchase Units in the Offering will be required to
represent and warrant they have received a copy of the Prospectus and have had
sufficient time to review it. Each Investor will be required to provide either
the Dealer Manager or a Participating Broker-Dealer the minimal initial
investment of at least $5,000, at the price of $1,000 per Unit.

 

Page 12 of 21

 

  

The Company is providing two closing services provided by DTC through which
investors can purchase Units. The first service is DTC Settlement. Investors
purchasing through DTC Settlement will coordinate with their registered
representatives to pay the full purchase price for their Units by the settlement
date, and such payments will not be held in escrow. The second service is DRS
Settlement. Investors permitted to purchase through DRS Settlement must complete
and sign subscription agreements, which will be delivered to the escrow agent,
[________]. In addition, Investors utilizing the DRS Settlement service must pay
the full purchase price for their Units to the escrow agent, to be held in trust
for the investor’s benefit pending release to the Company.

 

(a)        The methods of delivery of the Investors’ subscription to the Company
are detailed as follows:

 

(i)DRS Settlement. Subject to compliance with Rule 15c2-4 of the Exchange Act,
in connection with the purchases using DRS Settlement, the Dealer Manager or
Participating Broker-Dealer, as applicable, will promptly deposit any checks
received from subscribers in an escrow account maintained by [___________] by
the end of the next business day following receipt of the subscriber’s
subscription documents and check. Where the subscription review procedures are
more lengthy than customary or pursuant to a Participating Broker-Dealer’s
internal supervising review procedures, a subscriber’s check shall be
transmitted by the end of the next business day following receipt by the review
office. Any subscription payments received by the escrow agent will be deposited
into a special non-interest bearing account in the Company’s name until such
time as the Company has either accepted or rejected the subscription and will be
held in trust for the Investor’s benefit, pending the acceptance of the
subscription. Subscriptions will be accepted or rejected within 10 business days
of receipt by the Company, and, if rejected, all funds shall be returned to the
rejected subscribers within 10 business days. If accepted, the funds will be
transferred into the Company’s general account on the next closing date. The
Company will provide Investors a confirmation of their purchase subsequent to
closing, and will generally admit stockholders on a semimonthly basis.

 

(ii)DTC Settlement. Registered representatives whose clients are investing
through DTC Settlement must coordinate with their clients to pay the full
purchase price for the Units by the settlement date. Investor payments under the
DTC Settlement option will not be held in escrow. Investors must warrant and
represent to the registered representative that they have received a copy of the
Prospectus and have had time to review it.

  

(b)        Subscription Procedure. Each Person desiring to purchase Units
through the Dealer Manager, or any other Participating Broker- Dealer, must
comply with the subscription procedure applicable to them, as described in the
Prospectus.

 

(c)        Completed Sale.  A sale of a Unit shall be deemed by the Company to
be completed for purposes of Section 5.2 if and only if (i) the Company has
received payment of the full purchase price of each purchased Unit, from an
investor who satisfies the minimum purchase requirements set forth in the
Registration Statement as determined by the Participating Broker-Dealer, or the
Dealer Manager, as applicable, in accordance with the provisions of this
Agreement, (ii) the Company has accepted such subscription, and, if using DRS
Settlement, a properly completed and executed Subscription Agreement, and (iii)
such investor has been admitted as a stockholder of the Company. In addition, no
sale of Units shall be completed until at least five business days after the
date on which the subscriber receives a copy of the Prospectus. The Dealer
Manager hereby acknowledges and agrees that the Company, in its sole and
absolute discretion, may accept or reject any subscription, in whole or in part,
for any reason whatsoever or no reason, and no commission or Dealer Manager Fee
will be paid to the Dealer Manager with respect to that portion of any
subscription which is rejected. As used in this Agreement, “business day” means
any day other than a Saturday, Sunday or a day on which banking institutions in
the State of New York are authorized or obligated by law or executive order to
close.

 

Page 13 of 21

 

  

7.             Indemnification.

 

7.1        Indemnified Parties Defined.  For the purposes of this Section 7, an
entity’s “Indemnified Parties” shall include such entity’s officers, directors,
employees, members, partners, affiliates, agents and representatives, and each
person, if any, who controls such entity within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act.

