Document:

hgbl-ex41_129.htm

EXECUTION VERSION

Exhibit 4.1

THIS AGREEMENT AND THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAW AND MAY NOT BE OFFERED, SOLD, PLEDGED, TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT OR APPLICABLE EXEMPTION FROM REGISTRATION.

WARRANT AGREEMENT

 

THIS WARRANT AGREEMENT (this “Agreement”) is made as of March 19, 2019 (the “Effective Date”), between Heritage Global Inc., a Florida corporation (the “Company”), and Napier Park Industrial Asset Acquisition, LP, a Delaware limited partnership (together with its successors and assigns, the “Warrant Holder”). 

 

RECITALS

 

 

WHEREAS, Oak Grove Asset Acquisition LP, a Delaware limited partnership (the “Partnership”) was formed as a limited partnership pursuant to and in accordance with the Delaware Revised Uniform Limited Partnership Act (6 Del C. § 17), as it may be succeeded or amended from time to time (the “Act”), by the filing of a certificate of limited partnership with the office of the Secretary of the State of Delaware on December 19, 2018;

 

WHEREAS, the Partnership is governed by that certain Limited Partnership Agreement (the “Partnership Agreement”), dated as of December 19, 2018, by and among the Company, the Warrant Holder, Heritage Global Partners, Inc., a California corporation, and HGPNP, LLC, a Delaware limited liability company;

 

WHEREAS, the Company’s Articles of Incorporation, as amended, authorizes the issuance of 300,000,000 shares of common stock of the Company, par value of $0.01 per share (the “Common Stock”);

 

WHEREAS, in order to induce Warrant Holder to enter into the Partnership Agreement and provide capital in accordance with the terms thereof, the Company agreed to issue certain warrants (each a “Warrant”) to purchase shares of Common Stock, on the terms set forth herein

 

NOW, THEREFORE, in consideration of the premises and the mutual agreements herein set forth, and for other good and lawful consideration, the receipt, sufficiency and adequacy of which are hereby acknowledged, the parties hereto agree as follows:

 

SECTION 1Definitions.  When used herein, the following terms shall have the following meanings.  Capitalized terms not otherwise defined herein shall have the meaning set forth in the Partnership Agreement.

 

“Common Stock” is defined in the recitals.

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“Cumulative Gross Profit” means a dollar amount equal to the difference between: (i) the sum of (A) the aggregate distributions received by the Company under Section 3.1 of the Partnership Agreement in respect of Transactions, plus (B) the aggregate amount of Distributable Cash retained by the Partnership that the Company would be entitled to receive if such Distributable Cash were actually distributed, minus (ii) the aggregate Capital Contributions made to the Partnership by or on behalf of the Company or any affiliate of the Company.  For clarity, Cumulative Gross Profit can be a negative number and in determining the Cumulative Gross Profit, no sum or amount shall be counted more than once.

 

“Eligible Market” means the New York Stock Exchange, the NASDAQ Capital Market, the NASDAQ Global Market, the NASDAQ Global Select Market or the NYSE American or, in each case, any successor thereto.

 

“Exercise Period” is defined in Section 2(b).

 

“Exercise Price” is defined in Section 2(a).

 

“Fair Market Value” means, as of any date with respect to any security: (a) if such security is listed or quoted on an Eligible Market, the volume weighted average price of such security (as reported by Bloomberg Financial Markets) for the ten (10) Business Days immediately preceding such date of determination on the Eligible Market that is the principal market for such security; (b) if such security is not listed or quoted on an Eligible Market but is traded over the counter and quoted on a Pink OTC Market or on the OTC Bulletin Board, the average of the last bid prices (as reported by Bloomberg Financial Markets) for such security on all Pink OTC Markets and the OTC Bulletin Board during the thirty (30) day period prior to the date of determination; provided, that if such security is listed on any domestic securities exchange, the term “Business Day” as used in this sentence means Business Days on which such exchange is open for trading.  The Fair Market Value (y) of any property and (z) of any security that is not listed on any Eligible Market or traded over the counter and quoted on the Pink OTC Markets or OTC Bulletin Board shall, in each case, be the fair market value as determined jointly by the Board of Directors of the Company and the Warrant Holder; provided, that if the Board of Directors of the Company and the Warrant Holder are unable to agree on the fair market value of such security or other property within a reasonable period of time (not to exceed fourteen (14) days from the Company’s receipt of the Election to Purchase, notification of a dispute under Section 2(c) or the deemed exercise of a Warrant pursuant to Section 2(b), as applicable), such fair market value shall be determined by a nationally recognized investment banking, accounting or valuation firm engaged by the Company and reasonably acceptable to the Warrant Holder.  The determination of such firm shall be final and conclusive, and the fees and expenses of such valuation firm shall be borne equally by the Company and the Warrant Holder.

 

“Holder” means a registered holder of any Warrant, Warrant Certificate or Warrant Share.

 

“Major Transaction” means a sale of the Company to a third party, whether by direct sale of capital stock, issuance of capital stock, merger, consolidation, other business combination or otherwise, including through a sale of all or substantially all of the Company’s assets following which the Company distributes its assets to its stockholders.  Major Transactions shall include, 

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without limitation, a transaction or series of transactions following which the holders of Common Stock immediately preceding such transaction (or series of transactions) cease to (i) hold at least 50% of the Common Stock or (ii) have the ability to elect at least 50% of the members of the board of directors of the Company.  

 

“Major Transaction Consideration” means, in respect of any Warrant or portion thereof as to which a Holder has delivered a Major Transaction Redemption Notice (as defined below), the amount of cash and other assets and the number of securities or other property of a successor entity or other acquirer in a Major Transaction that would be issuable or payable to such Holder (or, in the case of an asset sale following which the Company distributes its assets to holders of Common Stock, the amount of cash, assets, securities and property distributable to such Holder) if the Warrant were exercised for cash immediately prior to such Major Transaction (or distribution, in the case of an asset sale) with respect to the number of Warrant Shares specified in the Major Transaction Redemption Notice.  

 

“OTC Bulletin Board” means the Financial Industry Regulatory Authority OTC Bulletin Board electronic inter-dealer quotation system. 

 

“Person” means an individual, corporation, partnership, limited liability company, trust or any other entity.

 

“Pink OTC Markets” means the OTC Markets Group Inc. electronic inter-dealer quotation system, including OTCQX, OTCQB and OTC Pink.

 

“Registrable Securities” means (a) any shares of Common Stock  issued or issuable upon exercise of, or otherwise pursuant to, the Warrants and (b) any securities issued or issuable upon any stock split, dividend or other distribution, recapitalization or similar event with respect to any of the foregoing.

 

“Registration Period” means the period commencing on the date hereof and ending on the earlier of (i) the date on which all of the Registrable Securities have been sold pursuant to a registration statement filed and declared effective under the Securities Act (a “Registration Statement”) and (ii) assuming all of the Warrants will be exercised for cash), the date on which all of the Registrable Securities (in the opinion of counsel to the Warrant Holders) may be immediately sold to the public without registration or restriction (including without limitation as to volume by each holder thereof), and without compliance with any “current public information” requirement, pursuant to Rule 144 under the Securities Act.

 

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

 

“Warrant” is defined in the recitals.

 

“Warrant Certificate” is defined in Section 3.

 

“Warrant Shares” means the shares of Common Stock issued or issuable upon exercise of the Warrants.

 

 

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SECTION 2Warrant Threshold.  

 

(a)Issuance.   Unless and until the amount of Cumulative Gross Profit equals $2.5 million (the “Initial Warrant Hurdle”), Warrant Holder shall not be entitled to receive any Warrants.   Following the achievement of the Initial Warrant Hurdle, for each $500,000 increment of additional Cumulative Gross Profit (each, a “Warrant Threshold”) achieved prior to December 19, 2022, Warrant Holder shall be entitled to receive from the Company, and the Company shall issue to Warrant Holder (for no additional consideration), a Warrant to purchase a number of Warrant Shares equal to the quotient obtained by dividing: (i) $71,368.00, by (ii) the Fair Market Value of a share of Common Stock as of the date the applicable Warrant Threshold was achieved (the “Exercise Price”), at a per share price equal to the Exercise Price.    

 

(b)Duration of Warrants.  The Company shall determine (in good faith) whether the Initial Warrant Hurdle and/or a Warrant Threshold has been achieved as soon as practicable following each Determination Date and, in any event, no less frequently than once per calendar quarter. Each Warrant shall be effective from the date the Warrant Threshold requiring the issuance of such Warrant was achieved until the fifth (5th) anniversary of the applicable Issuance Date (as defined below) (with respect to that Warrant, the “Exercise Period”).  Any Warrant not completely exercised prior to the end of its Exercise Period shall expire and cease to be exercisable as of such time and Warrant Holder shall promptly surrender to Company any related Warrant Certificate; provided, however, that any Warrant that has not been exercised in full immediately prior to the expiration of its applicable Exercise Period shall be deemed automatically exercised by the method set forth in Section 6(c) below immediately prior to its expiration to the extent the Fair Market Value of the Warrant Shares is greater than the Exercise Price then in effect.

 

(c)Successor.  

 

(1)Notwithstanding Section 2(a), if prior to December 19, 2022 (i) the Partnership Agreement terminates for any reason or no reason, and (ii) the Company enters into a Subsequent Financing, then until the later of (y) December 19, 2022, and (z) twelve (12) months after termination of the Partnership Agreement, Warrant Holder shall be entitled to receive twenty-five percent (25%) of the Warrants that would otherwise be due under Section 2(a) calculated using the equivalent of Cumulative Gross Profits that are received by the Company from the Subsequent Financing.  

