TABLE OF CONTENTS
| | | Page |
| | | |
| ARTICLE 1 DEFINITIONS | 5
|
| Section 1.1 | Definitions. | 5
|
| Section 1.2 | Interpretation and Rules of Construction | 17 |
| ARTICLE 2 THE MERGERS | 18 |
| Section 2.1 | The Mergers. | 18 |
| Section 2.2 | Closing | 18 |
| Section 2.3 | Effective Time. | 19 |
| Section 2.4 | Organizational Documents of the Surviving Entities. | 19 |
| Section 2.5 | Tax Treatment of Merger. | 20 |
| ARTICLE 3 EFFECTS OF THE MERGERS | 20 |
| Section 3.1 | Effects of the Mergers. | 20 |
| Section 3.2 | Exchange Procedures. | 23 |
| Section 3.3 | Withholding Rights | 24 |
| Section 3.4 | Dissenters Rights | 24 |
| Section 3.5 | General Effects of the Mergers. | 25 |
| ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE CRII PARTIES | 25 |
| Section 4.1 | Organization and Qualification; Subsidiaries. | 25 |
| Section 4.2 | Authority; Approval Required. | 26 |
| Section 4.3 | No Conflict; Required Filings and Consents. | 28 |
| Section 4.4 | Capital Structure. | 28 |
| Section 4.5 | SEC Correspondence; Financial Statements; Off Balance Sheet Arrangements; Investment Company Act; Anti-Corruption Laws. | 30 |
| Section 4.6 | Absence of Certain Changes or Events | 31 |
| Section 4.7 | No Undisclosed Liabilities | 31 |
| Section 4.8 | Permits; Compliance with Law. | 32 |
| Section 4.9 | Litigation | 32 |
| Section 4.10 | Properties. | 33 |
TABLE OF CONTENTS
(Continued)
| | | Page |
| | | |
| Section 4.11 | Environmental Matters | 34 |
| Section 4.12 | Material Contracts. | 34 |
| Section 4.13 | Taxes. | 37 |
| Section 4.14 | Intellectual Property | 40 |
| Section 4.15 | Insurance | 40 |
| Section 4.16 | Employee Matters. | 41 |
| Section 4.17 | Related-Party Transactions | 43 |
| Section 4.18 | Brokers | 43 |
| Section 4.19 | Opinion of Financial Advisor | 43 |
| Section 4.20 | Takeover Statutes; Appraisal Rights | 44 |
| Section 4.21 | COVID-19. | 44 |
| Section 4.22 | No Other Representations and Warranties; Non-Reliance. | 44 |
| ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF THE CCI PARTIES | 45 |
| Section 5.1 | Organization and Qualification; Subsidiaries. | 45 |
| Section 5.2 | Authority. | 46 |
| Section 5.3 | No Conflict; Required Filings and Consents. | 47 |
| Section 5.4 | Capital Structure. | 48 |
| Section 5.5 | SEC Documents; Financial Statements; Off-Balance Sheet Arrangements; Internal Controls; Investment Company Act; Anti-Corruption Laws. | 49 |
| Section 5.6 | Absence of Certain Changes or Events | 52 |
| Section 5.7 | No Undisclosed Liabilities | 52 |
| Section 5.8 | Permits; Compliance with Law. | 52 |
| Section 5.9 | Litigation | 53 |
| Section 5.10 | Properties. | 53 |
| Section 5.11 | Environmental Matters | 54 |
| Section 5.12 | Material Contracts. | 55 |
| Section 5.13 | Taxes. | 57 |
| Section 5.14 | Intellectual Property | 61 |
| Section 5.15 | Insurance | 61 |
TABLE OF CONTENTS
(Continued)
| | | Page |
| | | |
| Section 5.16 | Benefit Plans. | 61 |
| Section 5.17 | Related-Party Transactions | 62 |
| Section 5.18 | Brokers | 62 |
| Section 5.19 | Opinion of Financial Advisor | 62 |
| Section 5.20 | Appraisal Rights | 63 |
| Section 5.21 | Ownership of Merger Sub; No Prior Activities. | 63 |
| Section 5.22 | COVID-19. | 63 |
| Section 5.23 | No Other Representations and Warranties; Non-Reliance. | 63 |
| ARTICLE 6 COVENANTS RELATING TO CONDUCT OF BUSINESS PENDING THE MERGERS | 64 |
| Section 6.1 | Conduct of Business by CRII. | 64 |
| Section 6.2 | Conduct of Business by CCI. | 69 |
| Section 6.3 | No Control of Other Parties’ Business | 73 |
| ARTICLE 7 ADDITIONAL COVENANTS | 74 |
| Section 7.1 | Preparation of the Form S-4 and the Consent Solicitation Statements; Stockholder Approval. | 74 |
| Section 7.2 | Access to Information; Confidentiality. | 76 |
| Section 7.3 | No Solicitation; Superior Proposals. | 77 |
| Section 7.4 | Public Announcements | 82 |
| Section 7.5 | Appropriate Action; Consents; Filings. | 82 |
| Section 7.6 | Notification of Certain Matters; Transaction Litigation. | 84 |
| Section 7.7 | Indemnification; Directors’ and Officers’ Insurance. | 85 |
| Section 7.8 | Dividends. | 86 |
| Section 7.9 | Takeover Statutes | 87 |
| Section 7.10 | Tax Matters. | 87 |
| Section 7.11 | CCI Board | 88 |
| Section 7.12 | Voting Agreement | 88 |
| Section 7.13 | 401(k) Plan | 88 |
| Section 7.14 | CCA Note Distribution | 88 |
| Section 7.15 | The CMRI and CMRII Merger Agreements | 88 |
| Section 7.16 | Equity Incentive Matters. | 89 |
TABLE OF CONTENTS
(Continued)
| | | Page |
| | | |
| Section 7.17 | Pre-Merger Transactions | 89 |
| ARTICLE 8 CONDITIONS | 89 |
| Section 8.1 | Conditions to Each Party’s Obligation to Effect the Mergers | 89 |
| Section 8.2 | Conditions to Obligations of the CCI Parties | 90 |
| Section 8.3 | Conditions to Obligations of CRII Parties | 91 |
| ARTICLE 9 TERMINATION, FEES AND EXPENSES, AMENDMENT AND WAIVER | 93 |
| Section 9.1 | Termination | 93 |
| Section 9.2 | Effect of Termination | 94 |
| Section 9.3 | Fees and Expenses. | 95 |
| ARTICLE 10 GENERAL PROVISIONS | 97 |
| Section 10.1 | Nonsurvival of Representations and Warranties and Certain Covenants | 97 |
| Section 10.2 | Notices | 97 |
| Section 10.3 | Severability | 98 |
| Section 10.4 | Counterparts | 98 |
| Section 10.5 | Entire Agreement; No Third-Party Beneficiaries | 99 |
| Section 10.6 | Amendment; Extension; Waiver | 99 |
| Section 10.7 | Governing Law; Venue. | 99 |
| Section 10.8 | Assignment | 100 |
| Section 10.9 | Specific Performance | 100 |
| Section 10.10 | Waiver of Jury Trial | 101 |
| Section 10.11 | Authorship | 101 |
EXHIBITS
Exhibit A – CCI Articles Supplementary (Series 2016 Preferred Stock)
Exhibit B – CCI Articles Supplementary (Series 2017 Preferred Stock)
Exhibit C – Form of Amended and Restated Advisory Agreement
Exhibit D – Form of Amended and Restated CROP OP Agreement
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER, dated as of January 26, 2021 (this “Agreement”), is entered into by and among Cottonwood Communities, Inc., a Maryland corporation (“CCI”), Cottonwood Communities GP Subsidiary, LLC, a Maryland limited liability company and a wholly owned subsidiary of CCI (“Merger Sub”), Cottonwood Communities O.P., LP, a Delaware limited partnership and a subsidiary of CCI (“CCOP” and together with CCI and the Merger Sub, the “CCI Parties”), Cottonwood Residential II, Inc., a Maryland corporation (“CRII”), and Cottonwood Residential O.P., LP, a Delaware limited partnership and subsidiary of CRII (“CROP” and together with CRII, the “CRII Parties”). Each of the CCI Parties and CRII Parties is sometimes referred to herein as a “Party,” and, collectively, the CCI Parties and the CRII Parties are referred to herein as the “Parties.” Capitalized terms used but not otherwise defined herein have the meanings ascribed to them in Article 1.
RECITALS
WHEREAS, the Parties wish to effect a business combination in which CRII will be merged with and into Merger Sub (the “REIT Merger”), with Merger Sub being the surviving entity, and each share of CRII Common Stock, CRII Series 2016 Preferred Stock and CRII Series 2017 Preferred Stock issued and outstanding immediately prior to the Merger Effective Time that is not cancelled and retired pursuant to this Agreement will be converted into the right to receive the applicable REIT Merger Consideration, upon the terms and subject to the conditions set forth in this Agreement and in accordance with the Maryland General Corporation Law (the “MGCL”) and the Maryland Limited Liability Company Act (the “MLLCA”);
WHEREAS, the Parties wish to effect a business combination in which CCOP will be merged with and into CROP (the “Partnership Merger” and, together with the REIT Merger, the “Mergers”), with CROP being the surviving entity, and each CCOP Partnership Unit issued and outstanding immediately prior to the Partnership Merger Effective Time that is not cancelled and retired pursuant to this Agreement will be converted into the right to receive the Partnership Merger Consideration, upon the terms and subject to the conditions set forth in this Agreement and in accordance with the Delaware Revised Uniform Limited Partnership Act (the “DRULPA”);
WHEREAS, in order to issue preferred stock of CCI with the preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends and other distributions, qualifications and terms and conditions of redemption that mirror those of the CRII Series 2016 Preferred Stock and the CRII Series 2017 Preferred Stock as part of the REIT Merger Consideration, the Parties desire that CCI supplement the CCI Charter with the Articles Supplementary attached hereto as Exhibit A (the “CCI Articles Supplementary (Series 2016 Preferred Stock)”) and Exhibit B (the “CCI Articles Supplementary (Series 2017 Preferred Stock)”);
WHEREAS, all of the voting shares of common stock of CRII are owned by Cottonwood Residential Holdings, LLC and a number of partnership units of CROP are owned by High Traverse Holdings, LLC, a Delaware limited liability company (“High Traverse”), each of which, together with certain Affiliates, have agreed to vote such securities in favor of the Mergers pursuant to a Voting Agreement with CCI (the “Voting Agreement”);
WHEREAS, in connection with the Mergers, CCI’s external advisor, CC Advisors III, LLC, has agreed to enter into an Amended and Restated Advisory Agreement, in the form attached hereto as Exhibit C, to be effective on or before the Merger Effective Time (the “Amended and Restated Advisory Agreement”);
WHEREAS, concurrently with the execution and delivery of this Agreement, the CCI Parties have entered into a merger agreement with Cottonwood Multifamily REIT I, Inc., a Maryland corporation (“CMRI”), and Cottonwood Multifamily REIT I O.P., LP, a Delaware limited partnership (“CMRI OP”), pursuant to which CMRI will merge with and into Merger Sub and CMRI OP will merge into CCOP or CCOP’s successor (the “CMRI Merger”);
WHEREAS, concurrently with the execution and delivery of this Agreement, the CCI Parties have entered into a merger agreement with Cottonwood Multifamily REIT II, Inc., a Maryland corporation (“CMRII”), and Cottonwood Multifamily REIT II O.P., LP, a Delaware limited partnership (“CMRII OP”), pursuant to which CMRII will merge with and into Merger Sub and CMRII OP will merge into CCOP or CCOP’s successor (the “CMRII Merger” and collectively with the CMRI Merger, the “CMR Mergers”);
WHEREAS, the Mergers are not conditioned on the consummation of either of the CMRI Merger or the CMRII Merger;
WHEREAS, before the Merger Effective Time, CRII, CROP and Cottonwood Residential Holdings, LLC shall enter into a redemption agreement pursuant to which, immediately before the Merger Effective Time, CRII will redeem all of its outstanding shares of voting common stock in exchange for an in-kind distribution by CRII of CROP’s current indirect interest in Cottonwood Communities Advisors, LLC (the “CCA Externalization Transaction”);
WHEREAS, before the Merger Effective Time, (i) subject to Section 7.14, CROP intends to distribute the interests in the Promissory Note of Cottonwood Communities Advisors, LLC, dated January 1, 2021 in favor of CROP (the “CCA Note”), to the holders of CROP participating partnership units (including CRII), and CRII intends to distribute its portion of the CCA Note to its common stockholders (collectively, the “CCA Note Distribution”), (ii) CROP intends to issue 155,441 common limited partnership units in exchange for all of the remaining interests in CC Advisors Promote—Incentive Grant Investor, LLC and CC Advisors Promote—Employee Investor, LLC and (iii) CROP intends to redeem 306,584 common limited partnership units in exchange for notes receivables, all as detailed in Section 6.1(b)(ix) of the CRII Disclosure Letter (collectively with the CCA Externalization Transaction, the “Pre-Merger Transactions”);
WHEREAS, concurrently with the execution and delivery of this Agreement, CROP has entered into a tax protection agreement with High Traverse, which will become effective upon the Merger Effective Time (the “Tax Protection Agreement”);
WHEREAS, the Parties desire an amendment and restatement of the limited partnership agreement of CROP, substantially in the form attached hereto as Exhibit D (the “Amended and Restated CROP OP Agreement”), which shall become effective upon the Partnership Merger Effective Time;
WHEREAS, the Parties desire to condition the Mergers on, among other things, (i) the approval of the Mergers, the Tax Protection Agreement, the Amended and Restated Advisory Agreement and the Pre-Merger Transactions by the holders of a majority of the outstanding CROP Common Units held by limited partners (other than CRII’s management and certain of its affiliates) and (ii) the approval of the Partnership Merger and the Amended and Restated CROP OP Agreement by the holders of a majority of the outstanding CROP Common Units held by limited partners (together, the “Partner Approvals”);
WHEREAS, on the recommendation of the transaction committee (the “CRII Transaction Committee”) of the board of directors of CRII (the “CRII Board”), the CRII Board has (a) determined that this Agreement, the REIT Merger and the other transactions contemplated by this Agreement are advisable and in the best interests of CRII and its stockholders (other than CRII’s management and certain of its affiliates), (b) authorized and approved this Agreement, the REIT Merger and the other transactions contemplated by this Agreement and (c) recommended the approval of the REIT Merger by the holders of CRII Voting Common Stock and directed that CRII seek the written consent thereof by the holders of a majority of the outstanding CRII Voting Common Stock (the “Stockholder Approval”);
WHEREAS, on the recommendation of the CRII Transaction Committee, CRII, as the sole general partner of CROP, has (a) determined that this Agreement, the Mergers, the Tax Protection Agreement, the Amended and Restated Advisory Agreement, the Amended and Restated CROP OP Agreement, the Pre-Merger Transactions and the other transactions contemplated by this Agreement are advisable and in the best interests of CROP and its unitholders (other than CRII’s management and certain of its affiliates), (b) authorized and approved this Agreement, the Mergers, the Tax Protection Agreement, the Amended and Restated CROP OP Agreement, the Pre-Merger Transactions and the other transactions contemplated by this Agreement and (c) recommended that the Mergers, the Tax Protection Agreement, the Amended and Restated Advisory Agreement, the Amended and Restated CROP OP Agreement and the Pre-Merger Transactions and the other transactions contemplated by this Agreement be approved by the partners of CROP and directed that CROP seek the Partner Approvals;
WHEREAS, on the recommendation of the special committee (the “CCI Special Committee”) of the board of directors of CCI (the “CCI Board”), the CCI Board has (a) determined that this Agreement, the Mergers, the CCI Articles Supplementary (Series 2016 Preferred Stock), the CCI Articles Supplementary (Series 2017 Preferred Stock), the Voting Agreement, the Amended and Restated Advisory Agreement and the other transactions contemplated by this Agreement are advisable and in the best interests of CCI, (b) determined that this Agreement, the Mergers, the Voting Agreement and the other transactions contemplated by this Agreement are fair and reasonable to CCI and on terms and conditions no less favorable to CCI than those available from unaffiliated third parties, and (c) authorized and approved this Agreement, the Mergers, the CCI Articles Supplementary (Series 2016 Preferred Stock), the CCI Articles Supplementary (Series 2017 Preferred Stock), the Voting Agreement, the Amended and Restated Advisory Agreement and the other transactions contemplated by this Agreement;
WHEREAS, CCI, in its capacity as the sole member of Merger Sub, has taken all actions required for the execution of this Agreement by Merger Sub and to approve this Agreement and the consummation by Merger Sub of the REIT Merger and the other transactions contemplated by this Agreement;
WHEREAS, the Parties intend that, for United States federal income tax purposes (and, where applicable, state and local income tax purposes), the REIT Merger shall qualify as a reorganization within the meaning of Section 368(a) of the Code, and this Agreement shall be, and is hereby adopted as, a “plan of reorganization” for purposes of Sections 354, 361 and 368 of the Code;
WHEREAS, the Parties intend that, for United States federal income tax purposes (and, where applicable, state and local income tax purposes), the Partnership Merger shall qualify as and constitute an “assets-over” form of merger governed by Treasury Regulations Section 1.708-1(c)(3)(i) pursuant to which CCOP shall be treated as transferring all of its assets and liabilities to CROP in exchange for CROP Partnership Units followed by the distribution of such units to CCI and to those Persons listed on Section 5.4(b) of the CCI Disclosure Letter in a complete liquidation of CCOP, the deemed exchange and distribution being respectively described in Section 721 of the Code and Section 731 of the Code; and
WHEREAS, each of the Parties desires to make certain representations, warranties, covenants and agreements in connection with the Mergers, and to prescribe various conditions to the Mergers.
NOW THEREFORE, in consideration of the foregoing and the mutual representations, warranties, covenants and agreements contained in this Agreement, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties, intending to be legally bound, agree as follows:
ARTICLE 1
DEFINITIONS
Section 1.1
Definitions.
(a)
For purposes of this Agreement:
“Acceptable NDA” means a confidentiality agreement with a term of at least one year and terms that (1) are not materially less favorable in the aggregate to CRII than those terms set forth in the Confidentiality Agreement (except that such confidentiality agreement need not prohibit the making or amending of a confidential Acquisition Proposal) and (2) do not in any respect restrict CRII from complying with its obligations under this Agreement.
“Action” means any claim, action, cause of action, demand, suit, litigation, investigation, audit, proceeding, arbitration, mediation, interference, audit, assessment, hearing, or other legal proceeding (whether sounding in contract, tort or otherwise, whether civil or criminal and whether brought, conducted, tried or heard by or before any Governmental Authority).
“Affiliate” of a specified Person means a Person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, such specified Person. Notwithstanding the foregoing, (i) the CCI Parties shall not be deemed Affiliates of the CRII Parties and (ii) CMRI and CMRII and their respective subsidiaries shall not be deemed Affiliates of the CCI Parties or the CRII Parties.
“Alternative Acquisition Agreement” means any letter of intent, memorandum of understanding, agreement in principle, acquisition agreement, merger agreement, option agreement, joint venture agreement, partnership agreement or other similar agreement (other than an Acceptable NDA) relating to any Acquisition Proposal.
“Anti-Corruption Laws” means (i) the U.S. Foreign Corrupt Practices Act of 1977 and (ii) any applicable anti-bribery, anti-money laundering, anti-corruption or similar Law of any other jurisdiction.
“Benefit Plan” means, with respect to a Person, any benefit or compensation plan, program, policy, practice, Contract or other obligation, whether or not funded, that is sponsored or maintained by, or required to be contributed to, or with respect to which any potential liability is borne by such Person or any of its subsidiaries including, but not limited to, “employee benefit plans” (within the meaning of Section 3(3) of ERISA), and any employment, consulting, termination, severance, change in control, separation, retention equity option, equity appreciation rights, restricted equity, phantom equity, equity-based compensation, profits interest unit, outperformance, equity purchase, deferred compensation, bonus, incentive compensation, fringe benefit, health, medical, dental, disability, accident, life insurance, welfare benefit, cafeteria, vacation, paid time off, perquisite, retirement, pension, or savings or any other compensation or employee benefit plan, agreement, program, policy, practice, understanding or other arrangement, whether or not subject to ERISA.
“Business Day” means any day ending at 11:59 p.m., New York City time, other than a Saturday, a Sunday or any day on which the SDAT or banks located in New York, New York are authorized or required by Law to be closed.
“CCI Charter” means the charter of CCI.
“CCI Governing Documents” means the CCI Charter, the bylaws of CCI, the certificate of limited partnership of CCOP and the CCOP OP Agreement.
“CCI Material Adverse Effect” means any event, circumstance, change, effect, development, condition or occurrence that, individually or in the aggregate, (i) would reasonably be expected to have a material adverse effect on the business, properties, assets, liabilities, condition (financial or otherwise) or results of operations of CCI and the CCI Subsidiaries, taken as a whole, or (ii) would reasonably be expected to prevent or materially impair the ability of CCI and CCOP to consummate the Mergers before the Outside Date; provided, however, that the following shall not be deemed to constitute, or be taken into account in determining, whether a CCI Material Adverse Effect has occurred: (A) any failure of CCI to meet any projections or forecasts or any estimates of earnings, revenues or other metrics for any period (provided, that any event, circumstance, change, effect, development, condition or occurrence giving rise to such failure may be taken into account in determining whether there has been a CCI Material Adverse Effect), (B) any changes that generally affect the residential real estate industry in which CCI and the CCI Subsidiaries operate, (C) any changes in the United States or global economy or capital, financial or securities markets generally, including changes in interest or exchange rates, (D) any changes in the regulatory or political conditions in the United States or in any other country or region of the world, (E) the commencement, escalation or worsening of a war or armed hostilities or the occurrence of acts of terrorism or sabotage occurring after the date hereof, (F) the taking of any action expressly required by this Agreement, (G) earthquakes, hurricanes, floods or other natural disasters, (H) any epidemic, pandemic or disease outbreak (including COVID-19 or any quarantine, shelter in place, stay at home, workforce reduction, social distancing, shut down, closure, sequester or any other Law, directive, policy, guideline or recommendation by any Governmental Authority in connection with, or in response to, COVID-19 (“COVID-19 Measures”)), and any material worsening of any epidemic, pandemic or disease outbreak threatened or existing as of the date hereof, or any shutdown or material limiting of certain United States or foreign federal, state or local government services, declaration of martial law, quarantine or similar directive, guidance, policy or other similar action by any Governmental Authority in connection with any epidemic, pandemic or disease outbreak, (I) changes or prospective changes in GAAP or in any Law of general applicability unrelated to the Mergers (or the interpretation or enforcement of the foregoing), (J) the public announcement of this Agreement or the pendency of this Agreement, including the impact thereof on the relationships of CCI and its Subsidiaries with their respective partners or other material third-party business relations or (K) assuming no waiver by the CCI Parties of the conditions of the CMRI Merger Agreement or CMRII Merger Agreement that was not approved by CRII in writing in advance, the consummation of the CMRI Merger or the CMRII Merger, provided, further, that if any event described in any of clauses (B), (C), (D), (E), (G), (H) and (I) has had a disproportionate adverse impact on CCI and the CCI Subsidiaries, taken as a whole, relative to others in the residential real estate industry in the geographic regions in which CCI and the CCI Subsidiaries operate, then only the incremental disproportionate impact of such event shall be taken into account for the purpose of determining whether a CCI Material Adverse Effect has occurred.
“CCI Properties” means each real property, or interest therein, owned, or leased (including ground leased) as lessee or sublessee, by CCI or any CCI Subsidiary as of the date of this Agreement (including all of CCI’s or any CCI Subsidiary’s right, title and interest in and to buildings, structures and other improvements and fixtures located on or under such real property and all easements, rights and other appurtenances to such real property).
“CCI Series 2016 Preferred Stock” means “Series 2016 Preferred Stock” as defined in the CCI Articles Supplementary (Series 2016 Preferred Stock).
“CCI Series 2017 Preferred Stock” means “Series 2017 Preferred Stock” as defined in the CCI Articles Supplementary (Series 2017 Preferred Stock).
“CCI Subsidiary” means (i) any corporation of which more than 50% of the outstanding voting securities is directly or indirectly owned by CCI or CCOP and (ii) any partnership, limited liability company, joint venture or other entity of which more than 50% of the total equity interest is directly or indirectly owned by CCI or CCOP or of which CCI or any CCI Subsidiary is a general partner, a manager, a managing member or the equivalent.
“CCOP Common Unit” means “Common Unit” as defined in the CCOP OP Agreement.
“CCOP General Partner Unit” means “General Partner Unit” as defined in the CCOP OP Agreement.
“CCOP LTIP Unit” means “LTIP Unit” as defined in the CCOP OP Agreement.
“CCOP OP Agreement” means the Amended and Restated Limited Partnership Agreement of CCOP, dated as of February 1, 2020, as amended.
“CCOP Partnership Unit” means “Partnership Unit” as defined in the CCOP OP Agreement.
“CCOP Series 2019 Preferred Unit” means “Series 2019 Preferred Unit” as defined in the CCOP OP Agreement.
“CCOP Special Limited Partner Interest” means “Special Limited Partner Interest” as defined in the CCOP OP Agreement.
“CCOP Special LTIP Unit” means “Special LTIP Unit” as defined in the CCOP OP Agreement.
“CCOP Vesting Agreement” means “Vesting Agreement” as defined in the CCOP OP Agreement.
“CMRI Merger Agreement” means the Agreement and Plan of Merger, dated as of January 26, 2021, by and among CCI, CCOP, Merger Sub, CMRI and CMRI OP.
“CMRII Merger Agreement” means the Agreement and Plan of Merger, dated as of January 26, 2021, by and among CCI, CCOP, Merger Sub, CMRII and CMRII OP.
“CRII Benefit Plan” means a Benefit Plan sponsored or maintained by CRII, CROP or a CRII Subsidiary or for which any of the foregoing have or may have any liability or obligation.
“Code” means the Internal Revenue Code of 1986.
“Common Exchange Ratio” means 2.015 shares of CCI Common Stock for each share of then-outstanding CRII Common Stock, as such ratio may be adjusted in accordance with Section 3.1.
“Confidentiality Agreement” means the Confidentiality Agreement, dated as of July 15, 2020, among CCI, CRII, CMRI and CMRII.
“Consent Solicitation Statements” means the CROP Consent Solicitation Statement and the CRII Consent Solicitation Statement.
“Contract” means any written or oral contract, agreement, indenture, note, bond, instrument, lease, conditional sales contract, mortgage, license, guaranty, binding commitment or other obligation.
“CRII Charter” means the charter of CRII.
“CRII Consent Solicitation Statement” means the solicitation statement of CRII used to solicit the Stockholder Approval.
“CRII Governing Documents” means the CRII Charter, the bylaws of CRII, the certificate of limited partnership of CROP and CROP OP Agreement.
“CRII Material Adverse Effect” means any event, circumstance, change, effect, development, condition or occurrence that, individually or in the aggregate, (i) would reasonably be expected to have a material adverse effect on the business, properties, assets, liabilities, condition (financial or otherwise) or results of operations of CRII and the CRII Subsidiaries, taken as a whole, or (ii) would reasonably be expected to prevent or materially impair the ability of CRII and CROP to consummate the Mergers before the Outside Date; provided, however, that the following shall not be deemed to constitute, or be taken into account in determining, whether a CRII Material Adverse Effect has occurred: (A) any failure of CRII to meet any projections or forecasts or any estimates of earnings, revenues or other metrics for any period (provided, that any event, circumstance, change, effect, development, condition or occurrence giving rise to such failure may be taken into account in determining whether there has been a CRII Material Adverse Effect), (B) any changes that generally affect the residential real estate industry in which CRII and the CRII Subsidiaries operate, (C) any changes in the United States or global economy or capital, financial or securities markets generally, including changes in interest or exchange rates, (D) any changes in the regulatory or political conditions in the United States or in any other country or region of the world, (E) the commencement, escalation or worsening of a war or armed hostilities or the occurrence of acts of terrorism or sabotage occurring after the date hereof, (F) the taking of any action expressly required by this Agreement, (G) earthquakes, hurricanes, floods or other natural disasters, (H) any epidemic, pandemic or disease outbreak (including COVID-19 or any COVID-19 Measures) and any material worsening of any epidemic, pandemic or disease outbreak threatened or existing as of the date hereof or any shutdown or material limiting of certain United States or foreign federal, state or local government services, declaration of martial law, quarantine or similar directive, guidance, policy or other similar action by any Governmental Authority in connection with any epidemic, pandemic or disease outbreak, (I) changes or prospective changes in GAAP or in any Law of general applicability unrelated to the Mergers (or the interpretation or enforcement of the foregoing) or (J) the public announcement of this Agreement or the pendency of this Agreement, including the impact thereof on the relationships of CRII and its Subsidiaries with their respective partners or other material third-party business relations or with their respective employees, provided, further, that if any event described in any of clauses (B), (C), (D), (E), (G), (H) and (I) has had a disproportionate adverse impact on CRII and the CRII Subsidiaries, taken as a whole, relative to others in the residential real estate industry in the geographic regions in which CRII and the CRII Subsidiaries operate, then only the disproportionate incremental impact of such event shall be taken into account for the purpose of determining whether a CRII Material Adverse Effect has occurred.
“CRII Properties” means each real property, or interest therein, owned, or leased (including ground leased) as lessee or sublessee, by CRII or any CRII Subsidiary as of the date of this Agreement (including all of CRII’s or any CRII Subsidiary’s right, title and interest in and to buildings, structures and other improvements and fixtures located on or under such real property and all easements, rights and other appurtenances to such real property).
“CRII Series 2016 Preferred Stock” means “Series 2016 Preferred Stock” as defined in the CRII Charter.
“CRII Series 2017 Preferred Stock” means “Series 2017 Preferred Stock” as defined in the CRII Charter.
“CRII Subsidiary” means (i) any corporation of which more than 50% of the outstanding voting securities is directly or indirectly owned by CRII or CROP, and (ii) any partnership, limited liability company, joint venture or other entity of which more than 50% of the total equity interest is directly or indirectly owned by CRII or CROP or of which CRII or any CRII Subsidiary is a general partner, manager, managing member or the equivalent.
“CROP ‘CCOP’ LTIP Unit” means “CCOP LTIP Unit” as defined in the Amended and Restated CROP OP Agreement.
“CROP ‘CCOP’ Special LTIP Unit” means “CCOP Special LTIP Unit” as defined in the Amended and Restated CROP OP Agreement.
“CROP Common Unit” means “Common Limited Partnership Unit” as defined in the CROP OP Agreement.
“CROP Consent Solicitation Statement” means the solicitation statement of CROP used to solicit the Partner Approvals.
“CROP General Partner Unit” means “General Partnership Unit” as defined in the CROP OP Agreement.
“CROP LTIP Unit” means “LTIP Unit” as defined in the CROP OP Agreement.
“CROP OP Agreement” means the Fourth Amended and Restated Limited Partnership Agreement of CROP, dated as of December 1, 2015, as amended.
“CROP Participating Partnership Unit” means “Participating Partnership Unit” as defined in the CROP OP Agreement.
“CROP Partnership Unit” means “Partnership Unit” as defined in the CROP OP Agreement.
“CROP Preferred Unit” means “Preferred Units” as defined in the CROP OP Agreement.
“CROP Series 2019 Preferred Unit” means “Series 2019 Preferred Unit” as defined in the Amended and Restated CROP OP Agreement.
“CROP Special LTIP Unit” means “Special LTIP Unit” as defined in the CROP OP Agreement.
“Environmental Law” means any Law (including common law) relating to the investigation, pollution (or cleanup or other remediation thereof), restoration or protection of the natural resources, endangered or threatened species, or environment (including ambient air, soil, surface water, groundwater, land surface or subsurface land), or human health or safety (as such matters relate to Hazardous Substances), including Laws relating to (i) the use, handling, presence, transportation, treatment, generation, processing, recycling, remediation, storage, disposal, release or discharge of Hazardous Substances and (ii) any noise, odor, indoor air, employee exposure, wetlands, pollution, contamination or any injury or threat of injury to persons or property relating to any Hazardous Substance.
“Environmental Permit” means any permit, approval, license, exemption, action, consent or other authorization issued, granted, given, authorized by or required under any applicable Environmental Law.
“ERISA” means the Employee Retirement Income Security Act of 1974.
“ERISA Affiliate” means, with respect to an entity (the “Referenced Entity”), any other entity, which, together with the Referenced Entity, would be treated as a single employer under Code Section 414 or ERISA Section 4001.
“Exchange Act” means the U.S. Securities Exchange Act of 1934.
“Exchange Ratio” or “Exchange Ratios” mean the Common Exchange Ratio, the Preferred Exchange Ratio and/or the Partnership Exchange Ratio, as the case may be.