 

7.2        Indemnification of the Dealer Manager and Participating
Broker-Dealers.  The Company and the Operating Partnership, jointly and
severally, will indemnify, defend (subject to Section 7.6) and hold harmless the
Dealer Manager and the Participating Broker-Dealers, and their respective
Indemnified Parties, from and against any losses, claims (including the
reasonable cost of investigation), damages or liabilities, joint or several, to
which such Participating Broker-Dealers or the Dealer Manager, or their
respective Indemnified Parties, may become subject, under the Securities Act or
the Exchange Act, or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon (a)
in whole or in part, any material inaccuracy in a representation or warranty
contained herein by either the Company or the Operating Partnership, any
material breach of a covenant contained herein by either the Company or the
Operating Partnership, or any material failure by either the Company or the
Operating Partnership to perform its obligations hereunder or to comply with
state or federal securities laws applicable to the Offering, or (b) any untrue
statement or alleged untrue statement of a material fact contained (i) in any
Registration Statement or any post-effective amendment thereto or in the
Prospectus or any amendment or supplement to the Prospectus or (ii) in any
Authorized Sales Materials or (iii) in any blue sky application or other
document executed by the Company or on its behalf specifically for the purpose
of qualifying any or all of the Units or the Class A Shares issuable on exercise
of the Warrants for sale under the securities laws of any jurisdiction or based
upon written information furnished by the Company or the Operating Partnership
under the securities laws thereof (any such application, document or information
being hereinafter called a “Blue Sky Application”), or (c) the omission or
alleged omission to state a material fact required to be stated in the
Registration Statement or any post-effective amendment thereof or in the
Prospectus or any amendment or supplement to the Prospectus or necessary to make
the statements therein not misleading, and the Company and the Operating
Partnership will reimburse each Participating Broker-Dealer or the Dealer
Manager, and their respective Indemnified Parties, for any legal or other
expenses reasonably incurred by such Participating Broker-Dealer or the Dealer
Manager, and their respective Indemnified Parties, in connection with
investigating or defending such loss, claim, damage, liability or
action; provided, however, that the Company or the Operating Partnership will
not be liable in any such case to the extent that any such loss, claim, damage
or liability arises out of, or is based upon an untrue statement or alleged
untrue statement or omission or alleged omission made in reliance upon and in
conformity with written information furnished either (x) to the Company or the
Operating Partnership by the Dealer Manager or (y) to the Company, the Operating
Partnership or the Dealer Manager by or on behalf of any Participating
Broker-Dealer, in each case expressly for use in the Registration Statement or
any post-effective amendment thereof, or the Prospectus or any such amendment
thereof or supplement thereto.  This indemnity agreement will be in addition to
any liability which either the Company or the Operating Partnership may
otherwise have.

 

7.3        Dealer Manager Indemnification of the Company and the Operating
Partnership.  The Dealer Manager will indemnify, defend and hold harmless the
Company and the Operating Partnership, their respective Indemnified Parties and
each person who has signed the Registration Statement, from and against any
losses, claims, damages or liabilities to which any of the aforesaid parties may
become subject, under the Securities Act or the Exchange Act, or otherwise,
insofar as such losses, claims (including the reasonable cost of investigation),
damages or liabilities (or actions in respect thereof) arise out of or are based
upon (a) in whole or in part, any material inaccuracy in a representation or
warranty contained herein by the Dealer Manager, any material breach of a
covenant contained herein by the Dealer Manager, or any material failure by the
Dealer Manager to perform its obligations hereunder or (b) any untrue statement
or any alleged untrue statement of a material fact contained (i) in any
Registration Statement or any post-effective amendment thereto or in the
Prospectus or any amendment or supplement to the Prospectus or (ii) in any
Authorized Sales Materials or (iii) any Blue Sky Application, or (c) the
omission or alleged omission to state a material fact required to be stated in
the Registration Statement or any post-effective amendment thereof or in the
Prospectus or any amendment or supplement to the Prospectus or necessary to make
the statements therein not misleading, provided, however, that in each case
described in clauses (b) and (c) to the extent, but only to the extent, that
such untrue statement or omission was made in reliance upon and in conformity
with written information furnished to the Company or the Operating Partnership
by the Dealer Manager specifically for use with reference to the Dealer Manager
in the preparation of the Registration Statement or any such post-effective
amendments thereof or the Prospectus or any such amendment thereof or supplement
thereto, or (d) any use of sales literature by the Dealer Manager not authorized
or approved by the Company or any use of “broker-dealer use only” materials with
members of the public concerning the Units by the Dealer Manager, or (e) any
untrue statement made by the Dealer Manager or its representatives or agents or
omission to state a fact necessary in order to make the statements made, in
light of the circumstances under which they were made, not misleading in
connection with the offer and sale of the Units, or (f) any material violation
by the Dealer Manager of this Agreement, or (g) any failure by the Dealer
Manager to comply with applicable laws governing money laundry abatement and
anti-terrorist financing efforts in connection with the Offering, including
applicable FINRA Rules, Exchange Act Regulations and the USA PATRIOT Act, or (h)
any other failure by the Dealer Manager to comply with applicable FINRA or
Exchange Act Regulations.  The Dealer Manager will reimburse the aforesaid
parties in connection with investigation or defense of such loss, claim, damage,
liability or action.  This indemnity agreement will be in addition to any
liability which the Dealer Manager may otherwise have.