(2)In the event that a Major Transaction occurs, at least fifteen (15) Business Days prior to the consummation of any Major Transaction, the Company shall deliver written notice thereof via electronic mail and overnight courier to each Holder (a “Major Transaction Notice”).  Each Major Transaction Notice shall describe the material terms of the applicable Major Transaction (including the Major Transaction Consideration per Warrant Share and, if the Major Transaction Consideration includes non-cash consideration, the Company’s good faith estimate of the Fair Market Value thereof) and shall be accompanied by any other materials or information furnished or made available to stockholders of the Company in connection with the Major Transaction.  At any time during the period beginning after Holder’s receipt of a Major Transaction Notice and ending five (5) days prior to the consummation of such Major Transaction, Holder may require the Company to redeem all or any portion of this Warrant by delivering written notice thereof (a “Major Transaction Redemption Notice”) to the Company, which Major Transaction Redemption Notice shall indicate the portion of the amount of the Warrant (by reference 

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to the number of Warrant Shares issuable upon an exercise of the Warrant) that Holder is electing to have redeemed. After such redemption, Holder shall be entitled to the Major Transaction Consideration due to such Holder upon the consummation of such Major Transaction that is equal to (x) the Fair Market Value of the Major Transaction Consideration, minus (y) the aggregate Exercise Price for the portion of the Warrant being redeemed, as set forth in the Major Transaction Redemption Notice.  In the event that the consideration payable to stockholders of the Company is payable upon satisfaction of contingencies, or is placed into escrow or retained as a holdback for satisfaction of indemnification or similar obligations in connection with the Major Transaction (collectively, “Additional Amounts”), any additional Major Transaction Consideration attributable to Additional Amounts received by the Company or its stockholders shall be paid to Holder contemporaneously with the payment of such Additional Amounts to the Company or its stockholders, as applicable.     

 

SECTION 3Warrant Certificates.  Each Warrant due in accordance with Section 2 shall be evidenced by a certificate representing such Warrant (each a “Warrant Certificate”) substantially in the form of Exhibit A hereto and dated as of the applicable.  Company shall promptly, and in any event within five (5) Business Days following a determination that a Warrant Threshold has been achieved, issue and deliver to Warrant Holder a Warrant Certificate in respect of each Warrant that becomes due under Section 2.  The “Date of Issuance” in respect of each Warrant shall be the date the Warrant Certificate evidencing such Warrant is delivered to Warrant Holder.  

 

SECTION 4Registration.  The Company shall keep at its principal office a register or registers in which the Company shall record the registrations of the Warrants and the names and addresses of the Holders thereof from time to time and all transfers thereof.  The Company shall number and register the Warrant Certificates in such register as they are issued by the Company.  The Company may deem and treat the registered Holders of the Warrant Certificates as the absolute owners thereof, for all purposes, and the Company shall not be affected by any notice to the contrary.

 

SECTION 5Legends; Rule 144.  

 

(a)Each Warrant Certificate and each certificate representing Warrant Shares shall, until (i) the Warrants or Warrant Shares represented by such certificates have been distributed to the public pursuant to an offering registered under the Securities Act, (ii) until the Warrants or Warrant Shares may be sold (or have been sold) by the Holder pursuant to Rule 144 under the Securities Act, (iii) a registration statement under the Securities Act covering the sale or resale of the Warrant Shares is declared effective or (iv) until the Company has received an opinion of counsel, which may be counsel to the Holder of such certificate, reasonably satisfactory to the Company, that such legend is not required under the Securities Act, bear a legend in substantially the following form:

 

THE SECURITY EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAW AND MAY NOT BE OFFERED, SOLD, PLEDGED, TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT OR APPLICABLE EXEMPTION FROM REGISTRATION.

 

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(b)For so long as any Warrants remain outstanding or may become issuable hereunder and thereafter until such time as the Holders may sell all of the Warrant Shares without compliance with the public information requirements of Rule 144 under the Securities Act, with a view to making available to the Holders the benefits of Rule 144 or any other similar rule or regulation of the Securities and Exchange Commission (“SEC”) that may at any time permit the Holders to sell securities of the Company to the public without registration, the Company agrees to: (a) make and keep public information available, as those terms are understood and defined in Rule 144; (b) file with the SEC in a timely manner all reports and other documents required of the Company under the Exchange Act so long as the Company remains subject to such requirements and the filing of such reports and other documents is required for the applicable provisions of Rule 144; and (c) so long as any of the Holders owns Warrants or Warrant Shares, promptly upon request, furnish to such Investor a written statement by the Company that it has complied with the reporting requirements of the Exchange Act as required for applicable provisions of Rule 144 and such other information as may be reasonably requested to permit such Investor to sell such Registrable Securities pursuant to Rule 144 without registration.

 

SECTION 6      Warrant Thresholds; Exercise of Warrants

 

(a) Exercise and Delivery.  

 

(1)Each Holder may exercise, at any time or from time to time, a portion or all of the Warrant represented by its Warrant Certificates by (1) delivering to the Company at its principal office the Form of Election to Purchase, in substantially the form attached hereto as Exhibit B, duly filled in and signed, and (2) paying to the Company the Exercise Price for the number of Warrant Shares in respect of which such Warrants are then being exercised.  Warrants shall be deemed exercised on the date (the “Date of Exercise”) the Form of Election with respect to  such number of Warrant Shares is delivered as provided above, and payment of the Exercise Price for such Warrant is received by the Company, and the Warrant Shares in respect of which the Warrant is exercised shall be deemed issued on that date, and the Person in whose name the certificate representing the Warrant Shares is to be issued shall be deemed the Holder of such Warrant Shares as of that date for all purposes; provided, however, that a Holder may elect to condition its exercise of a Warrant upon the consummation of a Major Transaction, in which case such exercise shall be deemed effective immediately prior to (and conditional upon) the consummation of such Major Transaction.  All Warrant Shares will upon issuance be validly issued, fully paid and nonassessable and free of all liens, encumbrances and restrictions (other than restrictions on transfer arising under applicable securities laws).

 

(2)  Within the standard settlement period for equity trades effected by U.S. broker-dealers after each Date of Exercise (the “Delivery Period”), the Company shall issue and deliver (or cause its transfer agent (the “Transfer Agent”) to issue and deliver) in accordance with the terms hereof to the Holder or its designee that number of Warrant Shares (“Exercise Shares”) for the portion of the Warrant exercised as shall be determined in accordance herewith. Upon the exercise of any Warrant or any part thereof, the Company shall take all reasonable action, to assure that the Transfer Agent shall issue stock certificates in the name of Holder (or its nominee) or such other persons as designated by Holder and in such denominations as Holder shall specify at exercise, representing the number of Exercise Shares issuable upon such exercise.  Notwithstanding anything in this Agreement to the contrary, the Company shall have no obligation to issue a Warrant Certificate or Warrant Shares to any Person unless such Person is an accredited investor (within the 

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meaning of Regulation D) as of the date such Warrant Certificate is otherwise issuable hereunder or the Date of Exercise in respect of such Warrant Shares, as applicable, it being agreed that, a representation in substantially the form of Section 13(a) shall conclusively evidence such Person’s status as an accredited investor, if evidence thereof is requested by the Company, unless additional evidence is required to be provided by applicable law.    

 

                     (b) Partial Exercise.  Each Warrant shall be exercisable at any time or from time to time during the Exercise Period, at the election of the applicable Holder, either in full or from time to time in part, and if the Warrant is exercised for fewer than all of the Warrant Shares represented by a Warrant Certificate, and provided Holder elects to surrender such Warrant Certificate to the Company, a new Warrant Certificate evidencing the remaining Warrant Shares not exercised will be issued by the Company at the Company’s expense, to the Warrant Holder of such Warrants with all reasonable dispatch.  All Warrant Certificates surrendered upon exercise of Warrants shall be canceled by the Company.

 

                    (c) Cashless Exercise.  In addition to the rights of Warrant Holder under the preceding provisions of this Section 6, the Warrant Holder shall have the right, in lieu of paying the Exercise Price in cash, to instruct the Company to reduce the number of shares of Common Stock thereafter eligible to be purchased by Warrant Holder pursuant to Warrants held by it in accordance with the following formula:

  E (M-P)

N =      ------------

     M

 

where:

 

	
 
	

	
N =the number of Warrant Shares to be issued to Warrant Holder

 

	
 
	

	
E = the number of Warrant Shares purchasable under the Warrant, or, if only a portion of the Warrant is being exercised, the portion of the Warrant Shares that are then being exercised (and cancelled as of the exercise date);

 

	
 
	

	
P =the Exercise Price per Warrant Share, which would otherwise be payable in cash; and

 

	
 
	

	
M =the Fair Market Value per Warrant share, determined as of the date of such exercise.

 

(d)Securities Law Compliance. Notwithstanding any other provisions of this Agreement, in no event may Warrant Holder exercise a Warrant unless the Warrant Shares issuable upon exercise are then registered under the Securities Act or, if not registered, the Company has determined that Warrant Holder’s exercise of the Warrant and the issuance of the Warrant Shares would be exempt from the registration requirements of the Securities Act.  The exercise of the Warrant must also comply with all other applicable laws and regulations governing the Warrant and shares of Common Stock of the Company, and Warrant Holder may not exercise the Warrant if the Company determines that such exercise would not be in material compliance with such laws and 

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regulations (including any restrictions on exercise required for compliance with Treas. Reg. 1.401(k)-1(d)(3), if applicable). 

