Document:

EXHIBIT 10.7

 

TAX PROTECTION AGREEMENT

 

THIS TAX PROTECTION AGREEMENT (this “Agreement”) is made and entered into as of April 16, 2014 by and among Farmland Partners Inc., a Maryland corporation (the “REIT”), Farmland Partners Operating Partnership, LP, a Delaware limited partnership (the “Partnership”) and the persons set forth on Schedule 1 hereof (each, a “Protected Partner” and collectively, the “Protected Partners”).

 

WHEREAS, pursuant to that certain Agreement and Plan of Merger (the “Merger Agreement”), dated as of March 24, 2014, by and among Pittman Hough Farms, LLC, a Colorado limited liability company, FP Land LLC, a Delaware limited liability company, the REIT and the Partnership, FP Land LLC merged with and into the Partnership, with the Partnership surviving (the “Merger”), and in connection therewith, Pittman Hough Farms LLC received OP Units (the receipt of such OP Units, together with the Merger, the “Transaction”);

 

WHEREAS, FP Land LLC is a wholly owned subsidiary, and disregarded entity, of Pittman Hough Farms LLC, and the parties hereto intend, for U.S. federal income tax purposes, to treat the Transaction as a transfer of assets by Pittman Hough Farms LLC to the Partnership in exchange for OP Units under Section 721 of the Code; and

 

WHEREAS, in connection with the Transaction, the REIT and the Partnership desire to evidence their agreement regarding amounts that may be payable as a result of certain actions taken by the Partnership regarding the disposition of certain of the assets of the Partnership and certain indebtedness of the Partnership, its partners and its Subsidiaries.

 

NOW, THEREFORE, in consideration of the premises and the mutual representations, warranties, covenants and agreements contained herein and in the Merger Agreement, the parties hereto hereby agree as follows:

 

ARTICLE I
 DEFINITIONS

 

To the extent not otherwise defined herein, capitalized terms used in this Agreement have the meanings ascribed to them in the Merger Agreement (as defined above).

 

“Agreement” has the meaning set forth in the recitals.

 

“Cash Consideration” has the meaning set forth in Section 2.4(ii).

 

“Closing Date” means the date hereof.

 

“Code” means the Internal Revenue Code of 1986, as amended.

 

“Deficit Restoration Obligation” or “DRO” means a written obligation by a Protected Partner to become a “DRO Partner” as defined in the Partnership Agreement.

 

“DRO Amounts” has the meaning set forth in Section 3.8.

 

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“Guaranteed Amount” means the aggregate amount of each Guaranteed Debt that is guaranteed at any time by Partner Guarantors.

 

“Guaranteed Debt” means any loan existing, incurred or assumed by the Partnership or any of its Subsidiaries that is guaranteed in whole or in part by Partner Guarantors at any time on or after the Closing Date pursuant to Article III hereof.

 

“Merger” has the meaning set forth in the recitals.

 

“Merger Agreement” has the meaning set forth in the recitals.

 

“Minimum Liability Amount” means, for each Protected Partner, the amount set forth on Schedule 3.1 hereto next to such Protected Partner’s name, as amended from time to time.

 

“Nonrecourse Liability” has the meaning set forth in Treasury Regulations Section 1.752-1(a)(2).

 

“OP Units” means units of limited partnership interest of the Partnership owned by the Protected Partners, as described in the Partnership Agreement, and any other partnership interest into which such OP Units may be converted.

 

“Partner Guarantor” means a Protected Partner who has guaranteed any portion of a Guaranteed Debt.  The Partner Guarantors’ dollar amount shares of the Guaranteed Amounts with respect to any Guaranteed Debt shall be as set forth on Schedule 3.3 hereto, as amended from time to time.

 

“Partnership” means Farmland Partners Operating Partnership, LP, a Delaware limited partnership.

 

“Partnership Agreement” means the Second Amended and Restated Agreement of Limited Partnership of the Partnership, dated as of April 16, 2014, and as the same may be further amended in accordance with the terms thereof.

 

“Partnership Interest Consideration” has the meaning set forth in Section 2.4(ii).

 

“Proceeding” has the meaning set forth in Section 7.1.

 

“Proposed Regulations” has the meaning set forth in Section 3.10(i).

 

“Protected Gain” shall mean the gain that would be recognized by a Protected Partner under Section 704(c) of the Code in the event of the sale of a Protected Property in a fully taxable transaction pursuant to which an amount of consideration equal to the Section 704(c) Value of such Protected Property, as set forth in Schedule 2.1 hereto, was received.  For purposes of calculating the amount of Section 704(c) gain allocable to a Protected Partner, any “reverse Section 704(c) gain” allocable to such Partner pursuant to Treasury Regulations Section 1.704-3(a)(6) shall not be taken into account unless, as a result of adjustments to the Carrying Value (as defined in the Partnership Agreement) of any Protected Property pursuant to Exhibit B of the Partnership Agreement, all or a portion of the gain recognized by the Partnership that would have

 

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been Section 704(c) gain without regard to such adjustments becomes or is treated as “reverse Section 704(c) gain” or Section 704(b) gain under Section 704 of the Code, in which case such gain shall continue to be treated as Section 704(c) gain.

 

“Protected Partner” means (i) any person set forth on Schedule 1 hereto as a “Protected Partner” and (ii) any person who acquires OP Units from a Protected Partner in a transaction in which gain or loss is not recognized in whole or in part and in which such transferee’s adjusted basis, as determined for U.S. federal income tax purposes, is determined in whole or in part by reference to the adjusted basis of a Protected Partner in such OP Units.

 

“Protected Property” means: (i) each of the properties identified as a Protected Property on Schedule 2 hereto; (ii) a direct or indirect interest owned by the Partnership in any Subsidiary that owns an interest in a Protected Property, if the disposition of such interest would result in the recognition of Protected Gain with respect to a Protected Partner; and (iii) any other property that the Partnership directly or indirectly receives that is in whole or in part a “substituted basis property” as defined in Section 7701(a)(42) of the Code with respect to a Protected Property or interest therein.  For the avoidance of doubt, if any Protected Property is transferred to another entity in a transaction in which gain or loss is not recognized, and if the acquiring entity’s disposition of such Protected Property would cause a Protected Partner to recognize gain or loss as a result thereof, such Protected Property shall remain subject to this Agreement.

 

“Qualified Guarantee” has the meaning set forth in Section 3.3.

 

“Qualified Guarantee Indebtedness” has the meaning set forth in Section 3.3.

 

“REIT” means Farmland Partners Inc., a Maryland corporation.

 

“Section 704(c) Value” means the fair market value of a Protected Property as set forth next to such Protected Property on Schedule 2.1 and as determined pursuant to this Agreement.  The Partnership initially shall carry each Protected Property on its books at a value equal to the Section 704(c) Value of such Protected Property as set forth herein.

 

“Subsidiary” means any entity in which the Partnership owns a direct or indirect interest.

 

“Successor Partnership” has the meaning set forth in Section 2.2.

 

“Tax Claim” has the meaning set forth in Section 7.1.

 

“Tax Protection Period” means (i) with respect to the obligations of the Partnership set forth in Article II hereof, (X) with respect to the Protected Properties listed as Schedule 2(i) Protected Properties on Schedule 2, the period commencing on the Closing Date and ending at 12:01 AM on the day after the five (5) year anniversary of the Closing Date, and (Y) with respect to the Protected Properties listed as Schedule 2(ii) Protected Properties on Schedule 2, the period commencing on the Closing Date and ending at 12:01 AM on the day after the seven (7) year anniversary of the Closing Date, and (ii) with respect to the obligations of the Partnership set forth in Article III hereof, the period commencing on the Closing Date and ending at 12:01 AM on the day after the seven (7) year anniversary of the Closing Date; provided, however, that with respect to a Protected Partner, the Tax Protection Periods shall terminate at such time as such

 

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Protected Partner (or one or more successor Protected Partners) has disposed of fifty percent (50%) or more of the OP Units received, directly or indirectly, in the Transaction by such Protected Partner in one or more taxable transactions; provided, further, that the Tax Protection Periods will terminate for all Protected Partners upon the later of the death of Paul A. Pittman or his wife, Julie J. Levenson.

 

“Transaction” has the meaning set forth in the recitals.

 

ARTICLE II
 RESTRICTIONS ON DISPOSITIONS OF 
 PROTECTED PROPERTIES

 

2.1                               General Prohibition on Disposition of Protected Properties.  The REIT and the Partnership agree, for the benefit of each Protected Partner and for the term of the applicable Tax Protection Period, not to directly or indirectly sell, exchange, transfer or otherwise dispose of a Protected Property or any interest therein (without regard to whether such disposition is voluntary or involuntary) in a transaction that would cause a Protected Partner to recognize any Protected Gain.  Without limiting the foregoing, (i) any transaction or event that would cause a Protected Partner to recognize gain for U.S. federal income tax purposes with respect to any Protected Property or any direct or indirect interest therein will be treated as a disposition of a Protected Property, and (ii) a disposition shall include any transfer, voluntary or involuntary, in a foreclosure proceeding, pursuant to a deed in lieu of foreclosure, or in a bankruptcy proceeding.  In addition, with respect to the Protected Properties listed as Schedule 2(ii) Protected Properties on Schedule 2 hereto, after the expiration of the Tax Protection Period applicable to such Protected Properties, the REIT and the Partnership shall use their best efforts to continue to comply with the obligations of this Article II; provided, however, that with respect to a Protected Partner, such obligation to use best efforts shall terminate at such time as such Protected Partner (or one or more successor Protected Partners) has disposed of fifty percent (50%) or more of the OP Units received, directly or indirectly, in the Transaction by such Protected Partner in one or more taxable transactions; provided, further, that such obligation to use best efforts will terminate for all Protected Partners upon the later of the death of Paul A. Pittman or his wife, Julie J. Levenson.