“Excluded Shares” means all shares of capital stock of CRII held, as of immediately prior to the Merger Effective Time, by CCI, any wholly owned subsidiary of CCI or by any wholly owned subsidiary of CRII.
“Expenses” means all reasonable and documented out-of-pocket expenses (including all fees and expenses of counsel, accountants, investment bankers, experts and consultants) incurred by a CCI Party or on its behalf in connection with or related to the authorization, preparation, negotiation, execution and performance of this Agreement and the other agreements and documents contemplated hereby, the preparation, printing and filing of the Form S-4 and all SEC and other regulatory filing fees incurred in connection with the Form S-4, obtaining any third party consents, making any other filings with the SEC and all other matters related to the closing of the Mergers and the other transactions contemplated by this Agreement.
“Fundamental Representations” means the representations and warranties contained in Section 4.1 (Organization and Qualification; Subsidiaries); Section 4.2 (Authority; Approval Required); Section 4.3(a)(i) (No Conflict; Required Filings and Consents); Section 4.4(a)-(b) (Capital Structure); Section 4.5(d) (Investment Company Act); Section 4.13(b) (Taxes); Section 5.1 (Organization and Qualification; Subsidiaries); Section 5.2 (Authority); Section 5.3(a)(i) (No Conflict; Required Filings and Consents); Section 5.4(a)-(b) (Capital Structure); Section 5.5(h) (Investment Company Act); and Section 5.13(b) (Taxes).
“GAAP” means United States generally accepted accounting principles.
“Governmental Authority” means the United States (federal, state or local) government or any foreign government, or any other governmental or quasi-governmental regulatory, judicial or administrative authority, instrumentality, board, bureau, agency, commission, body, department, self-regulatory organization, arbitration panel or similar entity or subdivision thereof.
“Hazardous Substances” means (i) those materials, substances, chemicals, wastes, products, compounds, solid, liquid, gas, minerals in each case, whether naturally occurred or man-made, that are listed, designated, classified or regulated as hazardous or toxic under any Environmental Law; (ii) petroleum and petroleum-derived products, including crude oil and any fractions thereof, and lead-containing paint or plumbing; and (iii) polychlorinated biphenyls, urea formaldehyde foam insulation, methane, asbestos in any form, radioactive materials or wastes and radon.
“Indebtedness” means, with respect to any Person and without duplication, (i) the principal of and premium (if any) of all indebtedness, notes payable, accrued interest payable or other obligations for borrowed money, whether secured or unsecured, (ii) all obligations under conditional sale or other title retention agreements, or incurred as financing, in either case with respect to property acquired by such Person, (iii) all obligations issued, undertaken or assumed as the deferred purchase price for any property or assets, (iv) all obligations under capital leases, (v) all obligations in respect of bankers acceptances or letters of credit, (vi) net cash payment obligations under interest rate cap, swap, collar or similar transaction or currency hedging transactions (valued at the termination value thereof), (vii) any guarantee of any of the foregoing, whether or not evidenced by a note, mortgage, bond, indenture or similar instrument and (viii) any agreement to provide any of the foregoing.
“Intellectual Property” means all United States and foreign (i) patents, patent applications and all related continuations, continuations-in-part, divisionals, reissues, re-examinations, substitutions and extensions thereof, (ii) trademarks, service marks, trade dress, logos, trade names, corporate names, Internet domain names, design rights and other source identifiers, together with the goodwill symbolized by any of the foregoing, (iii) registered and unregistered copyrights and rights in copyrightable works, (iv) rights in confidential and proprietary information, including trade secrets, know-how, ideas, formulae, invention disclosure, models, algorithms and methodologies, (v) all rights in the foregoing and in other similar intangible assets, and (vi) all applications and registrations for the foregoing.
“Investment Company Act” means the Investment Company Act of 1940.
“IRS” means the United States Internal Revenue Service or any successor agency.
“Knowledge” means (i) with respect to CRII, the actual knowledge of the persons named in Section 1.1(a) of the CRII Disclosure Letter and (ii) with respect to CCI, the actual knowledge of the persons named in Section 1.1(a) of the CCI Disclosure Letter, in each case of (i) and (ii), after reasonable inquiry.
“Law” means any and all domestic (federal, state or local) or foreign laws, statutes, common laws, rules, ordinances, codes, regulations and Orders promulgated by any Governmental Authority.
“Lien” means with respect to any asset (including any security), any mortgage, deed of trust, claim, condition, covenant, lien, pledge, hypothecation, charge, security interest, preferential arrangement, option or other third party right (including right of first refusal or first offer), restriction, right of way, easement, or title defect or encumbrance of any kind in respect of such asset, including any restriction on the use, voting, transfer, receipt of income or other exercise of any attributes of ownership, other than transfer restrictions arising under applicable securities Laws.
“Order” means a judgment, writ, stipulation, injunction, order or decree of any Governmental Authority or arbitrator.
“Partnership Exchange Ratio” means one CROP Partnership Units for each CCOP Partnership Unit, as such ratio may be adjusted in accordance with Section 3.1(c).
“Permitted Liens” means any of the following: (i) Liens for current Taxes or governmental assessments, charges or claims of payment not yet delinquent or that are being contested in good faith and for which adequate accruals or reserves have been established as of the date of this Agreement; (ii) Liens that are carriers’, suppliers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s, construction or other similar Liens arising in the ordinary course of business if the underlying obligations are not delinquent, or are being contested in good faith; (iii) with respect to any real property, Liens that are zoning, building or other regulations, requirements, entitlements or other land use or environmental regulations by any Governmental Authority that do not materially impact the use of the real property as currently conducted; (iv) with respect to CRII, Liens that are disclosed on Section 4.10 of the CRII Disclosure Letter, and with respect to CCI, Liens that are disclosed on Section 5.10 of the CCI Disclosure Letter; (v) with respect to CCI, Liens that are disclosed in its most recent Quarterly Report on Form 10-Q; (vi) with respect to CRII, Liens arising pursuant to any CRII Material Contract or, with respect to CCI, Liens arising pursuant to any CCI Material Contract; (vii) with respect to the CRII Properties or the CCI Properties, Liens that are recorded in a public record or disclosed on existing title policies made available to the other Party prior to the date hereof and any unrecorded easements (including reciprocal easement agreements), rights of way and other similar restrictions; (viii) with respect to CRII or CCI, as applicable, Liens that were incurred in the ordinary course of business since December 31, 2019 and that do not materially interfere with the use, operation or transfer of, or any of the benefits of ownership of, the property of such Party and its subsidiaries, taken as a whole; (ix) Liens with respect to pledges or deposits under workers’ compensation legislation, unemployment insurance, social security, ERISA or similar Laws; (x) statutory Liens of landlords for amounts not yet delinquent; (xi) Liens attaching to inventory held by consignees in the ordinary course of business, (xii) Liens of any utility company to construct and/or maintain lines, pipes, wires, cables, poles, conduits and distribution boxes and equipment in, over, under, and/or upon any portion of the CRII Properties or the CCI Properties; (xiii) Liens related to matters of recorded plats with respect to the CRII Properties or the CCI Properties; and (xiv) easements, rights‑of‑way, covenants, conditions, restrictions and other similar matters affecting title and other title defects, none of which materially impairs the use or occupancy of the CRII Properties or the CCI Properties.
“Person” or “person” means an individual, corporation, partnership, limited partnership, limited liability company, group (including a “person” as defined in Section 13(d)(3) of the Exchange Act), trust, association or other entity or organization (including any Governmental Authority or a political subdivision, agency or instrumentality of a Governmental Authority).
“Preferred Exchange Ratio” means one share of CCI Series 2016 Preferred Stock for each share of CRII Series 2016 Preferred Stock and one share of CCI Series 2017 Preferred Stock for each share of CRII Series 2017 Preferred Stock, as such ratio may be adjusted in accordance with Section 3.1(c).
“REIT” means a “real estate investment trust” within the meaning of Section 856 of the Code.
“Representatives” means, with respect to any Person, such Person’s directors, officers, employees, advisors (including attorneys, accountants, consultants, investment bankers, and financial advisors), agents and other representatives.
“SEC” means the U.S. Securities and Exchange Commission (including the staff thereof).
“Securities Act” means the U.S. Securities Act of 1933.
“Tax” or “Taxes” means any federal, state, local and foreign income, gross receipts, capital gains, withholding, property, recording, stamp, transfer, sales, use, abandoned property, escheat, franchise, employment, payroll, excise, environmental and any other taxes, duties, assessments or similar governmental charges, together with penalties, interest or additions imposed with respect to such amounts by the U.S. or any Governmental Authority, whether computed on a separate, consolidated, unitary, combined or any other basis.
“Tax Return” means any return, declaration, report, claim for refund, or information return or statement relating to Taxes filed or required to be filed with a Governmental Authority, including any schedule or attachment thereto, and including any amendment thereof.
“Termination Payment” means (i) $10,703,000 or (ii) in the event the CRII Transaction Committee determines not to effect the CCA Note Distribution provided for in Section 7.14, $11,154,000.
(b)
In addition to the terms defined in Section 1.1(a), the following terms have the respective meanings set forth in the sections set forth below opposite such term:
| Defined Term | Location of Definition |
Acquisition Proposal | Section 7.3(j)(i) |
Adverse Recommendation Change | Section 7.3(d) |
Agreement | Preamble |
Amended and Restated Advisory Agreement | Recitals |
Amended and Restated CROP OP Agreement | Recitals |
Articles of Merger | Section 2.3(a) |
CCA Externalization Transaction | Recitals |
CCA Note | Recitals |
CCA Note Adjustment | Section 3.1(c)(i) |
CCA Note Distribution | Recitals |
CCI | Preamble |
| CCI Articles Supplementary (Series 2016 Preferred Stock) | Recitals |
| Defined Term | Location of Definition |
CCI Articles Supplementary (Series 2017 Preferred Stock) | Recitals |
CCI Board | Recitals |
CCI Class A Common Stock | Section 5.4(a) |
CCI Class T Common Stock | Section 5.4(a) |
CCI Common Stock | Section 5.4(a) |
CCI Disclosure Letter | Article 5 |
CCI Financial Advisor | Section 5.19 |
CCI Insurance Policies | Section 5.15 |
CCI Material Contracts | Section 5.12(a) |
CCI Parties | Preamble |
CCI Permits | Section 5.8(a) |
CCI SEC Documents | Section 5.5(a) |
CCI Series 2019 Preferred Stock | Section 5.4(a) |
CCI Special Committee | Recitals |
CCI Subsidiary Partnership | Section 5.13(h) |
CCI Tax Protection Agreement | Section 5.13(h) |
CCI Terminating Breach | Section 9.1(c)(i) |
CCI Voting Debt | Section 5.4(d) |
CCOP | Preamble |
Certificate of Merger | Section 2.3(b) |
Closing | Section 2.2 |
Closing Date | Section 2.2 |
CMR Mergers | Recitals |
CMRI | Recitals |
CMRI Merger | Recitals |
CMRI OP | Recitals |
CMRII | Recitals |
CMRII Merger | Recitals |
CMRII OP | Recitals |
CRII | Preamble |
CRII Board | Recitals |
CRII Board Recommendation | Section 4.2(c) |
CRII Change Notice | Section 7.3(e)(i) |
CRII Common Stock | Section 4.4(a) |
CRII Disclosure Letter | Article 4 |
CRII Financial Advisor | Section 4.19 |
CRII Insurance Policies | Section 4.15 |
CRII Material Contract | Section 4.12(b) |
CRII Non-Voting Common Stock | Section 4.4(a) |
CRII Parties | Preamble |
CRII Permits | Section 4.8(a) |
CRII Subsidiary Partnership | Section 4.13(h) |
| Defined Term | Location of Definition |
CRII Tax Protection Agreements | Section 4.13(h) |
CRII Terminating Breach | Section 9.1(d)(i) |
CRII Transaction Committee | Recitals |
CRII Voting Common Stock | Section 4.4(a) |
CRII Voting Debt | Section 4.4(d) |
CROP | Preamble |
Delaware Secretary | Section 2.3(b) |
DRULPA | Recitals |
Equity Incentive Plan | Section 7.16(a) |
Escrow Agreement | Section 9.3(f) |
FLSA | Section 4.16(i) |
Form S-4 | Section 7.1(a) |
High Traverse | Recitals |
Indemnified Parties | Section 7.7(a) |
Interim Period | Section 6.1(a) |
Intervening Event | Section 7.3(j)(ii) |
IRCA | Section 4.16(m) |
Merger Effective Time | Section 2.3(a) |
Merger Sub | Preamble |
Mergers | Recitals |
MGCL | Recitals |
MLLCA | Recitals |
OP Unit Split | Section 3.1(b)(i) |
Outside Date | Section 9.1(b)(i) |
Partner Approvals | Recitals |
Partnership Merger | Recitals |
Partnership Merger Consideration | Section 3.1(b)(x) |
Partnership Merger Effective Time | Section 2.3(b) |
Party(ies) | Preamble |
Permits | Section 4.8(a) |
Pre-Merger Transactions | Recitals |
Qualified REIT Subsidiary | Section 4.1(c) |
Qualifying REIT Income | Section 9.3(f)(i) |
Registered Securities | Section 7.1(a) |
REIT Common Merger Consideration | Section 3.1(a)(i) |
REIT Merger | Recitals |
REIT Merger Consideration | Section 3.1(a)(ii) |
REIT Preferred Merger Consideration | Section 3.1(a)(ii) |
SDAT | Section 2.3(a) |
Stockholder Approval | Recitals |
Superior Proposal | Section 7.3(j)(iii) |
Surviving Corporation | Section 2.1(a) |
Surviving OP | Section 2.1(b) |
| Defined Term | Location of Definition
|
Takeover Statutes | Section 4.20 |
Tax Protection Agreement | Recitals |
Taxable REIT Subsidiary | Section 4.1(c) |
Transfer Agent | Section 3.2(a) |
Transfer Taxes | Section 7.10(d) |
Voting Agreement | Recitals |
WARN Act | Section 4.16(l) |
Section 1.2
Interpretation and Rules of Construction. In this Agreement, except to the extent otherwise provided or that the context otherwise requires:
(a)
when a reference is made in this Agreement to an Article, Section, Exhibit or Schedule, such reference is to an Article or Section of, or Exhibit or Schedule to, this Agreement unless otherwise indicated;
(b)
the table of contents and headings in this Agreement are for reference purposes only and do not affect in any way the meaning or interpretation of this Agreement;
(c)
whenever the words “include,” “includes” or “including” are used in this Agreement, they are deemed to be followed by the words “without limiting the generality of the foregoing” unless expressly provided otherwise;
(d)
“or” shall be construed in the inclusive sense of “and/or”;
(e)
the words “hereof,” “herein” and “hereunder” and words of similar import, when used in this Agreement, refer to this Agreement as a whole and not to any particular provision of this Agreement, except to the extent otherwise specified;
(f)
all references herein to “$” or dollars shall refer to United States dollars;
(g)
no specific provision, representation or warranty shall limit the applicability of a more general provision, representation or warranty;
(h)
it is the intent of the Parties that each representation, warranty, covenant, condition and agreement contained in this Agreement shall be given full, separate, and independent effect and that such provisions are cumulative;
(i)
the phrase “ordinary course of business” shall be deemed to be followed by the words “consistent with past practice” and shall refer to business similar in nature and magnitude to actions customarily taken without any authorization by the board of directors in the course of normal day-to-day operations, subject to any commercially reasonable modifications to past practice made in good faith to respond to the actual or anticipated effects of COVID-19 or any COVID-19 Measures;
(j)
the phrase “wholly owned subsidiary” shall be deemed to be preceded with “directly or indirectly”;
(k)
references to a Person are also to its successors and permitted assigns;
(l)
except as otherwise expressly provided herein, all references in this Agreement to any statute include the rules and regulations promulgated thereunder, in each case as amended, re-enacted, consolidated or replaced from time to time and shall also include, unless the context otherwise requires, all applicable guidelines, bulletins or policies made in connection therewith; and
(m)
the definitions contained in this Agreement are applicable to the singular as well as the plural forms of such terms.
ARTICLE 2
THE MERGERS
Section 2.1
The Mergers.
(a)
Upon the terms and subject to the satisfaction or waiver of the conditions set forth in this Agreement, and in accordance with the MGCL and the MLLCA, at the Merger Effective Time, CRII shall be merged with and into Merger Sub, whereupon the separate existence of CRII will cease, with Merger Sub surviving the REIT Merger (Merger Sub, as the surviving entity upon consummation of the REIT Merger, the “Surviving Corporation”), such that following the REIT Merger, the Surviving Corporation will be a wholly owned subsidiary of CCI. The REIT Merger shall have the effects set forth in the applicable provisions of the MGCL, the MLLCA and this Agreement.
(b)
Upon the terms and subject to the satisfaction or waiver of the conditions set forth in this Agreement, and in accordance with the DRULPA, at the Partnership Merger Effective Time, which shall occur after the Merger Effective Time, CCOP shall be merged with and into CROP, whereupon the separate existence of CCOP will cease, with CROP surviving the Partnership Merger (CROP, as the surviving entity upon consummation of the Partnership Merger, the “Surviving OP”). The Partnership Merger shall have the effects set forth in the applicable provisions of the DRULPA and this Agreement.
Section 2.2
Closing. The closing of the Mergers (the “Closing”) will take place (a) by electronic exchange of documents and signatures at 10:00 a.m., New York City time, no later than the third Business Day after all the conditions set forth in Article 8 (other than those conditions that by their nature are to be satisfied or waived at the Closing, but subject to the satisfaction or valid waiver of such conditions) shall have been satisfied or validly waived by the Party entitled to the benefit of such condition (subject to applicable Law), or (b) at such physical location or on such other date as may be agreed in writing by CRII and CCI. The date on which Closing actually takes place is referred to herein as the “Closing Date.”
Section 2.3
Effective Time.
(a)
On the Closing Date, CRII, CCI and Merger Sub shall (i) cause articles of merger with respect to the REIT Merger to be duly executed and filed with the State Department of Assessments and Taxation of Maryland (the “SDAT”) in accordance with the MGCL and the MLLCA (the “Articles of Merger”) and (ii) make any other filings, recordings or publications required to be made by CRII, CCI or the Surviving Corporation under the MGCL and the MLLCA in connection with the REIT Merger. The REIT Merger shall become effective at such time as the Articles of Merger are accepted for record by the SDAT or on such other date and time (not to exceed 30 days after the Articles of Merger are accepted for record by the SDAT) as specified in the Articles of Merger (such date and time, the “Merger Effective Time”), it being understood and agreed that the Parties shall cause the Merger Effective Time to occur on the Closing Date.
(b)
On the Closing Date, CCOP and CROP shall (i) cause a certificate of merger with respect to the Partnership Merger to be duly executed and filed with the Secretary of State of the State of Delaware (the “Delaware Secretary”) in accordance with the DRULPA (the “Certificate of Merger”) and (ii) make any other filings, recordings or publications required to be made by CRII, CCI or the Surviving OP under the DRULPA in connection with the Partnership Merger. The Partnership Merger shall become effective at the time set forth in the Certificate of Merger (such date and time, the “Partnership Merger Effective Time”), it being understood and agreed that the Parties shall cause the Partnership Merger Effective Time to occur on the Closing Date after the Merger Effective Time.
Section 2.4
Organizational Documents of the Surviving Entities.
(a)
At the Merger Effective Time, the CCI Charter (as supplemented by the CCI Articles Supplementary (Series 2016 Preferred Stock) and the CCI Articles Supplementary (Series 2017 Preferred Stock)) shall be the charter of CCI until thereafter amended in accordance with applicable Law and the applicable provisions of the CCI Charter.
(b)
At the Merger Effective Time and by virtue of the REIT Merger, (i) the articles of organization of Merger Sub as in effect immediately prior to the Merger Effective Time shall be the articles of organization of the Surviving Corporation and (ii) the operating agreement of Merger Sub as in effect immediately prior to the Merger Effective Time shall be the operating agreement of the Surviving Corporation.
(c)
At the Partnership Merger Effective Time and by virtue of the Partnership Merger, (i) the certificate of limited partnership of CROP as in effect immediately prior to the Partnership Merger Effective Time shall be the certificate of limited partnership of the Surviving OP, and (ii) the Amended and Restated CROP OP Agreement shall be the agreement of limited partnership of the Surviving OP.
Section 2.5
Tax Treatment of Merger.
(a)
The Parties intend that, for United States federal income tax purposes (and, where applicable, state and local income tax purposes), the REIT Merger shall qualify as a reorganization within the meaning of Section 368(a) of the Code, and this Agreement shall be, and is hereby adopted as, a “plan of reorganization” for purposes of Sections 354, 361 and 368 of the Code. Unless otherwise required by a final determination within the meaning of Section 1313(a) of the Code (or a similar determination under applicable state or local Law), all Parties shall file all United States federal, state and local Tax Returns in a manner consistent with the intended tax treatment of the REIT Merger described in this Section 2.5(a), and no Party shall take a position inconsistent with such treatment.
(b)
The Parties intend that, for United States federal income tax purposes (and, where applicable, state and local income tax purposes), the Partnership Merger shall qualify as and constitute an “assets-over” form of merger governed by Treasury Regulations Section 1.708-1(c)(3)(i) pursuant to which CCOP shall be treated as transferring all of its assets and liabilities to CROP in exchange for CROP Partnership Units followed by the distribution of such units to CCI and to those Persons listed on Section 5.4(b) of the CCI Disclosure Letter in a complete liquidation of CCOP, the deemed exchange and distribution being respectively described in Section 721 of the Code and Section 731 of the Code. Unless otherwise required by a final determination within the meaning of Section 1313(a) of the Code (or a similar determination under applicable state or local Law), all Parties shall file all United States federal, state and local Tax Returns in a manner consistent with the intended tax treatment of the Partnership Merger described in this Section 2.5(b), and no Party shall take a position inconsistent with such treatment.
ARTICLE 3
EFFECTS OF THE MERGERS
Section 3.1
Effects of the Mergers.
(a)
The REIT Merger. At the Merger Effective Time and by virtue of the REIT Merger and without any further action on the part of CRII, CCI or Merger Sub or the holders of any securities of CRII, CCI or Merger Sub:
(i)
Subject to Section 3.1(c) and Section 3.3, each share of CRII Common Stock issued and outstanding immediately prior to the Merger Effective Time (other than Excluded Shares) will be converted into the right to receive from CCI the number of shares of CCI Class A Common Stock equal to the Common Exchange Ratio, subject to the treatment of fractional shares in accordance with Section 3.1(e) (the “REIT Common Merger Consideration”);
(ii)
Subject to Section 3.1(c) and Section 3.3, each share of CRII Series 2016 Preferred Stock issued and outstanding immediately prior to the Merger Effective Time (other than Excluded Shares) will be converted into the right to receive from CCI one share of CCI Series 2016 Preferred Stock, and each share of CRII Series 2017 Preferred Stock issued and outstanding immediately prior to the Merger Effective Time (other than Excluded Shares) will be converted into the right to receive from CCI one share of CCI Series 2017 Preferred Stock, subject to the treatment of fractional shares in accordance with Section 3.1(e) (the “REIT Preferred Merger Consideration” and, together with the REIT Common Merger Consideration, the “REIT Merger Consideration”);
(iii)
As of the Merger Effective Time, all such shares of capital stock of CRII shall no longer be outstanding and shall automatically be cancelled and shall cease to exist, and shall thereafter only represent the right to receive the REIT Merger Consideration;
(iv)
All Excluded Shares shall automatically be cancelled and shall cease to exist, and no REIT Merger Consideration shall be paid, nor shall any other payment or right inure or be made with respect thereto, in connection with or as a consequence of the REIT Merger; and
(v)
Each share of Merger Sub issued and outstanding immediately prior to the Merger Effective Time shall remain outstanding and, collectively, shall constitute the only issued and outstanding shares of the Surviving Corporation.
(b)
The Partnership Merger. At the Partnership Merger Effective Time and by virtue of the Partnership Merger and without any further action on the part of CCOP, CROP or the holders of any securities of CCOP or CROP:
(i)
The Surviving Corporation, as the holder of the CROP General Partner Units, will continue as the sole general partner of the Surviving OP;
(ii)
Each CROP Participating Partnership Unit issued and outstanding immediately prior to the Partnership Merger Effective Time will be split (the “OP Unit Split”) into a number of units equal to 2.015 CROP Participating Partnership Units (or 2.10 CROP Participating Partnership Units in the event the CRII Transaction Committee determines not to effect the CCA Note Distribution provided for in Section 7.14) and will remain outstanding;
(iii)
Each CROP Preferred Unit issued and outstanding immediately prior to the Partnership Merger Effective Time will remain outstanding and continue to be held by the Surviving Corporation;
(iv)
Each CROP Special LTIP Unit issued and outstanding immediately prior to the Partnership Merger Effective Time, after giving effect to the OP Unit Split, will remain outstanding and its terms will be adjusted as set forth in the Amended and Restated CROP OP Agreement if the CRII Transaction Committee determines to effect the CCA Note Distribution;
(v)
Each CCOP Special LTIP Unit issued and outstanding immediately prior to the Partnership Merger Effective Time will be converted automatically into the right to receive, in accordance with the terms of this Agreement, a number of CROP ‘CCOP’ Special LTIP Units equal to the Partnership Exchange Ratio, and each such CROP ‘CCOP’ Special LTIP Unit shall continue to have, and be subject to, the same terms and conditions (including vesting terms) set forth in the CCOP Vesting Agreement relating thereto, as in effect immediately prior to the Partnership Merger Effective Time;
(vi)
Each CCOP LTIP Unit issued and outstanding immediately prior to the Partnership Merger Effective Time will be converted automatically into the right to receive, in accordance with the terms of this Agreement, a number of CROP ‘CCOP’ LTIP Units equal to the Partnership Exchange Ratio, and each such CROP ‘CCOP’ LTIP Unit shall continue to have, and be subject to, the same terms and conditions (including vesting terms) set forth in the CCOP Vesting Agreement relating thereto, as in effect immediately prior to the Partnership Merger Effective Time;
(vii)
Each CCOP Series 2019 Preferred Unit issued and outstanding immediately prior to the Partnership Merger Effective Time will be converted into the right to receive from CROP one CROP Series 2019 Preferred Unit;
(viii)
Each CCOP Special Limited Partner Interest held, as of immediately prior to the Partnership Merger Effective Time, shall be cancelled for no consideration and will cease to exist and each holder thereof shall cease to have any rights with respect thereto;
(ix)
Each CCOP Partnership Unit held, as of immediately prior to the Partnership Merger Effective Time, by CROP or any wholly owned subsidiary of CROP shall automatically be cancelled and shall cease to exist, and no consideration shall be paid, nor shall any other payment or right inure or be made with respect thereto, in connection with or as a consequence of the Partnership Merger;
(x)
Except as noted above, each CCOP General Partner Unit and each CCOP Common Unit issued and outstanding immediately prior to the Merger Effective Time will be converted into the right to receive from CROP the number of CROP Common Units equal to the Partnership Exchange Ratio, subject to the treatment of fractional units of CCOP Common Units in accordance with Section 3.1(e) (together with the merger consideration referred to in clauses (vi) and (vii) above, the “Partnership Merger Consideration”); and
(xi)
From and after the Partnership Merger Effective Time, all CCOP Partnerships Units shall no longer be outstanding and shall automatically be cancelled and shall cease to exist, and each holder thereof shall cease to have any rights with respect thereto, except for the right to receive the Partnership Merger Consideration therefor in accordance with this Agreement.
(c)
Adjustment of the Merger Consideration.
(i)
In the event the CRII Transaction Committee determines not to effect the CCA Note Distribution provided for in Section 7.14, the Common Exchange Ratio shall be adjusted to 2.10 shares of CCI Common Stock for each share of CRII Common Stock (the “CCA Note Adjustment”). The Common Exchange Ratio, the Partnership Exchange Ratio and the CCA Note Adjustment shall be adjusted in accordance with clause (ii) below; provided, however, that nothing in this clause (i) shall be construed to permit any Party to take any action with respect to its securities that is prohibited by the terms of this Agreement.
(ii)
Between the date of this Agreement and the Merger Effective Time, if the issued and outstanding shares of capital stock of CRII, CROP Partnership Units, securities convertible or exchangeable into or exercisable for shares of capital stock of CRII or CROP Partnership Units, shares of capital stock of CCI, CCOP Partnership Units or securities convertible or exchangeable into or exercisable for shares of capital stock of CCI or CCOP Partnership Units shall have been changed into a different number of shares or other securities or a different class by reason of any stock split (whether forward or reverse), combination, reclassification, reorganization, recapitalization, merger or exchange or other similar transaction, or a stock dividend (including any distribution in securities convertible or exchangeable into or exercisable for shares of capital stock of CRII or CCI or CROP Partnership Units or CCOP Partnership Units) having a record date within such period shall have been declared, then (without limiting any other rights of the Parties hereunder), the applicable Exchange Ratio shall be ratably adjusted to reflect fully the effect of any such change, and thereafter all references to the applicable Exchange Ratio shall be deemed to be the Exchange Ratio as so adjusted.
(d)
Transfer Books. From and after the Merger Effective Time, the equity transfer books of CRII and CCOP shall be closed, and thereafter there shall be no further registration of transfers of capital stock of CRII or CCOP Partnership Units. From and after the Merger Effective Time, Persons who held outstanding shares of capital stock of CRII or CCOP Partnership Units immediately prior to the Merger Effective Time shall cease to have rights with respect to such shares, except as otherwise provided for in this Agreement or by applicable Law.
(e)
Fractional Shares. Notwithstanding anything to the contrary in this Agreement, no fractional shares of CCI Common Stock or CROP Partnership Units less than 1/1,000th of a share or unit shall be issued pursuant to this Agreement and, in lieu thereof, such fractional shares or units a Person would otherwise be entitled to receive pursuant to this Agreement, but for this Section 3.1(e), shall be aggregated and rounded up to the nearest 1/1,000th of a share or unit.
Section 3.2
Exchange Procedures.
(a)
As soon as reasonably practicable after the Merger Effective Time, CCI shall cause DST Systems, Inc., or any successor transfer agent of CCI (the “Transfer Agent”), to record on the stock records of CCI the issuance of shares of capital stock of CCI (including any fractional shares thereof) equal to the REIT Merger Consideration that is issuable to each holder of shares of capital stock of CRII pursuant to Section 3.1. For the avoidance of doubt, payment of the REIT Merger Consideration shall only be made to the Person in whose name the relevant shares of capital stock of CRII are registered in the stock transfer books of CRII as of the Merger Effective Time.
(b)
As soon as reasonably practicable after the Partnership Merger Effective Time, CCI and the Surviving Partnership shall take such action as may be reasonably necessary to provide the former holders of CCOP Partnership Units with the Partnership Merger Consideration therefor, subject to the receipt of customary representations from such holders.
(c)
All securities issuable pursuant to this Agreement shall be in book-entry form.
(d)
None of CCI, CRII, the Surviving Corporation, the Surviving OP, the Transfer Agent or any employee, officer, director, agent or Affiliate of such entities, shall be liable to any Person in respect of any REIT Merger Consideration or Partnership Merger Consideration (or the appropriate portion thereof) that has been delivered to a public official pursuant to any applicable abandoned property, escheat or similar Law. Any amounts so delivered that remain unclaimed by holders of shares of capital stock of CRII immediately prior to the time at which such amounts would otherwise escheat to, or become property of, any Governmental Authority shall, to the extent permitted by applicable Law, become the property of CCI free and clear of any claims or interest of such holders or their successors, assigns or personal representatives previously entitled thereto.
(e)
No interest shall be paid or accrued on the REIT Merger Consideration (or any amounts in respect thereof, including any dividends payable on shares of CCI Common Stock) or the Partnership Merger Consideration (or any amounts in respect thereof, including any distributions payable on CROP Partnership Units) for the benefit of the holders thereof.
Section 3.3
Withholding Rights. Each and any of CCI, CRII, the Surviving Corporation, CCOP, CROP, the Surviving OP or the Transfer Agent, or any of their agents, as applicable, shall be entitled to deduct and withhold from the REIT Merger Consideration and the Partnership Merger Consideration and any other amounts otherwise payable pursuant to this Agreement to any holder of capital stock of CRII or CCOP Partnership Units such amounts as it is required to deduct and withhold with respect to such payments under the Code or any other provision of state, local or foreign Tax Law. Any such amounts so deducted and withheld shall be timely paid to the applicable Governmental Authority in accordance with applicable Law and shall be treated for all purposes of this Agreement as having been paid to the Person in respect of which such deduction and withholding was made.
Section 3.4
Dissenters Rights. No dissenters’ or appraisal rights shall be available with respect to the Mergers or the other transactions contemplated by this Agreement.
Section 3.5
General Effects of the Mergers.