 

SECTION 7Payment of Taxes.  The Company will pay all documentary stamp taxes attributable to the initial issuance of the Warrants or the initial issuance of the Warrant Shares upon the exercise of Warrants; provided, that the Company shall not be required to pay any tax or taxes which may be payable in respect of any certificates for Warrant Shares in a name other than that of the registered Holder of the Warrant Certificate surrendered for exercise of a Warrant, and the Company shall not be required to issue or deliver the items described in Section 6 hereof unless or until the Person or Persons requesting the issuance thereof shall have paid to the Company the amount of such tax or shall have established to the satisfaction of the Company that such tax has been paid.

 

SECTION 8Mutilated or Missing Warrant Certificates.  In case any Warrant Certificate shall be mutilated, lost, stolen or destroyed, the Company shall issue in exchange and substitution for, upon surrender of the mutilated Warrant Certificate, or in lieu of and substitution for the Warrant Certificate lost, stolen or destroyed, a new Warrant Certificate of like tenor and representing an equivalent number of Warrants, but only upon receipt of evidence satisfactory to the Company of such loss, theft or destruction of such Warrant Certificate.  The new Warrant Certificate shall be dated the date of issue of the mutilated, lost, stolen or destroyed Warrant Certificate.  Applicants for such substitute Warrant Certificates shall also comply with any other reasonable requests of the Company, including, without limitation, in the case of any such loss, theft or destruction, a request to provide an indemnity bond, the form and issuer of which shall be satisfactory to the Company.

 

SECTION 9Reservation of Warrant Shares.  The Company will at all times reserve and keep available, free from preemptive (and similar) rights and liens, out of the aggregate of its authorized but unissued Common Stock or its authorized and issued shares of Common Stock held in its treasury, for the purpose of enabling it to satisfy any obligation to issue Warrant Shares upon exercise of Warrants, the maximum number of shares of Common Stock which may then be deliverable upon the exercise of all outstanding Warrants.

 

SECTION 10  Adjustment of Number of Warrant Shares.  In order to prevent dilution of the rights granted under this Agreement, the number of Warrant Shares shall be subject to adjustment from time to time as provided in this Section 10.

 

                        (a) Adjustment for Stock Splits and Combinations.  If the Company shall at any time or from time to time effect a subdivision of the outstanding Common Stock (including by a forward stock split, stock dividend or other similar transaction of such a character that the Common Stock shall be changed into or be exchangeable for a larger number of shares), the Exercise Price in effect immediately before that subdivision for each then-outstanding Warrant shall be decreased, and the number of shares of Common Stock issuable on exercise of the Warrants shall be increased, in each case, in proportion to such increase in the aggregate number of shares of Common Stock outstanding.  If the Company shall at any time or from time to time combine the outstanding shares of Common Stock (including through a reverse stock split or other similar transaction of such a character that the Common Stock shall be changed into or be exchangeable for a smaller number of shares), the Exercise Price in effect immediately before the combination for each then-outstanding Warrant shall be increased, and the number of shares of Common Stock issuable on exercise of the Warrants shall be decreased, in each case, in proportion to such decrease in the aggregate number of 

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shares of Common Stock outstanding.  Any adjustment under this subsection shall become effective at the close of business on the date the subdivision or combination becomes effective.

 

                         (b) Adjustment for Merger or Reorganization, etc.  If there shall occur any reorganization, recapitalization, reclassification, consolidation, merger or other transaction involving the Company, in each case, in which the Common Stock is converted into or exchanged for securities, cash or other property (other than a transaction otherwise covered by this Section 10), then, following any such reorganization, recapitalization, reclassification, consolidation, merger or other transaction, each Warrant shall thereafter be exercisable for, in lieu of the Common Stock into which it was exercisable prior to such event, the kind and amount of securities, cash or other property which a holder of the number of shares of Common Stock of the Company issuable upon exercisable of a Warrant immediately prior to such reorganization, recapitalization, reclassification, consolidation, merger or other transaction would have been entitled to receive pursuant to such transaction; and, in such case, appropriate adjustment (as determined in good faith by the Board of Directors of the Company) shall be made in the application of the provisions in this Section 10 with respect to the rights and interests thereafter of the Warrant Holder, to the end that the provisions set forth in this Section 10 (including provisions with respect to changes in and other adjustments of the Exercise Price) shall thereafter be applicable, as nearly as reasonably may be, in relation to any securities or other property thereafter deliverable upon the exercise of the Warrants.

 

                          (c) Certificate as to Adjustments.  Upon the occurrence of each adjustment or readjustment of the Exercise Price pursuant to this Section 10, the Company shall, as promptly as reasonably practicable but in any event not later than 10 days thereafter, compute such adjustment or readjustment in accordance with the terms hereof and furnish to the Warrant Holder a certificate setting forth such adjustment or readjustment (including the kind and amount of securities, cash or other property into which the Warrants are exercisable) and showing in detail the facts upon which such adjustment or readjustment is based.  

 

                         (d) Notice of Record Date.  In the event:

 

(a)the Company shall take a record of the holders of its Common Stock for the purpose of entitling or enabling them to notice of or to vote at a meeting or to receive any dividend or other distribution; or

(b)of any capital reorganization of the Company, any reclassification of the Common Stock of the Company, or any Deemed Liquidation Event (as defined in the Certificate of Incorporation); or

(c)of the voluntary or involuntary dissolution, liquidation or winding-up of the Company,

then, and in each such case, the Company will send or cause to be sent to the Warrant Holder a notice specifying, as the case may be, (i) the record date for such meeting, dividend, distribution or right , and the amount and character of such dividend, distribution or right, or (ii) the effective date on which such reorganization, reclassification, consolidation, merger, transfer, dissolution, liquidation or winding-up is proposed to take place, and the time, if any is to be fixed, as of which the holders of record of Common Stock (or such other capital stock or securities at the time issuable upon the exercise of the Warrants) shall be entitled to exchange their shares of Common Stock (or such other 

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capital stock or securities) for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, transfer, dissolution, liquidation or winding-up, and the amount per share and character of such exchange applicable to the Common Stock.  Such notice shall be sent at least ten (10) days prior to the earliest of the record date or effective date for the event specified in such notice.  

 

SECTION 11No Dilution or Impairment.  The Company will not, by amendment of its certificate of incorporation or by-laws or through any consolidation, merger, reorganization, transfer of assets, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Agreement or any Warrant.  Without limiting the generality of the foregoing, the Company (1) will take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable shares of Common Stock on the exercise of the Warrants from time to time outstanding, (2) will not take any action which results in any adjustment of the Exercise Price if the total number of Warrant Shares issuable after the action upon the exercise of the Warrant would exceed the total number of shares of Common Stock then authorized and available for the purposes of issue upon such exercise, or would cause the Exercise Price to be less than the par value of the Common Stock and (3) will not increase the par value of the Common Stock above the Exercise Price then in effect.

 

SECTION 12Fractional Interests.  The Company shall not be required to issue a fractional Warrant Share upon exercise of any Warrant. As to any fraction of a Warrant Share that the Holder would otherwise be entitled to purchase upon such exercise, the Company shall pay to the Warrant Holder an amount in cash (by delivery of a certified or official bank check or by wire transfer of immediately available funds) equal to the product of (i) such fraction multiplied by (ii) the Market Price of one Warrant Share on the date on which the Warrant is exercised.

 

SECTION 13Representations of Warrant Holder. 

 

(a)Accredited Investor. Warrant Holder represents and warrants that Warrant Holder is an accredited investor as that term is defined under Regulation D under the Securities Act, and Warrant Holder has such experience in business and financial matters that Warrant Holder is capable of evaluating the merits and risks of an investment in the Warrant and the Warrant Shares.  

 

(b)Acquisition of Warrant for Personal Account. The Warrant Holder represents and warrants that they are acquiring the Warrant and the Warrant Shares solely for their account and not with a view to or for the sale or distribution of said Warrant or Warrant Shares or any part thereof in violation of the Securities Act. 

 

(c) Securities are Not Registered. The Warrant Holder understands that the Warrant and the Warrant Shares have not been registered under the Securities Act on the basis that no distribution or public offering of the stock of the company is to be effected.

 

(d)Holding Period.  The Warrant Holder recognizes that the Warrant and the Warrant Shares may need to be held indefinitely unless they are subsequently registered under the Securities Act or an exemption from such registration is available.  The Warrant Holder recognizes that the Company has no obligation to register the Warrant or the Warrant Shares under the Securities Act.

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(e)Transfer Restrictions.  The Warrant Holder is aware that neither the Warrant nor the Warrant Shares may be sold pursuant to Rule 144 adopted under the Securities Act unless certain conditions are met, which may under certain circumstances that may not apply to the Warrant Holder include, among other things, the availability of certain current public information about the Company, satisfaction of the required holding period under Rule 144 and the number of shares being sold during any three month period not exceeding specified limitations.  In addition to each other restriction on transfer contained in this Agreement, prior to termination of the Partnership Agreement the Warrant Holder shall not, without the prior written consent of the Company, directly or indirectly assign or otherwise transfer this Agreement or any Warrant or Warrant Certificate to any third-party, including by assignment, operation of law, change of control or otherwise, and any attempt to do so shall be null and void; provided, however, that the Warrant Holder and any other Holder may assign this Agreement, any Warrant and/or any Warrant Certificate, in whole or in part, to an Affiliate of the Warrant Holder or such other Holder, subject to compliance with applicable securities laws. 