 

2.2                               Exceptions Where No Gain Recognized.  Notwithstanding the restrictions set forth in Section 2.1, the Partnership may dispose of any Protected Property (or an interest therein) if and to the extent that such disposition qualifies as a like-kind exchange under Section 1031 of the Code, an involuntary conversion under Section 1033 of the Code, or other transaction (including, but not limited to, a contribution of property to any entity that qualifies for the non-recognition of gain under Section 721 or Section 351 of the Code, or a merger or consolidation of the Partnership with or into another entity that qualifies for taxation as a “partnership” for U.S. federal income tax purposes (a “Successor Partnership”)) that does not result (in the year of such disposition or in a later year within the Tax Protection Period) in the recognition of any Protected Gain to a Protected Partner.  In further clarification thereof, in the case of a Section 1031 like-kind exchange, if such exchange is with a “related person” within the meaning of Section 1031(f)(3) of the Code, any direct or indirect disposition by such related person of the Protected Property or any other transaction prior to the expiration of the two (2) year period following such exchange and within the Tax Protection Period that would cause

 

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Section 1031(f)(1) of the Code to apply with respect to such Protected Property (including by reason of the application of Section 1031(f)(4) of the Code) and a result of which a Protected Partner recognizes Protected Gain shall be considered a violation of Section 2.1 by the Partnership.

 

2.3                               Dispositions of Encumbered Property.  In the event that, at the time of a disposition of a Protected Property described in Section 2.2, such Protected Property is secured, directly or indirectly, by indebtedness guaranteed by a Partner Guarantor (or for which a Protected Partner otherwise has personal liability) and the transferee is not a “pass-through” Subsidiary of the Partnership that both is one hundred percent (100%) owned, directly or indirectly, by the Partnership and is and will continue to be under the legal control of the Partnership, (a) in the Partnership’s sole discretion, either (I) such indebtedness shall be repaid in full or (II) the Partnership shall obtain from the lenders with respect to such indebtedness a full and complete release of liability for each of the Protected Partners that has guaranteed, or otherwise has liability for, such indebtedness and (b) if such indebtedness is a Guaranteed Debt and the Tax Protection Period with respect to Article III has not expired, the Partnership shall comply with its covenants set forth in Article III below with respect to such Guaranteed Debt and the Partner Guarantors that are considered to have liability for such Guaranteed Debt (determined under Section 3.5 by treating such events as a repayment of the Guaranteed Debt).

 

2.4                               Mergers.

 

(i)                                     For the avoidance of doubt, any merger or consolidation involving the Partnership or any Subsidiary, whether or not the Partnership or Subsidiary is the surviving entity in such merger or consolidation, that results in a Protected Partner recognizing part or all of the Protected Gain shall be deemed a disposition of the Protected Property subject to Section 2.1.

 

(ii)                                  Notwithstanding Section 2.4(i), Section 2.1 shall not apply to a voluntary, actual disposition by a Protected Partner of OP Units in connection with a merger or consolidation of the Partnership pursuant to which (1) the Protected Partner is offered either cash or property treated as cash pursuant to Section 731 of the Code (“Cash Consideration”) or partnership interests (“Partnership Interest Consideration”) and the receipt of such partnership interests would not result in the recognition of gain for U.S. federal income tax purposes by the Protected Partner; (2) the Protected Partner has the right to elect to receive solely Partnership Interest Consideration in exchange for his OP Units, an election to receive solely Partnership Interest Consideration would not adversely affect the Protected Partner (viewed objectively and relative to an election to receive Cash Consideration) and the continuing partnership has agreed in writing to assume the obligations of the Partnership under this Agreement; (3) no Protected Gain is recognized by the Partnership as a result of any partner of the Partnership receiving Cash Consideration; and (4) the Protected Partner elects or is deemed to elect to receive Cash Consideration.

 

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ARTICLE III
 ALLOCATION OF LIABILITIES; GUARANTEE OPPORTUNITY 
 AND DEFICIT RESTORATION OBLIGATIONS

 

3.1                               Maintenance of Indebtedness.

 

(i)                                     During the Tax Protection Period, the Partnership shall maintain an amount of indebtedness sufficient to allow each Protected Partner, after taking advantage of the provisions of this Article III, to be allocated Partnership liabilities for purposes of Section 752 of the Code, and to be “at risk” with respect to Partnership liabilities for purposes of Section 465 of the Code, in each case in an amount no less than such Protected Partner’s Minimum Liability Amount.

 

(ii)                                  During the Tax Protection Period, the Partnership shall use commercially reasonable efforts to maintain an amount of indebtedness treated as Nonrecourse Liabilities for purposes of Section 752 such that each Protected Partner shall be allocated Partnership liabilities under Treasury Regulations Section 1.752-3 in an amount no less than such Protected Partner’s Minimum Liability Amount.

 

(iii)                               After the expiration of the Tax Protection Period, the REIT and the Partnership shall use their best efforts to continue to comply with the obligations of this Article III and Section 6.1; provided, however, that with respect to a Protected Partner, such obligation to use best efforts shall terminate at such time as such Protected Partner (or one or more successor Protected Partners) has disposed of fifty percent (50%) or more of the OP Units received, directly or indirectly, in the Transaction by such Protected Partner in one or more taxable transactions; provided, further, that such obligation to use best efforts will terminate for all Protected Partners upon the later of the death of Paul A. Pittman or his wife, Julie J. Levenson.

 

3.2                               Minimum Liability Allocations.  During the Tax Protection Period, the Partnership will offer to each Protected Partner, at the Protected Partner’s option, the opportunity (i) to enter into a “bottom dollar guarantee” (whether individually or as part of a group of partners) of indebtedness of the Partnership or a wholly-owned “pass-through” Subsidiary of the Partnership or (ii) in the event the Partnership has sufficient recourse debt outstanding, to enter into a DRO, in such amount or amounts so as to cause the amount of Partnership liabilities allocated to such Protected Partner for purposes of Section 752 of the Code to be not less than such Protected Partner’s Minimum Liability Amount and to cause the amount of Partnership liabilities with respect to which such Protected Partner will be considered to be “at risk” for purposes of Section 465 of the Code to be not less than such Protected Partner’s Minimum Liability Amount.  In order to minimize the need for Protected Partners to enter into guarantees or DROs, the Partnership will use the optional method under Treasury Regulations Section 1.752-3(a)(3) to allocate Nonrecourse Liabilities considered secured by any property acquired by the Partnership pursuant to the Transaction to and for the benefit of the Protected Partners to the extent that the “built-in gain” allocable to the Protected Partner under Section 704(c) of the Code with respect to such property exceeds the amount of the Nonrecourse Liabilities considered secured by such property allocated to the Protected Partners under Treasury Regulations Section 1.752-3(a)(2).  A bottom dollar guarantee or a DRO entered into

 

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by a Protected Partner pursuant to this Section 3.2 shall, for purposes of this Agreement, be presumed to cause a Protected Partner to be allocated an amount of liabilities equal to such Protected Partner’s Guaranteed Amounts of Guaranteed Debt or such Protected Partner’s DRO Amount, as applicable, for purposes of Sections 465 and 752 of the Code.

 

3.3                               Qualified Guarantee Indebtedness and Qualified Guarantee; Treatment of Qualified Guarantee Indebtedness as Guaranteed Debt.  In order for an offer by the Partnership of an opportunity to guarantee indebtedness to satisfy the requirements of Section 3.2: (1) the indebtedness to be guaranteed also must satisfy conditions (i) through (vi) set forth in this Section 3.3 (indebtedness satisfying all such conditions is referred to as “Qualified Guarantee Indebtedness”); (2) the guarantee by the Partner Guarantors must be pursuant to a Guarantee Agreement substantially in the form attached hereto as Schedule 3.7 or containing substantially similar terms and conditions if the lender of the indebtedness to be guaranteed requires use of its form guarantee agreement that satisfies the conditions set forth in Sections 3.3(i) and (iii) below (a “Qualified Guarantee”); (3) the amount of indebtedness offered to be guaranteed by the Partner Guarantor, if pursuant to Section 3.5, must not exceed the portion of the Guaranteed Amount for which a replacement guarantee is being offered; and (4) the indebtedness to be guaranteed must be considered indebtedness of the Partnership for purposes of determining the adjusted tax basis of the interests of partners in the Partnership in their OP Units.  If, and to the extent that, a Protected Partner elects to guarantee Qualified Guarantee Indebtedness pursuant to an offer made in accordance with this Article III, such indebtedness thereafter shall be considered a Guaranteed Debt of the Partnership and subject to all of this Article III.

 

The conditions that must be satisfied at all times with respect to any Guaranteed Debt offered pursuant to this Article III hereof and the guarantees with respect thereto are as follows:

 

(i)                                     each such guarantee shall be a “bottom dollar guarantee” in that the lender for the Guaranteed Debt is required to pursue all other collateral and security for the Guaranteed Debt (other than any bottom dollar guarantees permitted pursuant to this Article III) prior to seeking to collect on such a guarantee, and the lender shall have recourse against the guarantee only if, and solely to the extent that, the total amount recovered by the lender with respect to the Guaranteed Debt after the lender has exhausted its remedies as set forth above is less than the aggregate of the Guaranteed Amounts with respect to such Guaranteed Debt (plus the aggregate amounts of any other guarantees (x) that are in effect with respect to such Guaranteed Debt at the time the guarantees pursuant to this Article III are entered into, or (y) that are entered into after the date the guarantees pursuant to this Article III are entered into with respect to such Guaranteed Debt and that comply with Section 3.6 below, but only to the extent that, in either case, such guarantees are bottom dollar guarantees with respect to the Guaranteed Debt), and the maximum aggregate liability of each Partner Guarantor for all Guaranteed Debt shall be limited to the amount actually guaranteed by such Partner Guarantor;

 

(ii)                                  the Partnership reasonably believes the fair market value of the collateral (not including any guarantees) against which the lender has recourse pursuant to the Guaranteed Debt, determined as of the time the guarantee is entered into (an independent appraisal relied upon by the lender in making the loan will be conclusive evidence of such fair market value when the guarantee is being entered into in connection with the closing of such loan), is not less

 

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than 150% of the sum of (1) the aggregate of the Guaranteed Amounts with respect to such Guaranteed Debt, plus (2) the dollar amount of any other indebtedness that is senior to or pari passu with the Guaranteed Debt and as to which the lender thereunder has recourse against property that is collateral of the Guaranteed Debt, plus (3) the aggregate amounts of any other guarantees that are in effect with respect to such Guaranteed Debt at the time the guarantees pursuant to this Article III are entered into with respect to such Guaranteed Debt and that comply with Section 3.3(v) below, but only to the extent that such guarantees are “bottom dollar guarantees” with respect to the Guaranteed Debt;

 

(iii)                               (A) the executed guarantee must be executed by and delivered to the lender, (B) the Partnership shall have used commercially reasonably efforts to obtain an acknowledgement by the lender of the execution of the guarantee by the Partner Guarantor, and (C) the guarantee must be enforceable under the laws of the state governing the loan and in which the property securing the loan is located;

 

(iv)                              as to each Partner Guarantor that is executing a guarantee pursuant to this Agreement, there must be no other person that would be considered to “bear the economic risk of loss,” within the meaning of Treasury Regulations Section 1.752-2, or would be considered to be “at risk” for purposes of Section 465(b), with respect to that portion of such debt for which such Partner Guarantor is being made liable for purposes of satisfying the Partnership’s obligations to such Partner Guarantor under this Article III;

 

(v)                                 the aggregate Guaranteed Amounts with respect to the Guaranteed Debt will not exceed 25% of the amount of the Guaranteed Debt outstanding at the time the guarantee is executed.  Except for guarantees already in place at the time a guarantee opportunity is presented to the Protected Partners, at no time can there be guarantees with respect to the Guaranteed Debt that are provided by other persons that are pari passu with or at a lower level of risk than the guarantees provided by the Protected Partners.  If there are guarantees already in place at the time a guarantee opportunity is presented to the Protected Partners that are pari passu with or at a lower level of risk than the guarantees provided by the Protected Partners, then the amount of Guaranteed Debt subject to such existing guarantees shall be added to the Guaranteed Amount for purposes of calculating the 25% limitation set forth in this Section 3.3(v); and

 

(vi)                              the obligor with respect to the Guaranteed Debt is the Partnership or a “pass-through” Subsidiary in which the Partnership owns, directly and indirectly, 100% of the economic interests and which is and will continue to be under the legal control of the Partnership.