(a)
At the Merger Effective Time, the effect of the REIT Merger shall be as set forth in this Agreement and the Articles of Merger and as provided in the applicable provisions of the MGCL and the MLLCA. Without limiting the generality of the foregoing, and subject thereto, at the Merger Effective Time, all of the property, rights, privileges, powers and franchises of CRII and Merger Sub shall vest in the Surviving Corporation, and all debts, liabilities and duties of CRII and Merger Sub shall become the debts, liabilities and duties of the Surviving Corporation.
(b)
At the Partnership Merger Effective Time, the effect of the Partnership Merger shall be as set forth in this Agreement and the Certificate of Merger and as provided in the applicable provisions of the DRULPA. Without limiting the generality of the foregoing, and subject thereto, at the Partnership Merger Effective Time, all of the property, rights, privileges, powers and franchises of CROP and CCOP shall vest in the Surviving OP, and all debts, liabilities and duties of CROP and CCOP shall become the debts, liabilities and duties of the Surviving OP.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE CRII PARTIES
Except as set forth in the disclosure letter delivered by the CRII Parties to the CCI Parties prior to the execution and delivery of this Agreement (the “CRII Disclosure Letter”), it being acknowledged and agreed that disclosure of any item in any section or subsection of the CRII Disclosure Letter shall be deemed disclosed with respect to the section or subsection of this Agreement to which it corresponds and any other section or subsection of this Agreement to the extent the applicability of such disclosure is reasonably apparent on its face, the CRII Parties hereby jointly and severally represent and warrant to the CCI Parties that:
Section 4.1
Organization and Qualification; Subsidiaries.
(a)
CRII is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Maryland and has the requisite corporate power and authority to own, lease and operate its properties and to carry on its business as it is now being conducted. CRII is duly qualified or licensed to do business, and is in good standing, in each jurisdiction where the character of the properties owned, operated or leased by it or the nature of its business makes such qualification, licensing or good standing necessary, except for such failures to be so qualified, licensed or in good standing that, individually or in the aggregate, would not reasonably be expected to have a CRII Material Adverse Effect.
(b)
Each CRII Subsidiary is duly organized, validly existing and in good standing under the Laws of the jurisdiction of its incorporation or organization, as the case may be, and has the requisite organizational power and authority to own, lease and, to the extent applicable, operate its properties and to carry on its business as it is now being conducted. Each CRII Subsidiary is duly qualified or licensed to do business, and is in good standing, in each jurisdiction where the character of the properties owned, operated or leased by it or the nature of its business makes such qualification, licensing or good standing necessary, except for such failures to be so qualified, licensed or in good standing that, individually or in the aggregate, would not reasonably be expected to have a CRII Material Adverse Effect.
(c)
Section 4.1(c) of the CRII Disclosure Letter sets forth a true and complete list of the CRII Subsidiaries and their respective jurisdictions of incorporation or organization, as the case may be, the jurisdictions in which CRII and the CRII Subsidiaries are qualified or licensed to do business, and the percentage of interest held, directly or indirectly, by CRII in each CRII Subsidiary, including a list of each CRII Subsidiary that is (i) a “qualified REIT subsidiary” within the meaning of Section 856(i)(2) of the Code (each a “Qualified REIT Subsidiary”), (ii) a “taxable REIT subsidiary” within the meaning of Section 856(1) of the Code (each a “Taxable REIT Subsidiary”) and (iii) an entity taxable as a corporation under the Code that is neither a Qualified REIT Subsidiary nor a Taxable REIT Subsidiary.
(d)
Neither CRII nor any CRII Subsidiary directly or indirectly owns any equity interest or investment (whether equity or debt) in any Person (other than in the CRII Subsidiaries and investments in short-term investment securities).
(e)
CRII has made available to the CCI Parties complete and correct copies of the CRII Governing Documents, which are in full force and effect as of the date of this Agreement. Each of the CRII Parties is in compliance with the terms of its applicable CRII Governing Documents. True and complete copies of CRII’s minute books, since January 1, 2018, have been made available by CRII to CCI upon the written request of CCI.
(f)
CRII has not exempted any ��Person” from the “Aggregate Stock Ownership Limit” or the “Common Stock Ownership Limit” or established or increased an “Excepted Holder Limit,” as such terms are defined in the CRII Charter, which exemption or Excepted Holder Limit is currently in effect.
Section 4.2
Authority; Approval Required.
(a)
Each of the CRII Parties has the requisite power and authority to execute and deliver this Agreement, to perform its obligations hereunder and, subject only to receipt of Stockholder Approval and Partner Approvals, respectively, to consummate the transactions contemplated by this Agreement, including the Mergers. The execution and delivery of this Agreement by the CRII Parties and the consummation by them of the transactions contemplated by this Agreement have been duly and validly authorized by all necessary corporate or partnership action, as applicable, and no other corporate or partnership proceedings on the part of any of the CRII Parties are necessary to authorize this Agreement or the Mergers or to consummate the other transactions contemplated by this Agreement, subject to receipt of Stockholder Approval, Partner Approvals, the filing of the Articles of Merger with, and acceptance for record of such Articles of Merger by, the SDAT, and the filing of the Certificate of Merger with, and acceptance for record of such Certificate of Merger by, the Delaware Secretary.
(b)
This Agreement has been duly executed and delivered by the CRII Parties and, assuming due authorization, execution and delivery by the CCI Parties, constitutes a legally valid and binding obligation of each of the CRII Parties, enforceable against them in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar Laws affecting creditors’ rights generally and by general principles of equity (regardless of whether enforceability is considered in a proceeding in equity or at law).
(c)
The CRII Transaction Committee has unanimously (i) determined that this Agreement, the REIT Merger and the other transactions contemplated by this Agreement are advisable and in the best interests of CRII and its stockholders (other than CRII’s management and certain of its affiliates), (ii) authorized and approved this Agreement, the REIT Merger and the other transactions contemplated by this Agreement and (iii) recommended the approval of the REIT Merger by the holders of CRII Voting Common Stock and directed that CRII seek the written consent thereof by the holders of a majority of the outstanding CRII Voting Common Stock.
(d)
The CRII Board (including a majority of directors not otherwise interested in the Mergers), on the recommendation of the CRII Transaction Committee, on behalf of CRII in its own capacity and/or in its capacity as the general partner of CROP, as applicable, has (i) determined that this Agreement, the REIT Merger and the other transactions contemplated by this Agreement are advisable and in the best interests of CRII and its stockholders (other than CRII’s management and certain of its affiliates), (ii) determined that this Agreement, the Mergers, the Tax Protection Agreement, the Amended and Restated Advisory Agreement, the Amended and Restated CROP OP Agreement, the Pre-Merger Transactions and the other transactions contemplated by this Agreement are advisable and in the best interests of CROP and its unitholders (other than CRII’s management and certain of its affiliates), (iii) authorized and approved this Agreement, the Mergers, the Tax Protection Agreement, the Amended and Restated Advisory Agreement, the Amended and Restated CROP OP Agreement the Pre-Merger Transactions and the other transactions contemplated by this Agreement, (iv) recommended the approval of the REIT Merger by the holders of CRII Voting Common Stock and directed that CRII seek the Stockholder Approval and (v) recommended that the Mergers, the Tax Protection Agreement, the Amended and Restated Advisory Agreement, the Amended and Restated CROP OP Agreement and the Pre-Merger Transactions and the other transactions contemplated by this Agreement be approved by the limited partners of CROP and directed that CROP seek the Partner Approvals (the recommendation in this clause (iv) and the preceding clause (iii), the “CRII Board Recommendation”).
(e)
The Stockholder Approval and the Partner Approvals are the only votes of the holders of securities of the CRII Parties required to approve the Mergers and the other transactions contemplated by this Agreement.
Section 4.3
No Conflict; Required Filings and Consents.
(a)
The execution and delivery of this Agreement by the CRII Parties do not, and the performance of this Agreement and its obligations hereunder will not, (i) assuming receipt of the Stockholder Approval and the Partner Approvals, conflict with or violate any provision of (A) the CRII Governing Documents or (B) any equivalent organizational or governing documents of any other CRII Subsidiary, (ii) assuming that all consents, approvals, authorizations and permits described in Section 4.3(b) have been obtained, all filings and notifications described in Section 4.3(b) have been made and any waiting periods thereunder have terminated or expired, conflict with or violate any Law applicable to CRII or any CRII Subsidiary or by which any property or asset of CRII or any CRII Subsidiary is bound, or (iii) except as set forth in Section 4.3(a)(iii) of the CRII Disclosure Letter, with or without notice, lapse of time or both, constitute or result in a breach or violation of, or a default under, or give rise to any Lien, acceleration of remedies, right of termination, purchase, first offer or forced sale under, any Contract of CRII or any CRII Subsidiary, except, as to clauses (ii) and (iii) above, for any such conflicts, violations, breaches, defaults or other occurrences which, individually or in the aggregate, would not reasonably be expected to have a CRII Material Adverse Effect.
(b)
The execution and delivery of this Agreement by each of the CRII Parties do not, and the performance of this Agreement by each of the CRII Parties will not, require any consent, approval, authorization or permit of, or filing with or notification to, any Governmental Authority, except (i) the filing of the Articles of Merger with, and the acceptance for record of the Articles of Merger by, the SDAT pursuant to the MGCL and the MLLCA, (ii) the filing of the Certificate of Merger with, and the acceptance for record of the Certificate of Merger by, the Delaware Secretary pursuant to the DRULPA, (iii) such filings and approvals as may be required by any applicable state securities or “blue sky” Laws, and (iv) where failure to obtain such consents, approvals, authorizations or permits, or to make such filings or notifications, individually or in the aggregate, would not reasonably be expected to have a CRII Material Adverse Effect.
Section 4.4
Capital Structure.
(a)
The authorized capital stock of CRII consists of (i) 1,100,000,000 shares of common stock, $0.01 par value per share, of which (x) 50 shares are designated as voting common stock (“CRII Voting Common Stock”) and (y) 2,000,000 shares are designated as non-voting common stock (“CRII Non-Voting Common Stock”), (ii) 100,000 shares of Series B Common Stock, $0.01 par value per share (“CRII Series B Common Stock” and together with the CRII Voting Common Stock and the CRII Non-Voting Stock, the “CRII Common Stock”), (iii) 100,000,000 shares of preferred stock, $0.01 par value per share, of which (x) 14,500,000 shares are designated as CRII Series 2016 Preferred Stock and (y) 5,000,000 shares are designated as CRII Series 2017 Preferred Stock. As of the date hereof, (i) 50 shares of CRII Voting Common Stock were issued and outstanding, (ii) 213,434.12 shares of CRII Non-Voting Common Stock were issued and outstanding, (iii) no shares of CRII Series B Common Stock were issued and outstanding, (iv) 14,149,943.36 shares of Series 2016 Preferred Stock were issued and outstanding and (v) 258,550 shares of 2017 Preferred Stock were issued and outstanding. All of the outstanding shares of capital stock of CRII are duly authorized, validly issued, fully paid and nonassessable. Except as set forth in this Section 4.4(a), as of the date hereof, there is no other outstanding capital stock of CRII.
(b)
As of the date hereof, (i) 14,612.377.58 CROP Common Units were outstanding, of which none were held by CRII or a wholly owned subsidiary of CRII, (ii) 14,408,493.36 CROP Preferred Units were outstanding, all of which were held by CRII or a wholly owned subsidiary of CRII, (iii) 352,277 CROP LTIP Units were outstanding and (iv) 250,618 CROP Special LTIP Units were outstanding, all of which were held by those Persons listed on Section 4.4(b) of the CRII Disclosure Letter, and (iv) 213,484.12 CROP General Partner Units were outstanding, all of which were held by CRII. Except as set forth in this Section 4.4(b), as of the date hereof, there are no other outstanding CROP partnership interests.
(c)
All of the outstanding shares of capital stock of each of the CRII Subsidiaries that is a corporation are duly authorized, validly issued, fully paid and nonassessable. All equity interests in each of the CRII Subsidiaries that is a partnership or limited liability company are duly authorized and validly issued and holders thereof have no obligation to make any further payments solely by reason of their ownership thereof. All shares of capital stock of (or other ownership interests in) each of the CRII Subsidiaries which may be issued upon exercise of outstanding options or exchange rights are duly authorized and, upon issuance will be validly issued, fully paid and, to the extent applicable, nonassessable. All of the issued and outstanding capital stock and other ownership interests of each of the CRII Subsidiaries that are owned, directly or indirectly, by CRII are owned free and clear of all Liens, other than Permitted Liens, and free of preemptive rights.
(d)
There are no bonds, debentures, notes or other Indebtedness having general voting rights (or convertible into securities having such rights) of CRII or any CRII Subsidiary issued and outstanding (“CRII Voting Debt”). Except as set forth on Section 4.4(d) of the CRII Disclosure Letter, there are no outstanding subscriptions, securities options, warrants, calls, rights, profits interests, stock appreciation rights, phantom stock, convertible securities, preemptive rights, anti-dilutive rights, rights of first refusal or other similar rights, agreements, arrangements, undertakings or commitments of any kind to which CRII or any CRII Subsidiary is a party or by which any of them is bound obligating CRII or any of the CRII Subsidiaries to (i) issue, transfer or sell or create, or cause to be issued, transferred or sold or created any additional shares of capital stock or other equity interests or phantom stock or other contractual rights the value of which is determined in whole or in part by the value of any equity security of CRII or any CRII Subsidiary or securities convertible into or exchangeable for such shares or other equity interests, (ii) issue, grant, extend or enter into any such subscriptions, options, warrants, calls, rights, profits interests, stock appreciation rights, phantom stock, convertible securities or other similar rights, agreements, arrangements, undertakings or commitments or (iii) redeem, repurchase or otherwise acquire any such shares of capital stock, CRII Voting Debt or other equity interests.
(e)
Neither CRII nor any CRII Subsidiary is a party to or bound by any Contracts concerning the voting (including voting trusts and proxies) of any capital stock of CRII or any of the CRII Subsidiaries. Neither CRII nor any CRII Subsidiary has granted any registration rights on any of its capital stock. No capital stock of CRII is owned by any CRII Subsidiary.
(f)
CRII does not have a “poison pill” or similar stockholder rights plan.
(g)
All dividends or other distributions on the shares of capital stock of CRII or CROP Partnership Units and any material dividends or other distributions on any securities of any CRII Subsidiary which have been authorized or declared prior to the date hereof have been paid in full (except to the extent such dividends or other distributions have been publicly announced and are not yet due and payable).
(h)
All of the outstanding securities of the CRII Parties were issued in compliance with applicable securities Laws.
Section 4.5
SEC Correspondence; Financial Statements; Off Balance Sheet Arrangements; Investment Company Act; Anti-Corruption Laws.
(a)
CRII and the CRII Subsidiaries have made available to CCI complete and correct copies of all written correspondence from the SEC to CRII or CROP since December 31, 2018. Neither CRII nor any CRII Subsidiary is separately subject to the periodic reporting requirements of Section 13(a) or Section 15(d) of the Exchange Act.
(b)
The consolidated audited and unaudited financial statements of CRII and the CRII Subsidiaries provided to CCI, including the related notes and schedules, (i) have been prepared from the books and records of CRII and CRII Subsidiaries in all material respects, (ii) have been prepared in accordance with GAAP applied on a consistent basis during the periods involved (except as may be indicated in the notes thereto, or, in the case of the unaudited financial statements, for normal and recurring year-end adjustments, which such adjustments are not, individually or in the aggregate, material to CRII) and (iii) fairly present in all material respects (subject, in the case of unaudited financial statements, for normal and recurring year-end adjustments, none of which is material, individually or in the aggregate), the consolidated financial position of CRII and the CRII Subsidiaries, taken as a whole, as of their respective dates and the consolidated statements of operations, comprehensive income, stockholders’ equity and cash flows of CRII and the CRII Subsidiaries for the periods presented therein.
(c)
CRII is not, and none of the CRII Subsidiaries is, a party to, and neither CRII nor any CRII Subsidiary has any commitment to become a party to, any joint venture, off-balance sheet partnership or any similar Contract or arrangement, including any arrangement relating to any transaction or relationship between or among CRII and any CRII Subsidiary, on the one hand, and any unconsolidated Affiliate of CRII or any CRII Subsidiary, including any structured finance, special purpose or limited purpose entity or Person, on the other hand, or any “off-balance sheet arrangements” (as defined in Item 303(a) of Regulation S-K of the SEC), where the result, purpose or effect of such arrangement is to avoid disclosure of any material transaction involving, or material liabilities of, CRII, any CRII Subsidiary or CRII’s or such CRII Subsidiary’s audited financial statements.
(d)
Neither CRII nor any CRII Subsidiary is required to be registered as an investment company under the Investment Company Act.
(e)
CRII and CRII Subsidiaries (including in each case any of their officers and directors) have complied and are in compliance with applicable Anti-Corruption Laws. Neither CRII nor any CRII Subsidiary nor, to the Knowledge of CRII, any director, officer or Representative of CRII or any CRII Subsidiary has (i) used any corporate funds for any unlawful contributions, gifts, entertainment or other unlawful expenses related to political activity, (ii) made, taken or will take any action in furtherance of any direct or indirect unlawful payment, promise to pay or authorization or approval of the payment or giving of money, property or gifts of anything of value, directly or indirectly to any foreign or domestic government official or employee, (iii) made, offered or taken an act in furtherance of any direct or indirect unlawful bribe, rebate, payoff, kickback or other unlawful payment to any foreign or domestic government official or employee, (iv) made any payment to any customer, supplier or tenant, or to any officer, director, partner, employee or agent of any such customer, supplier or tenant, for the unlawful sharing of fees to any such customer, supplier or tenant or any such officer, director, partner, employee or agent for the unlawful rebating of charges, (v) engaged in any other unlawful reciprocal practice, or made any other unlawful payment or given any other unlawful consideration to any such customer, supplier or tenant or any such officer, director, partner, employee or agent of such customer, officer or tenant, or (vi) taken any action or made any omission in violation of any applicable Law governing imports into or exports from the United States or any foreign country, or relating to economic sanctions or embargoes, corrupt practices, money laundering, or compliance with unsanctioned foreign boycotts, in each case, in violation of any applicable Anti-Corruption Law. Neither CRII nor any CRII Subsidiary has received any written communication that alleges that CRII or any CRII Subsidiary, or any of their respective Representatives, is, or may be, in violation of, or has, or may have, any liability under, any Anti-Corruption Law.
Section 4.6
Absence of Certain Changes or Events. Since September 30, 2020 through the date of this Agreement, (a) CRII and each CRII Subsidiary have conducted their respective business in all material respects in the ordinary course of business, (b) except as set forth in Section 4.6(b) of the CRII Disclosure Letter, neither CRII nor any CRII Subsidiary has taken any action that would have been prohibited by Section 6.1(b) (Conduct of the Business of CRII) if taken from and after the date of this Agreement and (c) there has not been any CRII Material Adverse Effect or any event, circumstance, change, effect, development, condition or occurrence that, individually or in the aggregate, with all other events, circumstances, changes, effects, developments, conditions or occurrences, would reasonably be expected to have a CRII Material Adverse Effect.
Section 4.7
No Undisclosed Liabilities. Except (a) as disclosed, reflected or reserved against on the balance sheet of CRII dated as of December 31, 2019 (including the notes thereto), (b) for liabilities or obligations incurred in connection with the transactions contemplated by this Agreement and (c) for liabilities or obligations incurred in the ordinary course of business since December 31, 2019, neither CRII nor any CRII Subsidiary has any liability or obligation (whether accrued, absolute, contingent or otherwise) that either alone or in the aggregate, has had, or would reasonably be expected to have, a CRII Material Adverse Effect.
Section 4.8
Permits; Compliance with Law.
(a)
Except for the authorizations, licenses, permits, certificates, approvals, variances, exemptions, orders, franchises, certifications and clearances that are the subject of Section 4.11, which are addressed solely in that Section, CRII and each CRII Subsidiary is in possession of all authorizations, licenses, permits, certificates, approvals, variances, exemptions, orders, franchises, certifications and clearances of any Governmental Authority (“Permits”) necessary for CRII and each CRII Subsidiary to own, lease and, to the extent applicable, operate its properties or to carry on its respective business substantially as they are being conducted (the “CRII Permits”), and all such CRII Permits are valid and in full force and effect, except where the failure to be in possession of, or the failure to be valid or in full force and effect of, any of the CRII Permits, individually, or in the aggregate, would not reasonably be expected to have a CRII Material Adverse Effect. CRII has paid all fees and assessments due and payable, in each case, in connection with all such Permits except where failure to pay, individually or in the aggregate, would not reasonably be expected to have a CRII Material Adverse Effect. No event has occurred with respect to any of the CRII Permits which permits, or after notice or lapse of time or both would permit, revocation or termination thereof or would result in any other material impairment of the rights of the holder of any such CRII Permits. Neither CRII nor any of the CRII Subsidiaries has received any notice indicating, nor to the Knowledge of CRII, is there any pending applicable petition, objection or other pleading with any Governmental Authority having jurisdiction or authority over the operations of CRII or the CRII Subsidiaries or the CRII Properties that impairs the validity of any CRII Permit or which would reasonably be expected, if accepted or granted, to result in the revocation of any CRII Permit, except where the impairment or revocation of any such CRII Permits, individually or in the aggregate, would not reasonably be expected to have a CRII Material Adverse Effect.
(b)
Since January 1, 2018, neither CRII nor any CRII Subsidiary has been in conflict with, or in default or violation of, any Law applicable to CRII or any CRII Subsidiary or by which any property or asset of CRII or any CRII Subsidiary is bound (except for compliance with Laws addressed in Section 4.10, Section 4.11, Section 4.13 and Section 4.16, respectively, which are solely addressed in those Sections), except for any such conflicts, defaults or violations that, individually or in the aggregate, would not reasonably be expected to have a CRII Material Adverse Effect.
Section 4.9
Litigation. Except as set forth on Section 4.9 of the CRII Disclosure Letter, (i) there is no material Action to which CRII or any CRII Subsidiary is a party (either as plaintiff or defendant) pending or, to the Knowledge of CRII, overtly threatened before any Governmental Authority and, to the Knowledge of CRII, there is no basis for any such Action, (ii) neither CRII nor any CRII Subsidiary has been permanently or temporarily enjoined by any Order from engaging in or continuing to conduct the business of CRII or the CRII Subsidiaries, (iii) no Order has been issued in any proceeding to which CRII or any of the CRII Subsidiaries is or was a party, or, to the Knowledge of CRII, in any other proceeding, that enjoins or requires CRII or any of the CRII Subsidiaries to take action of any kind with respect to its businesses, assets or properties and (iv) since December 31, 2019, neither CRII nor any CRII Subsidiary has received or made any settlement offer for any Action to which CRII or any CRII Subsidiary is a party or potentially could be a party (in each case, either as plaintiff or defendant), other than settlement offers that do not exceed $300,000 individually.
Section 4.10
Properties.
(a)
The CRII Properties are free and clear of Liens, except for Permitted Liens. Except as would not reasonably be expected to have a CRII Material Adverse Effect, (i) neither CRII nor any CRII Subsidiary has received written notice of any uncured violation of any Law affecting any portion of any of the CRII Properties issued by any Governmental Authority and (ii) neither CRII nor any CRII Subsidiary has received written notice to the effect that there is any (A) condemnation or rezoning proceeding that is pending or, to the Knowledge of CRII, threatened with respect to any of the CRII Properties or (B) zoning, building or similar Law that is or will be violated by the continued maintenance, operation or use of any buildings or other improvements on any of the CRII Properties or by the continued maintenance, operation or use of the parking areas associated with the CRII Properties.
(b)
CRII has not received written notice of, nor does CRII have any Knowledge of, any latent defects or adverse physical conditions affecting any of the CRII Properties or the improvements thereon, except as has not had and would not reasonably be expected to have a CRII Material Adverse Effect.
(c)
CRII and the CRII Subsidiaries have good title to, or a valid and enforceable leasehold interest in, all personal assets owned, used or held for use by them except as would not reasonably be expected to be material to CRII or the CRII Subsidiaries, taken as a whole. Except as would not reasonably be expected to be material to CRII or the CRII Subsidiaries, taken as a whole, neither CRII’s nor the CRII Subsidiaries’ ownership of any such personal property is subject to any Liens, other than Permitted Liens.
(d)
A policy of title insurance has been issued for each CRII Property insuring, as of the effective date of such insurance policy, (i)(A) fee simple title interest held by CRII or the applicable CRII Subsidiary with respect to CRII Properties that are not subject to ground leases and (B) a valid leasehold estate held by CRII or the applicable CRII Subsidiary that are subject to ground leases and (ii) to the Knowledge of CRII, such insurance policies are in full force and effect, and no material claim has been made against any such policy that remains outstanding.
Section 4.11
Environmental Matters. Except as set forth at Section 4.11 of the CRII Disclosure Letter and as, individually or in the aggregate, would not reasonably be expected to have a CRII Material Adverse Effect: (i) no written notification, demand, request for information, citation, summons, notice of violation or order has been received, no complaint has been filed, no penalty has been assessed and no investigation, action, suit or proceeding is pending or, to the Knowledge of CRII, is threatened, in each case relating to CRII or any of the CRII Subsidiaries or any of their respective properties, and relating to or arising out of any Environmental Law or Hazardous Substance; (ii) CRII and the CRII Subsidiaries are, and for the past year, have been, in compliance with all Environmental Laws and all applicable Environmental Permits; (iii) CRII and each of the CRII Subsidiaries is in possession of all Environmental Permits necessary for CRII and each CRII Subsidiary to own, lease and, to the extent applicable, operate its properties or to carry on its respective business substantially as they are being conducted, and all such Environmental Permits are valid and in full force and effect; (iv) any and all Hazardous Substances disposed of by CRII and each CRII Subsidiary since January 1, 2018 were disposed in accordance with all applicable Environmental Laws and Environmental Permits; (v) CRII and the CRII Subsidiaries are not subject to any Order, determination or award by any Governmental Authority pursuant to any Environmental Laws, any Environmental Permit or with respect to any Hazardous Substance; and (vi) there are no liabilities or obligations of CRII or any of the CRII Subsidiaries of any kind whatsoever, whether accrued, contingent, absolute, determined, determinable or otherwise arising under or relating to any Environmental Law or any Hazardous Substance, and there is no condition, situation or set of circumstances that would reasonably be expected to result in any such liability or obligation.
Section 4.12
Material Contracts.
(a)
Section 4.12(a) of the CRII Disclosure Letter sets forth a true, correct and complete list of each Contract (or the accurate description of principal terms in case of oral Contracts), including all amendments, supplements and side letters thereto, to which CRII or any CRII Subsidiary is a party or by which it is bound or to which any CRII Property or other material asset is subject, that:
(i)
obligates CRII or any CRII Subsidiary to make non-contingent aggregate annual expenditures (other than principal and/or interest payments or the deposit of other reserves with respect to debt obligations) in excess of $250,000 and is not cancelable within 90 days without material penalty to CRII or any CRII Subsidiary;
(ii)
contains any non-compete or exclusivity provisions with respect to any line of business or geographic area that materially restricts the business of CRII or any CRII Subsidiary, including upon consummation of the transactions contemplated by this Agreement, or that otherwise restricts the lines of business conducted by CRII or any CRII Subsidiary or the geographic area in which CRII or any CRII Subsidiary may conduct business;
(iii)
obligates CRII or any CRII Subsidiary to indemnify any past or present directors, officers, or employees of CRII or any CRII Subsidiary, other than the CRII Governing Documents or any equivalent organizational or governing documents of any other CRII Subsidiary;
(iv)
constitutes (A) an Indebtedness obligation of CRII or any CRII Subsidiary with a principal amount greater than $1,000,000 or (B) a Contract under which (1) any Person (including CRII or a CRII Subsidiary) has directly or indirectly guaranteed Indebtedness, liabilities or obligations of CRII or a CRII Subsidiary or (2) CRII or a CRII Subsidiary has directly or indirectly guaranteed Indebtedness, liabilities or obligations of any Person (other than CRII or any CRII Subsidiary);
(v)
provides for the pending purchase or sale, option to purchase or sell or other right to purchase, sell, dispose of or ground lease (by merger, by purchase or sale of assets or stock, by lease or otherwise) (other than any right of first refusal or right of first offer) of (A) any real property (including any CRII Property or any portion thereof) or (B) any other asset of CRII or any CRII Subsidiary or equity interests of any Person, in the case of (A) and (B), with a purchase or sale price greater than $1,000,000;
(vi)
constitutes an interest rate cap, interest rate collar, interest rate swap or other Contract relating to a swap or other hedging transaction of any type;
(vii)
constitutes a loan to any Person (other than a wholly owned subsidiary of CRII) by CRII or any CRII Subsidiary;
(viii)
sets forth the operational or economic terms of a joint venture, partnership, limited liability company or strategic alliance of CRII or any CRII Subsidiary with a third party;
(ix)
prohibits the pledging of the capital stock of CRII or any CRII Subsidiary or prohibits the issuance of guarantees by any CRII Subsidiary;
(x)
contains covenants limiting the ability of CRII or any CRII Subsidiary to sell, transfer, pledge or otherwise, dispose of any material assets or business of CRII or any CRII Subsidiary;
(xi)
contains restrictions on the ability of CRII or any CRII Subsidiary to pay dividends or other distributions, other than the CRII Governing Documents or any equivalent organizational or governing documents of any other CRII Subsidiary;
(xii)
has continuing “earn-out” or other similar contingent purchase price payment obligations, in each case that could result in payments, individually or in the aggregate, in excess of $250,000;
(xiii)
provides for the management or operation of any of the CRII Properties by any third party;
(xiv)
is a lease, sublease, license or other rental agreement or occupancy agreement that grants any possessory interest in and to any space situated on or in the CRII Properties or that otherwise gives rights with regard to the use of the CRII Properties pursuant to which CRII or any CRII Subsidiary expects to receive annualized rental income per year in excess of $350,000;
(xv)
is a ground lease under which CRII or a CRII Subsidiary holds a leasehold interest in the CRII Properties or any portion thereof;
(xvi)
provides a right of first refusal or right of first offer of any real property;
(xvii)
is with a Governmental Authority; or
(xviii)
is both (A) not made in the ordinary course of business and (B) material to CRII and the CRII Subsidiaries, taken as a whole.
(b)
Each Contract in any of the categories set forth in Section 4.12(a) to which CRII or any CRII Subsidiary is a party or by which CRII or any CRII Subsidiary is bound is referred to herein as a “CRII Material Contract.”
(c)
Each CRII Material Contract is legal, valid, binding on and enforceable against CRII or the CRII Subsidiary that is a party thereto and, to the Knowledge of CRII, each other party thereto, and is in full force and effect, except as may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar Laws affecting creditors’ rights generally and by general principles of equity (regardless of whether enforceability is considered in a proceeding in equity or at Law). Except as would not, individually or in the aggregate, reasonably be expected to be material to CRII and the CRII Subsidiaries, taken as a whole, CRII and each CRII Subsidiary has performed all obligations required to be performed by it under each CRII Material Contract and, to the Knowledge of CRII, each other party thereto has performed all obligations required to be performed by it under such CRII Material Contract. None of CRII, any CRII Subsidiary or, to the Knowledge of CRII, any other party thereto, is in breach or violation of, or default under, any CRII Material Contract, and no event has occurred that, with notice or lapse of time or both, would constitute a violation, breach or default under any CRII Material Contract, except where in each case such breach, violation or default, individually or in the aggregate, would not reasonably be expected to be material to CRII and the CRII Subsidiaries, taken as a whole. Neither CRII nor any CRII Subsidiary has received written notice of any violation or default under, or currently owes any termination, cancellation or other similar fees or any liquidated damages with respect to, any CRII Material Contract, except for violations, defaults, fees or damages that, individually or in the aggregate, would not reasonably be expected to have a CRII Material Adverse Effect.
(d)
Since December 31, 2019, (i) neither CRII nor any CRII Subsidiary has received any written notice of the intention of any party to cancel, terminate, materially change the scope of rights under or fail to renew any CRII Material Contract, (ii) no party has exercised, or threatened to exercise, any force majeure or similar provision under any CRII Material Contract and (iii) no party has sought to, or threatened to, withhold or otherwise delay amounts payable to CRII or any CRII Subsidiary under any CRII Material Contract as a result of COVID-19 or the COVID-19 Measures (whether or not CRII or such CRII Subsidiary granted any forgiveness or deferral).
(e)
Neither CRII nor any CRII Subsidiary owes any termination, cancellation or other similar fees or any liquidated damages to any third-party manager or operator.
Section 4.13
Taxes.