 

SECTION 14     No Rights as Stockholders.  Except as expressly set forth in this Agreement (including Section 10 hereof), this Agreement shall not be construed as conferring upon the any Holder of any Warrant or Warrant Certificate, prior to the time of the exercise of such Warrant, the right to vote, to receive dividends or to consent to or receive notice as a holder of Common Stock in respect of any meeting of holders of Common Stock for the election of directors of the Company, or otherwise to enjoy the rights of a holder of Common Stock of the Company.

 

SECTION 15Termination. This Agreement and each party’s rights and duties under this Agreement shall begin on the Effective Date and shall automatically terminate on December 19, 2022; provided that the rights and duties of each Party under this Agreement shall continue in full force and effect with respect to any Warrant that is outstanding and unexpired as of December 19, 2022, until such Warrant expires in accordance with Section 2(b).

 

SECTION 16     Notices. All notices and other communications provided for herein shall be in writing and delivered by hand, mailed (registered or certified mail) or sent by email transmission to the parties at their respective mailing and email addresses set forth below:

 

If to the Company:Heritage Global Inc.

12625 High Bluff Drive, Suite 305

San Diego, CA 92130

Attention: James Sklar, General Counsel

Email: jsklar@hginc.com

 

with a copy (which shall not constitute notice) to:

 

Bass, Berry & Sims PLC

150 Third Avenue South

Suite 2800

Nashville, TN 37201

Attention: Curtis Capeling

Email:  ccapeling@bassberry.com

 

 

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If to the Warrant Holder:Napier Park Global Capital (US) LP

280 Park Avenue, 3rd Floor

New York, NY 10017

Attention: General Counsel

Email: legal@napierparkglobal.com

 

 

and if to a Holder other than the Warrant Holder, to its address shown from time to time on the register maintained by the Company pursuant to Section 4.  The address of the Company, the Warrant Holder or any other Holder for the purposes of such notice may be changed from time to time by a similar notice to be effective ten (10) days after such change is supplied.

 

SECTION 17Amendments and Waivers.  No Amendment or waiver of any provision of this Agreement shall be effective unless set forth in writing and signed by each party to this Agreement.

 

SECTION 18Successors.  All the covenants and provisions of this Agreement by or for the benefit of the Company or Warrant Holder shall bind and inure to the benefit of their respective successors and assigns hereunder.

 

SECTION 19Benefits of this Agreement.  Except as set forth in Section 6(e), nothing in this Agreement shall be construed to give to any Person other than the Company, Warrant Holder and the registered Holders of the Warrants any legal or equitable right, remedy or claim under this Agreement; but this Agreement shall be for the sole and exclusive benefit of the Company, Warrant Holder and the registered Holders of the Warrants.

 

SECTION 20Counterparts; Effectiveness.  This Agreement may be executed in any number of counterparts, each of which, when so executed, shall be deemed to be an original and all of which, taken together, shall constitute one and the same agreement.  A facsimile copy or a copy sent in portable document format (PDF) by email or otherwise or any electronic signature of any nature shall be deemed to be the functional equivalent of a manually executed original for all purposes.

 

SECTION 21Entire Agreement.  This Agreement and the Partnership Agreement embody the entire agreement and understanding among the parties with respect to the subject matter hereof and supersede all prior agreements and understandings relating to the subject matter hereof; provided, in the event of any conflict between the terms of this Agreement and the Partnership Agreement, the terms of this Agreement will control.  The headings in this Agreement are for reference only and shall not affect the interpretation of this Agreement.

 

SECTION 22Severability.  If any provision of this Agreement shall be held or deemed to be, or shall in fact be, invalid, inoperative, illegal or unenforceable as applied to any particular case in any jurisdiction because of the conflict of such provision with any constitution or statute or rule of public policy or for any other reason, such circumstance shall not have the effect of rendering the provision or provisions in question invalid, inoperative, illegal or unenforceable in any other jurisdiction or in any other case or circumstance or of rendering any other provision or provisions 

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herein contained invalid, inoperative, illegal or unenforceable to the extent that such other provisions are not themselves actually in conflict with such constitution, statute or rule of public policy, but this Agreement shall be reformed and construed in any such jurisdiction or case as if such invalid, inoperative, illegal or unenforceable provision had never been contained herein and such provision reformed so that it would be valid, operative, legal and enforceable to the maximum extent permitted in such jurisdiction or in such case.

 

SECTION 23Governing Law.  All issues and questions concerning the construction, validity, interpretation and enforcement of this Agreement shall be governed by and construed in accordance with the General Corporation Law of the State of Delaware without reference to the conflicts of law provisions or principles thereof.

 

SECTION 24Piggyback Registration Right.   If at any time prior to the expiration of the Registration Period the Company shall determine (i) to file with the Securities and Exchange Commission a Registration Statement relating to an offering for its own account or for the account of any other holder of its equity securities (other than securities being registered on Form S-4 or Form S-8 or their then equivalents relating to equity securities to be issued solely in connection with any acquisition of any entity or business or equity securities issuable in connection with stock option or other employee benefit plans), and/or (ii) otherwise to effect an underwritten offering of any securities of the Company of a type included in a then effective Registration Statement, the Company shall send to each Holder written notice of such determination and, if within fifteen (15) days after the date such notice is given, a Holder shall so request in writing, the Company shall include in such Registration Statement and/or include in such underwritten offering, as applicable, all or any part of such Holder’s Registrable Securities that the Holder requests to be registered and/or included in the underwritten offering, as applicable, except that if, in connection with any underwritten offering for the account of the Company, the managing underwriter(s) thereof shall impose a limitation on the number of Registrable Securities which may be included in such offering because, in such underwriter(s)’ judgment, marketing or other factors dictate such limitation is necessary to facilitate public distribution, then the Company shall be obligated to include in such underwritten offering only such limited portion of the Registrable Securities with respect to which the Holder has requested inclusion hereunder as the underwriter(s) shall permit.   In connection with the exercise of the foregoing registration rights, the Company and each Holder electing to participate in such registration shall enter into customary indemnification agreements with respect to the accuracy of information contained in or, in the case of the indemnity to be provided by each such Holder, provided specifically for inclusion in, the applicable Registration Statement.  

 

 

[Signature Page follows]

 

 

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13

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed, as of the Effective Date.

 

 

		
	
 
	
COMPANY:

 

Heritage Global Inc.

 

 

By:/s/ James Sklar

Name: ________________________

Title: __EVP & General Counsel___

 

 

 

	
 
	
WARRANT HOLDER:

 

 

Napier Park Industrial 

Asset Acquisition, LP 

 

By:/s/ Jeffrey Traum

Name: ________________________

Title: _________________________

 

	
 
	
 

 

[Signature page to Warrant Agreement]

14

 

EXHIBIT A

 

THE SECURITY EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAW AND MAY NOT BE SOLD, PLEDGED, TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT OR APPLICABLE EXEMPTION FROM REGISTRATION.

 

 

No. [________]

 

 

Warrant Certificate

 

_______________________________________

 

This Warrant Certificate certifies that Napier Park Industrial Asset Acquisition, LP, a Delaware limited partnership, is the holder of a warrant (the “Warrant”) to purchase [________] ([________]) shares of Common Stock (the “Common Stock”), of Heritage Global Inc., a Delaware corporation (the “Company”).  The Warrant entitles the holder, upon exercise, to receive from the Company, if exercised during the Exercise Period, that number of fully paid and nonassessable shares of Common Stock (each, a “Warrant Share”) as noted above, at the exercise price (the “Exercise Price”) of $[___] per share of Common Stock, payable as provided in the Warrant Agreement (defined below), upon surrender of this Warrant Certificate and payment of the Exercise Price at the principal office of the Company, subject to the conditions set forth herein and in the Warrant Agreement.  The number of Warrant Shares issuable upon the exercise or partial exercise of the Warrant is subject to adjustment, as provided in the Warrant Agreement.

 

The Warrant evidenced by this Warrant Certificate are part of a duly authorized issue of Warrants of the Company and are issued or to be issued pursuant to a Warrant Agreement dated as of March 19, 2019 (the “Warrant Agreement”), between the Company and the Warrant Holder (as defined therein) party thereto.  The Warrant Agreement is hereby incorporated by reference in and made a part of this instrument and is hereby referred to for a description of the rights, limitations, obligations, duties and immunities thereunder of the Company and the Holders (the words “Holders” or “Holder” meaning the registered holders or holder of the Warrant).  A copy of the Warrant Agreement may be obtained by the Holder hereof upon written request to the Company.

 

All issues and questions concerning the construction, validity, interpretation and enforcement of this Warrant Certificate shall be governed by the laws of the State of Delaware, without regard to principles of conflicts of laws.

 

[Signature Page follows]

 

 

 

15

IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be duly executed.

 

 

HERITAGE GLOBAL INC.

 

 

Dated:_______By:_____________________________

Name:

Title:

 

 

EXHIBIT B

 

FORM OF ELECTION TO PURCHASE

 

 

Dated: ____________

 

The undersigned, being duly authorized, hereby irrevocably elects to exercise the within Warrant to the extent of purchasing ___________________ shares of Common Stock and: 

 

Check the applicable box: 

 

🗌  hereby makes payment of $_________ in payment of the Exercise Price thereof or, 

 

	

	
🗌  elects to exercise this Warrant as a cashless exercise, in accordance with Section 6(c) of the Warrant Agreement.