 

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7.4        Participating Broker-Dealer Indemnification of the Company and the
Operating Partnership.  By virtue of entering into the Participating
Broker-Dealer Agreement, each Participating Broker-Dealer severally will agree
to indemnify, defend and hold harmless the Company, the Operating Partnership,
the Dealer Manager, each of their respective Indemnified Parties, and each
person who signs the Registration Statement, from and against any losses,
claims, damages or liabilities to which the Company, the Operating Partnership,
the Dealer Manager, or any of their respective Indemnified Parties, or any
person who signed the Registration Statement, may become subject, under the
Securities Act or otherwise, as more fully described in the Participating
Broker-Dealer Agreement.

 

7.5        Action Against Parties; Notification.  Promptly after receipt by any
indemnified party under this Section 7 of notice of the commencement of any
action, such indemnified party will, if a claim in respect thereof is to be made
against any indemnifying party under this Section 7, promptly notify the
indemnifying party of the commencement thereof; provided, however, the failure
to give such notice shall not relieve the indemnifying party of its obligations
hereunder except to the extent it shall have been prejudiced by such
failure.  In case any such action is brought against any indemnified party, and
it notifies an indemnifying party of the commencement thereof, the indemnifying
party will be entitled, to the extent it may wish, jointly with any other
indemnifying party similarly notified, to participate in the defense thereof,
with separate counsel.  Such participation shall not relieve such indemnifying
party of the obligation to reimburse the indemnified party for reasonable legal
and other expenses (subject to Section 7.6) incurred by such indemnified party
in defending itself, except for such expenses incurred after the indemnifying
party has deposited funds sufficient to effect the settlement, with prejudice,
of the claim in respect of which indemnity is sought.  Any such indemnifying
party shall not be liable to any such indemnified party on account of any
settlement of any claim or action effected without the consent of such
indemnifying party.

 

7.6        Reimbursement of Fees and Expenses.  An indemnifying party under
Section 7 of this Agreement shall be obligated to reimburse an indemnified party
for reasonable legal and other expenses as follows:

 

(a)    In the case of the Company and/or the Operating Partnership indemnifying
the Dealer Manager, the advancement of Company funds to the Dealer Manager for
legal expenses and other costs incurred as a result of any legal action for
which indemnification is being sought shall be permissible only if all of the
following conditions are satisfied: (i) the legal action relates to acts or
omissions with respect to the performance of duties or services on behalf of the
Company; (ii) the legal action is initiated by a third party who is not a
stockholder of the Company or the legal action is initiated by a stockholder of
the Company acting in his or her capacity as such and a court of competent
jurisdiction specifically approves such advancement; and (iii) the Dealer
Manager undertakes to repay the advanced funds to the Company, together with the
applicable legal rate of interest thereon, in cases in which the Dealer Manager
is found not to be entitled to indemnification.