(a)
CRII and each CRII Subsidiary has timely filed with the appropriate Governmental Authority all U.S. federal and state income and other material Tax Returns required to be filed, taking into account any extensions of time within which to file such Tax Returns, and all such Tax Returns are complete and correct in all material respects. CRII and each CRII Subsidiary has duly paid (or there has been paid on their behalf), or made adequate provisions in accordance with GAAP for, all material Taxes required to be paid by them, whether or not shown on any Tax Return. True and complete copies of all United States federal income Tax Returns that have been filed with the IRS by CRII and each CRII Subsidiary with respect to the taxable years ending on or after December 31, 2018 have been made available to CCI. No written claim has been proposed by any Governmental Authority in any jurisdiction where CRII or any CRII Subsidiary do not file Tax Returns that CRII or any CRII Subsidiary is or may be subject to Tax by such jurisdiction.
(b)
Beginning with CRII’s taxable year ending on December 31, 2018, (i) CRII has been organized and operated in conformity with the requirements to qualify as a REIT under the Code, (ii) the current and proposed method of operation for CRII is expected to enable CRII to continue to meet the requirements for qualification as a REIT through and including CRII’s final taxable year ending with the Merger Effective Time (assuming the Closing of the Mergers in accordance with the terms of this Agreement), and (iii) CRII has not taken any action that would, or omitted to take any action the omission of which would reasonably be expected to, result in CRII’s failure to qualify as a REIT, and no challenge to CRII’s status as a REIT is pending or threatened in writing.
(c)
(i) There are no audits, investigations by any Governmental Authority or other proceedings pending or threatened in writing with regard to any material Taxes or material Tax Returns of CRII or any CRII Subsidiary; (ii) no deficiency for any material Taxes of CRII or any CRII Subsidiary has been claimed, proposed or assessed, in each case, in writing by any Governmental Authority, which deficiency has not yet been settled except for such deficiencies which are being contested in good faith; (iii) neither CRII nor any CRII Subsidiary has waived any statute of limitations with respect to the assessment of material Taxes or agreed to any extension of time with respect to any material Tax assessment or deficiency for any open tax year; (iv) neither CRII nor any CRII Subsidiary is currently the beneficiary of any extension of time within which to file any material Tax Return, other than automatic extensions; and (v) neither CRII nor any CRII Subsidiary has entered into any “closing agreement” as described in Section 7121 of the Code (or any corresponding or similar provision of state, local or foreign income Tax Law).
(d)
Each CRII Subsidiary that is a partnership, joint venture or limited liability company and that has not elected to be a Taxable REIT Subsidiary has been, since it became a CRII Subsidiary, treated for United States federal income tax purposes as a partnership, disregarded entity, or Qualified REIT Subsidiary, as the case may be, and not as a corporation or an association taxable as a corporation whose separate existence is respected for United States federal income tax purposes, or a “publicly traded partnership” within the meaning of Section 7704(b) of the Code that is treated as a corporation for U.S. federal income tax purposes under Section 7704(a) of the Code. No CRII Subsidiary is a corporation for United States federal income tax purposes, other than a corporation that qualifies as a Qualified REIT Subsidiary or as a Taxable REIT Subsidiary.
(e)
Neither CRII nor any CRII Subsidiary holds any asset the disposition of which would be subject to Treasury Regulation Section 1.337(d)-7, nor has it disposed of any such asset during its current taxable year.
(f)
Since its inception, CRII and the CRII Subsidiaries have not incurred (i) any liability for Taxes under Sections 857(b)(1), 857(b)(4), 857(b)(5), 857(b)(6)(A), 857(b)(7), 860(c) or 4981 of the Code, (ii) any liability for Taxes under Sections 857(b)(5) (for income test violations), 856(c)(7)(C) (for asset test violations), or 856(g)(5)(C) (for violations of other qualification requirements applicable to REITs) and (iii) CRII has not, and none of the CRII Subsidiaries have, incurred any material liability for Tax other than (A) in the ordinary course of business, or (B) transfer or similar Taxes arising in connection with sales of property. No event has occurred, and to the Knowledge of CRII no condition or circumstances exists, which presents a material risk that any material liability for Taxes described in clause (iii) of the preceding sentence or any liability for Taxes described in clause (i) or (ii) of the preceding sentence will be imposed upon CRII or any CRII Subsidiary.
(g)
CRII and the CRII Subsidiaries have complied, in all material respects, with all applicable Laws relating to the payment and withholding of Taxes (including withholding of Taxes pursuant to Sections 1441, 1442, 1445, 1446 and 3402 of the Code or similar provisions under any state and foreign Laws) and have duly and timely withheld and, in each case, have paid over to the appropriate taxing authorities all material amounts required to be so withheld and paid over on or prior to the due date thereof under all applicable Laws.
(h)
Except as set forth in Section 4.13(h) of the CRII Disclosure Letter, there are no CRII Tax Protection Agreements (as hereinafter defined) in force at the date of this Agreement (other than customary Tax indemnification provisions in commercial Contracts not primarily relating to Taxes), and, as of the date of this Agreement, no person has raised in writing, or to the Knowledge of CRII threatened to raise, a material claim against CRII or any CRII Subsidiary for any breach of any CRII Tax Protection Agreements. As used herein, “CRII Tax Protection Agreement” means any written agreement to which CRII or any CRII Subsidiary is a party pursuant to which: (i) any liability to holders of limited partnership interests in a CRII Subsidiary Partnership (as hereinafter defined) relating to Taxes may arise, whether or not as a result of the consummation of the transactions contemplated by this Agreement; or (ii) in connection with the deferral of income Taxes of a holder of limited partnership interests or limited liability company interests in a CRII Subsidiary Partnership, CRII or any CRII Subsidiary has agreed to (A) maintain a minimum level of debt, continue a particular debt or provide rights to guarantee debt, (B) retain or not dispose of assets, (C) make or refrain from making Tax elections, or (D) only dispose of assets in a particular manner. As used herein, “CRII Subsidiary Partnership” means a CRII Subsidiary that is a partnership for United States federal income tax purposes.
(i)
There are no Tax Liens upon any property or assets of CRII or any CRII Subsidiary except Liens for Taxes not yet delinquent or that are being contested in good faith by appropriate proceedings and for which adequate reserves have been established in accordance with GAAP.
(j)
There are no Tax allocation or sharing agreements or similar arrangements (other than CRII Tax Protection Agreements, customary Tax indemnification provisions in commercial Contracts not primarily relating to Taxes or any such agreement between or among solely CRII and the CRII Subsidiaries) with respect to or involving CRII or any CRII Subsidiary, and after the Closing Date neither CRII nor any CRII Subsidiary shall be bound by any such Tax allocation agreements or similar arrangements or have any liability thereunder for amounts due in respect of periods prior to the Closing Date.
(k)
Neither CRII nor any CRII Subsidiary has requested or received any private letter ruling or other similar written ruling of a Governmental Authority or entered into any written agreement with a Governmental Authority with respect to any Taxes, and neither CRII nor any CRII Subsidiary is subject to any such private letter ruling or other similar written ruling of a Governmental Authority.
(l)
Neither CRII nor any CRII Subsidiary (i) has been a member of an affiliated group filing a consolidated federal income Tax Return or (ii) has any liability for the Taxes of any Person (other than any CRII Subsidiary) under (A) Treasury Regulation Section 1.1502-6 (or any similar provision of state, local or foreign law), (B) as a transferee or successor, or (C) by Contract (other than CRII Tax Protection Agreements, customary Tax indemnification provisions in commercial Contracts not primarily relating to Taxes), or otherwise.
(m)
Neither CRII nor any CRII Subsidiary has participated in any “listed transaction” within the meaning of Treasury Regulation Section 1.6011-4(b)(2).
(n)
Neither CRII nor any CRII Subsidiary has constituted either a “distributing corporation” or a “controlled corporation” (within the meaning of Section 355(a)(1)(A) of the Code) in a distribution of stock qualifying for tax-free treatment under Section 355 of the Code in the two years prior to the date of this Agreement or in a distribution that could otherwise constitute part of a “plan” or “series of related transaction” (within the meaning of Section 355(e) of the Code) in conjunction with transactions contemplated by this Agreement.
(o)
No written power of attorney that has been granted by CRII or any CRII Subsidiary (other than to CRII or a CRII Subsidiary) currently is in force with respect to any matter relating to material Taxes.
(p)
CRII does not own a direct or indirect interest in an entity that is treated as a REIT for U.S. federal and applicable state and local income tax purposes.
(q)
CRII’s dividends paid deduction, within the meaning of Section 561 of the Code, for each taxable year (including the taxable year that will end with the REIT Merger), taking into account any dividends subject to Sections 857(b)(9) or 858 of the Code, has not been less than the sum of (I) CRII’s REIT taxable income, as defined in Section 857(b)(2) of the Code, determined without regard to any dividends paid deduction for such year and (II) CRII’s net capital gain for such year.
(r)
Neither CRII nor any CRII Subsidiary has taken any action or failed to take any action which action or failure would reasonably be expected to prevent, nor to the Knowledge of CRII is there any other fact or circumstance that could reasonably be expected to prevent, the REIT Merger from qualifying as a reorganization within the meaning of Section 368(a) of the Code.
(s)
CRII is a “domestically controlled qualified investment entity” within the meaning of Section 897(h)(4)(B) of the Code.
Section 4.14
Intellectual Property. Neither CRII nor any CRII Subsidiary: (a) owns any registered trademarks, patents or copyrights, (b) has any pending applications, registrations or recordings for any trademarks, patents or copyrights or (c) is a party to any Contracts with respect to use by CRII or any CRII Subsidiary of any trademarks or patents. Except as, individually or in the aggregate, would not reasonably be expected to have a CRII Material Adverse Effect, (i) no Intellectual Property used by CRII or any CRII Subsidiary infringes or is alleged to infringe any Intellectual Property rights of any third party, (ii) to CRII’s Knowledge, no Person is misappropriating, infringing or otherwise violating any Intellectual Property of CRII or any CRII Subsidiary, and (iii) CRII and the CRII Subsidiaries own or are licensed to use, or otherwise possess valid rights to use, all Intellectual Property necessary to conduct the business of CRII and the CRII Subsidiaries as it is currently conducted. Since January 1, 2018, neither CRII nor any CRII Subsidiary has received any written or, to the Knowledge of CRII, verbal complaint, claim or notice alleging misappropriation, infringement or violation of any Intellectual Property rights of any third party.
Section 4.15
Insurance. Section 4.15 of the CRII Disclosure Letter sets forth, for all material insurance policies and all material fidelity bonds of CRII and the CRII Subsidiaries, the general type of insurance, insurer, policy number and aggregate limit (the “CRII Insurance Policies”). All such insurance policies are in full force and effect and no written notice of cancellation or termination has been received by CRII or any CRII Subsidiary with respect to any such policy which has not been replaced on substantially similar terms prior to the date of such cancellation. Except as, individually, or in the aggregate, would not reasonably be expected to be material to CRII and the CRII Subsidiaries, taken as a whole, (a) there is no existing default or event which, with the giving of notice or lapse of time or both, would constitute a breach or default under any CRII Insurance Policy, or permit termination or modification thereof, (b) all premiums currently due and payable under all CRII Insurance Policies have been paid, and (c) CRII and the CRII Subsidiaries have otherwise complied in all material respects with the terms and conditions of all CRII Insurance Policies.
Section 4.16
Employee Matters.
(a)
Neither CRII nor any CRII Subsidiary has ever (i) been a party to any collective bargaining agreement; (ii) had any application or petition for an election, or for certification, of a collective bargaining agent pending; (iii) had pending, existing, or threatened, any strike, slowdown, picketing or work stoppage or employee grievance process involving CRII or any CRII Subsidiary; or (iv) been subject to any Action or threatened Action relating to the alleged violation of any Law pertaining to labor relations, including any charge or complaint filed with the National Labor Relations Board. CRII, and the CRII Subsidiaries are, and in the three years preceding the date of this Agreement have been, in compliance with all applicable Laws and Orders regarding the terms and conditions of employment or other labor related matters, and the payment and withholding of Taxes with respect to their employees, and there are no Actions relating to any such violation pending or threatened against CRII or any CRII Subsidiary, nor have there been any such actual or threatened Actions in the three years preceding the date of this Agreement.
(b)
Section 4.16(b) of the CRII Disclosure Letter sets forth a list of each CRII Benefit Plan and its sponsoring entity or entities. Other than the CRII Benefit Plans listed on Section 4.16(b) of the CRII Disclosure Letter, CRII and the CRII Subsidiaries do not and are not required to and do not have any liability (contingent or otherwise) with respect to, any Benefit Plans. Neither CRII nor any CRII Subsidiary has any contract, plan or written commitment, whether or not legally binding, to create any Benefit Plan.
(c)
None of CRII, any CRII Subsidiaries nor any of their respective ERISA Affiliates has ever maintained, contributed to, or participated in, or otherwise has any obligation or liability in connection with: (i) a “pension plan” under Section 3(2) of ERISA that is subject to Title IV or Section 302 of ERISA or Section 412 or 4971 of the Code, (ii) a “multiemployer plan” (as defined in Section 3(37) of ERISA), (iii) a “multiple employer welfare arrangement” (as defined in Section 3(40) of ERISA), or (iv) a “multiple employer plan” (as defined in Section 413(c) of the Code). No CRII Benefit Plan promises or provides retiree medical or other retiree welfare benefits to any Person other than pursuant to COBRA (whether company paid or not) or other applicable legal requirements.
(d)
Each CRII Benefit Plan has been established, administered, and maintained in all material respects in accordance with its terms and in compliance in all material respects with the applicable provisions of ERISA, the Code and other applicable Laws. With respect to each CRII Benefit Plan that is intended to meet the requirements of a “qualified plan” under Code Section 401(a), the CRII Benefit Plan has received and is entitled to rely on a determination letter from the Internal Revenue Service that such CRII Benefit Plan is so qualified (or if it is a prototype plan, it has a favorable opinion letter; or if it is a volume submitter, it has a favorable advisory letter). No event or documentation defect with respect to any CRII Benefit Plan has occurred which would reasonably be expected to cause such CRII Benefit Plan to become disqualified for purposes of Section 401(a) of the Code or which could reasonably be expected to cause CRII or any CRII Subsidiary to incur any material monetary penalty or other material liability. No audits, investigations, actions, suits, or claims (other than routine claims for benefits in the ordinary course of business) are pending or, to the Knowledge of CRII, threatened with respect to any CRII Benefit Plan.
(e)
The execution, delivery and performance of this Agreement will not constitute a triggering event that will result (either alone or upon the occurrence of any additional or subsequent event) in any payment (whether of severance pay or otherwise) becoming due, any “parachute payment” as defined in Section 280G of the Code, any increase in payment, or accelerate the time of payment or vesting of compensation due to any current or former employee, independent contractor, officer or director (or dependents of such Persons) of CRII or any CRII Subsidiary. Neither CRII nor any CRII Subsidiary is a party to or has any obligation to compensate any Person for excise taxes payable pursuant to Section 4999 of the Code or for additional taxes payable pursuant to Section 409A of the Code. Any CRII Benefit Plan which is a “nonqualified deferred compensation plan” as defined in Section 409A of the Code has been maintained and operated in compliance in all material respects with Section 409A of the Code or an available exemption therefrom.
(f)
All material premiums for, contributions to, and payments from, any CRII Benefit Plans have been timely made or timely accrued by CRII and/or the CRII Subsidiaries in the consolidated audited and unaudited financial statements of CRII and the CRII Subsidiaries.
(g)
None of CRII, any CRII Subsidiary or any of their respective ERISA Affiliates, nor any of their respective directors, officers or employees, nor, to the Knowledge of CRII, any other “disqualified person” or “party in interest” (as defined in Section 4975(e)(2) of the Code and Section 3(14) of ERISA, respectively) has engaged in any transaction, act or omission to act in connection with any CRII Benefit Plan that could reasonably be expected to result in the imposition of a material penalty or fine pursuant to Section 502 of ERISA, damages pursuant to Section 409 of ERISA or a material tax pursuant to Section 4975 of the Code.
(h)
No event has occurred, and no condition or circumstance exists, that could subject CRII, any CRII Subsidiary, or any CRII Benefit Plan to material penalties or excise taxes under Sections 4980D or 4980H of the Code.
(i)
All current and former employees of CRII and any CRII Subsidiary who have been classified as exempt under the Fair Labor Standards Act (the “FLSA”) have been properly classified and treated as such, and all current and former employees of CRII and any CRII Subsidiary have been properly compensated for all time worked in accordance with the FLSA. All Persons who have provided services to CRII and any CRII Subsidiary as independent contractors or consultants have been properly classified as independent contractors, rather than employees, for purposes of all applicable Laws and CRII Benefit Plans.
(j)
Section 4.16(j) of the CRII Disclosure Letter contains a true, accurate and complete list of all employees of CRII and any CRII Subsidiary, specifying each employee’s name and title. The current year annual base salary or hourly wage of each such employee has been separately provided to the CCI Parties, and shall be deemed to be part of Section 4.16(j) of the CRII Disclosure Letter.
(k)
There are not any oral or informal arrangements, commitments or promises between CRII, nor any CRII Subsidiary, and any employees, independent contractors or consultants thereof that have not been documented as part of the formal written agreements between any such Persons and CRII or any CRII Subsidiary. There are no agreements or understandings between CRII or any CRII Subsidiary and any employee, independent contractor or consultant that the term of their employment or engagement will be for any particular period.
(l)
In the three years preceding the date of this Agreement, neither CRII nor any CRII Subsidiary has failed to provide advance notice of any plant closing, layoff, termination or reduction in hours as required by, or incurred any liability under, the Worker Adjustment and Retraining Notification Act of 1988, and including any similar foreign, state, or local Law (the “WARN Act”), and as of the date of this Agreement, neither CRII nor any CRII Subsidiary has taken any action that would reasonably be expected to cause the CRII or any CRII Subsidiaries to incur any liability or obligation under WARN following the Closing.
(m)
CRII and any CRII Subsidiary has complied in all material respects with the Immigration Reform and Control Act of 1986 and all regulations promulgated thereunder (“IRCA”). Neither CRII, nor any CRII Subsidiary, has employed individuals not authorized to work in the United States. Neither CRII, nor any CRII Subsidiary, has received any written notice of any inspection or investigation relating to its alleged noncompliance with or violation of IRCA, nor has it been warned, fined or otherwise penalized by reason of any failure to comply with IRCA.
Section 4.17
Related-Party Transactions. Except as set forth in Section 4.17 of the CRII Disclosure Letter, prior to the date hereof, no agreements, arrangements or understandings between CRII or any CRII Subsidiary (or binding on any of their respective properties or assets), on the one hand, and any other Person, on the other hand (other than those exclusively among CRII and CRII Subsidiaries), are in existence that would be required to be disclosed under Item 404 of Regulation S-K promulgated by the SEC if CRII were subject to such regulation.
Section 4.18
Brokers. No broker, investment banker or other Person (other than the Persons listed in Section 4.18 of the CRII Disclosure Letter, pursuant to the terms of the engagement letter between CRII and such Person, true, correct and complete copies of which have been provided to CCI prior to the date hereof) is entitled to any broker’s, finder’s or other similar fee or commission in connection with the Mergers and the other transactions contemplated by this Agreement based upon arrangements made by or on behalf of CRII or any CRII Subsidiary.
Section 4.19
Opinion of Financial Advisor. The CRII Transaction Committee has received the oral opinion (which opinion has been or will be confirmed in writing) of Piper Sandler & Co. (the “CRII Financial Advisor”), to the effect that, as of the date thereof and based on and subject to the assumptions, limitations, qualifications and conditions set forth in its written opinion, the Common Exchange Ratio is fair, from a financial point of view, to the holders of shares of the CRII Common Stock. CRII will deliver to CCI a complete and correct copy of such opinion promptly after receipt thereof by the CRII Transaction Committee solely for informational purposes and on a non-reliance basis (though such delivery need not be prior to entering into this Agreement).
Section 4.20
Takeover Statutes; Appraisal Rights. The CRII Board has taken all action necessary to render inapplicable to the REIT Merger the restrictions on business combinations contained in Subtitle 6 of Title 3 of the MGCL. No other “business combination,” “control share acquisition,” “fair price,” “moratorium” or other takeover or anti-takeover statute or similar federal or state Law (collectively, “Takeover Statutes”) are applicable to this Agreement, the Mergers or the other transactions contemplated by this Agreement. No dissenters’, appraisal or similar rights are available to the holders of capital stock of CRII or the limited partners of CCOP with respect to the Mergers and the other transactions contemplated by this Agreement.
Section 4.21
COVID-19.
(a)
Each of CRII and the CRII Subsidiaries has complied with all applicable mandatory public health mandates announced by Governmental Authorities to address COVID‑19, including the COVID-19 Measures, in all material respects.
(b)
Neither CRII nor any CRII Subsidiary has incurred any Indebtedness or received any funding (regardless of whether constituting Indebtedness), or applied for any such Indebtedness or funding, pursuant to the Coronavirus Aid, Relief, and Economic Security Act or any other economic relief or stimulus legislation or program, in each case related to COVID-19.
Section 4.22
No Other Representations and Warranties; Non-Reliance.
(a)
Except for the representations and warranties expressly set forth in this Article 4, or any document, agreement, certificate or other instrument contemplated by this Agreement, no CRII Party, nor any Person on behalf of a CRII Party, has made any representation or warranty, expressed or implied, with respect to CRII, any CRII Subsidiary, including their respective businesses, operations, assets (including the CRII Properties), liabilities, condition (financial or otherwise), results of operations, future operating or financial results, estimates, projections, forecasts, plans or prospects (including the reasonableness of the assumptions underlying such estimates, projections, forecasts, plans or prospects), or the accuracy or completeness of any information regarding CRII or any CRII Subsidiary.
(b)
Notwithstanding anything contained in this Agreement to the contrary, the CRII Parties acknowledge and agree with the representation of the CCI Parties in Section 5.23(a), and hereby acknowledge and confirm that, other than the representations and warranties expressly set forth in Article 5, or any document, agreement, certificate or other instrument contemplated by this Agreement, none of the CCI Parties or any other Person has made or is making, and the CRII Parties are not relying on, any representations or warranties relating to the CCI Parties whatsoever, express or implied, by operation of law or otherwise, including any implied representation or warranty as to the accuracy or completeness of any information furnished or made available to the CRII Parties or any of their Representatives by the CCI Parties or their Representatives.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF THE CCI PARTIES
Except as set forth in (a) the disclosure letter delivered by the CCI Parties to the CRII Parties prior to the execution and delivery of this Agreement (the “CCI Disclosure Letter”), it being acknowledged and agreed that disclosure of any item in any section or subsection of the CCI Disclosure Letter shall be deemed disclosed with respect to the section or subsection of this Agreement to which it corresponds and any other section or subsection of this Agreement to the extent the applicability of such disclosure is reasonably apparent on its face, or (b) the CCI SEC Documents publicly filed with or publicly furnished to the SEC on or after December 31, 2019 and prior to the date of this Agreement, excluding any information or documents incorporated by reference therein or filed as exhibits thereto and any disclosures set forth or referenced in any risk factor section, forward-looking statements section or in any other section therein to the extent they are forward-looking statements or cautionary, non-specific, predictive or forward-looking in nature (and then only to the extent that the relevance of any disclosed event, item or occurrence in such filings to a matter covered by a representation or warranty set forth in this Article 5 is reasonably apparent on its face), the CCI Parties hereby jointly and severally represent and warrant to the CRII Parties that:
Section 5.1
Organization and Qualification; Subsidiaries.
(a)
CCI is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Maryland and has the requisite corporate power and authority to own, lease and operate its properties and to carry on its business as it is now being conducted. Merger Sub is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Maryland and has the requisite limited liability company power and authority to own, lease and, to the extent applicable, operate its properties and to carry on its business as it is now being conducted. Each of CCI and Merger Sub is duly qualified or licensed to do business, and is in good standing, in each jurisdiction where the character of the properties owned, operated or leased by it or the nature of its business makes such qualification, licensing or good standing necessary, except for such failures to be so qualified, licensed or in good standing that, individually or in the aggregate, would not reasonably be expected to have a CCI Material Adverse Effect.
(b)
Each CCI Subsidiary is duly organized, validly existing and in good standing under the Laws of the jurisdiction of its incorporation or organization, as the case may be, and has the requisite organizational power and authority to own, lease and, to the extent applicable, operate its properties and to carry on its business as it is now being conducted. Each CCI Subsidiary is duly qualified or licensed to do business, and is in good standing, in each jurisdiction where the character of the properties owned, operated or leased by it or the nature of its business makes such qualification, licensing or good standing necessary, except for such failures to be so qualified, licensed or in good standing that, individually or in the aggregate, would not reasonably be expected to have a CCI Material Adverse Effect.
(c)
Section 5.1(c) of the CCI Disclosure Letter sets forth a true and complete list of the CCI Subsidiaries and their respective jurisdictions of incorporation or organization, as the case may be, the jurisdictions in which CCI and the CCI Subsidiaries are qualified or licensed to do business, and the percentage of interest held, directly or indirectly, by CCI in each CCI Subsidiary, including a list of each CCI Subsidiary that is (i) a Qualified REIT Subsidiary, (ii) a Taxable REIT Subsidiary and (iii) an entity taxable as a corporation under the Code that is neither a Qualified REIT Subsidiary nor a Taxable REIT Subsidiary.
(d)
Except as set forth in Section 5.1(d) of the CCI Disclosure Letter, neither CCI nor any CCI Subsidiary directly or indirectly owns any equity interest or investment (whether equity or debt) in any Person (other than in the CCI Subsidiaries and investments in short-term investment securities).
(e)
CCI has made available to the CRII Parties complete and correct copies of the CCI Governing Documents, which are in full force and effect as of the date of this Agreement. Each of the CCI Parties is in compliance with the terms of its applicable CCI Governing Documents. True and complete copies of CCI’s minute books, since January 1, 2018, have been made available by CCI to CRII upon the written request of CRII.
(f)
CCI has not exempted any “Person” from the “Aggregate Stock Ownership Limit” or the “Common Stock Ownership Limit” or established or increased an “Excepted Holder Limit,” as such terms are defined in the CCI Charter, which exemption or Excepted Holder Limit is currently in effect.
Section 5.2
Authority.
(a)
Each of the CCI Parties has the requisite power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated by this Agreement, including the Mergers. The execution and delivery of this Agreement by the CCI Parties and the consummation by them of the transactions contemplated by this Agreement have been duly and validly authorized by all necessary corporate or partnership action, as applicable, and no other corporate or partnership proceedings on the part of any of the CCI Parties are necessary to authorize this Agreement or the Mergers or to consummate the other transactions contemplated by this Agreement, subject, to the filing of the Articles of Merger with, and acceptance for record of such Articles of Merger by, the SDAT, and the filing of the Certificate of Merger with, and acceptance for record of such Certificate of Merger by, the Delaware Secretary.
(b)
This Agreement has been duly executed and delivered by the CCI Parties and, assuming due authorization, execution and delivery by the CRII Parties, constitutes a legally valid and binding obligation of each of the CCI Parties, enforceable against them in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar Laws affecting creditors’ rights generally and by general principles of equity (regardless of whether enforceability is considered in a proceeding in equity or at law).
(c)
On the recommendation of the CCI Special Committee, the CCI Board (including a majority of directors not otherwise interested in the Mergers) has (i) determined that this Agreement, the Mergers, the CCI Articles Supplementary (Series 2016 Preferred Stock), the CCI Articles Supplementary (Series 2017 Preferred Stock), the Voting Agreement, the Amended and Restated Advisory Agreement and the other transactions contemplated by this Agreement are advisable and in the best interests of CCI, (ii) determined that this Agreement, the Mergers, the Voting Agreement and the other transactions contemplated by this Agreement are fair and reasonable to CCI and on terms and conditions no less favorable to CCI than those available from unaffiliated third parties, and (iii) authorized and approved this Agreement, the Mergers, the CCI Articles Supplementary (Series 2016 Preferred Stock), the CCI Articles Supplementary (Series 2017 Preferred Stock), the Voting Agreement, the Amended and Restated Advisory Agreement and the other transactions contemplated by this Agreement.
(d)
CCI, as the sole member of Merger Sub, has approved this Agreement and the REIT Merger.
Section 5.3
No Conflict; Required Filings and Consents.
(a)
The execution and delivery of this Agreement by the CCI Parties do not, and the performance of this Agreement and its obligations hereunder will not, (i) conflict with or violate any provision of (A) the CCI Governing Documents or (B) any equivalent organizational or governing documents of any other CCI Subsidiary, (ii) assuming that all consents, approvals, authorizations and permits described in Section 5.3(b) have been obtained, all filings and notifications described in Section 5.3(b) have been made and any waiting periods thereunder have terminated or expired, conflict with or violate any Law applicable to CCI or any CCI Subsidiary or by which any property or asset of CCI or any CCI Subsidiary is bound, or (iii) except as set forth in Section 5.3(a)(iii) of the CCI Disclosure Letter, with or without notice, lapse of time or both, constitute or result in a breach or violation of, or a default under, or give rise to any Lien, acceleration of remedies, right of termination, purchase, first offer or forced sale under, any Contract of CCI or any CCI Subsidiary, except, as to clauses (ii) and (iii) above, for any such conflicts, violations, breaches, defaults or other occurrences which, individually or in the aggregate, would not reasonably be expected to have a CCI Material Adverse Effect.
(b)
The execution and delivery of this Agreement by each of the CCI Parties do not, and the performance of this Agreement by each of the CCI Parties will not, require any consent, approval, authorization or permit of, or filing with or notification to, any Governmental Authority, except (i) the filing of the Form S-4 and the declaration of effectiveness of the Form S-4 and the filing of such other reports under or compliance with the Exchange Act and the Securities Act as may be required in connection with this Agreement and the transactions contemplated by this Agreement, (ii) the filing of the Articles of Merger with, and the acceptance for record of the Articles of Merger by, the SDAT pursuant to the MGCL and the MLLCA, (iii) the filing of the Certificate of Merger with, and the acceptance for record of the Certificate of Merger by, the Delaware Secretary pursuant to the DRULPA, (iv) such filings and approvals as may be required by any applicable state securities or “blue sky” Laws, and (v) where failure to obtain such consents, approvals, authorizations or permits, or to make such filings or notifications, individually or in the aggregate, would not reasonably be expected to have a CCI Material Adverse Effect.
Section 5.4
Capital Structure.
(a)
The authorized capital stock of CCI consists of (i) 500,000,000 shares of common stock, $0.01 par value per share (“CCI Class A Common Stock”), (ii) 500,000,000 shares of common stock, $0.01 par value per share (“CCI Class T Common Stock” and together with the CCI Class A Common Stock, the “CCI Common Stock”), (iii) 95,000,000 shares, $0.01 par value per share, are designated as preferred stock and (iv) 5,000,000 shares, $0.01 par value per share, are designated as Series 2019 Preferred Stock (“CCI Series 2019 Preferred Stock”). As of the date hereof, (x) 12,214,770.50 shares of CCI Class A Common Stock were issued and outstanding, (y) 17,518.32 shares of CCI Class T Common Stock were issued and outstanding and (z) 3,308,325.86 shares of CCI Series 2019 Preferred Stock were issued and outstanding. All of the outstanding shares of capital stock of CCI are duly authorized, validly issued, fully paid and nonassessable. Except as set forth in this Section 5.4(a), as of the date hereof, there is no other outstanding capital stock of CCI. All shares to be issued by CCI as REIT Merger Consideration, when issued in accordance with this Agreement, will be duly authorized, validly issued, fully paid and nonassessable.
(b)
As of the date hereof, (i) no CCOP Common Units were outstanding, (ii) 3,308,325.86 CCOP Series 2019 Preferred Units were outstanding, all of which were held by CCI or a wholly owned subsidiary of CCI, (iii) 12,437.50 CCOP LTIP Units were outstanding, all of which were held by those Persons listed on Section 5.4(b)(iii) of the CCI Disclosure Letter, (iv) 37,312.50 CCOP Special LTIP Units were outstanding, all of which were held by those Persons listed on Section 5.4(b)(iv) of the CCI Disclosure Letter, (v) the CCOP Special Limited Partnership Interest was outstanding and (vi) 12,232,288.82 CCOP General Partner Units were outstanding, all of which were held by CCI. Except as set forth in this Section 5.4(b), as of the date hereof, there are no other outstanding CCOP partnership interests.
(c)
All of the outstanding shares of capital stock of each of the CCI Subsidiaries that is a corporation are duly authorized, validly issued, fully paid and nonassessable. All equity interests in each of the CCI Subsidiaries that is a partnership or limited liability company are duly authorized and validly issued and holders thereof have no obligation to make any further payments solely by reason of their ownership thereof. All shares of capital stock of (or other ownership interests in) each of the CCI Subsidiaries which may be issued upon exercise of outstanding options or exchange rights are duly authorized and, upon issuance will be validly issued, fully paid and, to the extent applicable, nonassessable. All of the issued and outstanding capital stock and other ownership interests of each of the CCI Subsidiaries that are owned, directly or indirectly, by CCI are owned free and clear of all Liens, other than Permitted Liens, and free of preemptive rights.