 

The undersigned represents that: 

 

(i) if this Form of Election to Purchase relates to an exercise in which the Exercise Price is being paid in cash, the aforesaid shares of Common Stock are being acquired for the account of the undersigned and not with a view to, or for resale in connection with, the distribution thereof in violation of the Securities Act of 1933, as amended.   ; 

 

(ii) the undersigned is aware of the Company’s business affairs and financial condition and has acquired sufficient information about the Company to reach an informed and knowledgeable decision regarding its investment in the Company; 

 

(iii) the undersigned is experienced in making investments of this type and has such knowledge and background in financial and business matters that the undersigned is capable of evaluating the merits and risks of this investment and protecting the undersigned’s own interests; 

 

 

(v) if this Form of Election to Purchase relates to an exercise in which the Exercise Price is being paid in cash, the undersigned understands that if the aforementioned shares of Common Stock have not been registered under the Securities Act, such shares may need to be held indefinitely unless they are subsequently registered under the Securities Act or an exemption from such registration is available; 

 

(vi) the undersigned is aware that the aforesaid shares of Common Stock may not be sold pursuant to Rule 144 adopted under the Securities Act unless certain conditions are met; and 

 

(vii) the undersigned agrees not to make any disposition of all or any part of the aforesaid shares of Common Stock unless and until there is then in effect a registration statement under the Securities Act covering such proposed disposition and such disposition is made in accordance with said registration statement, or the undersigned has provided the Company with an opinion of counsel satisfactory to the Company, stating that such registration is not required.

 

 

 

*     *     *     *     *

 

 

INSTRUCTIONS FOR REGISTRATION OF STOCK

 

Name: ___________________________________

              (please typewrite or print in block letters)

 

Address: _________________________________

   _________________________________
   _________________________________

 

 

	

	
Signature/ Title_________________________________________

	

	
Note:  The signature must conform in all

	

	
respects to the name of the holder

	

	
as specified on the face of this

	

	
Warrant Certificate.

 

 

__________________________________

Taxpayer Identification Number of holder

 

__________________________________

Signature GuaranteeEXHIBIT 10.1

 

SECOND AMENDMENT

TO

SECOND AMENDED AND RESTATED AGREEMENT
OF LIMITED PARTNERSHIP

OF AMERICAN FINANCE OPERATING PARTNERSHIP, L.P. 

 

THIS SECOND AMENDMENT TO SECOND AMENDED
AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF AMERICAN FINANCE OPERATING PARTNERSHIP, L.P. (this “Amendment”),
dated as of March 22, 2019, is entered into by AMERICAN FINANCE TRUST, INC., a Maryland corporation, as general partner (the “General
Partner”) of AMERICAN FINANCE OPERATING PARTNERSHIP, L.P., a Delaware limited partnership (the “Partnership”),
for itself and on behalf of any limited partners of the Partnership. Capitalized terms used but not otherwise defined in this Amendment
shall have the meanings given to such terms in the Second Amended and Restated Agreement of Limited Partnership of the Partnership
entered into on July 19, 2018 (as now or hereafter amended, restated, modified, supplemented or replaced, the “Partnership
Agreement”).

 

WHEREAS, Section 4.02(a) of the Partnership
Agreement authorizes the General Partner to cause the Partnership to issue additional Partnership Units in one or more classes,
or one or more series of any such classes, with such designations, preferences and relative, participating, optional or other special
rights, powers, preferences and duties, including rights, powers, preferences an duties senior and superior to the then-outstanding
Partnership Units as shall be determined by the General Partner, in its sole and absolute discretion without the approval of any
Limited Partner or other Person;

 

WHEREAS, the General Partner has
authorized the issuance and sale of up to 1,380,000 shares of its 7.50% Series A Cumulative Redeemable Perpetual Preferred Stock,
par value $0.01 per share (the “Series A Preferred Stock”), at a gross offering price of $25.00 per share of
Series A Preferred Stock and, in connection therewith, the General Partner, pursuant to Section 4.02(b) of the Partnership Agreement,
is contributing the net proceeds of such issuance and sale to the Partnership in exchange for, and is causing the Partnership to
issue to the General Partner, the Series A Preferred Units (as hereinafter defined); and

 

WHEREAS, pursuant to the authority
granted to the General Partner pursuant to Section 4.02(a) and Article 14 of the Partnership Agreement, and as authorized by the
unanimous written consent of the offering committee of the Board of Directors of the General Partner, which has been delegated
certain power and authority of the Board of Directors of the General Partner, dated as of March 21, 2019, the General Partner desires
to amend the Partnership Agreement (i) to set forth the designations, rights, powers, preferences and duties and other terms of
the Series A Preferred Units and (ii) to issue the Series A Preferred Units to the General Partner.

 

NOW, THEREFORE, in consideration
of good and valuable consideration, the receipt and sufficiency of which hereby are acknowledged, the General Partner hereby amends
the Partnership Agreement as follows:

 

1.            The Partnership
Agreement is hereby amended by the addition of a new annex thereto, entitled “Annex A,” in the form attached hereto
as Annex A, which sets forth the designations, allocations, preferences, conversion or other special rights, powers
and duties of the Series A Preferred Units which exhibit shall be attached to and made a part of, and shall be an exhibit to, the
Partnership Agreement.

 

2.             Pursuant to Sections
4.02(a) and 4.02(b) of the Partnership Agreement, effective as of the applicable issuance date of any issuance of shares of
Series A Preferred Stock by the General Partner, the Partnership will issue Series A Preferred Units to the General Partner in
an amount that will be reflected on Schedule A to the Partnership Agreement, as such Schedule A may be amended or restated by the
General Partner in its sole discretion from time to time to the extent necessary to reflect such issuances, but in no event shall
the number of Series A Preferred Units issued pursuant to this Amendment exceed 1,380,000 or such greater number of shares of Series
A Preferred Stock as may be hereafter authorized for issuance by the General Partner. The Series A Preferred Units have been
created and are being issued in conjunction with the General Partner’s issuance and sale of the Series A Preferred Stock,
and as such, the Series A Preferred Units are intended to have designations, preferences and other rights and terms that are substantially
the same as those of the Series A Preferred Stock, all such that the economic interests of the Series A Preferred Units and the
Series A Preferred Stock are substantially similar, and the provisions, terms and conditions of this Amendment, including without
limitation the attached Annex A, shall be interpreted in a fashion consistent with this intent. In return for the issuance
to the General Partner of the Series A Preferred Units, the General Partner has contributed to the Partnership the net proceeds
from its issuance and sale of the Series A Preferred Stock (the General Partner’s capital contribution shall be deemed to
equal the amount of the gross proceeds of that share issuance (i.e., the net proceeds actually contributed, plus any underwriter’s
discount or other expenses incurred, with any such discount or expense deemed to have been incurred by the General Partner on behalf
of the Partnership)).

 

    

     

    

 

3.            The foregoing recitals
are incorporated in and are made a part of this Amendment.

 

4.            Except as specifically
defined herein, all capitalized terms shall have the definitions provided in the Partnership Agreement. This Amendment has
been authorized by the General Partner pursuant to Article 14 of the Partnership Agreement and does not require execution by any
Limited Partner or any other Person.

 

[SIGNATURE PAGE FOLLOWS]

 

    

     

    

 

IN WITNESS WHEREOF, the undersigned
has executed this Amendment as of the date first set forth above.

 

	 	GENERAL PARTNER:
	 	 
	 	AMERICAN FINANCE TRUST, INC.
	 	 	 
	 	By: 	/s/ Edward M. Weil, Jr.         
	 	Name:	Edward M. Weil, Jr.
	 	Title:	Chief Executive Officer and President

 

    

     

    

 

ANNEX A 

 

DESIGNATION OF THE SERIES A PREFERRED
UNITS 

OF

AMERICAN FINANCE OPERATING PARTNERSHIP,
L.P.

 

1.     Designation and Number. A
series of Preferred Units (as defined below) of American Finance Operating Partnership, L.P., a Delaware limited partnership (the
 “Partnership”), designated the “7.50% Series A Cumulative Redeemable Perpetual Preferred Units”
(the “Series A Preferred Units”), is hereby established. The number of authorized Series A Preferred Units
shall be 1,380,000.

 

2.    Defined Terms. Capitalized
terms used herein and not otherwise defined shall have the meanings given to such terms in the Second Amended and Restated Agreement
of Limited Partnership of American Finance Operating Partnership, L.P. (as now or hereafter amended, restated, modified, supplemented
or replaced, the “Partnership Agreement”). The following defined terms used herein shall have the meanings specified
below:

 

“Articles Supplementary” means the Articles
Supplementary of the General Partner filed with the State Department of Assessments and Taxation of the State of Maryland on March
22, 2019, designating the terms, rights and preferences of the Series A Preferred Stock.

 

“Base Liquidation Preference” shall have
the meaning provided in Section 6(a).

 

“Capital Gains Amount” shall have the meaning
provided in Section 5(g).

 

“Change of Control” shall have the meaning
provided in the Articles Supplementary.

 

“Common Stock” shall have the meaning provided
in the Articles Supplementary.

 

“Delisting Event” shall have the meaning
provided in the Articles Supplementary.

 

“Distribution Record Date” shall have the
meaning provided in Section 5(a).

 

“Junior Preferred Units” shall have the meaning
provided in Section 4.

 

“Liquidating Distribution” shall have the
meaning provided in Section 6(a).

 

“Parity Preferred Units” shall have the meaning
provided in Section 4.

 

“Partnership Agreement” shall have the meaning
provided above.

 

“Redemption Date” shall have the meaning
provided in Section 7(a).

 

“Preferred Units” means all Partnership Units
designated as preferred units by the General Partner from time to time in accordance with Section 4.02(a) of the Partnership Agreement.