 

(b)    In any case of indemnification other than that described in
Section 7.6(a) above, the indemnifying party shall pay all legal fees and
expenses reasonably incurred by the indemnified party in the defense of such
claims or actions; provided, however, that the indemnifying party shall not be
obligated to pay legal expenses and fees to more than one law firm in connection
with the defense of similar claims arising out of the same alleged acts or
omissions giving rise to such claims notwithstanding that such actions or claims
are alleged or brought by one or more parties against more than one indemnified
party.  If such claims or actions are alleged or brought against more than one
indemnified party, then the indemnifying party shall only be obliged to
reimburse the expenses and fees of the one law firm that has been participating
by a majority of the indemnified parties against which such action is finally
brought; and in the event a majority of such indemnified parties is unable to
agree on which law firm for which expenses or fees will be reimbursable by the
indemnifying party, then payment shall be made to the first law firm of record
representing an indemnified party against the action or claim.  Such law firm
shall be paid only to the extent of services performed by such law firm and no
reimbursement shall be payable to such law firm on account of legal services
performed by another law firm.

 

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8.             Contribution.

 

If the indemnification provided for in Section 7 hereof is for any reason
unavailable to or insufficient to hold harmless an indemnified party in respect
of any losses, liabilities, claims, damages or expenses referred to therein,
then each indemnifying party shall contribute to the aggregate amount of such
losses, liabilities, claims, damages and expenses incurred by such indemnified
party, as incurred, (a) in such proportion as is appropriate to reflect the
relative benefits received by the Company and the Operating Partnership, the
Dealer Manager and the Participating Broker-Dealer, respectively, from the
offering of the Units pursuant to this Agreement and the relevant Participating
Broker-Dealer Agreement or (b) if the allocation provided by clause (a) is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause (a) above but also the relative
fault of the Company and the Operating Partnership, the Dealer Manager and the
Participating Broker-Dealer, respectively, in connection with the statements or
omissions which resulted in such losses, liabilities, claims, damages or
expenses, as well as any other relevant equitable considerations.

 

The relative benefits received by the Company and the Operating Partnership, the
Dealer Manager and the Participating Broker-Dealer, respectively, in connection
with the offering of the Units pursuant to this Agreement and the relevant
Participating Broker-Dealer Agreement shall be deemed to be in the same
respective proportion as the total net proceeds from the offering of the Units
pursuant to this Agreement and the relevant Participating Broker-Dealer
Agreement (before deducting expenses), received by the Company, and the total
selling commissions and Dealer Manager Fees received by the Dealer Manager and
the Participating Broker-Dealer, respectively, in each case as set forth on the
cover of the Prospectus bear to the aggregate initial public offering price of
the Units as set forth on such cover.

 

The relative fault of the Company and the Operating Partnership, the Dealer
Manager and the Participating Broker-Dealer, respectively, shall be determined
by reference to, among other things, whether any such untrue or alleged untrue
statement of a material fact or omission or alleged omission to state a material
fact related to information supplied by the Company or the Operating
Partnership, or by the Dealer Manager or by the Participating Broker-Dealer,
respectively, and the parties’ relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission.

 

The Company, the Operating Partnership, the Dealer Manager and the Participating
Broker-Dealer (by virtue of entering into the Participating Broker-Dealer
Agreement) agree that it would not be just and equitable if contribution
pursuant to this Section 8 were determined by pro rata allocation or by any
other method of allocation which does not take account of the equitable
contributions referred to above in this Section 8.  The aggregate amount of
losses, liabilities, claims, damages and expenses incurred by an indemnified
party and referred to above in this Section 8 shall be deemed to include any
legal or other expenses reasonably incurred by such indemnified party in
investigating, preparing or defending against any litigation, or any
investigation or proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever based upon any such untrue statement or
omission or alleged omission.

 

Notwithstanding the provisions of this Section 8, the Dealer Manager and the
Participating Broker-Dealer shall not be required to contribute any amount by
which the total amount of selling commissions and Dealer Manager Fees paid to
them pursuant to Section 5 above exceeds the amount of any damages which the
Dealer Manager and the Participating Broker-Dealer have otherwise been required
to pay by reason of any untrue or alleged untrue statement or omission or
alleged omission.