(d)
There are no bonds, debentures, notes or other Indebtedness having general voting rights (or convertible into securities having such rights) of CCI or any CCI Subsidiary issued and outstanding (“CCI Voting Debt”). Except as set forth on Section 5.4(d) of the CCI Disclosure Letter, there are no outstanding subscriptions, securities options, warrants, calls, rights, profits interests, stock appreciation rights, phantom stock, convertible securities, preemptive rights, anti-dilutive rights, rights of first refusal or other similar rights, agreements, arrangements, undertakings or commitments of any kind to which CCI or any CCI Subsidiary is a party or by which any of them is bound obligating CCI or any of the CCI Subsidiaries to (i) issue, transfer or sell or create, or cause to be issued, transferred or sold or created any additional shares of capital stock or other equity interests or phantom stock or other contractual rights the value of which is determined in whole or in part by the value of any equity security of CCI or any CCI Subsidiary or securities convertible into or exchangeable for such shares or other equity interests, (ii) issue, grant, extend or enter into any such subscriptions, options, warrants, calls, rights, profits interests, stock appreciation rights, phantom stock, convertible securities or other similar rights, agreements, arrangements, undertakings or commitments or (iii) redeem, repurchase or otherwise acquire any such shares of capital stock, CCI Voting Debt or other equity interests.
(e)
Neither CCI nor any CCI Subsidiary is a party to or bound by any Contracts concerning the voting (including voting trusts and proxies) of any capital stock of CCI or any of the CCI Subsidiaries. Neither CCI nor any CCI Subsidiary has granted any registration rights on any of its capital stock. No capital stock of CCI is owned by any CCI Subsidiary.
(f)
CCI does not have a “poison pill” or similar stockholder rights plan.
(g)
All dividends or other distributions on the shares of capital stock of CCI or CCOP Partnership Units and any material dividends or other distributions on any securities of any CCI Subsidiary which have been authorized or declared prior to the date hereof have been paid in full (except to the extent such dividends or other distributions have been publicly announced and are not yet due and payable).
(h)
All of the outstanding securities of the CCI Parties were issued in compliance with applicable securities Laws.
Section 5.5
SEC Documents; Financial Statements; Off-Balance Sheet Arrangements; Internal Controls; Investment Company Act; Anti-Corruption Laws.
(a)
Except as set forth at Section 5.5(a) of the CCI Disclosure Letter, CCI has timely filed with, or furnished (on a publicly available basis) to the SEC, all forms, documents, certifications, statements, schedules and reports required to be filed or furnished by CCI under the Exchange Act or the Securities Act (together with all certifications required pursuant to the Sarbanes-Oxley Act) since January 1, 2018 (the forms, documents, certifications, statements, schedules, reports (including the financial statements referenced in Section 5.5(e)) filed with the SEC since January 1, 2018, including those filed with the SEC since the date of this Agreement, if any, including any amendments thereto, the “CCI SEC Documents”).
(b)
As of their respective filing dates, the CCI SEC Documents (i) complied, or with respect to CCI SEC Documents filed after the date hereof, will comply, in all material respects with the requirements of the Securities Act or the Exchange Act, as the case may be, and the Sarbanes-Oxley Act, and (ii) did not, or with respect to CCI SEC Documents filed after the date hereof, will not, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances under which they were made, not misleading. None of the CCI SEC Documents is, to the Knowledge of CCI, the subject of ongoing SEC review or threatened review, and CCI does not have any outstanding and unresolved comments from the SEC with respect to any CCI SEC Documents. None of the CCI SEC Documents is the subject of any confidential treatment request by CCI.
(c)
CCI has made available to CRII complete and correct copies of all written correspondence between the SEC, on the one hand, and CCI, on the other hand, since December 31, 2018. No CCI Subsidiary is separately subject to the periodic reporting requirements of Section 13(a) or Section 15(d) of the Exchange Act.
(d)
At all applicable times, CCI has complied in all material respects with the applicable provisions of the Sarbanes-Oxley Act.
(e)
The consolidated audited and unaudited financial statements of CCI and the CCI Subsidiaries included, or incorporated by reference, in the CCI SEC Documents, including the related notes and schedules, (i) have been prepared from, are in accordance with, and accurately reflect the books and records of CCI and the CCI Subsidiaries in all material respects, (ii) complied or will comply, as the case may be, as of their respective dates in all material respects with the then-applicable accounting requirements of the Securities Act and the Exchange Act, (iii) have been prepared in accordance with GAAP applied on a consistent basis during the periods involved (except as may be indicated in the notes thereto, or, in the case of the unaudited financial statements, for normal and recurring year-end adjustments and as may be permitted by the SEC on Form 10-Q or any successor form under the Exchange Act, which such adjustments are not, individually or in the aggregate, material to CCI) and (iv) fairly present in all material respects (subject, in the case of unaudited financial statements, for normal and recurring year-end adjustments, none of which is material, individually or in the aggregate), the consolidated financial position of CCI and the CCI Subsidiaries, taken as a whole, as of their respective dates and the consolidated statements of operations, comprehensive income, stockholders’ equity and cash flows of CCI and the CCI Subsidiaries for the periods presented therein.
(f)
(A) CCI maintains disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) that are designed to ensure that material information required to be disclosed by CCI in the reports that it files or furnishes under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and is accumulated and communicated to CCI’s management as appropriate to allow timely decisions regarding required disclosure and to make the certifications of the Chief Executive Officer and Chief Financial Officer of CCI required under the Exchange Act with respect to such reports, and (B) such disclosure controls and procedures are effective in timely alerting CCI’s principal executive officer and principal financial officer to material information required to be included in CCI’s periodic reports required under the Exchange Act. CCI and CCI Subsidiaries have designed and maintained a system of internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act) reasonably designed to provide reasonable assurances (i) regarding the reliability of financial reporting and the preparation of financial statements in accordance with GAAP, (ii) that transactions are executed in accordance with management’s general or specific authorizations, (iii) that transactions are recorded as necessary to permit preparation of financial statements and to maintain asset accountability, (iv) that access to assets is permitted only in accordance with management’s general or specific authorizations, (v) that the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences and (vi) that accounts, notes and other receivables and inventory are recorded accurately, and proper and adequate procedures are implemented to effect the collection thereof on a current and timely basis. CCI has disclosed to CCI’s auditors and audit committee (and made summaries of such disclosures available to CRII), based on the most recent evaluation of its chief executive officer and its chief financial officer prior to the date of this Agreement, (A) any significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect in any material respect CCI’s ability to record, process, summarize and report financial information and (B) any fraud, whether or not material, that involves management or other employees who have a significant role in internal control over financial reporting.
(g)
CCI is not, and none of the CCI Subsidiaries is, a party to, and neither CCI nor any CCI Subsidiary has any commitment to become a party to, any joint venture, off-balance sheet partnership or any similar Contract or arrangement, including any arrangement relating to any transaction or relationship between or among CCI and any CCI Subsidiary, on the one hand, and any unconsolidated Affiliate of CCI or any CCI Subsidiary, including any structured finance, special purpose or limited purpose entity or Person, on the other hand, or any “off-balance sheet arrangements” (as defined in Item 303(a) of Regulation S-K of the SEC), where the result, purpose or effect of such arrangement is to avoid disclosure of any material transaction involving, or material liabilities of, CCI, any CCI Subsidiary or CCI’s or such CCI Subsidiary’s audited financial statements or other CCI SEC Documents.
(h)
Neither CCI nor any CCI Subsidiary is required to be registered as an investment company under the Investment Company Act.
(i)
CCI and CCI Subsidiaries (including in each case any of their officers and directors) have complied and are in compliance with applicable Anti-Corruption Laws. Neither CCI nor any CCI Subsidiary nor, to the Knowledge of CCI, any director, officer or Representative of CCI or any CCI Subsidiary has (i) used any corporate funds for any unlawful contributions, gifts, entertainment or other unlawful expenses related to political activity, (ii) made, taken or will take any action in furtherance of any direct or indirect unlawful payment, promise to pay or authorization or approval of the payment or giving of money, property or gifts of anything of value, directly or indirectly to any foreign or domestic government official or employee, (iii) made, offered or taken an act in furtherance of any direct or indirect unlawful bribe, rebate, payoff, kickback or other unlawful payment to any foreign or domestic government official or employee, (iv) made any payment to any customer, supplier or tenant, or to any officer, director, partner, employee or agent of any such customer, supplier or tenant, for the unlawful sharing of fees to any such customer, supplier or tenant or any such officer, director, partner, employee or agent for the unlawful rebating of charges, (v) engaged in any other unlawful reciprocal practice, or made any other unlawful payment or given any other unlawful consideration to any such customer, supplier or tenant or any such officer, director, partner, employee or agent of such customer, officer or tenant, or (vi) taken any action or made any omission in violation of any applicable Law governing imports into or exports from the United States or any foreign country, or relating to economic sanctions or embargoes, corrupt practices, money laundering, or compliance with unsanctioned foreign boycotts, in each case, in violation of any applicable Anti-Corruption Law. Neither CCI nor any CCI Subsidiary has received any written communication that alleges that CCI or any CCI Subsidiary, or any of their respective Representatives, is, or may be, in violation of, or has, or may have, any liability under, any Anti-Corruption Law.
Section 5.6
Absence of Certain Changes or Events. Since September 30, 2020 through the date of this Agreement, (a) CCI and each CCI Subsidiary have conducted their respective business in all material respects in the ordinary course of business, (b) neither CCI nor any CCI Subsidiary has taken any action that would have been prohibited by Section 6.2(a)(Conduct of the Business of CCI) if taken from and after the date of this Agreement and (c) there has not been any CCI Material Adverse Effect or any event, circumstance, change, effect, development, condition or occurrence that, individually or in the aggregate, with all other events, circumstances, changes, effects, developments, conditions or occurrences, would reasonably be expected to have a CCI Material Adverse Effect.
Section 5.7
No Undisclosed Liabilities. Except (a) as disclosed, reflected or reserved against on the balance sheet of CCI dated as of December 31, 2019 (including the notes thereto), (b) for liabilities or obligations incurred in connection with the transactions contemplated by this Agreement and (c) for liabilities or obligations incurred in the ordinary course of business since December 31, 2019, neither CCI nor any CCI Subsidiary has any liability or obligation (whether accrued, absolute, contingent or otherwise) that either alone or in the aggregate, has had, or would reasonably be expected to have, a CCI Material Adverse Effect.
Section 5.8
Permits; Compliance with Law.
(a)
Except for the authorizations, licenses, permits, certificates, approvals, variances, exemptions, orders, franchises, certifications and clearances that are the subject of Section 5.11, which are addressed solely in that Section, CCI and each CCI Subsidiary is in possession of all Permits necessary for CCI and each CCI Subsidiary to own, lease and, to the extent applicable, operate its properties or to carry on its respective business substantially as they are being conducted (the “CCI Permits”), and all such CCI Permits are valid and in full force and effect, except where the failure to be in possession of, or the failure to be valid or in full force and effect of, any of the CCI Permits, individually, or in the aggregate, would not reasonably be expected to have a CCI Material Adverse Effect. CCI has paid all fees and assessments due and payable, in each case, in connection with all such Permits except where failure to pay, individually or in the aggregate, would not reasonably be expected to have a CCI Material Adverse Effect. No event has occurred with respect to any of the CCI Permits which permits, or after notice or lapse of time or both would permit, revocation or termination thereof or would result in any other material impairment of the rights of the holder of any such CCI Permits. Neither CCI nor any of the CCI Subsidiaries has received any notice indicating, nor to the Knowledge of CCI, is there any pending applicable petition, objection or other pleading with any Governmental Authority having jurisdiction or authority over the operations of CCI or the CCI Subsidiaries or the CCI Properties that impairs the validity of any CCI Permit or which would reasonably be expected, if accepted or granted, to result in the revocation of any CCI Permit, except where the impairment or revocation of any such CCI Permits, individually or in the aggregate, would not reasonably be expected to have a CCI Material Adverse Effect.
(b)
Since January 1, 2018, neither CCI nor any CCI Subsidiary has been in conflict with, or in default or violation of, any Law applicable to CCI or any CCI Subsidiary or by which any property or asset of CCI or any CCI Subsidiary is bound (except for compliance with Laws addressed in Section 5.10, Section 5.11, Section 5.13 and Section 5.16, respectively, which are solely addressed in those Sections), except for any such conflicts, defaults or violations that, individually or in the aggregate, would not reasonably be expected to have a CCI Material Adverse Effect.
Section 5.9
Litigation. There is no material Action to which CCI or any CCI Subsidiary is a party (either as plaintiff or defendant) pending or, to the Knowledge of CCI, overtly threatened before any Governmental Authority and, to the Knowledge of CCI, there is no basis for any such Action. Neither CCI nor any CCI Subsidiary has been permanently or temporarily enjoined by any Order from engaging in or continuing to conduct the business of CCI or the CCI Subsidiaries. No Order has been issued in any proceeding to which CCI or any of the CCI Subsidiaries is or was a party, or, to the Knowledge of CCI, in any other proceeding, that enjoins or requires CCI or any of the CCI Subsidiaries to take action of any kind with respect to its businesses, assets or properties. Since December 31, 2019, neither CCI nor any CCI Subsidiary has received or made any settlement offer for any Action to which CCI or any CCI Subsidiary is a party or potentially could be a party (in each case, either as plaintiff or defendant), other than settlement offers that do not exceed $300,000 individually.
Section 5.10
Properties.
(a)
The CCI Properties are free and clear of Liens, except for Permitted Liens. Except as would not reasonably be expected to have a CCI Material Adverse Effect, (i) neither CCI nor any CCI Subsidiary has received written notice of any uncured violation of any Law affecting any portion of any of the CCI Properties issued by any Governmental Authority and (ii) neither CCI nor any CCI Subsidiary has received written notice to the effect that there is any (A) condemnation or rezoning proceeding that is pending or, to the Knowledge of CCI, threatened with respect to any of the CCI Properties or (B) zoning, building or similar Law that is or will be violated by the continued maintenance, operation or use of any buildings or other improvements on any of the CCI Properties or by the continued maintenance, operation or use of the parking areas associated with the CCI Properties.
(b)
CCI has not received written notice of, nor does CCI have any Knowledge of, any latent defects or adverse physical conditions affecting any of the CCI Properties or the improvements thereon, except as has not had and would not reasonably be expected to have a CCI Material Adverse Effect.
(c)
CCI and the CCI Subsidiaries have good title to, or a valid and enforceable leasehold interest in, all personal assets owned, used or held for use by them except as would not reasonably be expected to be material to CCI or the CCI Subsidiaries, taken as a whole. Except as would not reasonably be expected to be material to CCI or the CCI Subsidiaries, taken as a whole, neither CCI’s nor the CCI Subsidiaries’ ownership of any such personal property is subject to any Liens, other than Permitted Liens.
(d)
A policy of title insurance has been issued for each CCI Property insuring, as of the effective date of such insurance policy, (i)(A) fee simple title interest held by CCI or the applicable CCI Subsidiary with respect to CCI Properties that are not subject to ground leases and (B) a valid leasehold estate held by CCI or the applicable CCI Subsidiary that are subject to ground leases and (ii) to the Knowledge of CCI, such insurance policies are in full force and effect, and no material claim has been made against any such policy that remains outstanding.
Section 5.11
Environmental Matters. Except as set forth at Section 5.11 of the CCI Disclosure Letter and as, individually or in the aggregate, would not reasonably be expected to have a CCI Material Adverse Effect: (i) no written notification, demand, request for information, citation, summons, notice of violation or order has been received, no complaint has been filed, no penalty has been assessed and no investigation, action, suit or proceeding is pending or, to the Knowledge of CCI, is threatened, in each case relating to CCI or any of the CCI Subsidiaries or any of their respective properties, and relating to or arising out of any Environmental Law or Hazardous Substance; (ii) CCI and the CCI Subsidiaries are, and for the past year, have been, in compliance with all Environmental Laws and all applicable Environmental Permits; (iii) CCI and each of the CCI Subsidiaries is in possession of all Environmental Permits necessary for CCI and each CCI Subsidiary to own, lease and, to the extent applicable, operate its properties or to carry on its respective business substantially as they are being conducted, and all such Environmental Permits are valid and in full force and effect; (iv) any and all Hazardous Substances disposed of by CCI and each CCI Subsidiary since January 1, 2018 were disposed in accordance with all applicable Environmental Laws and Environmental Permits; (v) CCI and the CCI Subsidiaries are not subject to any Order, determination or award by any Governmental Authority pursuant to any Environmental Laws, any Environmental Permit or with respect to any Hazardous Substance; and (vi) there are no liabilities or obligations of CCI or any of the CCI Subsidiaries of any kind whatsoever, whether accrued, contingent, absolute, determined, determinable or otherwise arising under or relating to any Environmental Law or any Hazardous Substance, and there is no condition, situation or set of circumstances that would reasonably be expected to result in any such liability or obligation.
Section 5.12
Material Contracts.
(a)
Each Contract required to be filed (or incorporated by reference) as an exhibit to any CCI SEC Document filed on or after January 1, 2020 pursuant to Item 601(b)(1), (2), (4), (9) or (10) of Regulation S-K promulgated under the Securities Act has been so filed (or incorporated by reference) (such Contracts, together with those Contracts described in Section 5.12(b) and the CMRI Merger Agreement and the CMRII Merger Agreement, “CCI Material Contracts”).
(b)
Other than the Contracts described in Section 5.12(a) and except for this Agreement, Section 5.12(b) of the CCI Disclosure Letter sets forth a true, correct and complete list of each Contract (or the accurate description of principal terms in case of oral Contracts), including all amendments, supplements and side letters thereto, to which CCI or any CCI Subsidiary is a party or by which it is bound or to which any CCI Property or other material asset is subject, that:
(i)
obligates CCI or any CCI Subsidiary to make non-contingent aggregate annual expenditures (other than principal and/or interest payments or the deposit of other reserves with respect to debt obligations) in excess of $1,000,000 and is not cancelable within 90 days without material penalty to CCI or any CCI Subsidiary;
(ii)
contains any non-compete or exclusivity provisions with respect to any line of business or geographic area that materially restricts the business of CCI or any CCI Subsidiary, including upon consummation of the transactions contemplated by this Agreement, or that otherwise restricts the lines of business conducted by CCI or any CCI Subsidiary or the geographic area in which CCI or any CCI Subsidiary may conduct business;
(iii)
obligates CCI or any CCI Subsidiary to indemnify any past or present directors, officers, or employees of CCI or any CCI Subsidiary, other than the CCI Governing Documents or any equivalent organizational or governing documents of any other CCI Subsidiary;
(iv)
constitutes (A) an Indebtedness obligation of CCI or any CCI Subsidiary with a principal amount greater than $1,000,000 or (B) a Contract under which (1) any Person (including CCI or a CCI Subsidiary) has directly or indirectly guaranteed Indebtedness, liabilities or obligations of CCI or a CCI Subsidiary or (2) CCI or a CCI Subsidiary has directly or indirectly guaranteed Indebtedness, liabilities or obligations of any Person (other than CCI or any CCI Subsidiary);
(v)
provides for the pending purchase or sale, option to purchase or sell or other right to purchase, sell, dispose of or ground lease (by merger, by purchase or sale of assets or stock, by lease or otherwise) (other than any right of first refusal or right of first offer) of (A) any real property (including any CCI Property or any portion thereof) or (B) any other asset of CCI or any CCI Subsidiary or equity interests of any Person, in the case of (A) and (B), with a purchase or sale price greater than $1,000,000;
(vi)
constitutes an interest rate cap, interest rate collar, interest rate swap or other Contract relating to a swap or other hedging transaction of any type;
(vii)
constitutes a loan to any Person (other than a wholly owned subsidiary of CCI) by CCI or any CCI Subsidiary;
(viii)
sets forth the operational or economic terms of a joint venture, partnership, limited liability company or strategic alliance of CCI or any CCI Subsidiary with a third party;
(ix)
prohibits the pledging of the capital stock of CCI or any CCI Subsidiary or prohibits the issuance of guarantees by any CCI Subsidiary;
(x)
contains covenants limiting the ability of CCI or any CCI Subsidiary to sell, transfer, pledge or otherwise, dispose of any material assets or business of CCI or any CCI Subsidiary;
(xi)
contains restrictions on the ability of CCI or any CCI Subsidiary to pay dividends or other distributions, other than the CCI Governing Documents or any equivalent organizational or governing documents of any other CCI Subsidiary;
(xii)
has continuing “earn-out” or other similar contingent purchase price payment obligations, in each case that could result in payments, individually or in the aggregate, in excess of $250,000;
(xiii)
provides for the management or operation of any of the CCI Properties by any third party;
(xiv)
is a lease, sublease, license or other rental agreement or occupancy agreement that grants any possessory interest in and to any space situated on or in the CCI Properties or that otherwise gives rights with regard to the use of the CCI Properties pursuant to which CCI or any CCI Subsidiary expects to receive annualized rental income per year in excess of $350,000;
(xv)
is a ground lease under which CCI or a CII Subsidiary hold a leasehold interest in the CCI Properties or any portion thereof;
(xvi)
provides a right of first refusal or right of first offer of any real property; or
(xvii)
is with a Governmental Authority; or
(xviii)
is both (A) not made in the ordinary course of business and (B) material to CCI and the CCI Subsidiaries, taken as a whole.
(c)
Each CCI Material Contract is legal, valid, binding on and enforceable against CCI or the CCI Subsidiary that is a party thereto and, to the Knowledge of CCI, each other party thereto, and is in full force and effect, except as may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar Laws affecting creditors’ rights generally and by general principles of equity (regardless of whether enforceability is considered in a proceeding in equity or at Law). Except as would not, individually or in the aggregate, reasonably be expected to be material to CCI and the CCI Subsidiaries, taken as a whole, CCI and each CCI Subsidiary has performed all obligations required to be performed by it under each CCI Material Contract and, to the Knowledge of CCI, each other party thereto has performed all obligations required to be performed by it under such CCI Material Contract. None of CCI, any CCI Subsidiary or, to the Knowledge of CCI, any other party thereto, is in breach or violation of, or default under, any CCI Material Contract, and no event has occurred that, with notice or lapse of time or both, would constitute a violation, breach or default under any CCI Material Contract, except where in each case such breach, violation or default, individually or in the aggregate, would not reasonably be expected to be material to CCI and the CCI Subsidiaries, taken as a whole. Neither CCI nor any CCI Subsidiary has received written notice of any violation or default under, or currently owes any termination, cancellation or other similar fees or any liquidated damages with respect to, any CCI Material Contract, except for violations, defaults, fees or damages that, individually or in the aggregate, would not reasonably be expected to have a CCI Material Adverse Effect.
(d)
Since December 31, 2019, except as set forth in Section 5.12(d) of the CCI Disclosure Letter, (i) neither CCI nor any CCI Subsidiary has received any written notice of the intention of any party to cancel, terminate, materially change the scope of rights under or fail to renew any CCI Material Contract, (ii) no party has exercised, or threatened to exercise, any force majeure or similar provision under any CCI Material Contract and (iii) no party has sought to, or threatened to, withhold or otherwise delay amounts payable to CCI or any CCI Subsidiary under any CCI Material Contract as a result of COVID-19 or the COVID-19 Measures (whether or not CCI or such CCI Subsidiary granted any forgiveness or deferral).
(e)
Neither CCI nor any CCI Subsidiary owes any termination, cancellation or other similar fees or any liquidated damages to any third-party manager or operator.
Section 5.13
Taxes.
(a)
CCI and each CCI Subsidiary has timely filed with the appropriate Governmental Authority all U.S. federal and state income and other material Tax Returns required to be filed, taking into account any extensions of time within which to file such Tax Returns, and all such Tax Returns are complete and correct in all material respects. CCI and each CCI Subsidiary has duly paid (or there has been paid on their behalf), or made adequate provisions in accordance with GAAP for, all material Taxes required to be paid by them, whether or not shown on any Tax Return. True and complete copies of all United States federal income Tax Returns that have been filed with the IRS by CCI and each CCI Subsidiary with respect to the taxable years ending on or after December 31, 2019 have been made available to CRII. No written claim has been proposed by any Governmental Authority in any jurisdiction where CCI or any CCI Subsidiary do not file Tax Returns that CCI or any CCI Subsidiary is or may be subject to Tax by such jurisdiction.
(b)
Beginning with CCI’s taxable year ending on December 31, 2019, (i) CCI has been organized and operated in conformity with the requirements to qualify as a REIT under the Code, (ii) the current and proposed method of operation for CCI is expected to enable CCI to continue to meet the requirements for qualification as a REIT, and (iii) CCI has not taken any action that would, or omitted to take any action the omission of which would reasonably be expected to, result in CCI’s failure to qualify as a REIT, and no challenge to CCI’s status as a REIT is pending or threatened in writing.
(c)
(i) There are no audits, investigations by any Governmental Authority or other proceedings pending or threatened in writing with regard to any material Taxes or material Tax Returns of CCI or any CCI Subsidiary; (ii) no deficiency for any material Taxes of CCI or any CCI Subsidiary has been claimed, proposed or assessed, in each case, in writing by any Governmental Authority, which deficiency has not yet been settled except for such deficiencies which are being contested in good faith; (iii) neither CCI nor any CCI Subsidiary has waived any statute of limitations with respect to the assessment of material Taxes or agreed to any extension of time with respect to any material Tax assessment or deficiency for any open tax year; (iv) neither CCI nor any CCI Subsidiary is currently the beneficiary of any extension of time within which to file any material Tax Return, other than automatic extensions; and (v) neither CCI nor any CCI Subsidiary has entered into any “closing agreement” as described in Section 7121 of the Code (or any corresponding or similar provision of state, local or foreign income Tax Law).
(d)
Each CCI Subsidiary that is a partnership, joint venture or limited liability company and that has not elected to be a Taxable REIT Subsidiary has been, since it became a CCI Subsidiary, treated for United States federal income tax purposes as a partnership, disregarded entity, or Qualified REIT Subsidiary, as the case may be, and not as a corporation or an association taxable as a corporation whose separate existence is respected for United States federal income tax purposes, or a “publicly traded partnership” within the meaning of Section 7704(b) of the Code that is treated as a corporation for U.S. federal income tax purposes under Section 7704(a) of the Code. No CCI Subsidiary is a corporation for United States federal income tax purposes, other than a corporation that qualifies as a Qualified REIT Subsidiary or as a Taxable REIT Subsidiary.
(e)
Neither CCI nor any CCI Subsidiary holds any asset the disposition of which would be subject to Treasury Regulation Section 1.337(d)-7, nor has it disposed of any such asset during its current taxable year.
(f)
Since its inception, CCI and the CCI Subsidiaries have not incurred (i) any liability for Taxes under Sections 857(b)(1), 857(b)(4), 857(b)(5), 857(b)(6)(A), 857(b)(7), 860(c) or 4981 of the Code, (ii) any liability for Taxes under Sections 857(b)(5) (for income test violations), 856(c)(7)(C) (for asset test violations), or 856(g)(5)(C) (for violations of other qualification requirements applicable to REITs) and (iii) CCI has not, and none of the CCI Subsidiaries have, incurred any material liability for Tax other than (A) in the ordinary course of business, or (B) transfer or similar Taxes arising in connection with sales of property. No event has occurred, and to the Knowledge of CCI no condition or circumstances exists, which presents a material risk that any material liability for Taxes described in clause (iii) of the preceding sentence or any liability for Taxes described in clause (i) or (ii) of the preceding sentence will be imposed upon CCI or any CCI Subsidiary.
(g)
CCI and the CCI Subsidiaries have complied, in all material respects, with all applicable Laws relating to the payment and withholding of Taxes (including withholding of Taxes pursuant to Sections 1441, 1442, 1445, 1446 and 3402 of the Code or similar provisions under any state and foreign Laws) and have duly and timely withheld and, in each case, have paid over to the appropriate taxing authorities all material amounts required to be so withheld and paid over on or prior to the due date thereof under all applicable Laws.
(h)
There are no CCI Tax Protection Agreements (as hereinafter defined) in force at the date of this Agreement (other than customary Tax indemnification provisions in commercial Contracts not primarily relating to Taxes), and, as of the date of this Agreement, no person has raised in writing, or to the Knowledge of CCI threatened to raise, a material claim against CCI or any CCI Subsidiary for any breach of any CCI Tax Protection Agreements. As used herein, “CCI Tax Protection Agreement” means any written agreement to which CCI or any CCI Subsidiary is a party pursuant to which: (i) any liability to holders of limited partnership interests in a CCI Subsidiary Partnership (as hereinafter defined) relating to Taxes may arise, whether or not as a result of the consummation of the transactions contemplated by this Agreement; or (ii) in connection with the deferral of income Taxes of a holder of limited partnership interests or limited liability company interests in a CCI Subsidiary Partnership, CCI or any CCI Subsidiary has agreed to (A) maintain a minimum level of debt, continue a particular debt or provide rights to guarantee debt, (B) retain or not dispose of assets, (C) make or refrain from making Tax elections, or (D) only dispose of assets in a particular manner. As used herein, “CCI Subsidiary Partnership” means a CCI Subsidiary that is a partnership for United States federal income tax purposes.
(i)
There are no Tax Liens upon any property or assets of CCI or any CCI Subsidiary except Liens for Taxes not yet delinquent or that are being contested in good faith by appropriate proceedings and for which adequate reserves have been established in accordance with GAAP.
(j)
There are no Tax allocation or sharing agreements or similar arrangements (other than customary Tax indemnification provisions in commercial Contracts not primarily relating to Taxes or any such agreement between or among solely CCI and the CCI Subsidiaries) with respect to or involving CCI or any CCI Subsidiary, and after the Closing Date neither CCI nor any CCI Subsidiary shall be bound by any such Tax allocation agreements or similar arrangements or have any liability thereunder for amounts due in respect of periods prior to the Closing Date.
(k)
Neither CCI nor any CCI Subsidiary has requested or received any private letter ruling or other similar written ruling of a Governmental Authority or entered into any written agreement with a Governmental Authority with respect to any Taxes, and neither CCI nor any CCI Subsidiary is subject to any such private letter ruling or other similar written ruling of a Governmental Authority.
(l)
Neither CCI nor any CCI Subsidiary (i) has been a member of an affiliated group filing a consolidated federal income Tax Return or (ii) has any liability for the Taxes of any Person (other than any CCI Subsidiary) under (A) Treasury Regulation Section 1.1502-6 (or any similar provision of state, local or foreign law), (B) as a transferee or successor, or (C) by Contract (other than customary Tax indemnification provisions in commercial Contracts not primarily relating to Taxes), or otherwise.
(m)
Neither CCI nor any CCI Subsidiary has participated in any “listed transaction” within the meaning of Treasury Regulation Section 1.6011-4(b)(2).
(n)
Neither CCI nor any CCI Subsidiary has constituted either a “distributing corporation” or a “controlled corporation” (within the meaning of Section 355(a)(1)(A) of the Code) in a distribution of stock qualifying for tax-free treatment under Section 355 of the Code in the two years prior to the date of this Agreement or in a distribution that could otherwise constitute part of a “plan” or “series of related transaction” (within the meaning of Section 355(e) of the Code) in conjunction with transactions contemplated by this Agreement.
(o)
Merger Sub is and always has been a disregarded entity for U.S. federal and applicable state and local income tax purposes.
(p)
CCI does not own a direct or indirect interest in an entity that is treated as a REIT for U.S. federal and applicable state and local income tax purposes.
(q)
CCI’s dividends paid deduction, within the meaning of Section 561 of the Code, for each taxable year (other than the current taxable year), taking into account any dividends subject to Sections 857(b)(9) or 858 of the Code, has not been less than the sum of (i) CCI’s REIT taxable income, as defined in Section 857(b)(2) of the Code, determined without regard to any dividends paid deduction for such year and (ii) CCI’s net capital gain for such year.
(r)
Neither CCI nor any CCI Subsidiary has taken any action or failed to take any action which action or failure would reasonably be expected to prevent, nor to the Knowledge of CRII is there any other fact or circumstance that could reasonably be expected to prevent, the REIT Merger from qualifying as a reorganization within the meaning of Section 368(a) of the Code.
(s)
CCI is a “domestically controlled qualified investment entity” within the meaning of Section 897(h)(4)(B) of the Code.
(t)
CCI is a “publicly offered” REIT within the meaning of Section 562(c) of the Code.
Section 5.14
Intellectual Property. Neither CCI nor any CCI Subsidiary: (a) owns any registered trademarks, patents or copyrights, (b) has any pending applications, registrations or recordings for any trademarks, patents or copyrights or (c) is a party to any Contracts with respect to use by CCI or any CCI Subsidiary of any trademarks or patents. Except as, individually or in the aggregate, would not reasonably be expected to have a CCI Material Adverse Effect, (i) no Intellectual Property used by CCI or any CCI Subsidiary infringes or is alleged to infringe any Intellectual Property rights of any third party, (ii) to CCI’s Knowledge, no Person is misappropriating, infringing or otherwise violating any Intellectual Property of CCI or any CCI Subsidiary, and (iii) CCI and the CCI Subsidiaries own or are licensed to use, or otherwise possess valid rights to use, all Intellectual Property necessary to conduct the business of CCI and the CCI Subsidiaries as it is currently conducted. Since January 1, 2018, neither CCI nor any CCI Subsidiary has received any written or, to the Knowledge of CCI, verbal complaint, claim or notice alleging misappropriation, infringement or violation of any Intellectual Property rights of any third party.