 

“Senior Preferred Units” shall have the meaning
provided in Section 4.

 

“Series A Preferred Return” shall have the
meaning provided in Section 5(a).

 

“Series A Preferred Stock” shall have the
meaning provided in the Articles Supplementary.

 

“Series A Preferred Unit Distribution Payment Date”
shall have the meaning provided in Section 5(a).

 

“Series A Preferred Units” shall have the
meaning provided in Section 1.

 

“Total Distributions” shall have the meaning
provided in Section 5(g).

 

    

     

    

 

3.     Maturity. The Series A Preferred
Units have no stated maturity and will not be subject to any sinking fund or mandatory redemption.

 

4.     Rank. In respect of rights
to the payment of distributions and the distribution of assets in the event of any voluntary or involuntary liquidation, dissolution
or winding up of the affairs of the Partnership, the Series A Preferred Units shall rank (a) senior to all classes or series
of Common Units and any class or series of Preferred Units issued by the Partnership, the terms of which expressly provide that
such units rank junior to the Series A Preferred Units with respect to distribution rights and rights upon the voluntary or involuntary
liquidation, dissolution or winding up of the Partnership (the “Junior Preferred Units”); (b) on parity with
any class or series of Preferred Units issued by the Partnership, the terms of which expressly provide that such units rank on
parity with the Series A Preferred Units with respect to distribution rights and rights upon the voluntary or involuntary liquidation,
dissolution or winding up of the Partnership (the “Parity Preferred Units”); and (c) junior to any class
or series of Preferred Units issued by the Partnership, the terms of which expressly provide that such units rank senior to the
Series A Preferred Units with respect to distribution rights and rights upon the voluntary or involuntary liquidation, dissolution
or winding up of the Partnership (the “Senior Preferred Units”).  The term “Preferred Units”
does not include convertible or exchangeable debt securities of the Partnership, including convertible or exchangeable debt securities
which will rank senior to the Series A Preferred Units prior to the conversion or exchange. The Series A Preferred Units will also
rank junior in right or payment to the Partnership’s existing and future indebtedness. All of the Series A Preferred Units
shall rank equally with one another and shall be identical in all respects.

 

5.     Distributions.

 

a.     Subject to the preferential rights of holders
of any class or series of Senior Preferred Units of the Partnership, the holders of Series A Preferred Units shall be entitled
to receive, when, as and if authorized by the General Partner and declared by the Partnership, out of assets of the Partnership
legally available for payment of distributions, cumulative cash distributions in the amount of $1.875 per unit per year, which
is equivalent to the rate of 7.5% of the Base Liquidation Preference (as defined below) per unit per year (the “Series
A Preferred Return”). The Series A Preferred Return shall accrue and be cumulative from and including the date of original
issue of any Series A Preferred Units and shall be payable quarterly in arrears, on or about the 15th day of each January, April,
July and October of each year (or, if not a Business Day, the next succeeding business day, each a “Series A Preferred
Unit Distribution Payment Date”) for the period ending on such Series A Preferred Unit Distribution Payment Date, commencing
on July 15, 2019.  The amount of any distribution payable on the Series A Preferred Units for any partial distribution period
will be prorated and computed, and for any full distribution period will be computed, on the basis of twelve 30-day months and
a 360-day year. Distributions will be payable in arrears to holders of record of the Series A Preferred Units as they appear
on the records of the Partnership at the close of business on the applicable record date, which shall be the Series A Record Date
(as defined in the Articles Supplementary), which is the close of business on the date set by the Board of Directors as the record
date for the payment of dividends on Series A Preferred Stock (each, a “Distribution Record Date”).

 

b.     No distributions on the Series A Preferred
Units shall be authorized by the General Partner or declared and or set apart for payment by the Partnership at such time as the
terms and conditions of any agreement of the General Partner or the Partnership, including any agreement relating to the indebtedness
of any of them, prohibits such authorization, payment or setting apart for payment or provides that such authorization, payment
or setting apart for payment would constitute a breach thereof or a default thereunder, or if such authorization, payment or setting
apart for payment shall be restricted or prohibited by law.

 

c.     Notwithstanding anything to the contrary
contained herein, the Series A Preferred Return will accrue whether or not distributions are authorized by the General Partner
or declared by the Partnership. No interest or additional distributions shall be payable in respect of any accrued and unpaid Series
A Preferred Return.

 

    2

     

    

 

d.     Except provided in Section 5(e) below,
no distributions shall be declared and paid or set apart for payment, and no other distribution of cash or other property may be
declared and made, directly or indirectly, on or with respect to any Common Units, Parity Preferred Units or Junior Preferred Units
of the Partnership (other than a distribution paid in units of, or options, warrants or rights to subscribe for or purchase units
of, Common Units or Junior Preferred Units) for any period, nor shall units of any class or series of Common Units, Parity Preferred
Units or Junior Preferred Units be redeemed (or assets be paid to our made available for a sinking fund for the redemption of any
such units of the Partnership), purchased or otherwise acquired (except (i) by conversion into or exchange for Common Units or
Junior Preferred Units, (ii) for the acquisition of units corresponding with the acquisition of shares pursuant to the provisions
of Section 5.7 of Article V of the Charter, and (iii) for purchases or exchanges pursuant to a purchase or exchange offer made
on the same terms to all holders of Series A Preferred Units and all holders of Parity Preferred Units), unless full cumulative
distributions on the Series A Preferred Units for all past distribution periods shall have been or contemporaneously are declared
and paid or declared and a sum sufficient for the payment thereof is set apart for such payment.

 

e.     When cumulative distributions are not paid
in full (or declared and a sum sufficient for such full payment is not set apart) on the Series A Preferred Units and any Parity
Preferred Units, all distributions (other than (i) any acquisition of units corresponding with the acquisition of shares pursuant
to the provisions of Section 5.7 of Article V of the Charter or (ii) a purchase or exchange pursuant to a purchase or exchange
offer made on the same terms to all holders of Series A Preferred Units and all holders of Parity Preferred Units) declared on
the Series A Preferred Units and any Parity Preferred Units shall be declared pro rata so that the amount of distributions
declared per Series A Preferred Unit and such Parity Preferred Units shall in all cases bear to each other the same ratio that
accrued distributions per Series A Preferred Unit and such Parity Preferred Units (which shall not include any accrual in respect
of unpaid distributions on any Parity Preferred Units for prior distribution periods if such Parity Preferred Units do not have
a cumulative distribution) bear to each other. No interest, or sum of money in lieu of interest, shall be payable in respect
of any distribution payment or payments on Series A Preferred Units which may be in arrears.

 

f.     Holders of Series A Preferred Units shall
not be entitled to any distribution, whether payable in cash, property or units of the Partnership, in excess of the Series A Preferred
Return on the Series A Preferred Units as provided above. Any distribution made on the Series A Preferred Units shall first
be credited against the earliest accrued but unpaid Series A Preferred Return which remains payable.

 

g.     If, for any taxable year, the General Partner
elects to designate as “capital gain dividends” (as defined in Section 857 of the Code) any portion (the “Capital
Gains Amount”) of the total distributions not in excess of the General Partner’s earnings and profits (as determined
for U.S. federal income tax purposes) paid or made available for such taxable year to holders of all classes and series of the
General Partner’s stock (the “Total Distributions”), then the portion of the Capital Gains Amount that
shall be allocable to holders of Series A Preferred Units shall be in the same proportion that the Total Distributions paid or
made available to the holders of Series A Preferred Units for such taxable year bears to the Total Distributions for such taxable
year made with respect to all classes or series of Partnership Units outstanding.

 

6.     Liquidation Preference.

 

a.     Upon any voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the Partnership, before any distribution or payment shall be made to the holders of
any Common Units or Junior Preferred Units, the holders of the Series A Preferred Units then outstanding shall be entitled to be
paid out of the assets of the Partnership legally available for distribution to its Partners a liquidation preference in cash of
$25.00 per Series A Preferred Unit (the “Base Liquidation Preference”), plus an amount equal to any accrued
and unpaid Series A Preferred Return to, but not including, the date of payment (together with the Base Liquidation Preference,
the “Liquidating Distribution”).

 

b.     If upon any such voluntary or involuntary
liquidation, dissolution or winding up of the Partnership, the available assets of the Partnership are insufficient to pay the
full amount of the Liquidating Distributions on all outstanding Series A Preferred Units and the corresponding amounts payable
on all outstanding Parity Preferred Units, then the holders of Series A Preferred Units and Parity Preferred Units shall share
ratably in any such distribution of assets in proportion to the full Liquidating Distributions to which they would otherwise be
respectively entitled.

 

    3

     

    

 

c.     After payment of the full amount of the
Liquidating Distributions to which they are entitled, holders of Series A Preferred Units will have no right or claim to any of
the remaining assets of the Partnership.

 

d.    For the avoidance of doubt, the consolidation,
merger or conversion of the Partnership with or into another entity, the merger of another entity with or into the Partnership,
a statutory unit exchange by the Partnership or the sale, lease, transfer or conveyance of all or substantially all of the assets
or business of the Partnership shall not be considered a liquidation, dissolution or winding up of the affairs of the Partnership.