 

The Partnership shall be deemed to satisfy the requirements of Sections 3.3(i), (ii) and (vi) if, in lieu of offering a bottom dollar guarantee of indebtedness secured by specific properties, it offers a bottom dollar guarantee (or an indemnity of an existing guarantor) of a general unsecured obligation of the Partnership which is recourse, without limitation, to all of the assets of the Partnership and is made by a third-party institutional lender with financial covenants that are standard for such a loan.

 

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3.4                               Covenant With Respect to Guaranteed Debt Collateral.  The Partnership covenants with each Partner Guarantor with respect to any Guaranteed Debt that (A) it will comply with the requirements set forth in Section 2.3 upon any disposition of any collateral for a Guaranteed Debt, whether during or following the Tax Protection Period, and (B) it will not at any time, whether during or following the Tax Protection Period, pledge the collateral for a Guaranteed Debt to secure any other indebtedness (unless such other indebtedness is, by its terms, subordinate in all respects to the Guaranteed Debt for which such collateral is security) or otherwise voluntarily dispose of or reduce the amount of such collateral unless either (i) after giving effect thereto the conditions in Section 3.3 would continue to be satisfied with respect to the Guaranteed Debt and the Guaranteed Debt otherwise would continue to be Qualified Guarantee Indebtedness, or (ii) the Partnership (A) obtains from the lender with respect to the original Guaranteed Debt a full and complete release of any Partner Guarantor unless the Partner Guarantor expressly requests that it not be released, and (B) if the Tax Protection Period has not expired, offers to each Partner Guarantor with respect to such original Guaranteed Debt, not less than 30 days prior to such pledge or disposition, the opportunity to enter into a Qualified Guarantee of other Partnership indebtedness that constitutes Qualified Guarantee Indebtedness (with such replacement indebtedness thereafter being considered a Guaranteed Debt and subject to this Article III) or, in the event the Partnership has sufficient recourse indebtedness and the Protected Partner agrees in lieu of entering into a Qualified Guarantee of replacement indebtedness to enter into a DRO in an amount equal to the amount of such original Guaranteed Debt that was guaranteed by such Partner Guarantor.

 

3.5                               Repayment or Refinancing of Guaranteed Debt.  The Partnership shall not, at any time during the Tax Protection Period applicable to a Partner Guarantor, repay or refinance all or any portion of any Guaranteed Debt or otherwise take any action that would result in a decrease in the amount of Partnership liabilities allocated to a Partner Guarantor, unless (i) after taking into account such repayment or other action, each Partner Guarantor would be entitled, pursuant to Section 752 of the Code and the Treasury Regulations thereunder, to include in its adjusted tax basis for its OP Units an amount of Partnership liabilities at least equal to its Minimum Liability Amount or (ii) alternatively, the Partnership, not less than 30 days prior to such repayment, refinancing or other action, offers to the applicable Partner Guarantors at their election the opportunity either (A) to enter into a Qualified Guarantee with respect to other indebtedness of the Partnership or a wholly-owned “pass-through” Subsidiary of the Partnership or (B) in the event the Partnership has sufficient recourse debt outstanding and the Protected Partner agrees, in lieu of entering into a Qualified Guarantee pursuant to clause (A) above, to enter into a DRO, in either case in an amount sufficient so that, taking into account such guarantees of such other indebtedness or DROs and taking into account the presumption in the last sentence of Section 3.2, each such Partner Guarantor would be entitled, pursuant to Section 752 and the Treasury Regulations thereunder, to include in its adjusted tax basis for its OP Units an amount of Partnership liabilities equal to the Minimum Liability Amount for such Partner Guarantor.

 

3.6                               Limitation on Additional Guarantees with respect to Debt Secured by Collateral for Guaranteed Debt.  The Partnership shall not offer the opportunity or make available to any person or entity other than a Protected Partner a guarantee of any Guaranteed Debt or other debt that is secured, directly or indirectly, by any collateral for Guaranteed Debt unless (i) such debt by its terms is subordinate in all respects to the Guaranteed Debt or, if such

 

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other guarantees are of the Guaranteed Debt itself, such guarantees by their terms must be paid in full before the lender can have recourse to the Partner Guarantors (i.e., the first dollar amount of recovery by the applicable lenders must be applied to the Guaranteed Amount); provided that the foregoing shall not apply with respect to additional guarantees of Guaranteed Debt so long as the conditions set forth in Sections 3.3(ii) and (v) would be satisfied immediately after the implementation of such additional guarantee (determined in the case of Section 3.3(ii), based upon the fair market value of the collateral for such Guaranteed Debt at the time the additional guarantee is entered into and adding the amount of such additional guarantee(s) to the sum of the applicable Guaranteed Amounts plus any other preexisting bottom dollar guarantees previously permitted pursuant to this Section 3.6 or Sections 3.4(i) and (ii) above, for purposes of making the computation provided for in Section 3.3(ii)), and (ii) such other guarantees do not have the effect of reducing the amount of the Guaranteed Debt that is includible by any Partner Guarantor in its adjusted tax basis for its OP Units pursuant to Treasury Regulations Section 1.752-2.

 

3.7                               Presumption as to Schedule 3.7.  A guarantee in the form of the Guarantee Agreement attached hereto as Schedule 3.7 that is (A) properly executed by the Partner Guarantor and (B) delivered to the lender shall be conclusively presumed to satisfy the conditions set forth in Section 3.3(i) and 3.3(iii) and to have caused the Guaranteed Debt to be considered allocable to the Protected Partner who enters into such Guarantee Agreement pursuant to Treasury Regulations Section 1.752-2 so long as all of the following conditions are met with respect such Guaranteed Debt:

 

(i)                                     there are no other guarantees in effect with respect to such Guaranteed Debt (other than the guarantees contemporaneously being entered into by the Partner Guarantors pursuant to this Article III or that are otherwise permitted pursuant to 3.3(i) and (v));

 

(ii)                                  the collateral securing such Guaranteed Debt is not, and shall not thereafter become, collateral for any other indebtedness that is senior to or pari passu with such Guaranteed Debt;

 

(iii)                               no additional guarantees with respect to such Guaranteed Debt will be entered into during the applicable Tax Protection Period pursuant to the proviso set forth in Section 3.6;

 

(iv)                              the lender with respect to such Guaranteed Debt is not the Partnership, any Subsidiary or other entity in which the Partnership owns a direct or indirect interest, the REIT, any other partner in the Partnership, or any person related to any partner in the Partnership as determined for purposes of Treasury Regulations Section 1.752-2 or any person that would be considered a “related person” as determined for purposes of Section 465 of the Code; and

 

(v)                                 none of the REIT, nor any other partner in the Partnership, nor any person related to any partner in the Partnership as determined for purposes of Treasury Regulations Section 1.752-2 shall have provided, or shall thereafter provide, collateral for, or otherwise shall have entered into, or shall thereafter enter into, a relationship that would cause such person to be considered to bear the economic risk of loss with respect to such Guaranteed Debt, as determined for purposes of Treasury Regulations Section 1.752-2 or that would cause such person to be

 

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considered “at risk” with respect to such Guaranteed Debt, as determined for purposes of Section 465 of the Code.

 

3.8                               Deficit Restoration Obligation.  In the event a Protected Partner has elected to enter into a DRO, the Partnership will maintain an amount of indebtedness of the Partnership that would be considered “recourse” indebtedness of the Partnership at least equal to the sum of the “DRO Amounts” (as defined in the Partnership Agreement) of all Protected Partners (plus, the DRO Amounts, if any, of other partners in the Partnership).  A DRO entered into by a Protected Partner pursuant to this Agreement shall be presumed, for purposes of this Agreement, to cause the Protected Partner to be allocated an amount of liabilities equal to the DRO Amount of such Protected Partner for purposes of Sections 465 and 752 of the Code provided that (1) the Partnership maintains an amount of debt that is considered “recourse” indebtedness (determined for purposes of Section 752 of the Code) equal to the aggregate DRO Amounts of all partners of the Partnership and (2) all other terms and conditions of the Partnership Agreement with respect to such DRO are met.

 

3.9                               Process.  Whenever the Partnership is required under this Article III to offer to a Protected Partner an opportunity to guarantee indebtedness or enter into a DRO, the Partnership shall be considered to have satisfied its obligation if the other conditions in this Article III are satisfied and, not less than thirty (30) days prior to the date that such guarantee or DRO would be required to be executed in order to satisfy this Article III, the Partnership sends by first class certified mail to the last known address of such Protected Partner (as reflected in the records of the Partnership) a guarantee agreement or, if such Protected Partner has agreed to enter into a DRO, a consent to DRO form to be executed, and a brief letter explaining the relevant circumstances (including, as applicable, that the offer is being made pursuant to this Article III, the circumstances giving rise to the offer, a brief summary of the terms of the indebtedness to be guaranteed (or, in the case of a DRO, the terms of the Partnership recourse debt), a brief description of the collateral for the indebtedness, a statement of the amount to be guaranteed (or DRO amount), the address to which the executed guarantee agreement (or consent to DRO form) must be sent and the date by which it must be received, and a statement to the effect that, if the Protected Partner fails to execute and return such guarantee agreement (or consent to DRO form) within the time period specified, the Protected Partner thereafter would lose its rights under this Article III with respect to the amount of debt that the Partnership is required to offer to be guaranteed (or that would be subject to the DRO) and depending upon the Protected Partner’s circumstances and other circumstances related to the Partnership, the Protected Partner could be required to recognize taxable gain as a result thereof, either currently or prior to the expiration of the Tax Protection Period, that otherwise would have been deferred).  If a notice is properly sent in accordance with this procedure, the Partnership shall have no responsibility as a result of the failure of a Protected Partner either to receive such notice or to respond thereto within the specified time period.