Section 5.15
Insurance. Section 5.15 of the CCI Disclosure Letter sets forth, for all material insurance policies and all material fidelity bonds of CCI and the CCI Subsidiaries, the general type of insurance, insurer, policy number and aggregate limit (the “CCI Insurance Policies”). All such insurance policies are in full force and effect and no written notice of cancellation or termination has been received by CCI or any CCI Subsidiary with respect to any such policy which has not been replaced on substantially similar terms prior to the date of such cancellation. Except as, individually, or in the aggregate, would not reasonably be expected to be material to CCI and the CCI Subsidiaries, taken as a whole, (a) there is no existing default or event which, with the giving of notice or lapse of time or both, would constitute a breach or default under any CCI Insurance Policy, or permit termination or modification thereof, (b) all premiums currently due and payable under all CCI Insurance Policies have been paid, and (c) CCI and the CCI Subsidiaries have otherwise complied in all material respects with the terms and conditions of all CCI Insurance Policies.
Section 5.16
Benefit Plans.
(a)
Except as set forth at Section 5.16 of the CCI Disclosure Letter, CCI and the CCI Subsidiaries do not and are not required to, and have not and have never been required to, maintain, sponsor or contribute to any Benefit Plans. Neither CCI nor any CCI Subsidiary has any contract, plan or commitment, whether or not legally binding, to create any Benefit Plan.
(b)
None of CCI, any CCI Subsidiaries or any of their respective ERISA Affiliates has ever maintained, contributed to, or participated in, or otherwise has any obligation or liability in connection with: (i) a “pension plan” under Section 3(2) of ERISA that is subject to Title IV or Section 302 of ERISA or Section 412 or 4971 of the Code, (ii) a “multiemployer plan” (as defined in Section 3(37) of ERISA), (iii) a “multiple employer welfare arrangement” (as defined in Section 3(40) of ERISA), or (iv) a “multiple employer plan” (as defined in Section 413(c) of the Code).
(c)
Neither CCI nor any CCI Subsidiary has, or has ever had, any employees.
(d)
Each CCI Benefit Plan has been established, administered, and maintained in all material respects in accordance with its terms and in compliance in all material respects with the applicable provisions of ERISA, the Code and other applicable Laws.
(e)
The execution, delivery and performance of this Agreement will not constitute a triggering event that will result (either alone or upon the occurrence of any additional or subsequent event) in any payment (whether of severance pay or otherwise) becoming due, any “parachute payment” as defined in Section 280G of the Code, any increase in payment, or accelerate the time of payment or vesting of compensation due to any current or former employee, independent contractor, officer or director (or dependents of such Persons) of CCI or any CCI Subsidiary. Neither CCI nor any CCI Subsidiary is a party to or has any obligation to compensate any Person for excise taxes payable pursuant to Section 4999 of the Code or for additional taxes payable pursuant to Section 409A of the Code. Any CCI Benefit Plan which is a “nonqualified deferred compensation plan” as defined in Section 409A of the Code has been maintained and operated in compliance in all material respects with Section 409A of the Code or an available exemption therefrom.
Section 5.17
Related-Party Transactions. Except as described in the publicly available CCI SEC Documents filed with or furnished to the SEC on or after January 1, 2018 and prior to the date hereof, no agreements, arrangements or understandings between CCI or any CCI Subsidiary (or binding on any of their respective properties or assets), on the one hand, and any other Person, on the other hand (other than those exclusively among CCI and CCI Subsidiaries), are in existence that are not, but are required to be, disclosed under Item 404 of Regulation S-K promulgated by the SEC.
Section 5.18
Brokers. No broker, investment banker or other Person (other than the Persons listed in Section 5.18 of the CCI Disclosure Letter, pursuant to the terms of the engagement letter between CCI and such Person, true, correct and complete copies of which have been provided to CRII prior to the date hereof) is entitled to any broker’s, finder’s or other similar fee or commission in connection with the Mergers and the other transactions contemplated by this Agreement based upon arrangements made by or on behalf of CCI or any CCI Subsidiary.
Section 5.19
Opinion of Financial Advisor. The CCI Special Committee has received the oral opinion (which opinion has been or will be confirmed in writing) of Robert A. Stanger & Co., Inc. (the “CCI Financial Advisor”), to the effect that, as of the date of this Agreement and based on and subject to the assumptions, limitations, qualifications and conditions set forth in its written opinion, the Common Exchange Ratio, the Preferred Exchange Ratio and the Partnership Exchange Ratio are fair, from a financial point of view, to CCI. CCI will deliver to CRII a complete and correct copy of such opinion promptly after receipt thereof by the CCI Special Committee solely for informational purposes and on a non-reliance basis (though such delivery need not be prior to entering into this Agreement).
Section 5.20
Appraisal Rights. No dissenters’, appraisal or similar rights are available to the limited partners of CROP with respect to the Mergers and the other transactions contemplated by this Agreement.
Section 5.21
Ownership of Merger Sub; No Prior Activities.
(a)
Merger Sub was formed solely for the purpose of engaging in the transactions contemplated by this Agreement, the CMRI Merger Agreement and the CMRII Merger Agreement. All of the limited liability company membership interests of Merger Sub are owned, directly or indirectly, by CCI.
(b)
Except for the obligations or liabilities incurred in connection with its organization and the transactions contemplated by this Agreement, the CMRI Merger Agreement and the CMRII Merger Agreement, Merger Sub has not, and will not have prior to the Merger Effective Time, incurred, directly or indirectly through any subsidiary, any obligations or liabilities or engaged in any business activities of any type or kind whatsoever or entered into any agreements or arrangements with any Person.
Section 5.22
COVID-19.
(a)
Each of CCI and the CCI Subsidiaries has complied with all applicable mandatory public health mandates announced by Governmental Authorities to address COVID-19, including the COVID-19 Measures, in all material respects.
(b)
Neither CCI nor any CCI Subsidiary has incurred any Indebtedness or received any funding (regardless of whether constituting Indebtedness), or applied for any such Indebtedness or funding, pursuant to the Coronavirus Aid, Relief, and Economic Security Act or any other economic relief or stimulus legislation or program, in each case related to COVID-19.
Section 5.23
No Other Representations and Warranties; Non-Reliance.
(a)
Except for the representations and warranties expressly set forth in this Article 5, or any document, agreement, certificate or other instrument contemplated by this Agreement, no CCI Party, nor any Person on behalf of a CCI Party, has made any representation or warranty, expressed or implied, with respect to CCI or any CCI Subsidiary, including their respective businesses, operations, assets (including the CCI Properties), liabilities, condition (financial or otherwise), results of operations, future operating or financial results, estimates, projections, forecasts, plans or prospects (including the reasonableness of the assumptions underlying such estimates, projections, forecasts, plans or prospects), or the accuracy or completeness of any information regarding CCI or any CCI Subsidiary.
(b)
Notwithstanding anything contained in this Agreement to the contrary, the CCI Parties acknowledge and agree with the representation of the CRII Parties in Section 4.22(a), and hereby acknowledge and confirm that, other than the representations and warranties expressly set forth in Article 5, or any document, agreement, certificate or other instrument contemplated by this Agreement, none of the CRII Parties or any other Person has made or is making, and the CCI Parties are not relying on, any representations or warranties relating to the CRII Parties whatsoever, express or implied, by operation of law or otherwise, including any implied representation or warranty as to the accuracy or completeness of any information furnished or made available to the CCI Parties or any of their Representatives by the CRII Parties or their Representatives.
ARTICLE 6
COVENANTS RELATING TO CONDUCT OF BUSINESS PENDING THE MERGERS
Section 6.1
Conduct of Business by CRII.
(a)
CRII covenants and agrees that, between the date of this Agreement and the earlier to occur of the Merger Effective Time and the date, if any, on which this Agreement is terminated pursuant to Section 9.1 (the “Interim Period”), except (1) to the extent required by applicable Law, (2) as may be consented to in advance in writing by CCI (which consent shall not be unreasonably withheld, conditioned or delayed), (3) as may be expressly contemplated by this Agreement, or (4) as set forth in Section 6.1(a) of the CRII Disclosure Letter, CRII shall, and shall cause each CRII Subsidiary to, (i) conduct its business in all material respects in the ordinary course of business and (ii) use all reasonable efforts to (A) preserve intact its current business organization, goodwill, ongoing businesses and significant relationships with third parties, (B) maintain the status of CRII as a REIT and (C) maintain its material assets and properties in their current condition (normal wear and tear and damage excepted).
(b)
Without limiting the foregoing, CRII further covenants and agrees that, during the Interim Period, except (1) to the extent required by applicable Law, (2) as may be consented to in advance in writing by CCI (which consent shall not be unreasonably withheld, conditioned or delayed), (3) as may be expressly contemplated by this Agreement, or (4) as set forth in Section 6.1(b) of the CRII Disclosure Letter, CRII shall not, and shall not cause or permit any CRII Subsidiary to, do any of the following:
(i)
amend or propose to amend the CRII Governing Documents or such equivalent organizational or governing documents of any CRII Subsidiary or waive the stock ownership limit or create an Excepted Holder Limit (as defined in the CRII Charter) under the CRII Charter;
(ii)
adjust, split, combine, reclassify or subdivide any shares of stock or other equity securities or ownership interests of CRII or any CRII Subsidiary (other than a wholly owned subsidiary of CRII);
(iii)
declare, set aside or pay any dividend on or make any other actual, constructive or deemed distributions (whether in cash, stock, property or otherwise) with respect to shares of capital stock of CRII or any CRII Subsidiary or other equity securities or ownership interests in CRII or any CRII Subsidiary or otherwise make any payment to its or their stockholders or other equity holders in their capacity as such, except for (A) the declaration and payment by CRII of regular dividends in accordance with past practice at a monthly rate not to exceed $0.0741666 per share of CRII Common Stock, (B) the payment by CROP of regular distributions in accordance with past practice at a monthly rate not to exceed $0.0741666 per CROP Common Unit, (C) payments pursuant to the terms of the Series 2016 Preferred Stock and the corresponding CROP Preferred Units, (D) payments pursuant to the terms of the Series 2017 Preferred Stock and the corresponding CROP Preferred Units, (E) the declaration and payment of dividends or other distributions to CRII or CROP by any directly or indirectly wholly owned subsidiary of CRII, and (F) distributions by any CRII Subsidiary that is not wholly owned, directly or indirectly, by CRII or CROP, in accordance with the requirements of the organizational documents of such CRII Subsidiary; provided, that, notwithstanding the restriction on dividends and other distributions in this Section 6.1(b)(iii), CRII and any CRII Subsidiary shall be permitted to make distributions, including under Sections 858 or 860 of the Code, reasonably necessary for CRII to maintain its status as a REIT under the Code (or applicable state Law) and avoid or reduce the imposition of any entity level income or excise Tax under the Code (or applicable state Law);
(iv)
except as required pursuant to the terms of any outstanding securities as set forth in the CRII Governing Documents, redeem, repurchase or otherwise acquire, directly or indirectly, any shares of its capital stock or other equity or debt interests of CRII or a CRII Subsidiary or securities convertible or exchangeable into or exercisable therefor;
(v)
adopt a plan of merger, complete or partial liquidation or resolutions providing for or authorizing such merger, liquidation or a dissolution, consolidation, recapitalization or bankruptcy reorganization, except in connection with any transaction permitted by Section 6.1(b)(vi) in a manner that would not reasonably be expected to be materially adverse to the CRII Parties or to prevent or impair their ability to consummate the Mergers;
(vi)
except for transactions among CRII and one or more wholly owned subsidiaries of CRII or among one or more wholly owned subsidiaries of CRII, issue, sell, pledge, dispose, encumber or grant any shares of capital stock of CRII or any of the capital stock or equity or debt interests of any CRII Subsidiaries or any options, warrants, convertible securities or other rights of any kind to acquire any capital stock of CRII or any of the capital stock or other equity interests of any CRII Subsidiary;
(vii)
enter into any Contract or understanding with respect to the voting of any shares of CRII or any of the CRII Subsidiaries;
(viii)
acquire or agree to acquire any material assets, except (A) acquisitions by CRII or any wholly owned subsidiary of CRII of or from an existing wholly owned subsidiary of CRII and (B) other acquisitions of personal property for a purchase price of less than $1,000,000 in the aggregate;
(ix)
except permitted by Section 6.1(b)(x), sell, mortgage, pledge, lease, license, assign, transfer, dispose of or encumber, or effect a deed in lieu of foreclosure with respect to, any property or assets, except in the ordinary course of business, provided that any sale, mortgage, pledge, lease, assignment, transfer, disposition or deed in connection with the satisfaction of any margin call or the posting of collateral in connection with any Contract to which CRII or any CRII Subsidiary is a party shall be considered to be done in the ordinary course of business;
(x)
incur, create, assume, refinance, replace or prepay any Indebtedness for borrowed money or guarantee such Indebtedness of another Person (other than a wholly owned subsidiary of CRII), except (A) Indebtedness incurred under CRII’s or any CRII Subsidiary’s existing credit facilities in the ordinary course of business, (B) Indebtedness incurred in the ordinary course of business that does not, in the aggregate, exceed $1,000,000 and (C) refinancing of existing Indebtedness (provided, that the refinancing of the existing indebtedness shall not involve the incurrence of yield-maintenance, defeasance or other material prepayment penalties, the terms of such new Indebtedness shall not be materially more onerous on CRII compared to the existing Indebtedness and the principal amount of such replacement Indebtedness shall not be materially greater than the Indebtedness it is replacing);
(xi)
make any loans, advances or capital contributions to, or investments in, any other Person (including to any of its officers, directors, Affiliates, agents or consultants), make any change in its existing borrowing or lending arrangements for or on behalf of such Persons, other than loans, advances or capital contributions to, or investments in, any wholly owned subsidiary of CRII;
(xii)
enter into any “keep well” or similar agreement to maintain the financial condition of another entity;
(xiii)
other than in the ordinary course of business, enter into, renew, modify, amend or terminate, or waive, release, compromise or assign any material rights or claims under, any CRII Material Contract (or any Contract that, if existing as of the date hereof, would be a CRII Material Contract) in any material respect, other than (A) any termination or renewal in accordance with the terms of any existing CRII Material Contract that occurs automatically without any action (other than notice of renewal) by CRII or any CRII Subsidiary or (B) as may be reasonably necessary to comply with the terms of this Agreement;
(xiv)
authorize, make or commit to make any material capital expenditures other than in the ordinary course of business or to address obligations under existing Contracts, or in conjunction with emergency repairs;
(xv)
make any payment, direct or indirect, of any liability of CRII or any CRII Subsidiary before the same comes due in accordance with its terms, other than in the ordinary course of business or in connection with dispositions or refinancings of any Indebtedness otherwise permitted hereunder;
(xvi)
waive, release, assign, settle or compromise any material Action, other than waivers, releases, assignments, settlements or compromises that (A) (I) involve only the payment of monetary damages in an amount (less any portion of such payment payable under an existing property-level insurance policy or reserved for such matter by the CRII on the most recent balance sheet of CRII made available to CCI as of the date of this Agreement) no greater than $100,000 individually or $250,000 in the aggregate, (II) do not involve the imposition of injunctive relief against CRII or any CRII Subsidiary or the Surviving Corporation and (III) do not provide for any admission of material liability by CRII or any of the CRII Subsidiaries, or (B) are made with respect to any Action involving any present, former or purported holder or group of holders of capital stock of CRII in accordance with Section 7.6(c);
(xvii)
(A) hire or, except where due to cause, terminate any officer of CRII or CROP, (B) increase in any manner the amount, rate or terms of compensation or benefits, in each case in any material respect, of any of CRII’s or CROP’s officers or employees, except for increases in annual compensation or wage rate in the ordinary course of business or as set forth in such individual’s Contract or as may be required to comply with applicable Law or (C) enter into, adopt, amend or terminate any employment, bonus, severance or retirement Contract or Benefit Plan or other compensation or employee benefits arrangement, except in the ordinary course in conjunction with annual Benefit Plan renewals or as may be required to comply with applicable Law;
(xviii)
fail to maintain all financial books and records in all material respects in accordance with GAAP or make any material change to its methods of accounting in effect on January 1, 2020, except as required by a change in GAAP or in applicable Law, or make any change with respect to accounting policies, principles or practices unless required by GAAP;
(xix)
enter into any new line of business;
(xx)
form any new funds, joint ventures or non-traded real estate investment trusts or other pooled investment vehicles;
(xxi)
fail to duly and timely file all material reports and other material documents required to be filed with any Governmental Authority, subject to extensions permitted by Law;
(xxii)
enter into or modify in a manner adverse to CRII any CRII Tax Protection Agreement; make, change or rescind any material election relating to Taxes; change a material method of Tax accounting; file or amend any material Tax Return; settle or compromise any material federal, state, local or foreign Tax liability, audit, claim or assessment; enter into any material closing agreement related to Taxes; knowingly surrender any right to claim any material Tax refund; or give or request any waiver of a statute of limitations with respect to any material Tax Return except, in each case, (A) to the extent required by Law or (B) to the extent necessary (I) to preserve CRII’s qualification as a REIT under the Code or (II) to qualify or preserve the status of any CRII Subsidiary as a disregarded entity or partnership for United States federal income tax purposes or as a Qualified REIT Subsidiary or a Taxable REIT Subsidiary under the applicable provisions of Section 856 of the Code, as the case may be;
(xxiii)
take any action that would, or fail to take any action, the failure of which to be taken would, reasonably be expected to cause CRII to fail to qualify as a REIT or any CRII Subsidiary to cease to be treated as any of (A) a partnership or disregarded entity for United States federal income tax purposes or (B) a Qualified REIT Subsidiary or a Taxable REIT Subsidiary under the applicable provisions of Section 856 of the Code, as the case may be;
(xxiv)
take any action (or fail to take any action) that would make dissenters’, appraisal or similar rights available to the holders of the capital stock of CRII with respect to the REIT Merger or any other transactions contemplated by this Agreement;
(xxv)
permit any Liens, except Permitted Liens or Liens that would not reasonably be expected to have a CRII Material Adverse Effect;
(xxvi)
materially modify or reduce the amount of any insurance coverage provided by the CRII Insurance Policies;
(xxvii)
enter into any transaction that would be disclosable under item 404(a) of Regulation S-K promulgated under the Exchange Act if CRII were subject to such regulation, except (A) in the ordinary course of business or (B) as contemplated by this Agreement; or
(xxviii)
authorize, or enter into any Contract or arrangement to do any of the foregoing.
(c)
Notwithstanding anything to the contrary set forth in this Agreement, nothing in this Agreement shall prohibit CRII from taking any action, or refraining to take any action, at any time or from time to time (i) if, in the reasonable judgment of the CRII Board, such action or inaction is reasonably necessary (A) for CRII to avoid or to continue to avoid incurring entity level income or excise Taxes under the Code (or applicable state Law) or to maintain its qualification as a REIT under the Code for any period or portion thereof ending on or prior to the Merger Effective Time or (B) to establish or maintain any exemption from or otherwise avoid the imposition of any requirement that CRII or any CRII Subsidiary be registered as an investment company under the Investment Company Act, including making dividend or any other actual, constructive or deemed distribution payments to stockholders of CRII in accordance with this Agreement or otherwise as permitted pursuant to Section 6.1(b)(iii), or (ii) to take actions in good faith to respond to the actual or anticipated effects of COVID-19 or the COVID-19 Measures on CRII or any CRII Subsidiary.
Section 6.2
Conduct of Business by CCI.
(a)
CCI covenants and agrees that during the Interim Period, except (1) to the extent required by applicable Law, (2) as may be consented to in advance in writing by CRII (which consent shall not be unreasonably withheld, conditioned or delayed) or (3) as may be expressly contemplated by this Agreement, the CMRI Merger Agreement or the CMRII Merger Agreement, CCI shall, and shall cause each CCI Subsidiary to, (i) conduct its business in all material respects in the ordinary course of business and (ii) use all reasonable efforts to (A) preserve intact its current business organization, goodwill, ongoing businesses and significant relationships with third parties, (B) maintain the status of CCI as a REIT and (C) maintain its material assets and properties in their current condition (normal wear and tear and damage excepted).
(b)
Without limiting the foregoing, CCI further covenants and agrees that, during the Interim Period, except (1) to the extent required by applicable Law, (2) as may be consented to in advance in writing by CRII (which consent shall not be unreasonably withheld, conditioned or delayed), (3) as may be expressly contemplated by this Agreement, the CMRI Merger Agreement or the CMRII Merger Agreement or (4) as set forth in Section 6.2(b) of the CCI Disclosure Letter, CCI shall not, and shall not cause or permit any CRII Subsidiary to, do any of the following:
(i)
amend or propose to amend the CCI Governing Documents or such equivalent organizational or governing documents of any CCI Subsidiary, amend the CCI dividend reinvestment plan or the CCI share repurchase program in a manner material to CCI or waive the stock ownership limit or create an Excepted Holder Limit (as defined in the CCI Charter) under the CCI Charter;
(ii)
adjust, split, combine, reclassify or subdivide any shares of stock or other equity securities or ownership interests of CCI or any CCI Subsidiary (other than a wholly owned subsidiary of CCI);
(iii)
declare, set aside or pay any dividend on or make any other actual, constructive or deemed distributions (whether in cash, stock, property or otherwise) with respect to shares of capital stock of CCI or any CCI Subsidiary or other equity securities or ownership interests in CCI or any CCI Subsidiary or otherwise make any payment to its or their stockholders or other equity holders in their capacity as such, except for (A) the declaration and payment by CCI of regular dividends in accordance with past practice at a daily rate not to exceed $0.00136986 per share of CCI Common Stock, (B) the payment by CCOP of regular distributions in accordance with past practice at a daily rate not to exceed $0.00136986 per CCOP Common Unit, (C) payments pursuant to the terms of the CCI Series 2019 Preferred Stock and the corresponding CCOP Series 2019 Preferred Units, (D) the declaration and payment of dividends or other distributions to CCI or CCOP by any directly or indirectly wholly owned subsidiary of CCI, and (E) distributions by any CCI Subsidiary that is not wholly owned, directly or indirectly, by CCI or CCOP, in accordance with the requirements of the organizational documents of such CCI Subsidiary; provided, that, notwithstanding the restriction on dividends and other distributions in this Section 6.2(b)(iii), CCI and any CCI Subsidiary shall be permitted to make distributions, including under Sections 858 or 860 of the Code, reasonably necessary for CCI to maintain its status as a REIT under the Code (or applicable state Law) and avoid or reduce the imposition of any entity level income or excise Tax under the Code (or applicable state Law);
(iv)
except as required pursuant to the terms of any outstanding securities as set forth in the CCI Governing Documents, redeem, repurchase or otherwise acquire, directly or indirectly, any shares of its capital stock or other equity or debt interests of CCI or a CCI Subsidiary or securities convertible or exchangeable into or exercisable therefor;
(v)
adopt a plan of merger, complete or partial liquidation or resolutions providing for or authorizing such merger, liquidation or a dissolution, consolidation, recapitalization or bankruptcy reorganization, except in connection with any transaction permitted by Section 6.2(b)(vi) in a manner that would not reasonably be expected to be materially adverse to the CCI Parties or to prevent or impair their ability to consummate the Mergers;
(vi)
except for transactions among CCI and one or more wholly owned subsidiaries of CCI or among one or more wholly owned subsidiaries of CCI, issue, sell, pledge, dispose, encumber or grant any shares of capital stock of CCI or any of the capital stock or equity or debt interests of any CCI Subsidiaries or any options, warrants, convertible securities or other rights of any kind to acquire any capital stock of CCI or any of the capital stock or other equity interests of any CCI Subsidiary;
(vii)
enter into any Contract or understanding with respect to the voting of any shares of CCI or any of the CCI Subsidiaries;
(viii)
acquire or agree to acquire any material assets, except (A) acquisitions by CCI or any wholly owned subsidiary of CCI of or from an existing wholly owned subsidiary of CCI and (B) other acquisitions of personal property for a purchase price of less than $1,000,000 in the aggregate;
(ix)
except as permitted by Section 6.2(b)(x), sell, mortgage, pledge, lease, license, assign, transfer, dispose of or encumber, or effect a deed in lieu of foreclosure with respect to, any property or assets, except in the ordinary course of business, provided that any sale, mortgage, pledge, lease, assignment, transfer, disposition or deed in connection with the satisfaction of any margin call or the posting of collateral in connection with any Contract to which CCI or any CCI Subsidiary is a party shall be considered to be done in the ordinary course of business;
(x)
incur, create, assume, refinance, replace or prepay any Indebtedness for borrowed money or guarantee such Indebtedness of another Person (other than a wholly owned subsidiary of CCI), except (A) Indebtedness incurred under CCI’s or any CCI Subsidiary’s existing credit facilities in the ordinary course of business, (B) Indebtedness incurred in the ordinary course of business that does not, in the aggregate, exceed $1,000,000 and (C) refinancing of existing Indebtedness (provided, that the refinancing of the existing indebtedness shall not involve the incurrence of yield-maintenance, defeasance or other material prepayment penalties, the terms of such new Indebtedness shall not be materially more onerous on CCI compared to the existing Indebtedness and the principal amount of such replacement Indebtedness shall not be materially greater than the Indebtedness it is replacing);
(xi)
make any loans, advances or capital contributions to, or investments in, any other Person (including to any of its officers, directors, Affiliates, agents or consultants), make any change in its existing borrowing or lending arrangements for or on behalf of such Persons, other than loans, advances or capital contributions to, or investments in, any wholly owned subsidiary of CCI;
(xii)
enter into any “keep well” or similar agreement to maintain the financial condition of another entity;
(xiii)
other than in the ordinary course of business, enter into, renew, modify, amend or terminate, or waive, release, compromise or assign any material rights or claims under, any CCI Material Contract (or any Contract that, if existing as of the date hereof, would be a CCI Material Contract) in any material respect, other than (A) any termination or renewal in accordance with the terms of any existing CCI Material Contract that occurs automatically without any action (other than notice of renewal) by CCI or any CCI Subsidiary or (B) as may be reasonably necessary to comply with the terms of this Agreement;
(xiv)
authorize, make or commit to make any material capital expenditures other than in the ordinary course of business or to address obligations under existing Contracts, or in conjunction with emergency repairs;
(xv)
make any payment, direct or indirect, of any liability of CCI or any CCI Subsidiary before the same comes due in accordance with its terms, other than in the ordinary course of business or in connection with dispositions or refinancings of any Indebtedness otherwise permitted hereunder;
(xvi)
waive, release, assign, settle or compromise any material Action, other than waivers, releases, assignments, settlements or compromises that (A) (I) involve only the payment of monetary damages in an amount (less any portion of such payment payable under an existing property-level insurance policy or reserved for such matter by the CCI on the most recent balance sheet included in the CCI SEC Documents as of the date of this Agreement) no greater than $100,000 individually or $250,000 in the aggregate, (II) do not involve the imposition of injunctive relief against CCI or any CCI Subsidiary or the Surviving Corporation and (III) do not provide for any admission of material liability by CCI or any of the CCI Subsidiaries, or (B) are made with respect to any Action involving any present, former or purported holder or group of holders of capital stock of CCI in accordance with Section 7.6(c);
(xvii)
(A) hire any officer or employee of CCI or any CCI Subsidiary, (B) except where due to cause, terminate any officer of CCI or any CCI Subsidiary, (C) increase in any manner the amount of compensation of any officer of CCI or any CCI Subsidiary or of any employee or officer of CC Advisors III, LLC or any Affiliate thereof or (D) enter into or adopt any bonus or other compensation arrangement for any officer of CCI or any CCI Subsidiary or any employee or officer of CC Advisors III, LLC or any Affiliate thereof;
(xviii)
fail to maintain all financial books and records in all material respects in accordance with GAAP or make any material change to its methods of accounting in effect on January 1, 2020, except as required by a change in GAAP or in applicable Law, or make any change with respect to accounting policies, principles or practices unless required by GAAP;
(xix)
enter into any new line of business;
(xx)
form any new funds, joint ventures or non-traded real estate investment trusts or other pooled investment vehicles;
(xxi)
fail to duly and timely file all material reports and other material documents required to be filed with any Governmental Authority, subject to extensions permitted by Law;
(xxii)
enter into or modify in a manner adverse to CCI any CCI Tax Protection Agreement; make, change or rescind any material election relating to Taxes; change a material method of Tax accounting; file or amend any material Tax Return; settle or compromise any material federal, state, local or foreign Tax liability, audit, claim or assessment; enter into any material closing agreement related to Taxes; knowingly surrender any right to claim any material Tax refund; or give or request any waiver of a statute of limitations with respect to any material Tax Return except, in each case, (A) to the extent required by Law or (B) to the extent necessary (I) to preserve CCI’s qualification as a REIT under the Code or (II) to qualify or preserve the status of any CCI Subsidiary as a disregarded entity or partnership for United States federal income tax purposes or as a Qualified REIT Subsidiary or a Taxable REIT Subsidiary under the applicable provisions of Section 856 of the Code, as the case may be;
(xxiii)
take any action that would, or fail to take any action, the failure of which to be taken would, reasonably be expected to cause CCI to fail to qualify as a REIT or any CCI Subsidiary to cease to be treated as any of (A) a partnership or disregarded entity for United States federal income tax purposes or (B) a Qualified REIT Subsidiary or a Taxable REIT Subsidiary under the applicable provisions of Section 856 of the Code, as the case may be;
(xxiv)
permit any Liens, except Permitted Liens or Liens that would not reasonably be expected to have a CCI Material Adverse Effect;
(xxv)
materially modify or reduce the amount of any insurance coverage provided by the CCI Insurance Policies;
(xxvi)
enter into any transaction disclosable under item 404(a) of Regulation S-K promulgated under the Exchange Act, except in the ordinary course of business or as contemplated by this Agreement;
(xxvii)
fail to remain a “publicly offered” REIT under Section 562(c) of the Code; or
(xxviii)
authorize, or enter into any Contract or arrangement to do any of the foregoing.
(c)
Notwithstanding anything to the contrary set forth in this Agreement, nothing in this Agreement shall prohibit CCI from taking any action, or refraining to take any action, at any time or from time to time (i) if, in the reasonable judgment of the CCI Board, such action or inaction is reasonably necessary (A) for CCI to avoid or to continue to avoid incurring entity level income or excise Taxes under the Code (or applicable state Law) or to maintain its qualification as a REIT under the Code for any period or portion thereof ending on or prior to the Merger Effective Time, (B) to establish or maintain any exemption from or otherwise avoid the imposition of any requirement that CCI or any CCI Subsidiary be registered as an investment company under the Investment Company Act, including making dividend or any other actual, constructive or deemed distribution payments to stockholders of CCI in accordance with this Agreement or otherwise as permitted pursuant to Section 6.2(b)(iii) or (ii) to take actions in good faith to respond to the actual or anticipated effects of COVID-19 or the COVID-19 Measures on CCI or any CCI Subsidiary.
Section 6.3
No Control of Other Parties’ Business. Nothing contained in this Agreement shall give (i) any CCI Party, directly or indirectly, the right to control or direct CRII or any CRII Subsidiary’s operations prior to the Merger Effective Time, or (ii) any CRII Party, directly or indirectly, the right to control or direct CCI or any CCI Subsidiary’s operations prior to the Merger Effective Time. Prior to the Merger Effective Time, (i) CRII shall exercise, consistent with the terms and conditions of this Agreement, complete control and supervision over its and the CRII Subsidiaries’ respective operations and (ii) CCI shall exercise, consistent with the terms and conditions of this Agreement, complete control and supervision over its and the CCI Subsidiaries’ respective operations.
ARTICLE 7
ADDITIONAL COVENANTS
Section 7.1
Preparation of the Form S-4 and the Consent Solicitation Statements; Stockholder Approval.