 

7.     Optional Redemption.

 

a.     The Series A Preferred Units are not redeemable
prior to March 26, 2024, except as otherwise provided in this Section 7.  On and after March 26, 2024, the Partnership, at
its option, upon not fewer than 30 nor more than 60 days’ written notice, may redeem the Series A Preferred Units, in whole
or in part, at any time or from time to time, for cash, at a redemption price equal to $25.00 per Series A Preferred Unit, plus
any accrued and unpaid distributions thereon (whether or not declared) to, but not including, the date fixed for redemption (the
 “Redemption Date”). Such notice shall be deemed to have been given to the General Partner, in its capacity
as holder of the Series A Preferred Units, upon the giving of any notice by the General Partner to holders of shares of Series
A Preferred Stock with respect to the redemption of such shares. If fewer than all of the outstanding Series A Preferred Units
are to be redeemed, the Series A Preferred Units to be redeemed may be selected pro rata (as nearly as practicable without
creating fractional units) or by lot.

 

b.     Unless full cumulative distributions on
all Series A Preferred Units shall have been or contemporaneously are declared and paid or declared and a sum sufficient for the
payment thereof set apart for payment for all past distribution periods, (i) no Series A Preferred Units shall be redeemed unless
all outstanding Series A Preferred Units are simultaneously redeemed, and (ii) the Partnership shall not purchase or otherwise
acquire directly or indirectly for any consideration, nor shall any monies be paid to or be made available for a sinking fund for
the redemption of, any Series A Preferred Units (except by conversion into or exchange for Common Units or Junior Preferred Units
of the Partnership); provided, however, that the foregoing shall not prevent the redemption or purchase of Series A Preferred
Units by the Partnership in connection with a redemption or purchase by the General Partner of Series A Preferred Stock pursuant
to Section 5.7 of Article V of the Charter or otherwise in order to ensure that the General Partner remains qualified as a REIT
for federal income tax purposes or pursuant to the terms of the Articles Supplementary, or the purchase or acquisition of Series
A Preferred Units pursuant to a purchase or exchange offer made on the same terms to holders of all outstanding Series A Preferred
Units.

 

c.     If a Redemption Date falls after a Distribution
Record Date and on or prior to the corresponding Series A Preferred Unit Distribution Payment Date, each holder of Series A Preferred
Units on such Distribution Record Date shall be entitled to the distribution payable on such units on the corresponding Series
A Preferred Unit Distribution Payment Date (including any accrued and unpaid distributions for prior distribution periods) notwithstanding
the redemption of such units on or prior to such Series A Preferred Unit Distribution Payment Date. Except as provided above,
the Partnership will make no payment or allowance for unpaid distributions, whether or not in arrears, on Series A Preferred Units
for which a notice of redemption has been given.

 

d.     Upon the occurrence of a Delisting Event
or Change of Control, if and when the General Partner exercises its option to redeem shares of Series A Preferred Stock as provided
in Section 6 of the Articles Supplementary, the General Partner shall cause the Partnership to concurrently redeem an equal number
of Series A Preferred Units if and when such shares of Series A Preferred Stock are so redeemed, at a redemption price per Series
A Preferred Unit payable in cash and equal to the same price per share paid by the General Partner to redeem the shares of Series
A Preferred Stock (i.e., a redemption price of $25.00 per share of Series A Preferred Stock, plus an amount equal to any accrued
and unpaid dividends thereon). No interest shall accrue for the benefit of the Series A Preferred Units to be redeemed on any cash
set aside by the Partnership.

 

e.     Notwithstanding anything to the contrary
contained herein, the Partnership may redeem one Series A Preferred Unit for each share of Series A Preferred Stock purchased in
the open market, through tender or by private agreement by the General Partner.

 

    4

     

    

 

f.     All Series A Preferred Units redeemed or
otherwise acquired by the Partnership in any manner whatsoever shall be retired and reclassified as authorized but unissued Preferred
Units, without designation as to class or series, and may thereafter be reissued as any class or series of Preferred Units in accordance
with the applicable provisions of the Partnership Agreement.

 

g.     Notwithstanding anything to the contrary
contained herein, the Partnership may redeem Series A Preferred Units at any time in connection with any redemption by the General
Partner of the Series A Preferred Stock.

 

8.     Voting Rights. Holders of the
Series A Preferred Units will not have any voting rights.

 

9.     Conversion. The Series A
Preferred Units are not convertible or exchangeable for any other property or securities, except as provided herein.

 

a.     In the event that a holder of shares of
Series A Preferred Stock exercises its right to convert such shares of Series A Preferred Stock into Common Stock in accordance
with the terms of the Articles Supplementary, then, concurrently with any conversion that actually occurs pursuant to such exercise
(i.e. such shares are not redeemed for cash prior thereto in accordance with the terms of the Articles Supplementary), an equivalent
number of Series A Preferred Units of the Partnership held by the General Partner shall be automatically converted into a number
of Class A Units of the Partnership equal to the number of shares of Common Stock issued upon conversion of such Series A Preferred
Stock; provided, however, that if a holder of Series A Preferred Stock receives cash or other consideration in addition
to or in lieu of Common Stock in connection with such conversion, then the General Partner, as the holder of the Series A Preferred
Units, shall be entitled to receive cash or such other consideration equal (in amount and form) to the cash or other consideration
to be paid by the General Partner to such holder of the Series A Preferred Stock. Any such conversion will be effective at
the same time the conversion of Series A Preferred Stock into Common Stock is effective.

 

b.     No fractional units will be issued in connection
with the conversion of Series A Preferred Units into Class A Units. In lieu of fractional Class A Units, the General Partner shall
be entitled to receive a cash payment in respect of any fractional unit in an amount equal to the fractional interest multiplied
by the Common Stock Price (as defined in the Articles Supplementary) on the date the shares of Series A Preferred Stock are surrendered
for conversion by a holder thereof.

 

10.     Allocation of Net Income and Net
Loss.

 

Article V, Sections 5.01(a), (b) and (c) of the Partnership
Agreement are hereby deleted in their entirety and replaced by Sections 5.01(a), (b) and (c) below:

 

“(a)     Allocations of Net Income
and Net Loss. Except as otherwise provided in this Agreement and subject to Sections 12.02(b) and 13.01(c)(iii), after giving
effect to the special allocations in Sections 5.01(c) and 5.01(d), Net Income, Net Loss and, to the extent necessary, individual
items of income, gain, loss or deduction, of the Partnership, without duplication, shall be allocated among the Partners as follows:

 

(i)     first, if the Partnership
has Net Income for any taxable year or portion thereof, such Net Income shall be allocated to the General Partner in respect of
the Series A Preferred Units until it has been allocated Net Income equal to the excess of (A) the cumulative amount of distributions
of Cash Available for Distribution the General Partner has received for all prior taxable years or portions thereof with respect
to the Series A Preferred Units, over (B) the cumulative Net Income allocated to the General Partner, pursuant to this Section
5.01(a)(i) for all prior taxable years or portions thereof;

 

(ii)    second, to the Partners
holding Class A Units, Class B Units or LTIP Units pro rata and pari passu to the extent of and in proportion to
the distribution of Cash Available for Distribution to such Partners with respect to their Class A Units, Class B Units or LTIP
Units in accordance with Section 5.02(a)(i);

 

    5

     

    

 

(iii)    third, to the Partners
holding LTIP Units pro rata to the extent of and in proportion to the distribution of Cash Available for Distribution to
such Partners with respect to their Vested LTIP Units in accordance with Section 5.02(a)(ii); and

 

(iv)    thereafter,
to the Partners holding Class A Units, Class B Units or LTIP Units pro rata and pari passu in accordance with each
such Partner’s respective Percentage Interest with respect to such Class A Units, Class B Units or LTIP Units; provided,
that for the avoidance of doubt, Net Loss, and to the extent necessary, individual items of loss or deductions shall be allocated
(A) first to the Partners holding Class A Units, Class B Units or LTIP Units pro rata and pari passu in accordance
with each such Partner’s respective Percentage Interest with respect to such Class A Units, Class B Units or LTIP Units until
such Partners have received cumulative allocations of Net Loss equal to the cumulative amount of Net Income allocated to them pursuant
to this Section 5.01(a)(iv), (B) then to the Partners holding LTIP Units to the extent of and in a manner that has the effect of
reversing the allocations of Net Income to such Partners pursuant to Section 5.01(a)(iii), (C) then to the Partners holding Class
A Units, Class B Units or LTIP Units to the extent of and in a manner that has the effect of reversing the allocations of Net Income
to such Partners pursuant to Section 5.01(a)(ii), (D) then to the Partners holding Class A Units, Class B Units or LTIP Units pro
rata and pari passu in accordance with each such Partner’s respective Percentage Interest with respect to such
Class A Units, Class B Units or LTIP Units until each such Partner’s Capital Account with respect to their Class A Units,
Class B Units or LTIP Units has been reduced to zero, but not below zero (provided, further, that if the Capital
Account of one or more such Partners, but not all such Partners, has been reduced to zero, any remaining Net Loss, and to the extent
necessary, individual item of loss or deduction shall be allocated to the remaining Partners holding Class A Units, Class B Units
or LTIP Units in the same manner as in this Section 5.01(a)(iii)(D) until the Capital Account of all such Partners with respect
to such Class A Units, Class B Units or LTIP Units has been reduced to zero), (E) then to the General Partner in respect of its
Series A Preferred Units until the Capital Account of the General Partner with respect to its Series A Preferred Units has been
reduced to zero, and (F) thereafter to the General Partner.