 

3.10                        Change in Law.

 

(i)                                     Notwithstanding the foregoing, if, due to a change in law, a Protected Partner reasonably believes that such Protected Partner may no longer continue to be allocated such Protected Partner’s Guaranteed Amount of a Guaranteed Debt, such Protected Partner may request a modification of such Guarantee Agreement and the Partnership will use its

 

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commercially reasonable efforts to work with the lender with respect to such Guaranteed Debt to have the Guarantee Agreement amended in a manner that will permit such Protected Partner to be allocated such Protected Partner’s Guaranteed Amount with respect to the Guaranteed Debt, or,  in the event the Partnership has sufficient recourse debt outstanding, such Protected Partner, at its option, shall be offered the opportunity to enter into a DRO in an amount equal to such Guaranteed Amount so that, assuming such DRO is effective under applicable law, the amount of Partnership liabilities allocated to such Protected Partner shall not decrease as a result of the change in law.  Furthermore, if, due to a change in law, a Protected Partner reasonably believes such Protected Partner may no longer continue to be allocated Partnership liabilities equal to such Protected Partner’s DRO Amount, such Protected Partner may request a modification of the terms of such DRO and the Partnership will use commercially reasonable efforts to modify such DRO in a manner that will permit such Protected Partner to be allocated Partnership liabilities in an amount equal to such Protected Partner’s DRO Amount.

 

(ii)                                  The Protected Partners acknowledge that the U.S. Department of Treasury has issued proposed Treasury Regulations (79 F.R. 4826 (Jan. 30, 2014)) addressing the allocation of partnership liabilities under Section 752 of the Code (the “Proposed Regulations”).  If the Proposed Regulations are finalized in their current form, a Protected Partner would not be allocated Partnership liabilities solely as a result of entering into a Qualified Guarantee.  For the avoidance of doubt, if the Proposed Regulations are finalized in their current form (or there is any other change in law), the Partnership shall have no liability to a Protected Partner hereunder by virtue of the Qualified Guarantee failing, in itself and as a result of finalization or other change, to provide the Protected Partner an allocation of Partnership liabilities, provided the Partnership has complied in full with the provisions of this Article III.

 

ARTICLE IV
 REMEDIES FOR BREACH

 

4.1                               Monetary Damages.  In the event the Partnership or a Subsidiary breaches its obligations set forth in Article II or Article III with respect to a Protected Partner, the Protected Partner’s sole right shall be to receive from the Partnership, and the Partnership shall pay to the Protected Partner as damages, an amount equal to:

 

(i)                                     in the case of a violation of Article III, the aggregate federal, state and local income taxes (including any applicable federal unearned income Medicare contribution under Section 1411 of the Code) incurred by the Protected Partner as a result of the income or gain allocated to, or otherwise recognized by, such Protected Partner by reason of such breach; and

 

(ii)                                  in the case of a violation of Article II, the aggregate federal, state, and local income taxes (including any applicable federal unearned income Medicare contribution under Section 1411 of the Code) incurred with respect to the Protected Gain incurred with respect to the Protected Property that is allocable to such Protected Partner under the Partnership Agreement;

 

plus, in either case, an additional amount so that, after the payment by such Protected Partner of all federal, state and local income taxes on amounts received pursuant to this Section 4.1

 

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(including any tax liability incurred as a result of such Protected Partner’s receipt of such indemnity payment), such Protected Partner has received an amount equal to its total federal, state and local income tax liability incurred as a result of such breach.

 

For purposes of computing the amount of federal, state, and local income taxes required to be paid by a Protected Partner, (i) any deduction for state and local income taxes payable as a result thereof that is actually allowed shall be taken into account, and (ii) a Protected Partner’s tax liability shall be computed using the highest federal, state and local marginal income tax rates that would be applicable to such Protected Partner’s taxable income (taking into account the character of such income or gain) for the year with respect to which the taxes must be paid, and, except as described in clause (i), without regard to any deductions, losses or credits that may be available to such Protected Partner that would reduce or offset its actual taxable income or actual tax liability if such deductions, losses or credits could be utilized by the Protected Partner to offset other income, gain or taxes of the Protected Partner, either in the current year, in earlier years, or in later years.

 

4.2                               Process for Determining Damages.  If the Partnership or a Subsidiary has breached or violated any of the covenants set forth in Article II or Article III (or a Protected Partner asserts that the Partnership or a Subsidiary has breached or violated any of the covenants set forth in Article II or Article III), the Partnership and the Protected Partner agree to negotiate in good faith to resolve any disagreements regarding any such breach or violation and the amount of damages, if any, payable to such Protected Partner under Section 4.1.  If any such disagreement cannot be resolved by the Partnership and such Protected Partner within (i) 60 days after the receipt of notice from the Partnership of such breach pursuant to Section 4.3, (ii) 60 days after the receipt of a notice from the Protected Partner that the Partnership or a Subsidiary has breached its obligations under this Agreement, which notice shall set forth the amount of income asserted to be recognized by the Protected Partner and the payment required to be made to such Protected Partner under Section 4.1 as a result of the breach, (iii) 10 days following the date that the Partnership notifies the Protected Partner of its intention to settle, compromise and/or concede any Tax Claim or Proceeding pursuant to Section 7.2, or (iv) 10 days following any final determination of any Tax Claim or Proceeding, the Partnership and the Protected Partner shall jointly retain a nationally recognized big four independent public accounting firm (an “Accounting Firm”) to act as an arbitrator to resolve as expeditiously as possible all points of any such disagreement (including, without limitation, whether a breach of any of the covenants set forth in Article II and Article III has occurred and, if so, the amount of damages to which the Protected Partner is entitled as a result thereof, determined as set forth in Section 4.1).  All determinations made by the Accounting Firm with respect to the resolution of any breach or violation of any of the covenants set forth in Article II and Article III and the amount of damages payable to the Protected Partner under Section 4.1 shall, subject to any subsequent Tax Claim or Proceeding, and subject to the last sentence of this Section 4.2, be final, conclusive and binding on the Partnership and the Protected Partner.  The fees and expenses of any Accounting Firm incurred in connection with any such determination shall be shared equally by the Partnership and the Protected Partner, provided that if the amount determined by the Accounting Firm to be owed by the Partnership to the Protected Partner is more than 5% higher than the amount proposed by the Partnership to be owed to such Protected Partner prior to the submission of the matter to the Accounting Firm, then all of the fees and expenses of any Accounting Firm incurred in connection with any such determination shall be paid by the Partnership, and if the

 

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amount determined by the Accounting Firm to be owed by the Partnership to the Protected Partner is less than 95% of the amount proposed by the Protected Partner to be owed to the Protected Partner prior to the submission of the matter to the Accounting Firm then all fees and expenses of any Accounting Firm incurred in connection with any such determination shall be paid by the Protected Partner.  In the case of any Tax Claim or Proceeding that is resolved pursuant to a final determination or that is settled, compromised and/or conceded pursuant to Section 7.2, the amount of taxes due to the Internal Revenue Service or other taxing authority shall, to the extent that such taxes relate to matters covered in this Agreement, be presumed to be damages resulting from a breach of this Agreement, and the amount of any such damages shall be increased by any interest and penalties required to be paid by the Protected Partner with respect to such taxes (other than interest and penalties resulting from a failure of the Protected Partner to timely and properly file any tax return or to timely pay any tax, unless such failure resulted solely from the Protected Partner reporting and paying its taxes in a manner consistent with the Partnership) so that the amount of the damages under Section 4.1 shall not be less than the amount required to be paid to the Internal Revenue Service or other taxing authority that pertains to matters covered in this Agreement.

 

4.3                               Required Notices; Time for Payment.  In the event that there has been a breach of Article II or Article III, the Partnership shall provide to each affected Protected Partner notice of the transaction or event giving rise to such breach, along with a calculation of the amount of income to be recognized by any Protected Partner and the amount required to be paid to such Protected Partner under Section 4.1 by reason thereof, not later than 30 days following the date that the Partnership becomes aware that such transaction or event constitutes a breach of this Agreement.  All payments required to be made under Section 4.1 to any Protected Partner shall be made to such Protected Partner on or before April 15 of the year following the year in which the transaction or event giving rise to such payment took place; provided that if the Protected Partner is required to make estimated tax payments that are required to be calculated by reference to any income resulting from such transaction or event, the Partnership shall make a payment to the Protected Partner on or before the due date for such estimated tax payment, and such payment from the Partnership shall be in an amount that corresponds to the amount of the estimated tax required to be paid by such Protected Partner with respect to such income at such time; provided further that any payment required to be made under Section 4.1 to any Protected Partner resulting from a Tax Claim or Proceeding shall be made on or before the date that the relevant taxes are required to be paid as a result of any final determination of such Tax Claim or Proceeding or any settlement, compromise and/or concession of such Tax Claim or Proceeding pursuant to Section 7.2.  In the event of a payment made after the date required pursuant to this Section 4.3, interest shall accrue on the aggregate amount required to be paid from such date to the date of actual payment at a rate equal to the “prime rate” of interest, as published in the Wall Street Journal (or if no longer published there, as announced by Citibank) effective as of the date the payment is required to be made plus 10%, but not to exceed the maximum amount permitted by law.

 

ARTICLE V
 SECTION 704(C) METHOD AND ALLOCATIONS

 

5.1                               Application of “Traditional Method.”  Notwithstanding any provision of the Partnership Agreement to the contrary, the Partnership shall use the “traditional method” under

 

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Treasury Regulations Section 1.704-3(b) for purposes of making all allocations under Section 704(c) of the Code with respect to the Protected Properties.