(a)
As promptly as reasonably practicable, and no later than 45 days following the date of this Agreement, (i) CROP shall prepare the CROP Consent Solicitation Statement, (ii) CRII shall prepare the CRII Consent Solicitation Statement and (iii) CCI shall complete the preparation (with CRII’s reasonable cooperation) and cause to be filed with the SEC, a registration statement on Form S-4 under the Securities Act (as amended or supplemented from time to time, the “Form S-4”) to register under the Securities Act the shares of CCI Series 2016 Preferred Stock and CCI Series 2017 Preferred Stock to be issued in the REIT Merger (the “Registered Securities”). CCI shall use its reasonable best efforts to (A) have the Form S-4 declared effective under the Securities Act as promptly as practicable after filing, (B) ensure that the Form S-4 complies in all material respects with the applicable provisions of the Securities Act and (C) keep the Form S-4 effective for so long as necessary to permit the Registrable Securities to be issued in the REIT Merger. Each of CRII and CCI shall furnish all information concerning itself, its Affiliates and the holders of its capital stock to the other Party and provide such other assistance as may be reasonably requested in connection with the preparation, filing and/or distribution of the Form S-4 and the Consent Solicitation Statements and shall provide to their and each other’s counsel such representations as reasonably necessary to render the opinions required to be filed therewith. The Form S-4 and the Consent Solicitation Statements shall include all information reasonably requested by such other Party to be included therein. CCI shall promptly notify CRII upon the receipt of any comments from the SEC or any request from the SEC for amendments or supplements to the Form S-4 and shall, as promptly as practicable after receipt thereof, provide CRII with copies of all correspondence between it and its Representatives, on the one hand, and the SEC, on the other hand, and all written comments with respect to the Form S-4 received from the SEC and advise CRII of any oral comments with respect to the Form S-4 received from the SEC. CCI shall use its reasonable best efforts to respond as promptly as practicable to any comments from the SEC with respect to the Form S-4. Notwithstanding the foregoing, prior to filing the Form S-4 (or any amendment or supplement thereto) with the SEC, mailing the Consent Solicitation Statements (or any amendment or supplement thereto) or responding to any comments of the SEC with respect to the Form S-4, each of CRII and CCI, as applicable, shall cooperate and provide the other Party a reasonable opportunity to review and comment on such document or response (including the proposed final version of such document or response) and shall give due consideration to all reasonable comments provided by the other Party. CCI shall notify CRII, promptly after it receives notice thereof, of the time of effectiveness of the Form S-4, the issuance of any stop order relating thereto or the suspension of the qualification for offering or sale in any jurisdiction of the Registered Securities, and CCI shall use its reasonable best efforts to have any such stop order or suspension lifted, reversed or otherwise terminated. CCI shall also use its reasonable best efforts to take any other action required to be taken under the Securities Act, any applicable foreign or state securities or “blue sky” Laws and the rules and regulations thereunder in connection with the issuance of the Registered Securities, and CRII shall furnish all information concerning CRII and its stockholders as may be reasonably requested in connection with any such actions.
(b)
None of the information supplied or to be supplied in writing by or on behalf of the CCI Parties for inclusion or incorporation by reference in (a) the CROP Consent Solicitation Statement will, at the time it is first mailed to the holders of CROP Partnership Units or on the Closing Date, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading, or (b) the Form S‑4 will, at the time such document is declared effective by the SEC, contain any untrue statement of material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading. All documents that CCI is responsible for filing with the SEC in connection with the transactions contemplated by this Agreement, to the extent relating to CCI and the CCI Subsidiaries (or other information supplied by or on behalf of CCI or any CCI Subsidiaries for inclusion therein) will comply in all material respects with the applicable requirements of the Securities Act and the Exchange Act. The covenants contained in this Section 7.1(b) will not apply to statements or omissions to the extent based upon information supplied to the CCI Parties by or on behalf of the CRII Parties.
(c)
None of the information supplied or to be supplied in writing by or on behalf of the CRII Parties for inclusion or incorporation by reference in (a) the CROP Consent Solicitation Statement will, at the time it is first mailed to the holders of CROP Partnership Units or on the Closing Date, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading, or (b) the Form S‑4 will, at the time such document is declared effective by the SEC, contain any untrue statement of material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading. The covenants contained in this Section 7.1(c) will not apply to statements or omissions to the extent based upon information supplied to the CRII Parties by or on behalf of the CCI Parties.
(d)
If, at any time prior to the receipt of the Stockholder Approval or the Partner Approvals, any information relating to CCI or CRII, or any of their respective Affiliates, should be discovered by CCI or CRII which, in the reasonable judgment of CCI or CRII, should be set forth in an amendment of, or a supplement to, any of the Form S-4 or the Consent Solicitation Statements, so that any of such documents would not include any misstatement of a material fact or omit to state any material fact necessary to make the statements therein, as applicable, in the light of the circumstances under which they were made, not misleading, the Party that discovers such information shall promptly notify the other Parties, and CCI and CRII shall cooperate in the prompt amendment of, or supplement to, the Form S-4 or the Consent Solicitation Statements and, to the extent required by Law, in disseminating the information contained in such amendment or supplement to investors in CRII and CROP, as applicable.
(e)
As promptly as practicable after the SEC advises it has no comments or no further comments to the Form S-4, CRII shall, in accordance with applicable Law and the CRII Governing Documents, (i) mail the CRII Consent Solicitation Statement to the holders of CRII Voting Common Stock and mail the CROP Consent Solicitation Statement to the holders of CROP Partnership Units, (ii) submit an irrevocable written consent to the holders of the CRII Voting Common Stock, (iii) submit an irrevocable written consent, the form of which shall be consented to in advance in writing by CCI (which consent shall not be unreasonably withheld, conditioned or delayed), to the limited partners of CROP and (iv) cooperate with the mailing of the prospectus included in the Form S-4 to the holders of the CRII Series 2016 Preferred Stock and the holders of the CRII Series 2017 Preferred Stock. The CRII Parties shall use their best efforts to obtain the Stockholder Approval and the Partner Approvals promptly. As soon as practicable upon receipt of the Partner Approvals by the corporate secretary of CRII in its capacity as general partner of CROP, CRII shall provide CCI with a certification of the consent totals from the corporate secretary of CRII. In connection with the Stockholder Approval and the Partner Approvals, CRII shall take all actions necessary to comply, and shall comply in all respects, with the requirements of Section 2-505 of the MGCL, Section 2-505 of the MLLCA and Section 17-302 of the DRULPA, as applicable, and the applicable provisions of the CRII Governing Documents. CRII shall solicit and use its reasonable best efforts to obtain the Partner Approvals, except to the extent that the CRII Transaction Committee and CRII Board shall have made an Adverse Recommendation Change as permitted by Section 7.3(c); provided, however, for the avoidance of doubt, no Adverse Recommendation Change shall alter the other obligations under Section 7.1 unless this Agreement shall have been terminated in accordance with its terms prior to the date of obtaining the Partner Approvals.
Section 7.2
Access to Information; Confidentiality.
(a)
During the period from the date of this Agreement to and including the Merger Effective Time, each of the Parties shall, and shall cause each of their respective subsidiaries to, subject to applicable Law and the COVID-19 Measures, afford to the other Parties and to their respective Representatives reasonable access during normal business hours and upon reasonable advance notice to all of their respective properties, offices, books and records that the other Party may reasonably request and, during such period, each of the Parties shall, and shall cause each of their respective subsidiaries to and shall use their reasonable best efforts to cause its Representatives to, furnish reasonably promptly to the other Parties a copy of any report, schedule, registration statement or other document filed by it during such period pursuant to the requirements of federal or state securities Laws as the other Party may reasonably request. In connection with such reasonable access to information, each of the Parties shall use their reasonable best efforts to cause its respective Representatives to participate in meetings and telephone conferences with the other Parties and their Representatives prior to the mailing of the Consent Solicitation Statements and the Prospectus included in the Registration Statement on Form S-4 and at such other times as may be reasonably requested. No investigation under this Section 7.2(a) or otherwise shall affect any of the representations and warranties of the Parties contained in this Agreement or any condition to the obligations of the Parties under this Agreement. Notwithstanding the foregoing, none of the Parties shall be required by this Section 7.2(a) to provide the other Parties or their respective Representatives with access to or to disclose information (A) that is subject to the terms of a confidentiality agreement with a third party entered into prior to the date of this Agreement or entered into after the date of this Agreement in the ordinary course of business in accordance with this Agreement (provided, however, that the withholding Party shall use its commercially reasonable efforts (without payment of any consideration, fees or expenses) to obtain the required consent of such third party to such access or disclosure), (B) of a sensitive or personal nature that would reasonably be expected to expose the CRII Parties or the CCI Parties to the risk of liability, (C) the disclosure of which would violate any Law applicable to such Party or any of its Representatives (provided, however, that the withholding Party shall use its commercially reasonable efforts to make appropriate substitute arrangements to permit reasonable disclosure not in violation of any Law or duty), (D) that is subject to any attorney-client, attorney work product or other legal privilege (provided, however, that the withholding Party shall use its commercially reasonable efforts to allow for such access or disclosure to the maximum extent that does not result in a loss of any such attorney-client, attorney work product or other legal privilege, including by means of entry into a customary joint defense agreement that would alleviate the loss of such privilege) or (E) for the purpose of allowing Parties or their respective Representatives to collect samples of soil, air, water, groundwater or building materials. The Parties will use their reasonable best efforts to minimize any disruption to the businesses of the other Parties and any of their respective subsidiaries that may result from the requests for access, data and information hereunder.
(b)
Each Party will hold, and will cause its respective Representatives and Affiliates to hold, any nonpublic information, including any information exchanged pursuant to this Section 7.2, in confidence to the extent required by and in accordance with, and will otherwise comply with, the terms of the Confidentiality Agreement, which shall remain in full force and effect pursuant to the terms thereof notwithstanding the execution and delivery of this Agreement or the termination thereof.
Section 7.3
No Solicitation; Superior Proposals.
(a)
Except as expressly permitted by this Section 7.3, CRII shall not, and shall cause each of the CRII Subsidiaries and shall direct each of its and their respective directors, officers, Affiliates and Representatives not to, directly or indirectly, (i) initiate, solicit, facilitate or knowingly encourage any inquiries, proposals or offers for, or engage in any negotiations concerning, or provide any confidential or nonpublic information or data to, or have any discussions with, any Person relating to, any inquiry, proposal, offer or other action that constitutes, or may reasonably be expected to lead to, any Acquisition Proposal, (ii) enter into or engage in, continue or otherwise participate in any discussions or negotiations with any Person regarding or otherwise in furtherance of, or furnish to any Person other than the CCI Parties or their Representatives, any information in connection with or for the purpose of encouraging or facilitating any inquiry, proposal, offer or other action that constitutes, or could reasonably be expected to lead to, or to otherwise obtain, an Acquisition Proposal, (iii) release any Person from or fail to enforce any confidentiality agreement, standstill agreement or similar obligation (provided that CRII shall be permitted to waive or not enforce any provision of any confidentiality agreement, standstill agreement or similar obligation to permit a Person to make a confidential Acquisition Proposal directly to the CRII Transaction Committee if the CRII Transaction Committee determines in good faith after consultation with outside legal counsel that any such failure to waive or any such nonenforcement would be inconsistent with the CRII directors’ duties under applicable Law), (iv) enter into any Contract contemplating or otherwise relating to an Acquisition Proposal (other than an Acceptable NDA), or (v) take any action to exempt any Person from any Takeover Statute or similar restrictive provision of the CRII Charter, the bylaws of CRII or organizational documents or agreements of any CRII Subsidiary. In furtherance of the foregoing, CRII shall, and shall cause each CRII Subsidiary and each Representative of CRII and the CRII Subsidiaries to, immediately cease any discussions, negotiations or communications with any Person with respect to any Acquisition Proposal or potential Acquisition Proposal and use reasonable efforts to cause such Person to return or destroy all non-public information concerning CRII and the CRII Subsidiaries to the extent permitted pursuant to any confidentiality agreement with such Person and promptly terminate all physical and electronic data room access granted to such Person. Nothing in this Section 7.3(a) shall be construed to restrict the ability of CRII and its directors, officers, Affiliates and Representatives to participate in discussions with CMRI and CMRII and their respective Representatives relating to the CMRI Merger and the CMRII Merger.
(b)
Notwithstanding anything in this Agreement to the contrary, at any time prior to the time, but not after, the Stockholder Approval and the Partner Approvals are obtained, CRII and its Representatives may, in response to an unsolicited, bona fide written Acquisition Proposal that did not result from a material breach of this Section 7.3, (x) contact such Person to clarify the terms and conditions of such Acquisition Proposal and (y)(i) provide information in response to a request therefor by the Person who made such written Acquisition Proposal, provided that (A) such information is provided pursuant to (and only pursuant to) one or more Acceptable NDAs, and (B) CRII, prior to or concurrently with the time such information is provided, provides such information to CCI, and (ii) engage or participate in any discussions or negotiations with the Person who made such written Acquisition Proposal, if and only to the extent that, in each such case referred to in clause (i) or (ii) above, the CRII Transaction Committee has either determined that such Acquisition Proposal constitutes a Superior Proposal or determined in good faith after consultation with outside legal counsel and outside financial advisors that such Acquisition Proposal could reasonably be expected to lead to a Superior Proposal.
(c)
CRII will promptly (and in any event no later than 24 hours after receipt thereof) notify CCI in writing if (i) any Acquisition Proposal is received by CRII or any CRII Subsidiary, (ii) any request for information relating to CRII or any CRII Subsidiary is received by CRII or any CRII Subsidiary from any Person who informs CRII or any CRII Subsidiary that it is considering making or has made an Acquisition Proposal or (iii) any discussions or negotiations are sought to be initiated with CRII or any CRII Subsidiary regarding any Acquisition Proposal, and thereafter shall promptly (and in any event no later than 24 hours after the occurrence of such developments, discussions or negotiations or receipt of materials) keep CCI reasonably informed of all material developments, discussions and negotiations concerning any such Acquisition Proposal, request or inquiry.
(d)
Except as expressly provided herein, neither the CRII Board, nor any committee thereof, nor any group of directors, formally or informally, shall: (i) change, withhold, withdraw, qualify or modify or announce its intention to change, withhold, withdraw, qualify or modify, in each case in a manner adverse to CCI, the CRII Board Recommendation, (ii) authorize, approve, endorse, declare advisable, adopt or recommend or announce its intention to authorize, approve, endorse, declare advisable, adopt or recommend, any Acquisition Proposal, (iii) authorize, cause or permit CRII or any CRII Subsidiary to enter into any Alternative Acquisition Agreement, (iv) take any formal action or make any recommendation or public statement in connection with a tender offer or exchange offer for CROP Partnership Units or the Common Stock of CRII other than a recommendation against such offer, or (v) fail to make the CRII Board Recommendation or to include the CRII Board Recommendation in the Consent Solicitation Statements (any event described in clause (i)-(v), an “Adverse Recommendation Change”).
(e)
Notwithstanding anything in this Agreement to the contrary, if CRII receives an Acquisition Proposal, which Acquisition Proposal did not result from a material breach of this Section 7.3 and is not withdrawn, and the CRII Transaction Committee determines that such Acquisition Proposal constitutes a Superior Proposal and, after consultation with outside legal counsel and its financial advisor, that failure to effect an Adverse Recommendation Change in connection with such Superior Proposal or that failure to terminate this Agreement to enter into an Alternative Acquisition Agreement for such Superior Proposal would be inconsistent with the CRII directors’ duties under applicable Law, then, provided that the Stockholder Approval and the Partner Approvals has not yet been obtained, the CRII Board (or the CRII Transaction Committee) may (x) effect an Adverse Recommendation Change and/or (y) enter into an Alternative Acquisition Agreement relating to or implementing the Superior Proposal and terminate this Agreement in accordance with Section 9.1(c)(ii); provided, that, in the case of each of clause (x) and (y), the CRII Board may not take action contemplated by this Section 7.3(e) unless:
(i)
CRII has notified CCI in writing that the CRII Board intends to take such action at least five Business Days in advance of effecting an Adverse Recommendation Change and/or entering into an Alternative Acquisition Agreement, which notice shall specify in reasonable detail the reasons for such action, describe the material terms of the Superior Proposal and attach the most current version of such agreements (including any amendments, supplements or modifications) between CRII and the party making such Superior Proposal (a “CRII Change Notice”); and
(ii)
during the five Business Day period following CCI’s receipt of a CRII Change Notice, CRII shall, and shall direct its outside financial and outside legal advisors to, negotiate in good faith with CCI (to the extent CCI wishes to negotiate) to make adjustments to the terms and conditions of this Agreement such that the Superior Proposal ceases to constitute (in the good faith determination of the CRII Board or the CRII Transaction Committee, after consultation with outside legal counsel and outside financial advisors) a Superior Proposal; provided, that, any amendment, supplement or modification to any Acquisition Proposal shall be deemed a new Acquisition Proposal and CRII may not enter into any agreement relating to the Superior Proposal pursuant this Section 7.3(e) or make an Adverse Recommendation Change pursuant to this Section 7.3(e) or terminate this Agreement pursuant to Section 9.1(c)(ii) unless CRII has complied with the requirements of this Section 7.3(e) with respect to such new Acquisition Proposal including sending an additional CRII Change Notice (except that the new negotiation period under this Section 7.3(e)(ii) shall be three Business Days instead of five Business Days). Notwithstanding anything in this Section 7.3(e)(ii), neither CCI’s acceptance nor rejection of CRII’s offer to negotiate pursuant to this Section 7.3(e)(ii) shall have any bearing on CCI’s right to terminate this Agreement pursuant to Section 9.1(d)(ii) herein.
(f)
Notwithstanding anything in this Agreement to the contrary, at any time after the date of this Agreement and before the Stockholder Approval and the Partner Approvals are obtained, the CRII Board (or the CRII Transaction Committee) may, if the CRII Board or the CRII Transaction Committee determines in good faith, after consultation with its outside legal counsel, that the failure to do so would be inconsistent with the duties of the directors under applicable Law, make an Adverse Recommendation Change in response to an Intervening Event; provided, that, (i) prior to making such Adverse Recommendation Change, CRII shall have (A) promptly notified CCI in writing of its intention to take such action (it being understood that such a notification shall not, itself, constitute and Adverse Recommendation Change), and (B) negotiated in good faith with CCI (if requested by CCI in writing) for five Business Days following such notice regarding any revisions to the terms of this Agreement proposed by CCI, and (ii) the CRII Transaction Committee and the CRII Board shall not effect any Adverse Recommendation Change involving or relating to an Intervening Event unless, after the period of five Business Days described in the foregoing clause (B), the CRII Transaction Committee and the CRII Board determine in good faith, after consultation with outside legal counsel, that the failure to take such action would be reasonably likely to be inconsistent with its fiduciary duties under applicable Law.
(g)
Nothing in this Section 7.3 or elsewhere in this Agreement shall prevent the CRII Transaction Committee, the CRII Board or the CRII Parties, directly or indirectly, from (i) taking and disclosing to the stockholders of CRII or the limited partners of CROP a position with respect to an Acquisition Proposal as contemplated by Rule 14e-2(a) promulgated under the Exchange Act, or (ii) making any required disclosure to the stockholders of CRII or the limited partners of CROP under applicable Law, if the CRII Board (or the CRII Transaction Committee) determines in good faith after consultation with its outside legal counsel that the failure to do so would be inconsistent with the duties of the CRII directors under applicable Law or the duties of CRII in its capacity as the general partner of CROP; provided, however, that to the extent any such disclosure affirmatively addresses the approval, recommendation or declaration of advisability by the CRII Transaction Committee or the CRII Board with respect to this Agreement or an Acquisition Proposal, such disclosure shall be deemed to be an Adverse Recommendation Change if not accompanied by an express public affirmation of the CRII Board Recommendation.
(h)
Notwithstanding anything to the contrary contained in this Agreement, none of CRII, any CRII Subsidiary or their respective Affiliates or Representatives shall reimburse or agree to reimburse the fees or expenses of any Person in connection with an Acquisition Proposal (including, for the avoidance of doubt, in connection with any Acceptable NDA but excluding, for the avoidance of doubt, in connection with any acquisition agreement or merger with respect to a Superior Proposal entered into pursuant to this Section 7.3 and resulting in termination of this Agreement pursuant to Section 9.1(c).
(i)
CRII agrees that in the event any Affiliate of CRII or any CRII Subsidiary takes any action (or if any Representative of CRII takes any action at the express direction or with the prior written consent of the CRII Transaction Committee or the CRII Board) that, if taken by CRII would constitute a violation of this Section 7.3, then CRII shall be deemed to be in violation of this Section 7.3 for all purposes of this Agreement.
(j)
For purposes of this Agreement:
(i)
“Acquisition Proposal” means any bona fide proposal or offer from any Person (other than CCI or any CCI Subsidiaries) made after the date of this Agreement, whether in one transaction or a series of related transactions, relating to any (A) merger, consolidation, share exchange, business combination or similar transaction involving CRII or any CRII Subsidiary that would constitute a “significant subsidiary” (as defined in Rule 1-02 of Regulation S-X) representing 20% or more of the consolidated assets of CRII, (B) sale or other disposition, by merger, consolidation, share exchange, business combination or any similar transaction, of any assets of CRII or any CRII Subsidiaries that are significant subsidiaries representing 20% or more of the consolidated assets of CRII, (C) issue, sale or other disposition by CRII or CROP of (including by way of merger, consolidation, share exchange, business combination or any similar transaction) securities (or options, rights or warrants to purchase, or securities convertible into, such securities) representing 20% or more of the outstanding CROP Partnership Units, (D) tender offer or exchange offer in which any Person or “group” (as such term is defined under the Exchange Act) shall acquire beneficial ownership (as such term is defined in Rule 13d-3 under the Exchange Act), or the right to acquire beneficial ownership, of 20% or more of the outstanding CROP Partnership Units, or (E) recapitalization, restructuring, liquidation, dissolution or other similar type of transaction with respect to CRII in which a third party shall acquire beneficial ownership of 20% or more of the outstanding CROP Partnership Units; provided, however, that the term “Acquisition Proposal” shall not include (I) the Mergers or any of the other transactions contemplated by this Agreement or (II) any merger, consolidation, business combination, reorganization, recapitalization or similar transaction solely among CRII and one or more of the CRII Subsidiaries or solely among the CRII Subsidiaries.
(ii)
“Intervening Event” means, with respect to CRII, a change in circumstances or development that materially affects the business, assets or operations of CRII and the CRII Subsidiaries, taken as a whole, that was not known to or reasonably foreseeable by the CRII Board prior to the execution of this Agreement, which change in circumstances or development becomes known to the CRII Board prior to Stockholder Approval and Partner Approvals being obtained; provided, however, that in no event shall the following events, circumstances or changes in circumstances constitute an Intervening Event: (i) the receipt, existence or terms of an Acquisition Proposal or any matter relating thereto or consequence thereof, or (ii) any effect arising out of the announcement or pendency of, or any actions required to be taken pursuant to, this Agreement.
(iii)
“Superior Proposal” means a written Acquisition Proposal (except for purposes of this definition, the references in the definition of “Acquisition Proposal” to “20%” shall be replaced with “50%”) that the CRII Board (based on the recommendation of the CRII Transaction Committee) determines in its good faith judgment (after consultation with its outside legal and financial advisors, and after taking into account (A) all of the terms and conditions of the Acquisition Proposal and this Agreement (as it may be proposed to be amended by CCI) and (B) the feasibility and certainty of consummation of such Acquisition Proposal on the terms proposed (taking into account such legal, financial, regulatory and other aspects of such Acquisition Proposal and conditions to consummation thereof as the CRII Transaction Committee determines in good faith to be material to such analysis)), to be more favorable from a financial point of view to the holders of CRII Common Stock (in their capacity as stockholders) than the Mergers and the other transactions contemplated by this Agreement (as it may be proposed to be amended by CCI). A Superior Proposal shall provide for the repayment in full of the CCA Note at the time of and in connection the consummation of such Superior Proposal.
Section 7.4
Public Announcements. Except with respect to any Adverse Recommendation Change or any action taken pursuant to, and in accordance with, Section 7.1 or Section 7.3, so long as this Agreement is in effect, the Parties shall consult with each other before issuing any press release or otherwise making any public statements or filings with respect to this Agreement or any of the transactions contemplated by this Agreement, and none of the Parties shall issue any such press release or make any such public statement or filing prior to obtaining the other Parties’ consent (which consent shall not be unreasonably withheld, delayed or conditioned), provided, that a Party may, without obtaining the other Parties’ consent, issue such press release or make such public statement or filing as may be required by Law if it is not possible to consult with the other Party before doing so.
Section 7.5
Appropriate Action; Consents; Filings.
(a)
Upon the terms and subject to the conditions set forth in this Agreement, CCI shall and shall cause each CCI Subsidiary and each of their respective Affiliates to, and CRII shall and shall cause each CRII Subsidiary and each of their respective Affiliates to, use its reasonable best efforts to take, or cause to be taken, all actions, and to do, or cause to be done, and to assist and cooperate with the other Parties in doing, all things necessary, proper or advisable under applicable Law or pursuant to any Contract to consummate and make effective, as promptly as practicable, the Mergers and the other transactions contemplated by this Agreement, including (i) taking all actions necessary to cause the conditions to Closing set forth in Article 8 to be satisfied, (ii) preparing and filing any applications, notices, registrations and requests as may be required or advisable to be filed with or submitted to any Governmental Authority in order to consummate the transactions contemplated by this Agreement, (iii) obtaining all necessary or advisable actions or nonactions, waivers, consents and approvals from Governmental Authorities or other Persons necessary in connection with the consummation of the Mergers and the other transactions contemplated by this Agreement and the making of all necessary or advisable registrations and filings (including filings with Governmental Authorities, if any) and the taking of all reasonable steps as may be necessary or advisable to obtain an approval or waiver from, or to avoid an action or proceeding by, any Governmental Authority or other Persons necessary in connection with the consummation of the Mergers and the other transactions contemplated by this Agreement, (iv) subject to Section 7.6(c), defending any lawsuits or other legal proceedings, whether judicial or administrative, challenging this Agreement or the consummation of the Mergers or the other transactions contemplated by this Agreement, including seeking to have any stay or temporary restraining order entered by any court or other Governmental Authority vacated or reversed, the avoidance of each and every impediment under any antitrust, merger control, competition or trade regulation Law that may be asserted by any Governmental Authority with respect to the Mergers so as to enable the Closing to occur as soon as reasonably possible, and (v) executing and delivering any additional instruments reasonably necessary or advisable to consummate the Mergers and the other transactions contemplated by this Agreement and to fully carry out the purposes of this Agreement; provided, that, notwithstanding anything to the contrary in this Agreement, no Party will have any obligation (A) to propose, negotiate, commit to or effect, by consent decree, hold separate order or otherwise, the sale, divestiture or other disposition of any assets or businesses of such Party, any of its subsidiaries or their Affiliates or (B) otherwise to take or commit to take any actions that would limit the freedom of such Party, its subsidiaries (including subsidiaries of CCI after the Closing) or their Affiliates with respect to, or their ability to retain, one or more of their businesses, product lines or assets.
(b)
In connection with and without limiting the foregoing Section 7.5(a), each of the Parties shall give (or shall cause their respective Affiliates to give) any notices to third parties, and each of the Parties shall use, and cause each of their respective Affiliates to use, its reasonable best efforts to obtain any third-party consents that are necessary, proper or advisable to consummate the Mergers and the other transactions contemplated by this Agreement. Each of the Parties will, and shall cause their respective Affiliates to, furnish to the other Parties such necessary information and reasonable assistance as the other Parties may request in connection with the preparation of any required applications, notices, registrations and requests as may be required or advisable to be filed with any Governmental Authority and will cooperate in responding to any inquiry from a Governmental Authority, including promptly informing the other Party of such inquiry, consulting in advance before making any presentations or submissions to a Governmental Authority, and supplying each other with copies of all material correspondence, filings or communications between such Party and any Governmental Authority with respect to this Agreement. To the extent reasonably practicable, the Parties or their Representatives shall have the right to review in advance and each of the Parties will consult the other Parties on, all the information relating to the other Parties and each of their Affiliates that appears in any filing made with, or written materials submitted to, any Governmental Authority in connection with the Mergers and the other transactions contemplated by this Agreement, except that confidential competitively sensitive business information may be redacted from such exchanges. To the extent reasonably practicable, no Party shall, nor shall any Party permit its respective Representatives to, participate independently in any meeting or engage in any substantive conversation with any Governmental Authority in respect of any filing, investigation or other inquiry without giving the other Parties prior notice of such meeting or conversation and, to the extent permitted by applicable Law, without giving the other Parties the opportunity to attend or participate (whether by telephone or in person) in any such meeting with such Governmental Authority.
(c)
Notwithstanding anything to the contrary in this Agreement, in connection with obtaining any approval or consent from any Person (other than any Governmental Authority) with respect to the Mergers and the other transactions contemplated by this Agreement, none of the Parties or any of their respective Representatives shall be obligated to pay or commit to pay to such Person whose approval or consent is being solicited any cash or other consideration, make any accommodation or commitment or incur any liability or other obligation to such Person other than commercially reasonable processing and consent fees and any other expenses required to be paid in connection with obtaining the consent or approval of any lender with respect to any Indebtedness set forth on Section 4.3(a) of the CRII Disclosure Letter and Section 5.3(a) of the CCI Disclosure Letter. Subject to the immediately foregoing sentence, the Parties shall cooperate with respect to reasonable accommodations that may be requested or appropriate to obtain such consents.
Section 7.6
Notification of Certain Matters; Transaction Litigation.
(a)
The CCI Parties shall give prompt notice to CRII, and the CRII Parties shall give prompt notice to CCI, of any notice or other communication received by such Party from any Governmental Authority in connection with this Agreement, the Mergers or the other transactions contemplated by this Agreement, or from any Person alleging that the consent of such Person is or may be required in connection with the Mergers or the other transactions contemplated by this Agreement.
(b)
The CCI Parties shall give prompt notice to CRII, and the CRII Parties shall give prompt notice to CCI, if (i) any representation or warranty made by it contained in this Agreement becomes untrue or inaccurate such that it would be reasonable to expect that the applicable closing conditions would be incapable of being satisfied by the Outside Date or (ii) it fails to comply with or satisfy in any material respect any covenant, condition or agreement to be complied with or satisfied by it under this Agreement; provided, that no such notification shall affect the representations, warranties, covenants or agreements of the Parties or the conditions to the obligations of the Parties under this Agreement. Notwithstanding anything to the contrary in this Agreement, the failure by the CRII Parties or the CCI Parties to provide such prompt notice under this Section 7.6(b) shall not constitute a breach of covenant for purposes of Section 8.2(b), Section 8.3(b), Section 9.1(c)(i), or Section 9.1(d)(i).
(c)
The CCI Parties shall give prompt notice to CRII, and the CRII Parties shall give prompt notice to CCI, of any Action commenced or, to such Party’s Knowledge, threatened against, relating to or involving such Party or any CCI Subsidiary or CRII Subsidiary, respectively, or any of their respective directors, officers or partners that relates to this Agreement, the Mergers or the other transactions contemplated by this Agreement. CRII shall give CCI the opportunity to reasonably participate in the defense and settlement of any Action against CRII or its directors, officers or partners relating to this Agreement and the transactions contemplated by this Agreement, and shall consider in good faith CCI’s advice with respect to such Action, and no settlement in respect of any such Action shall be agreed to without CCI’s prior written consent (which consent shall not be unreasonably withheld, delayed or conditioned). CCI shall give CRII the opportunity to reasonably participate in the defense and settlement of any Action against CCI or its directors, officers or partners relating to this Agreement and the transactions contemplated by this Agreement, and shall consider in good faith CRII’s advice with respect to such Action, and no settlement in respect of any such Action shall be agreed to without CRII’s prior written consent (which consent shall not be unreasonably withheld, delayed or conditioned).
Section 7.7
Indemnification; Directors’ and Officers’ Insurance.
(a)
From the Merger Effective Time until the sixth anniversary of the Merger Effective Time, CCI shall cause the Surviving Corporation to honor, and the Surviving Corporation immediately following the Merger Effective Time shall honor, all rights to indemnification, advancement of expenses, and limitation of liability now existing in favor of any individual who, at or prior to the Merger Effective Time, was a director, officer, employee or agent of CRII or any of the CRII Subsidiaries or who, at the request of CRII or any of the CRII Subsidiaries, served as a director, officer, member, trustee or fiduciary of another corporation, partnership, joint venture, trust, pension or other employee benefit plan or enterprise (collectively, with such individual’s heirs, executors or administrators, the “Indemnified Parties”) solely to the extent provided in the respective governing documents and the indemnification or similar agreements to which CRII or any of the CRII Subsidiaries is a party or bound and as set forth in Schedule 7.7, with regard to any pre-Closing actual or alleged acts, errors, omissions or claims by reason of their position. These obligations shall survive the Mergers and shall continue in full force and effect for a period of six years from the Merger Effective Time and such rights of the Indemnified Parties shall not be amended, repealed or otherwise modified in any manner that would adversely affect the rights of the Indemnified Persons thereunder; provided, that in the event any claim or claims are asserted or made within such six-year period, all rights to indemnification, advancement of expenses, and limitation of liability in respect of any such claim or claims shall continue until final disposition of any and all such claims. Notwithstanding anything to the contrary set forth in this Agreement, CCI or the Surviving Corporation, as applicable, (x) shall not settle or compromise or consent to the entry of any judgment or otherwise seek termination with respect to any claim against an Indemnified Party for which indemnification may be sought under this Section 7.7 without the Indemnified Party’s prior written consent (which consent may not be unreasonably withheld, delayed or conditioned) unless such settlement, compromise, consent or termination includes an unconditional release of such Indemnified Party from all liability arising out of such Action that is subject to indemnification by the Surviving Corporation under this Section 7.7, (y) shall not be liable for any settlement effected without its prior written consent (which consent shall not be unreasonably withheld, delayed or conditioned) and (z) shall not have any obligation hereunder to any Indemnified Party to the extent that such indemnification is prohibited by applicable Law.