 

No party guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to contribution from any
party who was not guilty of such fraudulent misrepresentation.

 

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For the purposes of this Section 8, the Dealer Manager’s officers, directors,
employees, members, partners, agents and representatives, and each person, if
any, who controls the Dealer Manager within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act shall have the same rights to
contribution of the Dealer Manager, and each of the officers, directors,
employees, members, partners, agents and representatives of the Company and the
Operating Partnership, respectively, each officer of the Company who signed the
Registration Statement and each person, if any, who controls the Company or the
Operating Partnership, within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act shall have the same rights to contribution of the
Company and the Operating Partnership, respectively.  The Participating
Broker-Dealers’ respective obligations to contribute pursuant to this Section 8
are several in proportion to the number of Units sold by each Participating
Broker-Dealer and not joint.

 

9.            Survival of Provisions.

 

The respective agreements, representations and warranties of the Company, the
Operating Partnership, and the Dealer Manager set forth in this Agreement shall
remain operative and in full force and effect until the Termination Date
regardless of: (a) any investigation made by or on behalf of the Dealer Manager
or any Participating Broker-Dealer or any person controlling the Dealer Manager
or any Participating Broker-Dealer or by or on behalf of the Company, the
Operating Partnership or any person controlling the Company; and (b) the
delivery of payment for the Units.  Following the termination of this Agreement,
this Agreement will become void and there will be no liability of any party to
any other party hereto, except for obligations under Sections 7, 8, 9, 10, 12,
13, 14 and 16, all of which will survive the termination of this Agreement.

 

10.          Applicable Law; Venue.

 

This Agreement was executed and delivered in, and its validity, interpretation
and construction shall be governed by the laws of, the State of New
York; provided however, that causes of action for violations of federal or state
securities laws shall not be governed by this Section 10.  Venue for any action
brought hereunder shall lie exclusively in New York, New York.

 

11.           Counterparts.

 

This Agreement may be executed in any number of counterparts.  Each counterpart,
when executed and delivered, shall be an original contract, but all
counterparts, when taken together, shall constitute one and the same Agreement.

 

12.           Entire Agreement.

 

This Agreement and the Exhibit attached hereto constitute the entire agreement
among the parties and supersede any prior understanding, whether written or
oral, prior to the date hereof with respect to the Offering.

 

13.           Successors and Amendment.

 

13.1      Successors.  This Agreement shall inure to the benefit of and be
binding upon the Dealer Manager and the Company and the Operating Partnership
and their respective successors and permitted assigns and shall inure to the
benefit of the Participating Broker-Dealers to the extent set forth in Sections
1 and 5 hereof.  Nothing in this Agreement is intended or shall be construed to
give to any other person any right, remedy or claim, except as otherwise
specifically provided herein.

 

13.2      Assignment.  Neither the Company or Operating Partnership, nor the
Dealer Manager may assign or transfer any of such party’s rights or obligations
under this Agreement without the prior written consent of the Dealer Manager, on
the one hand, or the Company and the Operating Partnership, acting together, on
the other hand.

 

13.3      Amendment.  This Agreement may be amended only by the written
agreement of the Dealer Manager, the Company and the Operating Partnership.

 

Page 17 of 21

 

  

14.          Term and Termination.

 

14.1      Termination; General.  This Agreement may be terminated by the Company
upon ten (10) calendar days’ written notice to the other party in accordance
with Section 16 below.  In any case, this Agreement shall expire at the close of
business on the Termination Date.

 

14.2      Dealer Manager Obligations Upon Termination.  The Dealer Manager, upon
the expiration or termination of this Agreement, shall (a) promptly deposit any
and all funds, if any, in its possession which were received from investors for
the sale of Units into the appropriate account designated by the Company for the
deposit of investor funds, (b) promptly deliver to the Company all records and
documents in its possession which relate to the Offering and are not designated
as dealer copies, (c) provide a list of all purchasers and broker-dealers with
whom the Dealer Manager has initiated oral or written discussions regarding the
Offering, and (d) notify Participating Broker-Dealers of such termination.  The
Dealer Manager, at its sole expense, may make and retain copies of all such
records and documents, but shall keep all such information confidential.  The
Dealer Manager shall use its best efforts to cooperate with the Company to
accomplish an orderly transfer of management of the Offering to a party
designated by the Company.