 

ARTICLE VI
 ALLOCATIONS OF LIABILITIES PURSUANT TO TREASURY REGULATIONS UNDER SECTION 752

 

6.1                               Allocation Methods to be Followed.  All tax returns prepared by the Partnership with respect to the Tax Protection Period that allocate liabilities of the Partnership for purposes of Section 752 and the Treasury Regulations thereunder shall allocate such liabilities in a manner such that, to the greatest extent permitted under applicable law, each Protected Partner is allocated an amount of liabilities equal to or greater than its Minimum Liability Amount.

 

6.2                               Treatment of Farmland Partners OP GP, LLC.  For the avoidance of doubt, the REIT and the Partnership shall treat Farmland Partners OP GP, LLC, a Delaware limited liability company, as a “disregarded entity” having no “net value” for purposes of Treasury Regulations Section 1.752-2(k), and shall take (or refrain from taking) such actions as are necessary to continue such treatment, such that, as of the date of the Merger, the REIT shall not be treated as bearing the economic risk of loss for any of the liabilities of the Partnership for purposes of Treasury Regulation Section 1.752-2.

 

ARTICLE VII
 TAX PROCEEDINGS

 

7.1                               Notice of Tax Audits.  If any claim, demand, assessment (including a notice of proposed assessment) or other assertion is made with respect to Taxes against any Protected Partner or the Partnership the calculation of which involves a matter covered in this Agreement or the income tax treatment of the Transaction (a “Tax Claim”), or if the REIT or the Partnership receives any notice from any jurisdiction with respect to any current or future audit, examination, investigation or other proceeding involving the Protected Partners or the Partnership or that otherwise could involve a matter covered in this Agreement and could directly or indirectly affect (adversely or otherwise) the Protected Partners (a “Proceeding”), then (i) in the case of a notification of a Tax Claim or Proceeding received by the REIT or the Partnership, the REIT or the Partnership, as applicable, shall promptly notify the Protected Partners of such Tax Claim or Proceeding, but in no event later than 20 business days after receipt of such notice, and (ii) in the case of a notification of a Tax Claim or Proceeding received by any Protected Partner, or any notice of any current or future audit, examination, investigation or other proceeding received by a Protected Partner that involves or could involve a matter covered in this Agreement or the income tax treatment of the Transaction, the Protected Partner shall promptly notify the Partnership of such Tax Claim, Proceeding, or other notice, but in no event later than 20 business days after receipt of such notice.

 

7.2                               Control of Tax Proceedings.  The Partnership shall have the right to control the defense, settlement or compromise of any Proceeding or Tax Claim; provided, however, that the Partnership shall keep the Protected Partners duly informed of the progress thereof to the extent that such Proceeding or Tax Claim could directly or indirectly affect (adversely or otherwise) the Protected Partners; the Protected Partners shall have the right to participate in such Proceeding or

 

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Tax Claim at their own expense; and the Partnership shall not settle, compromise and/or concede such Proceeding or Tax Claim without the prior written consent of the Protected Partners, which written consent shall not be unreasonably withheld, delayed or conditioned.

 

ARTICLE VIII
 AMENDMENT OF THIS AGREEMENT; WAIVER OF CERTAIN PROVISIONS; APPROVAL OF CERTAIN TRANSACTIONS

 

8.1                               Amendment.  This Agreement may not be amended, directly or indirectly (including by reason of a merger between the Partnership and another entity) except by a written instrument signed by the REIT, as general partner of the Partnership, and each of the Protected Partners.

 

8.2                               Waiver.  Notwithstanding the foregoing, upon written request by the Partnership, each Protected Partner in its sole discretion, may waive the payment of any damages that is otherwise payable to such Protected Partner pursuant to Article IV hereof.  Such a waiver shall be effective only if obtained in writing from the affected Protected Partner.

 

ARTICLE IX
 MISCELLANEOUS

 

9.1                               Additional Actions and Documents.  Each of the parties hereto hereby agrees to take or cause to be taken such further actions, to execute, deliver, and file or cause to be executed, delivered and filed such further documents, and will obtain such consents, as may be necessary or as may be reasonably requested in order to fully effectuate the purposes, terms and conditions of this Agreement.

 

9.2                               Assignment.  No party hereto shall assign its or his rights or obligations under this Agreement, in whole or in part, except by operation of law, without the prior written consent of the other parties hereto, and any such assignment contrary to the terms hereof shall be null and void and of no force and effect.  Notwithstanding the foregoing and for the avoidance of doubt, in the event a Protected Partner transfers its OP Units in a transaction described in clause (ii) of the definition of “Protected Partner,” such transferee of such OP Units shall become a Protected Partner for purposes of this Agreement.

 

9.3                               Successors and Assigns.  This Agreement shall be binding upon and shall inure to the benefit of the Protected Partners and their respective successors and permitted assigns, whether so expressed or not.  This Agreement shall be binding upon the REIT, the Partnership, and any entity that is a direct or indirect successor (including a Successor Partnership), whether by merger, transfer, spin-off or otherwise, to all or substantially all of the assets of either the REIT or the Partnership (or any prior successor thereto as set forth in the preceding portion of this sentence), provided, that none of the foregoing shall result in the release of liability of the REIT and the Partnership hereunder.  The REIT and the Partnership covenant with and for the benefit of the Protected Partners not to undertake (directly or indirectly) a merger or consolidation involving the Partnership (or any Subsidiary) and a Successor Partnership, or any other transfer of all or substantially all of the assets of either the REIT or the Partnership (whether by merger, spin-off or transfer, including a transfer by a Subsidiary, or otherwise),

 

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unless the transferee has in writing acknowledged and agreed to be bound by this Agreement, provided, that the foregoing shall not be deemed to permit any transaction otherwise prohibited by this Agreement.

 

9.4                               Captions.  The Article and Section headings contained in this Agreement are inserted for convenience of reference only, shall not be deemed to be a part of this Agreement for any purpose, and shall not in any way define or affect the meaning, construction or scope of any of the provisions hereof.

 

9.5                               Notices.  All notices and other communications given or made pursuant hereto shall be in writing and shall be deemed to have been duly given or made as of the date delivered, mailed or transmitted, and shall be effective upon receipt, if delivered personally, mailed by registered or certified mail (postage prepaid, return receipt requested) to the parties at the following addresses (or at such other address for a party as shall be specified by like changes of address) or sent by electronic transmission to the telecopier number specified below:

 

(i)                                     if to the Partnership, or the REIT, to:

 

Farmland Partners Operating Partnership, LP
 c/o Farmland Partners Inc.
 8670 Wolff Court, Suite 240
 Westminster, Colorado 80031

 

(ii)                                  if to a Protected Partner, to the address on file with the Partnership.

 

Each party may designate by notice in writing a new address to which any notice, demand, request or communication may thereafter be so given, served or sent.  Each notice, demand, request, or communication which shall be hand delivered, sent, mailed, or faxed in the manner described above, shall be deemed sufficiently given, served, sent, received or delivered for all purposes at such time as it is delivered to the addressee (with the return receipt, the delivery receipt, or (with respect to a facsimile) the answerback being deemed conclusive, but not exclusive, evidence of such delivery) or at such time as delivery is refused by the addressee upon presentation.

 

9.6                               Counterparts.  This Agreement may be executed in two or more counterparts, all of which shall be considered one and the same agreement and each of which shall be deemed an original.

 

9.7                               Governing Law.  The interpretation and construction of this Agreement, and all matters relating thereto, shall be governed by the laws of the State of Delaware, without regard to the choice of law provisions thereof.

 

9.8                               Consent to Jurisdiction; Enforceability.

 

(i)                                     This Agreement and the duties and obligations of the parties hereunder shall be enforceable against any of the parties in the courts of the State of Delaware.  For such purpose, each party hereto hereby irrevocably submits to the nonexclusive jurisdiction of such

 

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courts and agrees that all claims in respect of this Agreement may be heard and determined in any of such courts.

 

(ii)                                  Each party hereto hereby irrevocably agrees that a final judgment of any of the courts specified above in any action or proceeding relating to this Agreement shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law.

 

9.9                               Severability.  If any part of any provision of this Agreement shall be invalid or unenforceable in any respect, such part shall be ineffective to the extent of such invalidity or unenforceability only, without in any way affecting the remaining parts of such provision or the remaining provisions of this Agreement.

 

9.10                        Costs of Disputes.  Except as otherwise expressly set forth in this Agreement, the nonprevailing party in any dispute arising hereunder shall bear and pay the costs and expenses (including, without limitation, reasonable attorneys’ fees and expenses) incurred by the prevailing party or parties in connection with resolving such dispute.

 

[SIGNATURE PAGES FOLLOW]

 

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IN WITNESS WHEREOF, the REIT, the Partnership and each Protected Partner, have caused this Agreement to be signed by their respective officers (or general partners) thereunto duly authorized officers and representatives all as of the date first written above.

 

	
 
    	
FARMLAND   PARTNERS INC.,
    
	
 
    	
a   Maryland corporation
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:   
    	
/s/   Luca Fabbri
    
	
 
    	
 
    	
Name:   Luca Fabbri
    
	
 
    	
 
    	
Title:   Chief Financial Officer, Secretary and Treasurer
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
FARMLAND   PARTNERS OPERATING 
   PARTNERSHIP, LP,
    
	
 
    	
a   Delaware limited partnership
    
	
 
    	
 
    
	
 
    	
By:  
    	
FARMLAND   PARTNERS OP GP, LLC, its sole 
   General Partner
    
	
 
    	
 
    
	
 
    	
By:  
    	
FARMLAND   PARTNERS INC., its
   sole Member
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:   
    	
/s/   Luca Fabbri
    
	
 
    	
 
    	
Name:   Luca Fabbri
    
	
 
    	
 
    	
Title:   Chief Financial Officer, Secretary and Treasurer
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
PITTMAN   HOUGH FARMS LLC,
   a Colorado limited liability company and
   the initial protected partner
    
	
 
    	
 
    	
 
    
	
 
    	
By:   
    	
/s/   Paul A. Pittman
    
	
 
    	
 
    	
Name:   Paul A. Pittman
    
	
 
    	
 
    	
Title:   Manager
    
	
 
    	
 
    	
 
    

 

Signature Page to Tax Protection Agreement

 

19EXHIBIT 10.8

 

Registration Rights Agreement

 

THIS REGISTRATION RIGHTS AGREEMENT (this “Agreement”) is made and entered into as of April 16, 2014 by and among FARMLAND PARTNERS INC., a Maryland corporation (the “Company”), and Pittman Hough Farms LLC, a Colorado limited liability company (the “Initial Holder”).