 

(b)    Allocations of Net Property Gain
and Net Property Loss. Except as otherwise provided in this Agreement, after giving effect to the special allocations in Sections
5.01(c) and 5.01(d), Net Property Gain, Net Property Loss and, to the extent necessary, individual items of gain or loss comprising
Net Property Gain and Net Property Loss of the Partnership, without duplication, shall be allocated among the Partners as follows:

 

(i)    first, if the Partnership
has Net Property Gain for any taxable year or portion thereof, such Net Property Gain shall be allocated to the General in respect
of the Series A Preferred Units until it has been allocated Net Property Gain equal to the excess of (A) the cumulative amount
of distributions of Net Sales Proceeds the General Partner has received for all prior taxable years or portions thereof with respect
to the Series A Preferred Units, over (B) the cumulative Net Property Gain allocated to the General Partner, pursuant to this Section
5.01(b)(i) for all prior taxable years or portions thereof;

 

(ii)    thereafter, in a manner
such that the Capital Account of each Partner immediately after making such allocation, is, as nearly as possible, equal proportionately
to (A) the distributions that would be made to such Partner pursuant to Section 5.02(b) if the Partnership were dissolved, its
affairs wound up and its assets sold for cash equal to their Gross Asset Value, as determined in the reasonable discretion of the
General Partner, all Partnership liabilities were satisfied (limited with respect to each nonrecourse liability to the Gross Asset
Value of the assets securing such liability), and the net assets of the Partnership were distributed in accordance with Section
5.02(b) to the Partners immediately after making such allocation, minus (ii) such Partner’s share of Partnership Minimum
Gain and Partner Nonrecourse Debt Minimum Gain and the amount, if any and without duplication, that the Partner would be obligated
to contribute to the capital of the Partnership, all computed immediately prior to the hypothetical sale of assets.

 

    6

     

    

 

(c)    Special Allocations

 

(i)    Special Allocations Regarding
Class B Units. Notwithstanding any other provisions of this Sections 5.01, after giving effect to the regulatory allocations
in Section 5.01(d) but prior to any allocations under Section 5.01(b)(ii), Net Property Gain and, to the extent necessary, individual
items of income and gain comprising Net Property Gain of the Partnership, shall be allocated to the Partners holding Class B Units
until their Class B Economic Capital Account Balances are equal to (A) the Class A Unit Economic Balance, multiplied by (B) the
number of their Class B Units; provided, that no such Net Property Gain and, to the extent necessary, individual items of
income and gain comprising Net Property Gain of the Partnership, will be allocated with respect to any particular Class B Unit
unless and to the extent that the Class A Unit Economic Balance exceeds the Class A Unit Economic Balance in existence at the time
such Class B Unit was issued. Any allocations made pursuant to the first sentence of this Section 5.01(c)(i) shall be made among
the holders of Class B Units in proportion to the amounts required to be allocated to each under this Section 5.01(c)(i). The parties
agree that the intent of this Section 5.01(c)(i) is to make the Capital Account balance associated with each Class B Unit to be
economically equivalent to the Capital Account balance associated with the Class A Units outstanding (on a per-unit basis), but
only if and to the extent that the Capital Account balance associated with the Class A Units outstanding, without regard to the
allocations under this Section 5.01(c)(i), has increased on a per-unit basis since the issuance of the relevant Class B Unit. To
the extent Net Property Loss is allocated to Partners holding Class B Units pursuant to Section 5.01(b), such Net Property Loss
shall be allocated among the Partners holding Class B Units in a manner that reverses the allocation of Net Property Gain to such
Partner pursuant to this Section 5.01(c)(i).

 

(ii)    Special Allocations Regarding
the Special Limited Partner Interest. Notwithstanding any other provisions of this Sections 5.01, after giving effect
to the regulatory allocations in Section 5.01(d), and to the extent not previously allocated pursuant to Section 5.01(d)(ii),
and the special allocations in Section 5.01(c)(i), but prior to any allocations under Section 5.01(b)(ii), Net Property Gain and,
to the extent necessary, individual items of income and gain comprising Net Property Gain of the Partnership, and Liquidating
Gain shall be allocated to the Special Limited Partner until the Special Limited Partner has received aggregate allocations of
income for all fiscal years equal to the Listing Amount.

 

(iii)    Special Allocations Regarding
LTIP Units. Notwithstanding any other provisions of this Sections 5.01, after giving effect to the regulatory allocations in
Section 5.01(d) and the special allocations in Sections 5.01(c)(i) and 5.01(c)(ii), but prior to any allocations under Section
5.01(b)(ii), Net Property Gain and, to the extent necessary, individual items of income and gain comprising Net Property Gain of
the Partnership, shall be allocated to the LTIP Unitholders until their LTIP Economic Capital Account Balances are equal to (i)
the Class A Unit Economic Balance, multiplied by (ii) the number of their LTIP Units; provided that no such Net Property
Gain and, to the extent necessary, individual items of income and gain comprising Net Property Gain of the Partnership, will be
allocated with respect to any particular LTIP Unit unless and to the extent that the Class A Unit Economic Balance exceeds the
Class A Unit Economic Balance in existence at the time such LTIP Unit was issued. Any allocations made pursuant to the first sentence
of this Section 5.01(c)(iii) shall be made among the LTIP Unitholders in proportion to the amounts required to be allocated to
each under this Section 5.01(c)(iii). The parties agree that the intent of this Section 5.01(c)(iii) is to make the Capital Account
balance associated with each LTIP Unit to be economically equivalent to the Capital Account balance associated with the Class A
Units outstanding (on a per-unit basis), but only if and to the extent that the Capital Account balance associated with the Class
A Units outstanding, without regard to the allocations under this Section 5.01(c)(iii), has increased on a per-unit basis since
the issuance of the relevant LTIP Unit. To the extent Net Property Loss is allocated to LTIP Unitholders pursuant to Section 5.01(b)(ii),
such Net Property Loss shall be allocated among the LTIP Unitholders in a manner that reverses the allocation of Net Property Gain
to the LTIP Unitholders pursuant to this Section 5.01(c)(iii).”

 

Article V, Section 5.01 of the Partnership Agreement is hereby
amended with the addition of Section 5.01(g), below:

 

“(g)    It is the intention of the parties
hereunder that the aggregate Capital Account balance of the General Partner in respect of the Series A Preferred Units at any date
shall not exceed the amount of the original Capital Contributions made in respect of the Series A Preferred Units plus all accrued
and unpaid distributions thereon, whether or not declared, to the extent not previously distributed. Notwithstanding anything to
the contrary contained herein, in connection with the liquidation of the Partnership or the interest of a holder of Series A Preferred
Units, and prior to making any other allocations of Net Income or Net Loss, items of income and gain or deduction and loss shall
first be allocated to the General Partner in respect of the Series A Preferred Units in such amounts as is required to cause the General
Partner’s adjusted Capital Account in respect of the Series A Preferred Units (taking into account any amounts such Partner
is obligated to contribute to the capital of the Partnership or is deemed obligated to contribute pursuant to Regulations Section
1.704-1(b)(2)(ii)(c)(2)) to equal the amount the General Partner is entitled to receive pursuant to the provisions of the Partnership
Agreement in respect to the Series A Preferred Units.”

 

    7

     

    

 

11.     Additional Allocation Provisions.

 

Article V, Section 5.06(a) of the Partnership Agreement is hereby
deleted in its entirety and replaced by Section 5.06(a), below:

 

“(a)    Upon liquidation of the Partnership,
after the satisfaction of all the debts and obligations of the Partnership, to the extent permitted by law, whether by payment
or the making of reasonable provision for payment thereof, any remaining assets of the Partnership shall be distributed, subject
to Section 5.07(b), first to the General Partner in respect of the Series A Preferred Units until its Capital Account with respect
to the Series A Preferred Units has been reduced to zero and then to all Partners (including the Special Limited Partner) with
positive Capital Accounts in accordance with their respective positive Capital Accounts.

 

Article V, Section 5.07(b) of the Partnership Agreement is hereby
deleted in its entirety and replaced by Section 5.07(b), below:

 

“(b)    Notwithstanding anything to the
contrary in this Agreement, it is the intent of the Partners (including the Special Limited Partner) that the allocation provisions
of Section 5.01 produce (a) a final Capital Account balance of the General Partner in respect of the Series A Preferred Units equal
to the aggregate Base Liquidation Preference, plus any accrued but unpaid Series A Preferred Return for each Series A Preferred
Unit and (b) final Capital Account balances of the Partners (including the Special Limited Partner) equal to the amount such Partners
would receive with respect to their Class A Units, Class B Units, LTIP Units or the Special Limited Partner Interest pursuant to
Section 5.02(b). To the extent the allocation provisions of Section 5.01 would fail to produce such final Capital Account balances,
(y) such provisions shall be amended by the General Partner if and to the extent necessary to produce such result and (z) Net Income,
Net Loss, Net Property Gain, Net Property Loss and, to the extent necessary, individual items of income, gain, loss and deduction,
of the Partnership for prior open years shall be reallocated by the General Partner, in its sole and absolute discretion, among
the Partners to the extent it is not possible to achieve such result with allocations of Net Income, Net Loss, Net Property Gain,
Net Property Loss and, to the extent necessary, individual items of income, gain, loss and deduction, of the Partnership for the
current year and future years. This Section 5.07(b) shall control notwithstanding any reallocation or adjustment of taxable Net
Income, Net Loss, Net Property Gain, Net Property Loss and, to the extent necessary, individual items of income, gain, loss and
deduction, of the Partnership by the Service or any other taxing authority. The General Partner shall have the authority to amend
this Agreement without the consent of the Limited Partners or the Special Limited Partner, as it reasonably considers advisable,
to make the allocations and adjustments described in this Section 5.07(b).

 

12. Except as modified herein, all terms and conditions of the
Partnership Agreement shall remain in full force and effect, which terms and conditions the General Partner hereby ratifies and
confirms.

 

    8

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