 

14.3      Company Obligations Upon Termination.  Upon expiration or termination
of this Agreement, the Company shall pay to the Dealer Manager all compensation
to which the Dealer Manager is or becomes entitled under Section 5 hereof at
such time as such compensation becomes payable.

 

15.            Confirmation.

 

The Company hereby agrees and assumes the duty to confirm on its behalf and on
behalf of dealers or brokers who sell the Units all orders for purchase of Units
accepted by the Company.  Such confirmations will comply with the rules of the
Commission and FINRA, and will comply with applicable laws of such other
jurisdictions to the extent the Company is advised of such laws in writing by
the Dealer Manager.

 

16.            Notices.

 

Any notice, approval, request, authorization, direction or other communication
under this Agreement shall be deemed given (a) when delivered personally, (b) on
the first business day after delivery to a national overnight courier service,
(c) upon receipt of confirmation if sent via facsimile, or (d) on the fifth
business day after deposited in the United States mail, properly addressed and
stamped with the required postage, registered or certified mail, return receipt
requested, in each case to the intended recipient at the address set forth
below:

 

If to the Company:   Bluerock Residential Growth REIT, Inc.     712 Fifth
Avenue, 9th Floor     New York, New York 10019     Facsimile: [ (646) 278-4220]
    Attention: R. Ramin Kamfar       With a copy to:   Kaplan Voekler Cunningham
& Frank, PLC     1401 East Cary Street     Richmond, VA 23219     Facsimile:
(804) 823-4099     Attention:  Richard P. Cunningham, Esq.       If to the
Operating Partnership:   Bluerock Residential Holdings, L.P     c/o Bluerock
Residential Growth REIT, Inc.     General Partner     712 Fifth Avenue, 9th
Floor     New York, New York 10019     Facsimile: [(646) 278-4220]    
Attention: R. Ramin Kamfar       With a copy to:   Kaplan Voekler Cunningham &
Frank, PLC     1401 East Cary Street     Richmond, VA 23219     Facsimile: (804)
823-4099     Attention:  Richard P. Cunningham, Esq.

 

Page 18 of 21

 

 

If to the Dealer Manager:   Bluerock Capital Markets, LLC     17900 Skypark
Circle, Suite 260     Irvine, California 92614     Facsimile: [(953) 346-3979]  
  Attention: Kevin Boyle       With a copy to::   Kaplan Voekler Cunningham &
Frank, PLC     1401 East Cary Street     Richmond, VA 23219     Facsimile: 
(804)  823-4099     Attention:  Richard P. Cunningham, Esq.

 

Any party may change its address specified above by giving the other party
notice of such change in accordance with this Section 16.

 

[SIGNATURES ON FOLLOWING PAGE]

 

Page 19 of 21

 

  

If the foregoing correctly sets forth our understanding, please indicate your
acceptance thereof in the space provided below for that purpose, whereupon this
letter and your acceptance shall constitute a binding agreement between us as of
the date first above written.

 

  Very truly yours,       “COMPANY”       BLUEROCK RESIDENTIAL GROWTH REIT, INC.
        By: /s/ R. Ramin Kamfar     R. Ramin Kamfar     President and Chief
Executive Officer         “OPERATING PARTNERSHIP”       BLUEROCK RESIDENTIAL
HOLDINGS, L.P   .   By: Bluerock Residential Growth REIT, Inc.     its General
Partner         By: /s/ R. Ramin Kamfar     R. Ramin Kamfar     President and
Chief Executive Officer

 

Accepted and agreed as of the date first above written:

 

“DEALER MANAGER”

 

BLUEROCK CAPITAL MARKETS, LLC

 

By: /s/ Paul E. Dunn     Name: Paul Dunn     Title:  Senior Managing Director  

 

Page 20 of 21

 

  

EXHIBIT A

 

FORM OF PARTICIPATING BROKER-DEALER AGREEMENT

 

Page 21 of 21