 

WHEREAS, the Company intends to engage in various related transactions (collectively, the “IPO Transactions”) pursuant to which, among other things, the Company will effect an initial public offering of shares of its common stock, par value $0.01 per share (the “Common Stock”);

 

WHEREAS, in connection with the IPO Transactions, the Company intends to engage in certain formation  transactions (the “Formation Transactions”) pursuant to which, among other things, FP Land LLC, a Delaware limited liability company (“FP Land”), which is owned 100% by the Initial Holder, will merge with and into Farmland Partners Operating Partnership, LP, a Delaware limited partnership (the “Operating Partnership”), and the Initial Holder will receive an aggregate of 1,945,000 units of limited partnership in the Operating Partnership (such units, the “OP Units”) on the closing date of the Formation Transactions in exchange for their respective interests in FP Land, as set forth on Schedule I attached hereto; and

 

WHEREAS, pursuant to the terms of Section 8.6 and the other related provisions of the Seconded Amended and Restated Agreement of Limited Partnership of the Operating Partnership (such agreement, as amended from time to time, the “Partnership Agreement”), commencing on the first anniversary of the date of issuance, and subject to the various limitations contained in the Partnership Agreement and other instruments being delivered in connection with the Formation Transactions, the Initial Holder will be entitled to redeem their OP Units for cash or, at the Company’s election, for shares of Common Stock;

 

WHEREAS, the Company has agreed to grant to the Initial Holder (and its permitted assignees and transferees) the registration rights described in this Agreement (the “Registration Rights”).

 

NOW, THEREFORE, the parties hereto, in consideration of the foregoing, the mutual covenants and agreements hereinafter set forth, and other good and valuable consideration, the receipt and sufficiency of which are acknowledged, hereby agree as follows:

 

SECTION 1.                            DEFINITIONS

 

The following capitalized terms used herein have the following meanings:

 

“Agreement” is defined in the preamble hereof.

 

“Business Day” any Monday, Tuesday, Wednesday, Thursday or Friday other than a day on which banks and other financial institutions are authorized or required to be closed for business in the State of New York.

 

 

“Charter” means the Company’s Articles of Amendment and Restatement, as amended from time to time.

 

“Commission” means the U.S. Securities and Exchange Commission.

 

“Common Stock” is defined in the recitals hereof.

 

“Company” is defined in the preamble hereof.

 

“Formation Transactions” is defined in the recitals hereof.

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

 

“FP Land” is defined in the recitals hereof.

 

“Holder” means (a) the Initial Holder who is the record or beneficial owner of any Registrable Security or (b) any assignee or transferee of such Initial Holder (including as a result of any assignment or transfer in connection with the foreclosure on any loans secured by the Registrable Securities).

 

“Initial Holder” is defined in the preamble hereof.

 

“IPO Closing Date” means the closing date of the Company’s initial public offering of its Common Stock.

 

“IPO Transactions” is defined in the recitals hereof.

 

“OP Units” is defined in the recitals hereof.

 

“Operating Partnership” is defined in the recitals hereof.

 

“Partnership Agreement” is defined in the recitals hereof.

 

“Person” means any individual, corporation, partnership, joint venture, limited liability company, estate, trust, unincorporated association, any federal, state, county or municipal government or any bureau, department or agency thereof and any fiduciary acting in such capacity on behalf of any of the foregoing.

 

“Prospectus” means the prospectus or prospectuses included in the Registration Statement contemplated by Section 2.1 hereof, including any documents incorporated therein by reference.

 

“Redemption Shares” means the shares of Common Stock issued to Holders upon redemption of OP Units held by such Holders.

 

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“Registrable Securities” means the Redemption Shares and any shares of Common Stock issued to a Holder with respect to the Redemption Shares by way of share dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation or other reorganization or otherwise and any shares of Common Stock issuable upon conversion, exercise or exchange thereof.

 

“Registration Rights” is defined in the recitals hereof.

 

“Registration Statement” is defined in Section 2.1 hereof.

 

“Securities Act” means the Securities Act of 1933, as amended.

 

“Suspension Event” is defined in Section 2.2(a) hereof.

 

SECTION 2.                         REGISTRATION RIGHTS

 

2.1                                       Issuer Registration Statement.

 

Subject to Section 2.2 hereof, following the date on which the Company becomes eligible to use a registration statement on Form S-3 for the registration of securities under the Securities Act, the Company shall file with the Commission a registration statement and related prospectus (the “Registration Statement”) that comply as to form in all material respects with applicable Commission rules providing for the registration of the issuance of the Registrable Securities to such Holders upon redemption of OP Units held by such Holders and the subsequent resale of such Registrable Securities by such Holders.  The Company agrees (subject to Section 2.2 hereof) to use commercially reasonable efforts to cause the Registration Statement, if filed, to be declared effective by the Commission as soon as practicable after the filing thereof.

 

Subject to Section 2.2 hereof, the Company agrees to use commercially reasonable efforts to keep the Registration Statement continuously effective (including the preparation and filing of any amendments and supplements necessary for that purpose) until the earlier of (i) the date that is three years after the date of effectiveness of such Registration Statement, (ii) the date on which all of the Registrable Securities covered by such Registration Statement are eligible for sale without registration pursuant to Rule 144 (or any successor provision) under the Securities Act without volume limitations or other restrictions on transfer thereunder, or (iii) the date on which the Holder or Holders consummate the sale of all of the Registrable Securities registered under such Registration Statement.  In the event that the Registrable Securities are issued to any Holder (other than an “affiliate,” as defined by Rule 144 under the Securities Act, of the Company) by the Company pursuant to the Registration Statement, the Company shall be deemed to have satisfied all of its registration obligations under this Agreement in respect of such Registrable Securities.

 

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2.2                               Suspension of Offering.

 

(a)                                 Notwithstanding Section 2.1 hereof, the Company shall be entitled to postpone the filing of the Registration Statement, and from time to time to require Holders not to sell under the Registration Statement or to suspend the effectiveness thereof, if (i) the Company is actively pursuing an underwritten primary offering of equity securities of the Company, or (ii) the negotiation or consummation of a transaction by the Company or its subsidiaries is pending or an event has occurred, which negotiation, consummation or event would require additional disclosure by the Company in the Registration Statement of material information which the Company has a bona fide business purpose for keeping confidential and the non-disclosure of which in the Registration Statement would be expected, in the Company’s reasonable determination, to cause the Registration Statement to fail to comply with applicable disclosure requirements under the Exchange Act or the Securities Act (each such circumstance a “Suspension Event”); provided, however, that the Company may not delay, suspend or withdraw such Registration Statement for more than 90 days at any one time, or more than twice in any 12-month period.  Upon receipt of any written notice from the Company of the happening of any Suspension Event during the period the Registration Statement is effective or if as a result of a Suspension Event the Registration Statement or related Prospectus contains any untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made (in the case of the Prospectus) not misleading, each Holder agrees that (x) it will immediately discontinue offers and sales of the Registrable Securities under such Registration Statement until the Holder receives copies of a supplemental or amended Prospectus (which the Company agrees to promptly prepare) that corrects the misstatement(s) or omission(s) referred to above and receives notice that any post-effective amendment has become effective or unless otherwise notified by the Company that it may resume such offers and sales, and (y) it will maintain the confidentiality of any information included in the written notice delivered by the Company unless otherwise required by law or subpoena.  If so directed by the Company, each Holder will deliver to the Company all copies of the Prospectus covering the Registrable Securities current at the time of receipt of such notice, other than permanent file copies then in the possession of such Holder’s counsel.

 

(b)                                 If all reports required to be filed by the Company pursuant to the Exchange Act have not been filed by the required date taking into account any permissible extension, upon written notice thereof by the Company to the Holders, the rights of the Holders to offer, sell or distribute any Registrable Securities pursuant to the Registration Statement or to require the Company take action with respect to the registration or sale of any Registrable Securities pursuant to the Registration Statement shall be suspended until the date on which the Company has filed such reports, and the Company shall notify the Holders in writing as promptly as practicable when such suspension is no longer required.

 

2.3                               Qualification. The Company shall file such documents as necessary to register or qualify the Registrable Securities to be covered by the Registration Statement by the time such Registration Statement is declared effective by the Commission under all applicable state securities or “blue sky” laws of such jurisdictions as any Holder may reasonably request in writing, and shall use commercially reasonable efforts to keep each such registration or qualification effective during the period such Registration Statement is required to be kept

 

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effective pursuant to this Agreement or during the period offers or sales are being made by the Holders, whichever is shorter, and to do any and all other similar acts and things which may be reasonably necessary or advisable to enable the Holders to consummate the disposition of such Registrable Securities in each such jurisdiction; provided, however, that the Company shall not be required to (i) qualify generally to do business in any jurisdiction or to register as a broker or dealer in such jurisdiction where it would not otherwise be required to qualify but for this Agreement, (ii) take any action that would cause it to become subject to any taxation in any jurisdiction where it would not otherwise be subject to such taxation or (iii) take any action that would subject it to the general service of process in any jurisdiction where it is not then so subject.

 

2.4                               Additional Obligations of the Company. When the Company is required to effect the registration of Registrable Securities under the Securities Act pursuant to Section 2.1 of this Agreement, subject to Section 2.2 hereof, the Company shall:

 

(a)                                 prepare and file with the Commission such amendments and supplements to the Registration Statement and the Prospectus used in connection therewith as may be necessary (i) to keep such Registration Statement effective and (ii) to comply with the provisions of the Securities Act with respect to the disposition of the Registrable Securities covered by such Registration Statement, in each case for such time as is contemplated in Section 2.1;

 

(b)                                 furnish, without charge, to the Holders such number of copies of the Registration Statement, each amendment and supplement thereto (in each case including all exhibits), and the Prospectus included in such Registration Statement (including each preliminary Prospectus), in conformity with the requirements of the Securities Act as the Holders may reasonably request in order to facilitate the public sale or other disposition of the Registrable Securities owned by the Holders;

 

(c)                                  notify the Holders: (i) when the Registration Statement, any pre-effective amendment, the Prospectus or any prospectus supplement related thereto or post-effective amendment to the Registration Statement has been filed, and, with respect to the Registration Statement or any post-effective amendment, when the same has become effective, (ii) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or the initiation or threat of any proceedings for that purpose, and (iii) of the receipt by the Company of any notification with respect to the suspension of the qualification of any Registrable Securities for sale under the securities or “blue sky” laws of any jurisdiction or the initiation of any proceeding for such purpose;

 

(d)                                 promptly use commercially reasonable efforts to prevent the issuance of any order suspending the effectiveness of the Registration Statement, and, if any such order suspending the effectiveness of the Registration Statement is issued, shall promptly use commercially reasonable efforts to obtain the withdrawal of such order at the earliest possible moment;

 

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(e)                                  Until the sooner of completion, abandonment or termination of the offering or sale contemplated by the Registration Statement and related Prospectus and the expiration of the period during which the Company is required to maintain the effectiveness of the Registration Statement under Section 2.1, promptly notify the Holders: (i) of the existence of any fact of which the Company is aware or the happening of any event which has resulted in (A) the Registration Statement, as then in effect, containing an untrue statement of a material fact or omitting to state a material fact required to be stated therein or necessary to make any statements therein not misleading or (B) the Prospectus included in such Registration Statement containing an untrue statement of a material fact or omitting to state a material fact required to be stated therein or necessary to make any statements therein, in the light of the circumstances under which they were made, not misleading, and (ii) of the Company’s reasonable determination that a post-effective amendment to the Registration Statement would be appropriate or that there exist circumstances not yet disclosed to the public which make further sales under such Registration Statement inadvisable pending such disclosure and post-effective amendment; and, if the notification relates to any event described in either of the clauses (i) or (ii) of this Section 2.4(e), at the request of the Holders, the Company shall prepare and, to the extent the exemption from the prospectus delivery requirements in Rule 172 under the Securities Act is not available, furnish to the Holders a reasonable number of copies of a supplement or post-effective amendment to such Registration Statement or related Prospectus or file any other required document so that (1) such Registration Statement shall not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading and (2) as thereafter delivered to the purchasers of the Registrable Securities being sold thereunder, such Prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading;

 

(f)                                   use commercially reasonable efforts to cause all such Registrable Securities to be listed on the national securities exchange on which the Common Stock are then listed, if the listing of Registrable Securities is then permitted under the rules of such national securities exchange; and

 

(g)                                  if requested by any Holder participating in the offering of Registrable Securities, incorporate in a prospectus supplement or post-effective amendment such information concerning the Holder or the intended method of distribution as the Holder reasonably requests to be included therein and is reasonably necessary to permit the sale of the Registrable Securities pursuant to the Registration Statement, including, without limitation, information with respect to the number of Registrable Securities being sold, the purchase price being paid therefor and any other material terms of the offering of the Registrable Securities to be sold in such offering; provided, however, that the Company shall not be obligated to include in any such prospectus supplement or post-effective amendment any requested information that is not required by the rules of the Commission and is unreasonable in scope compared with the Company’s most recent prospectus or prospectus supplement used in connection with a primary or secondary offering of equity securities by the Company.

 

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2.5                               Obligations of the Holder.  In connection with any Registration Statement utilized by the Company to satisfy the Registration Rights pursuant to this Section 2, each Holder agrees to cooperate with the Company in connection with the preparation of the Registration Statement, and each Holder agrees that it will (i) respond within 10  Business Days to any written request by the Company to provide or verify information regarding the Holder or the Holder’s Registrable Securities (including the proposed manner of sale) that may be required to be included in such Registration Statement and related Prospectus pursuant to the rules and regulations of the Commission, and (ii) provide in a timely manner information regarding the proposed distribution by the Holder of the Registrable Securities and such other information as may be requested by the Company from time to time in connection with the preparation of and for inclusion in the Registration Statement and related Prospectus.

 

SECTION 3.                         INDEMNIFICATION; CONTRIBUTION

 

3.1                               Indemnification by the Company.  The Company agrees to indemnify and hold harmless each Holder and each Person, if any, who controls any Holder within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act and any of their partners, members, officers, trustees, employees or representatives, as follows:

 

(i)                                     against any and all loss, liability, claim, damage, judgment and expense whatsoever, as incurred, arising out of or based upon any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement (or any amendment thereto) pursuant to which the Registrable Securities were registered under the Securities Act, including all documents incorporated therein by reference, or the omission or alleged omission therefrom of a material fact required to be stated therein or necessary to make the statements therein not misleading or arising out of or based upon any untrue statement or alleged untrue statement of a material fact contained in any Prospectus (or any amendment or supplement thereto), including all documents incorporated therein by reference, or the omission or alleged omission therefrom of a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading;

 

(ii)                                  against any and all loss, liability, claim, damage, judgment and expense whatsoever, as incurred, to the extent of the aggregate amount paid in settlement of any litigation, or investigation or proceeding by any governmental agency or body, commenced or threatened, or of any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission, if such settlement is effected with the written consent of the Company; and

 

(iii)                               against any and all expense whatsoever, as incurred (including reasonable fees and disbursements of counsel), reasonably incurred in investigating, preparing or defending against any litigation, or investigation or proceeding by any governmental agency or body, commenced or threatened, in each case whether or not a party, or any claim whatsoever based upon any such untrue statement or omission, or any

 

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such alleged untrue statement or omission, to the extent that any such expense is not paid under subparagraph (i) or (ii) above;

 

provided, however, that the indemnity provided pursuant to this Section 3.1 does not apply to any Holder with respect to any loss, liability, claim, damage, judgment or expense to the extent arising out of (A) any untrue statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with written information furnished to the Company by such Holder expressly for use in the Registration Statement (or any amendment thereto) or the Prospectus (or any amendment or supplement thereto) or (B) any Holder’s failure to deliver an amended or supplemental Prospectus furnished to such Holder by the Company, if such loss, liability, claim, damage, judgment or expense would not have arisen had such delivery occurred.

 

3.2                               Indemnification by Holder. Each Holder (and each permitted assignee of such Holder, on a several basis) severally and not jointly agrees to indemnify and hold harmless the Company, and each of its trustees and officers (including each trustee and officer of the Company who signed a Registration Statement), each Person, if any, who controls the Company within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act and each other Holder as follows:

 

(i)                                     against any and all loss, liability, claim, damage, judgment and expense whatsoever, as incurred, arising out of or based upon any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement (or any amendment thereto) pursuant to which the Registrable Securities of such Holder were registered under the Securities Act, including all documents incorporated therein by reference, or the omission or alleged omission therefrom of a material fact required to be stated therein or necessary to make the statements therein not misleading or arising out of or based upon any untrue statement or alleged untrue statement of a material fact contained in any Prospectus (or any amendment or supplement thereto), including all documents incorporated therein by reference, or the omission or alleged omission therefrom of a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading;

 

(ii)                                  against any and all loss, liability, claim, damage, judgment and expense whatsoever, as incurred, to the extent of the aggregate amount paid in settlement of any litigation, or investigation or proceeding by any governmental agency or body, commenced or threatened, or of any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission, if such settlement is effected with the written consent of such Holder; and

 

(iii)                               against any and all expense whatsoever, as incurred (including reasonable fees and disbursements of counsel), reasonably incurred in investigating, preparing or defending against any litigation, or investigation or proceeding by any governmental agency or body, commenced or threatened, in each case whether or not a party, or any claim whatsoever based upon any such untrue statement or omission, or any

 

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such alleged untrue statement or omission, to the extent that any such expense is not paid under subparagraph (i) or (ii) above;

 

provided, however, that the indemnity provided pursuant to this Section 3.2 shall only apply with respect to any loss, liability, claim, damage, judgment or expense to the extent arising out of (A) any untrue statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with written information furnished to the Company by such Holder expressly for use in the Registration Statement (or any amendment thereto) or the Prospectus (or any amendment or supplement thereto) or (B) any Holder’s failure to deliver an amended or supplemental Prospectus furnished to the Holder by the Company, if such loss, liability, claim, damage or expense would not have arisen had such delivery occurred.  Notwithstanding the provisions of this Section 3.2, a Holder and any permitted assignee shall not be required to indemnify the Company, its officers, trustees or control persons with respect to any amount in excess of the amount of the net proceeds actually received by such Holder or such permitted assignee, as the case may be, from sales of the Registrable Securities of such Holder under the Registration Statement that is the subject of the indemnification claim.

 

3.3                               Conduct of Indemnification Proceedings.  An indemnified party hereunder shall give reasonably prompt notice to the indemnifying party of any action or proceeding commenced against it in respect of which indemnity may be sought hereunder, but failure to so notify the indemnifying party (i) shall not relieve the indemnifying party from any liability which it may have under the indemnity agreement provided in Sections 3.1 or 3.2 above, unless and only to the extent it did not otherwise learn of such action and the lack of notice by the indemnified party results in the forfeiture by the indemnifying party of substantial rights and defenses, and (ii) shall not, in any event, relieve the indemnifying party from any obligations to any indemnified party other than the indemnification obligation provided under Sections 3.1 or 3.2 above.  If the indemnifying party so elects within a reasonable time after receipt of such notice, the indemnifying party may assume the defense of such action or proceeding at such indemnifying party’s own expense with counsel chosen by the indemnifying party and approved by the indemnified party, which approval shall not be unreasonably withheld; provided, however, that the indemnifying party will not settle, compromise or consent to the entry of any judgment with respect to any such action or proceeding without the written consent of the indemnified party unless such settlement, compromise or consent secures the unconditional release of the indemnified party of all liability at no cost or expense to the indemnified party; and provided further, that, if the indemnified party reasonably determines that a conflict of interest exists where it is advisable for the indemnified party to be represented by separate counsel or that, upon advice of counsel, there may be legal defenses available to it which are different from or in addition to those available to the indemnifying party, then the indemnifying party shall not be entitled to assume such defense and the indemnified party shall be entitled to separate counsel at the indemnifying party’s expense. If the indemnifying party is not entitled to assume the defense of such action or proceeding as a result of the second proviso to the preceding sentence, the indemnifying party’s counsel shall be entitled to conduct the indemnifying party’s defense and counsel for the indemnified party shall be entitled to conduct the defense of the indemnified party, it being understood that both such counsel will cooperate with each other to conduct the defense of such action or proceeding as efficiently as possible. If the indemnifying party is not so

 

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entitled to assume the defense of such action or does not assume such defense, after having received the notice referred to in the first sentence of this paragraph, the indemnifying party will pay the reasonable fees and expenses of counsel for the indemnified party. In such event, however, the indemnifying party will not be liable for any settlement effected without the written consent of the indemnifying party (which consent will not be unreasonably withheld). If an indemnifying party is entitled to assume, and assumes, the defense of such action or proceeding in accordance with this paragraph, the indemnifying party shall not be liable for any fees and expenses of counsel for the indemnified party incurred thereafter in connection with such action or proceeding.

 

3.4                               Contribution.

 

(a)                                 In order to provide for just and equitable contribution in circumstances in which the indemnity agreement provided for in Sections 3.1 and 3.2 above is for any reason held to be unenforceable by the indemnified party although applicable in accordance with its terms, the Company and the relevant Holder shall contribute to the aggregate losses, liabilities, claims, damages and expenses of the nature contemplated by such indemnity agreement incurred by the Company and the Holder, in such proportion as is appropriate to reflect the relative fault of the Company on the one hand and the Holder on the other hand, in connection with the statements or omissions which resulted in such losses, claims, damages, liabilities, or expenses.  The relative fault of the indemnifying party and indemnified party shall be determined by reference to, among other things, whether the action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact, has been made by, or relates to information supplied by, the indemnifying party or the indemnified party, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such action.

 

(b)                                 The parties hereto agree that it would not be just or equitable if contribution pursuant to this Section 3.4 were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to in the immediately preceding paragraph. Notwithstanding the provisions of this Section 3.4, a Holder shall not be required to contribute any amount in excess of the amount of the net proceeds actually received by such Holder from sales of the Registrable Securities of such Holder under the Registration Statement that is the subject of the indemnification claim.

 

(c)                                  Notwithstanding the foregoing, no Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. For purposes of this Section 3.4, each Person, if any, who controls a Holder within the meaning of Section 15 of the Securities Act shall have the same rights to contribution as the Holder, and each trustee of the Company, each officer of the Company who signed a Registration Statement and each Person, if any, who controls the Company within the meaning of Section 15 of the Securities Act shall have the same rights to contribution as the Company.

 

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SECTION 4.                         EXPENSES

 

The Company shall pay all expenses incident to the performance by the Company of its registration obligations under Section 2 above, including (i) Commission, stock exchange and FINRA registration and filing fees, (ii) all fees and expenses incurred in complying with securities or “blue sky” laws (including reasonable fees, charges and disbursements of counsel to any underwriter incurred in connection with “blue sky” qualifications of the Registrable Securities as may be set forth in any underwriting agreement), (iii) all printing, messenger and delivery expenses, and (iv) the fees, charges and expenses of counsel to the Company and of its independent public accountants and any other accounting fees, charges and expenses incurred by the Company (including, without limitation, any expenses arising from any “comfort” letters or any special audits incident to or required by any registration or qualification).  Each Holder shall be responsible for the payment of any brokerage and sales commissions, fees and disbursements of such Holder’s counsel, accountants and other advisors, and any transfer taxes relating to the sale or disposition of the Registrable Securities by such Holder pursuant to this Agreement.

 

SECTION 5.                         RULE 144 COMPLIANCE

 

The Company covenants that it will use its best efforts to timely file the reports required to be filed by the Company under the Securities Act and the Exchange Act so as to enable the Holders to sell the Registrable Securities pursuant to Rule 144 under the Securities Act.  In connection with any sale, transfer or other disposition by a Holder of any Registrable Securities pursuant to Rule 144 under the Securities Act, the Company shall cooperate with the Holder to facilitate the timely preparation and delivery of certificates representing the Registrable Securities to be sold and not bearing any Securities Act restrictive legend, and enable certificates for such Registrable Securities to be for such number of shares and registered in such names as such Holder may reasonably request at least five Business Days prior to any sale of Registrable Securities hereunder.

 

SECTION 6.                         MISCELLANEOUS

 

6.1                               Integration; Amendment.  This Agreement constitutes the entire agreement among the parties hereto with respect to the matters set forth herein and supersedes and renders of no force and effect all prior oral or written agreements, commitments and understandings among the parties with respect to the matters set forth herein. Except as otherwise expressly provided in this Agreement, no amendment, modification or discharge of this Agreement shall be valid or binding unless set forth in writing and duly executed by each of the parties hereto.

 

6.2                               Waivers.  No waiver by a party hereto shall be effective unless made in a written instrument duly executed by the party against whom such waiver is sought to be enforced, and only to the extent set forth in such instrument. Neither the waiver by any of the parties hereto of a breach or a default under any of the provisions of this Agreement, nor the failure of any of the parties, on one or more occasions, to enforce any of the provisions of this Agreement or to exercise any right or privilege hereunder shall thereafter be construed as a waiver of any subsequent breach or default of a similar nature, or as a waiver of any such provisions, rights or privileges hereunder.

 

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6.3                               Assignment; Successors and Assigns.  This Agreement and the rights granted hereunder may not be assigned by a Holder without the written consent of the Company; provided, however, that a Holder may assign its rights and obligations hereunder, without such consent, in connection with a transfer of some or all of such Holder’s Registrable Securities (i) to the extent permitted under the Partnership Agreement or the Charter, as applicable, and (ii) provided such transferee agrees in writing to be bound by all of the provisions hereof and the Holder provides written notice to the Company within 10 days of the effectiveness of such assignment.  This Agreement shall inure to the benefit of and be binding upon all of the parties hereto and their respective heirs, executors, personal and legal representatives, successors and permitted assigns, including, without limitation, any successor of the Company by merger, acquisition, reorganization, recapitalization or otherwise.

 

6.4                               Notices.  All notices called for under this Agreement shall be in writing and shall be deemed duly given (a) on the date of delivery if delivered personally, (b) on the first Business Day following the date of dispatch if delivered by a nationally recognized next-day courier service, (c) on the fifth Business Day following the date of mailing if delivered by registered or certified mail, return receipt requested, postage prepaid, or (d) if sent by facsimile transmission during business hours on a Business Day, when transmitted and receipt is confirmed, or otherwise on the following Business Day.  All notices hereunder shall be delivered to the Company at the address of the Company set forth opposite its signature on the signature page, and to the Initial Holder at the addresses of the Initial Holder set forth on the signature page hereto, or to any other address or addressee as any party entitled to receive notice under this Agreement shall designate, from time to time, to others in the manner provided in this Section 6.4 for the service of notices; provided, however, that notices of a change of address shall be effective only upon receipt thereof.

 

6.5                               Specific Performance.  The parties hereto acknowledge that the obligations undertaken by them hereunder are unique and that there would be no adequate remedy at law if any party fails to perform any of its obligations hereunder, and accordingly agree that each party, in addition to any other remedy to which it may be entitled at law or in equity, shall be entitled to (i) compel specific performance of the obligations, covenants and agreements of any other party under this Agreement in accordance with the terms and conditions of this Agreement and (ii) obtain preliminary injunctive relief to secure specific performance and to prevent a breach or contemplated breach of this Agreement in any court of the United States or any State thereof having jurisdiction.

 

6.6                               Governing Law.  This Agreement, the rights and obligations of the parties hereto, and any claims or disputes relating thereto, shall be governed by and construed in accordance with the laws of the State of Maryland (excluding the conflict of law provisions thereof).

 

6.7                               Headings.  Section and subsection headings contained in this Agreement are inserted for convenience of reference only, shall not be deemed to be a part of this Agreement for any purpose, and shall not in any way define or affect the meaning, construction or scope of any of the provisions hereof.

 

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6.8                               Pronouns.  All pronouns and any variations thereof shall be deemed to refer to the masculine, feminine, neuter, singular or plural, as the identity of the person or entity may require.

 

6.9                               Execution in Counterparts.  This Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which together shall constitute one and the same agreement.  This Agreement may be executed by facsimile signatures.

 

6.10                        Severability.  If fulfillment of any provision of this Agreement, at the time such fulfillment shall be due, shall transcend the limit of validity prescribed by law, then the obligation to be fulfilled shall be reduced to the limit of such validity; and if any provision of this Agreement shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions of this Agreement shall not in any way be affected or impaired thereby.

 

6.11                        No Third-Party Beneficiaries.  Except as may be expressly provided herein (including without limitation Section 3 hereof), it is the explicit intention of the parties hereto that no person or entity other than the parties hereto is or shall be entitled to bring any action to enforce any provision of this Agreement against any of the parties hereto, and the covenants, undertakings and agreements set forth in this Agreement shall be solely for the benefit of, and shall be enforceable only by, the parties hereto or their respective successors, heirs, executors, administrators, legal representatives and permitted assigns.

 

6.12                        Legend Removal.  The Company, upon the request of any Holder of Registrable Securities, shall use its commercially reasonable efforts to remove any restrictive legend from the certificates representing such Registrable Securities with respect to the Securities Act and any state securities laws, and shall cause the termination of any related stop transfer orders, if (a) such Registrable Securities are eligible for sale without registration pursuant to Rule 144 (or any successor provision) under the Securities Act without any volume limitations or other restrictions on transfer under paragraphs (c), (e), (f) and (h) of Rule 144 and (b) such Holder provides the Company with a representation letter in customary form reasonably sufficient to establish that such limitations and restrictions under paragraphs (c), (e), (f) and (h) of Rule 144 do not apply to such Registrable Securities.  Such Holder further agrees to indemnify the Company against any loss, cost or expenses, including reasonable expenses and attorney’s fees, incurred as a result of such legend removal on such Holder’s behalf; provided, however, that the foregoing indemnification shall not apply to a Holder that is a governmental entity unless such Holder is authorized by applicable law to provide such indemnification.

 

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IN WITNESS WHEREOF, each of the undersigned has caused this Agreement to be duly executed and delivered in its name and on its behalf as of the date first written above.

 

	
Address:
    	
THE COMPANY:
    
	
 
    	
 
    	
 
    
	
8670   Wolff Court, Suite 240

Westminster,   CO 80031
    	
FARMLAND   PARTNERS INC., a Maryland
   corporation
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   Luca Fabbri
    
	
 
    	
Name:
    	
Luca   Fabbri
    
	
 
    	
Title:
    	
Chief   Financial Officer, Secretary and Treasurer
    
	
 
    	
 
    	
 
    
	
Address:
    	
INITIAL HOLDER:
    
	
 
    	
 
    
	
8670   Wolff Court, Suite 240

Westminster,   CO 80031
    	
PITTMAN   HOUGH FARMS LLC, a Colorado

limited   liability company
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   Paul A. Pittman
    
	
 
    	
Name:
    	
Paul   A. Pittman
    
	
 
    	
Title:
    	
Manager
    

 

[Signature Page to the Registration Rights Agreement]

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