(b)
During the six-year period following the Merger Effective Time, CCI shall, or shall cause the Surviving Corporation to, either: (i) maintain the same limits for directors’ and officers’ liability insurance coverage with terms and conditions that are not less advantageous to the directors and officers of CRII as CRII’s existing policies covering the Indemnified Parties with respect to actions or omissions occurring prior to the Closing Date; or (ii) obtain pre-paid “tail” insurance policies for current and former directors and officers of CRII (the cost and expense of which shall be an Expense), with a claims period of at least six years from the Effective Time with at least the same coverage and amount and containing terms and conditions that are not less advantageous to the directors and officers of CRII as CRII’s existing policies with respect to claims with respect to actions or omissions which occurred before or at the Effective Time (including in connection with the transactions contemplated hereby).
(c)
If CCI or the Surviving Corporation or any of their respective successors or assigns (i) consolidates with or merges with or into any other Person and shall not be the continuing or surviving corporation, partnership or other entity of such consolidation or merger or (ii) liquidates, dissolves or winds-up, or transfers or conveys all or substantially all of its properties and assets to any Person, then, and in each such case, proper provision shall be made so that the successors and assigns of CCI or the Surviving Corporation, as applicable, assume the obligations set forth in this Section 7.7.
(d)
The provisions of this Section 7.7 are intended to be for the express benefit of, and shall be enforceable by, each Indemnified Party, shall be binding on all successors and assigns of CCI, CRII and the Surviving Corporation and shall not be amended in a manner that is adverse to the Indemnified Party without the prior written consent of the Indemnified Party affected thereby. The exculpation and indemnification provided for by this Section 7.7 shall not be deemed to be exclusive of any other rights to which an Indemnified Party is entitled, whether pursuant to applicable Law, Contract or otherwise.
Section 7.8
Dividends.
(a)
In the event that a distribution with respect to the shares of capital stock of CRII permitted under the terms of this Agreement has a record date prior to the Merger Effective Time and has not been paid prior to the Closing Date, such distribution shall be paid to the holders of such shares of capital stock of CRII on the Closing Date immediately prior to the Merger Effective Time. In the event that a distribution with respect to the shares of capital stock of CCI permitted under the terms of this Agreement has a record date prior to the Merger Effective Time and has not been paid prior to the Closing Date, such distribution shall be paid to the holders of such shares of capital stock of CCI on the Closing Date immediately prior to the Merger Effective Time. CRII shall coordinate with CCI on the declaration, setting of record dates and payment dates of dividends on capital stock of CRII so that holders of capital stock of CRII (i) do not receive dividends on both capital stock of CRII and capital stock of CCI received in the REIT Merger in respect of a single distribution period or fail to receive a dividend on either capital stock of CRII or capital stock of CCI received in the REIT Merger in respect of a single distribution period or (ii) do not receive both a dividend permitted by the proviso to Section 6.2(b)(iii) on capital stock of CCI and a dividend permitted by the proviso to Section 6.1(b)(iii) on capital stock of CRII received in the REIT Merger or fail to receive either a dividend permitted by the proviso to Section 6.2(b)(iii) on capital stock of CCI or a dividend permitted by the proviso to Section 6.1(b)(iii) on capital stock of CRII received in the REIT Merger.
(b)
In the event that either CRII or CCI shall declare or pay any dividend or other distribution that is expressly permitted pursuant to the proviso at the end of Section 6.1(b)(iii) or Section 6.2(b)(iii), respectively, it shall notify the other Party at least 20 days prior to the Closing Date, and such other Party shall be entitled to declare a dividend per share payable (i) in the case of CRII, to holders of CRII Common Stock, in an amount per share of CRII Common Stock equal to the product of (A) the dividend declared by CCI with respect to each share of CCI Common Stock by (B) the Common Exchange Ratio, and (ii) in the case of CCI, to holders of CCI Common Stock, in an amount per share of CCI Common Stock equal to the quotient obtained by dividing (A) the dividend declared by CRII with respect to each share of CRII Common Stock by (B) the Common Exchange Ratio. The record date and time and payment date and time for any dividend payable pursuant to this Section 7.8(b) shall be prior to the Closing Date.
Section 7.9
Takeover Statutes. The Parties shall use their respective reasonable best efforts (a) to take all action necessary so that no Takeover Statute becomes applicable to the Mergers or any of the other transactions contemplated by this Agreement and (b) if any such Takeover Statute becomes applicable to any of the foregoing, to take all action necessary so that the Mergers and the other transactions contemplated by this Agreement may be consummated as promptly as practicable on the terms contemplated by this Agreement and otherwise to eliminate or minimize the effect of such Takeover Statute on the Mergers and the other transactions contemplated by this Agreement.
Section 7.10
Tax Matters.
(a)
Each of CCI and CRII shall use its reasonable best efforts (before and, as applicable, after the Merger Effective Time) to cause the Mergers to qualify as a reorganization within the meaning of Section 368(a) of the Code.
(b)
CCI shall (i) use its reasonable best efforts to obtain or cause to be provided the opinions referred to in Section 8.2(g) and Section 8.3(f), (ii) use its reasonable best efforts to obtain opinions of counsel consistent with the opinions of counsel referred to in Section 8.2(g) and Section 8.3(f), but dated as of the effective date of the Form S-4, to the extent required for the Form S-4 to be declared effective by the SEC, and (iii) deliver to DLA Piper LLP (US), or other tax counsel delivering such opinions, and Goodwin Procter LLP, or other tax counsel delivering such opinions, a tax representation letter, dated as of the effective date of the Form S-4 and the Closing Date, as applicable, and signed by an officer of CCI, in form and substance mutually agreeable to CRII and CCI (such agreement not to be unreasonably withheld, conditioned or delayed), containing representations reasonably necessary or appropriate to enable such counsel to render the applicable tax opinions described herein.
(c)
CRII shall (i) use its reasonable best efforts to obtain or cause to be provided the opinions referred to in Section 8.2(f) and Section 8.3(g), (ii) use its reasonable best efforts to obtain opinions of counsel consistent with the opinions of counsel referred to in Section 8.2(f) and Section 8.3(g), but dated as of the effective date of the Form S-4, to the extent required for the Form S-4 to be declared effective by the SEC, and (iii) deliver to each of DLA Piper LLP (US) and Goodwin Procter LLP, or other tax counsel delivering such opinions, a tax representation letter, dated as of the effective date of the Form S-4 and the Closing Date, as applicable, and signed by an officer of CRII, in form and substance mutually agreeable to CRII and CCI (such agreement not to be unreasonably withheld, conditioned or delayed), containing representations reasonably necessary or appropriate to enable such counsel to render the applicable tax opinions described herein.
(d)
CCI and CRII shall reasonably cooperate in the preparation, execution and filing of all returns, questionnaires, applications or other documents regarding any real property transfer or gains, sales, use, transfer, value added, stock transfer or stamp taxes, any transfer, recording, registration and other fees and any similar taxes that become payable in connection with the transactions contemplated by this Agreement (together with any related interest, penalties or additions to such taxes, “Transfer Taxes”), and shall reasonably cooperate in attempting to minimize the amount of Transfer Taxes.
(e)
With respect to the taxable year of CRII ending with the Merger Effective Time, CRII shall take all necessary actions, including declaring and paying dividends sufficient to satisfy its requirement under Section 857(a)(1), to cause CRII to qualify as a REIT for its shortened taxable year ending with the Merger Effective Time.
Section 7.11
CCI Board. The CCI Board shall take all such action as may be necessary to cause the number of directors comprising the CCI Board as of immediately following the Merger Effective Time to consist of five directors, including (i) two individuals designated by the CRII Transaction Committee and satisfactory to CCI and (ii) one individual designated by the CCI Special Committee. Each of these three designees shall qualify as an “independent director,” as such term is defined in the rules of the New York Stock Exchange.
Section 7.12
Voting Agreement. Pursuant to the irrevocable proxy granted by the Voting Agreement, CCI shall vote all of the shares of CRII Voting Common Stock and all of the CROP Partnership Units covered thereby in the manner provided for by the Voting Agreement.
Section 7.13
401(k) Plan. CCI shall take all appropriate action so that Cottonwood Communities Advisors, LLC shall terminate participation in the Cottonwood Capital Management, Inc. 401(k) Safe Harbor Retirement Plan effective no later than the day before the Closing Date.
Section 7.14
CCA Note Distribution. If the CRII Transaction Committee determines to effect the CCA Note Distribution, CCI will cooperate in good faith with CRII to effect the CCA Note Distribution; provided that failure of CRII to effect the CCA Note Distribution shall not be a condition to any Party’s obligations to consummate the transactions contemplated by this Agreement, including the Mergers, or otherwise affect CCI’s obligations under Section 3.1 of this Agreement.
Section 7.15
The CMRI and CMRII Merger Agreements. The Parties acknowledge that (a) concurrently with the execution and delivery of this Agreement CCI has entered into or intends to enter into the CMRI Merger Agreement and the CMRII Merger Agreement and (b) the CMRI Merger Agreement and the CMRII Merger Agreement contain closing conditions substantially similar to the nature of those of Section 8.2 and Section 8.3 herein. Notwithstanding anything in the CMRI Merger Agreement or the CMRII Merger Agreement to the contrary, the CCI Parties may not waive, without CRII’s prior written consent, the conditions of the CMRI Merger Agreement or the CMRII Merger Agreement referred to in the foregoing clause (b).
Section 7.16
Equity Incentive Matters.
(a)
Prior to the Merger Effective Time, in consultation with CRII, CCI shall adopt a new equity incentive plan (the “Equity Incentive Plan”), effective as of one day prior to the Closing Date.
(b)
Following the Closing, the parties shall use commercially reasonable efforts to amend the performance metrics underlying the CROP Special LTIP Units to the extent necessary to give effect to the transactions contemplated by this Agreement.
Section 7.17
Pre-Merger Transactions. Assuming all other conditions to the Closing have been met, the CRII Parties shall effect the Pre-Merger Transactions on the terms set forth herein and including as provided in Section 7.17 of the CRII Disclosure Letter; provided that the terms relating to the CCA Note Distribution are set forth in Section 7.14 of this Agreement.
ARTICLE 8
CONDITIONS
Section 8.1
Conditions to Each Party’s Obligation to Effect the Mergers. The respective obligations of the Parties to effect the Mergers and to consummate the other transactions contemplated by this Agreement are subject to the satisfaction or, to the extent permitted by Law, waiver by each of the Parties at or prior to the Merger Effective Time of the following conditions:
(a)
Authorizations. All consents, authorizations, orders or approvals of each Governmental Authority necessary for the consummation of the Mergers and the other transactions contemplated by this Agreement shall have been obtained and any applicable waiting periods in respect thereof shall have expired or been terminated.
(b)
Stockholder Approval; Partner Approvals. The Stockholder Approval and the Partner Approvals shall have been obtained in accordance with applicable Law and the applicable CRII Governing Documents.
(c)
No Injunctions or Restraints. No Order issued by any Governmental Authority of competent jurisdiction prohibiting consummation of the Mergers shall be in effect, and no Law shall have been enacted, entered, promulgated or enforced by any Governmental Authority that, in any case, prohibits, restrains, enjoins or makes illegal the consummation of the Mergers or the other transactions contemplated by this Agreement.
(d)
Form S-4. The Form S-4 shall have been declared effective in accordance with the provisions of the Securities Act and no stop order suspending the effectiveness of the Form S-4 shall have been issued by the SEC and remain in effect and no proceedings for that purpose shall have been initiated by the SEC that have not been withdrawn.
Section 8.2
Conditions to Obligations of the CCI Parties. The obligations of the CCI Parties to effect the Mergers and to consummate the other transactions contemplated by this Agreement are subject to the satisfaction or, to the extent permitted by Law, waiver by CCI, at or prior to the Merger Effective Time, of the following additional conditions:
(a)
Representations and Warranties. (i) The representations and warranties of the CRII Parties set forth in the Fundamental Representations (except the first sentence of Section 4.1(a) (Organization and Qualification; Subsidiaries) and Section 4.4(a)-(b) (Capital Structure)) shall be true and correct in all material respects as of the date of this Agreement and as of the Closing Date as though made as of the Closing Date, (ii) the representations and warranties set forth in the first sentence of Section 4.1(a) (Organization and Qualification; Subsidiaries) and Section 4.4(a)-(b) (Capital Structure) shall be true and correct in all but de minimis respects as of the date of this Agreement and as of the Closing Date as though made as of the Closing Date, and (iii) each of the other representations and warranties of the CRII Parties contained in this Agreement shall be true and correct as of the date of this Agreement and as of the Closing Date as though made as of the Closing Date, except where the failure of such representations or warranties to be true and correct (without giving effect to any materiality or CRII Material Adverse Effect qualifications set forth therein), individually or in the aggregate, does not have and would not reasonably be expected to have a CRII Material Adverse Effect; provided, however, that representations and warranties that are made as of a specific date shall be true and correct in accordance with clauses (i) through (iii) only on and as of such date.
(b)
Performance of Covenants and Obligations of the CRII Parties. The CRII Parties shall have performed in all material respects all obligations, and complied in all material respects with all agreements and covenants, required to be performed by it under this Agreement on or prior to the Closing.
(c)
Absence of Material Adverse Change. Since the date of this Agreement, no event, circumstance, change, effect, development, condition or occurrence shall exist or have occurred that, individually or in the aggregate, constitutes, or would reasonably be expected to constitute, a CRII Material Adverse Effect.
(d)
Consents. CRII shall have received the written Consents identified on Section 8.2(d) of the CRII Disclosure Letter in form and substance reasonably acceptable to CCI.
(e)
Delivery of Certificate. CRII shall have delivered to CCI a certificate, dated the date of the Closing and signed by its chief executive officer and chief financial officer on behalf of CRII, certifying to the effect that the conditions set forth in Section 8.2(a)-(c) have been satisfied.
(f)
REIT Opinion. CCI shall have received a written opinion of DLA Piper LLP (US), or other nationally recognized tax counsel to CRII reasonably satisfactory to CCI, dated as of the Closing Date and in form and substance reasonably satisfactory to CCI, to the effect that, commencing with CRII’s taxable year that ended on December 31, 2018, CRII has been organized and operated in conformity with the requirements for qualification and taxation as a REIT under the Code and its prior, current and proposed ownership, organization and method of operation have enabled and will enable CRII to continue to meet the requirements for qualification and taxation as a REIT under the Code through the Merger Effective Time, which opinion will be subject to customary exceptions, assumptions and qualifications (it being agreed and understood that any exceptions, assumptions and qualifications set forth in the draft opinion delivered to Goodwin Procter LLP on or prior to the date hereof and determined to be reasonably acceptable to Goodwin Procter LLP shall be deemed to be customary for this purpose) and based on customary representations contained in an officer’s certificate executed by the CRII Parties.
(g)
Tax Opinion. CCI shall have received a written opinion of DLA Piper LLP (US), or other nationally recognized tax counsel to CCI, dated as of the Closing Date, in form and substance reasonably acceptable to CCI, to the effect that, on the basis of facts, representations and assumptions set forth or referred to in such opinion, the REIT Merger will qualify as a reorganization within the meaning of Section 368(a) of the Code, which opinion will be subject to customary exceptions, assumptions and qualifications (it being agreed and understood that any exceptions, assumptions and qualifications set forth in the draft opinion delivered to Goodwin Procter LLP on or prior to the date hereof and determined to be reasonably acceptable to Goodwin Procter LLP shall be deemed to be customary for this purpose). In rendering such opinion, such counsel may rely upon the tax representation letters described in Section 7.10.
Section 8.3
Conditions to Obligations of CRII Parties. The obligations of the CRII Parties to effect the Mergers and to consummate the other transactions contemplated by this Agreement are subject to the satisfaction or, to the extent permitted by Law, waiver by CRII at or prior to the Merger Effective Time, of the following additional conditions:
(a)
Representations and Warranties. (i) The representations and warranties of the CCI Parties set forth in the Fundamental Representations (except the first sentence of Section 5.1(a) (Organization and Qualification; Subsidiaries) and Section 5.4(a)-(b) (Capital Structure)), shall be true and correct in all material respects as of the date of this Agreement and as of the Closing Date, as though made as of the Closing Date, (ii) the representations and warranties set forth in the first sentence of Section 5.1(a) (Organization and Qualification; Subsidiaries) and Section 5.4(a)-(b) (Capital Structure) shall be true and correct in all but de minimis respects as of the date of this Agreement and as of the Closing Date as though made as of the Closing Date, and (iii) each of the other representations and warranties of the CCI Parties contained in this Agreement shall be true and correct as of the date of this Agreement and as of the Closing Date, as though made as of the Closing Date, except where the failure of such representations or warranties to be true and correct (without giving effect to any materiality or CCI Material Adverse Effect qualifications set forth therein), individually or in the aggregate, does not have and would not reasonably be expected to have a CCI Material Adverse Effect; provided, however, that representations and warranties that are made as of a specific date shall be true and correct in accordance with clauses (i) through (iii) only on and as of such date; and provided further, that if the CMRI Merger or the CMRII Merger has been consummated before the Closing Date, such representations and warranties need not be true and correct as of the Closing Date if the inaccuracy is due to the consummation of the CMRI Merger or the CMRII Merger.
(b)
Performance of Covenants and Obligations of the CCI Parties. The CCI Parties shall have performed in all material respects all obligations, and complied in all material respects with all agreements and covenants, required to be performed by them under this Agreement on or prior to the Closing. The CCI Parties shall have complied in all respects with the covenant set forth in Section 7.15.
(c)
Absence of Material Adverse Change. Since the date of this Agreement, no event, circumstance, change, effect, development, condition or occurrence shall exist or have occurred that, individually or in the aggregate, constitutes, or would reasonably be expected to constitute, a CCI Material Adverse Effect.
(d)
Consents. CCI shall have received the written Consents identified on Section 8.3(d) of the CCI Disclosure Letter in form and substance reasonably acceptable to CRII.
(e)
Delivery of Certificate. CCI shall have delivered to CRII a certificate, dated the date of the Closing and signed by its chief executive officer and chief financial officer on behalf of CCI certifying to the effect that the conditions set forth in Section 8.3(a)-(c) have been satisfied.
(f)
REIT Opinion. CRII shall have received a written opinion of DLA Piper LLP (US), or other nationally recognized tax counsel to CCI reasonably satisfactory to CRII, dated as of the Closing Date and in form and substance reasonably satisfactory to CRII, to the effect that, commencing with CCI’s taxable year that ended on December 31, 2019, CCI has been organized and operated in conformity with the requirements for qualification and taxation as a REIT under the Code and its prior, current and proposed ownership, organization and method of operation have enabled and will enable CCI to continue to meet the requirements for qualification and taxation as a REIT under the Code, which opinion will be subject to customary exceptions, assumptions and qualifications (it being agreed and understood that any exceptions, assumptions and qualifications set forth in the draft opinion delivered to Goodwin Procter LLP on or prior to the date hereof and determined to be reasonably acceptable to Goodwin Procter LLP shall be deemed to be customary for this purpose) and based on customary representations contained in an officer’s certificate executed by the CCI Parties.
(g)
Tax Opinion. CRII shall have received a written opinion of Goodwin Procter LLP, or other nationally recognized tax counsel to CRII, dated as of the Closing Date, in form and substance reasonably acceptable to CRII, to the effect that, on the basis of facts, representations and assumptions set forth or referred to in such opinion, the REIT Merger will qualify as a reorganization within the meaning of Section 368(a) of the Code, which opinion will be subject to customary exceptions, assumptions and qualifications (it being agreed and understood that any exceptions, assumptions and qualifications set forth in the draft opinion delivered to DLA Piper LLP (US) and determined to be reasonably acceptable to DLA Piper LLP (US) on or prior to the date hereof shall be deemed to be customary for this purpose). In rendering such opinion, such counsel may rely upon the tax representation letters described in Section 7.10.
ARTICLE 9
TERMINATION, FEES AND EXPENSES, AMENDMENT AND WAIVER
Section 9.1
Termination. This Agreement may be terminated and the Mergers and the other transactions contemplated by this Agreement may be abandoned at any time prior to the Merger Effective Time, notwithstanding receipt of the Stockholder Approval or the Partner Approvals (except as otherwise specified in this Section 9.1):
(a)
by mutual written consent of each of CCI and CRII;
(b)
by either CCI or by CRII:
(i)
if the Mergers shall not have occurred on or before 11:59 p.m., New York City time, on October 25, 2021 (the “Outside Date”); provided, that the right to terminate this Agreement pursuant to this Section 9.1(b)(i) shall not be available to any Party if the failure of such Party to perform or comply in all material respects with the obligations, covenants or agreements of such Party set forth in this Agreement shall have been the primary cause of, or resulted in, the failure of the Mergers to be consummated by the Outside Date;
(ii)
if any Governmental Authority of competent jurisdiction shall have issued an Order permanently restraining or otherwise prohibiting the transactions contemplated by this Agreement, and such Order shall have become final and nonappealable; provided, that the right to terminate this Agreement under this Section 9.1(b)(ii) shall not be available to a Party if the issuance of such final, non-appealable Order was primarily due to the failure of such Party to perform or comply in all material respects with any of its obligations, covenants or agreements under this Agreement; or
(iii)
if the Stockholder Approval or Partner Approvals shall not have been obtained; provided, that the right to terminate this Agreement under this Section 9.1(b)(iii) shall not be available to a Party if the failure to receive the Stockholder Approval or the Partner Approvals was primarily due to the failure of a Party to perform or comply in all material respects with any of its obligations, covenants or agreements under this Agreement.
(c)
by CRII:
(i)
if a breach of any representation or warranty or failure to perform or comply with any obligation, covenant or agreement on the part of a CCI Party set forth in this Agreement has occurred that would cause any of the conditions set forth in Section 8.1 or Section 8.3 not to be satisfied (a “CCI Terminating Breach”), which breach or failure to perform or comply cannot be cured, or, if capable of cure, has not been cured by the earlier of 20 days following written notice thereof from CRII to CCI and two Business Days before the Outside Date; provided, however, that CRII shall not have such right to terminate this Agreement if a CRII Terminating Breach shall have occurred and be continuing at the time CRII delivers notice of its election to terminate this Agreement pursuant to this Section 9.1(c)(i); or
(ii)
at any time before the Stockholder Approval and the Partner Approvals are both obtained, in order to enter into an Alternative Acquisition Agreement with respect to a Superior Proposal in accordance with the provisions of Section 7.3; provided, however, that CRII shall have complied in all material respects with Section 7.3 and shall have paid or shall concurrently pay to CCI in full the Termination Payment in accordance with Section 9.3.
(d)
by CCI:
(i)
if a breach of any representation or warranty or failure to perform or comply with any obligation, covenant or agreement on the part of a CRII Party set forth in this Agreement has occurred that would cause any of the conditions set forth in Section 8.1 or Section 8.2 not to be satisfied (a “CRII Terminating Breach”), which breach or failure to perform or comply cannot be cured, or if capable of cure, has not been cured by the earlier of 20 days following written notice thereof from CCI to CRII and two Business Days before the Outside Date; provided, however, that CCI shall not have such right to terminate this Agreement if a CCI Terminating Breach shall have occurred and be continuing at the time CCI delivers notice of its election to terminate this Agreement pursuant to this Section 9.1(d)(i); or
(ii)
if, at any time prior to the receipt of both the Stockholder Approval and the Partner Approvals, (A) the CRII Board has made an Adverse Recommendation Change or (B) CRII shall have breached or failed to comply in any material respect with any of its obligations under Section 7.3.
Section 9.2
Effect of Termination. In the event of termination of this Agreement as provided in Section 9.1, written notice thereof shall forthwith be given to the other Parties, in accordance with the provisions of Section 10.2, specifying the provision hereof pursuant to which such termination is made, and this Agreement shall forthwith become void and have no effect, without any liability or obligation on the part of the CCI Parties or the CRII Parties, except that the Confidentiality Agreement and the provisions of Section 4.22 (No Other Representations and Warranties; Non-Reliance), Section 5.23 (No Other Representations and Warranties; Non-Reliance), this Section 9.2, Section 9.3 (Fees and Expenses) and Article 10 (General Provisions) shall survive the termination of this Agreement; provided, that no such termination shall relieve any Party from any liability or damages resulting from any fraud or any willful and material breach of any of its representations, warranties, covenants or agreements set forth in this Agreement, in which case the non-breaching party shall be entitled to all rights and remedies available at Law or in equity.
Section 9.3
Fees and Expenses.
(a)
Except as otherwise provided in this Section 9.3, all fees and expenses shall be paid by the Party incurring such fees or expenses, whether or not the Mergers are consummated.
(b)
In the event that this Agreement is terminated:
(i)
(A)(x) by CCI pursuant to Section 9.1(d)(i)(CRII Terminating Breach), and prior to the breach or failure to perform giving rise to such right of termination, a bona fide Acquisition Proposal has been publicly announced, disclosed or otherwise communicated to the CRII Board or (y) by CRII or CCI pursuant to Section 9.1(b)(iii)(Failure to Obtain Stockholder and Partner Approvals), and prior to the deadline for obtaining the Partner Approvals as set forth in the CROP Consent Solicitation Statement, an Acquisition Proposal has been publicly announced, disclosed or otherwise communicated to CROP’s partners, and (B) within 12 months after the date of such termination, a transaction in respect of an Acquisition Proposal with respect to CRII or CROP is consummated or CRII or CROP enter into a definitive agreement in respect of an Acquisition Proposal with respect to CRII or CROP that is later consummated, the CRII Parties shall pay to CCI an amount equal to the Termination Payment less any amount previously paid pursuant to Section 9.3(b)(iv);
(ii)
by CRII pursuant to Section 9.1(c)(ii) (Superior Proposal), then the CRII Parties shall pay to CCI an amount equal to the Termination Payment;
(iii)
by CCI pursuant to Section 9.1(d)(ii) (Adverse Recommendation Change), then the CRII Parties shall pay to CCI an amount equal to the Termination Payment; or
(iv)
by CCI or CRII pursuant to Section 9.1(b)(iii) (Failure to Obtain Stockholder and Partner Approvals), then the CRII Parties shall reimburse CCI’s Expenses.
(c)
Termination Payment. The Parties agree and acknowledge that in no event shall the CRII Parties be required to pay the applicable Termination Payment on more than one occasion. Payment of the Termination Payment and reimbursement of Expenses, as applicable, shall be made by wire transfer of same day funds to the account or accounts designated by CCI, (i) in the case of any amount payable pursuant to Section 9.3(b)(i), immediately prior to or concurrently with the consummation of any Acquisition Proposal; (ii) immediately prior to or concurrently with termination in the case of any amount payable pursuant to Section 9.3(b)(ii) or if such day is not a Business Day, no later than the immediately following Business Day; and (iii) as promptly as reasonably practicable after termination (and, in any event, within two Business Days thereof), in the case of any amount payable pursuant to Section 9.3(b)(iii) or Section 9.3(b)(iv).
(d)
Notwithstanding anything in this Agreement to the contrary, in the event that the Termination Payment becomes payable and is paid hereunder, then such payment (or any Expenses or other amounts payable pursuant to Section 9.3(b)(iv)) shall be CCI’s and its Affiliates’ sole and exclusive remedy as liquidated damages for any and all losses or damages of any nature against the CRII Parties in respect of this Agreement, any agreement executed in connection herewith, and the transactions contemplated hereby and thereby. In no event shall CRII be required to pay the Termination Payment or the Expenses on more than one occasion.
(e)
Each of the Parties acknowledges that the agreements contained in this Section 9.3 are an integral part of the transactions contemplated by this Agreement, and that without these agreements, the other Parties would not enter into this Agreement. In the event that the CRII Parties shall fail to pay the applicable Termination Payment when due, the CRII Parties shall reimburse CCI for all reasonable costs and expenses actually incurred or accrued by CCI (including reasonable fees and expenses of counsel) in connection with the collection under and enforcement of this Section 9.3. Further, if a CRII Party fails to timely pay any amount due to CCI pursuant to Section 9.3(b) and, in order to obtain the payment, CCI commences an Action that results in a judgment against a CRII Party for the payment set forth in this Section 9.3, the CRII Parties shall pay to CCI its reasonable and documented costs and expenses (including reasonable and documented attorneys’ fees) in connection with such Action, together with interest on such amount at a rate per annum equal to the prime rate published in the Wall Street Journal in effect on the date such payment was required to be made through the date of payment.
(f)
If the CRII Parties become obligated to make a Termination Payment under this Section 9.3, then, if requested by CCI, the CRII Parties shall deposit into escrow an amount in cash equal to the Termination Payment with an escrow agent selected by CCI, after reasonable consultation with the CRII Parties, and pursuant to a written escrow agreement (the “Escrow Agreement”) reflecting the terms set forth in this Section 9.3(f) and otherwise reasonably acceptable to CRII and the escrow agent. The payment or deposit into escrow of the Termination Payment shall be made by the CRII Parties in accordance with the timing set forth in Section 9.3(c) or, at CCI’s reasonable request, promptly after receipt of notice from CRII that the Escrow Agreement has been executed by the parties thereto. The Escrow Agreement shall provide that the Termination Payment in escrow or the applicable portion thereof shall be released to CCI on an annual basis based upon the delivery by CCI to the escrow agent of any one (or a combination) of the following:
(i)
a letter from CCI’s independent certified public accountants indicating the maximum amount that can be paid by the escrow agent to CCI without causing CCI to fail to meet the requirements of Sections 856(c)(2) and (3) of the Code for the applicable taxable year of CCI determined as if the payment of such amount did not constitute income described in Sections 856(c)(2)(A)-(I) or 856(c)(3)(A)-(I) of the Code (such income, “Qualifying REIT Income”), in which case the escrow agent shall release to CCI such maximum amount stated in the accountant’s letter;
(ii)
a letter from CCI’s counsel indicating that CCI received a private letter ruling from the IRS holding that the receipt by CCI of the Termination Payment would either constitute Qualifying REIT Income or would be excluded from gross income within the meaning of Sections 856(c)(2) and (3) of the Code, in which case the escrow agent shall release to CCI the remainder of the Termination Payment; or
(iii)
a letter from CCI’s counsel indicating that CCI has received a tax opinion from CCI’s outside counsel or accountant, respectively, to the effect that the receipt by CCI of the Termination Payment should either constitute Qualifying REIT Income or should be excluded from gross income within the meaning of Section 856(c)(2) and (3) of the Code, in which case the escrow agent shall release to CCI the remainder of the Termination Payment.
The CRII Parties agree to cooperate in good faith to amend this Section 9.3(f) at the reasonable request of CCI in order to (A) maximize the portion of the Termination Payment that may be distributed to CCI hereunder without causing CCI to fail to meet the requirements of Sections 856(c)(2) and (3) of the Code, (B) improve CCI’s chances of securing the favorable private letter ruling from the IRS described in this Section 9.3(f) or (C) assist CCI in obtaining the favorable tax opinion from its outside counsel or accountant described in this Section 9.3(f). The Escrow Agreement shall provide that CCI shall bear all costs and expenses under the Escrow Agreement. The CRII Parties shall not be a party to the Escrow Agreement and shall not bear any liability, cost or expense resulting directly or indirectly from the Escrow Agreement (other than any Taxes imposed on the CRII Parties in connection therewith).
ARTICLE 10
GENERAL PROVISIONS
Section 10.1
Nonsurvival of Representations and Warranties and Certain Covenants. None of the representations and warranties in this Agreement or in any instrument delivered pursuant to this Agreement shall survive the Merger Effective Time. The covenants to be performed prior to or at the Closing shall terminate at the Closing. This Section 10.1 shall not limit any covenant or agreement of the Parties that by its terms contemplates performance after the Merger Effective Time or the full force and effect of Article 1, this Article 10 or the definitions of capitalized terms not substantively defined in Article 1.
Section 10.2
Notices. All notices, requests, claims, consents, demands and other communications under this Agreement shall be in writing and shall be deemed given or made on the date of receipt by the recipient thereof if received on or prior to 11:59 p.m., New York City time, if delivered personally, sent by overnight courier (providing proof of delivery) to the Parties or sent by e-mail of a portable document form (pdf) attachment (providing confirmation of transmission (other than by automatic response)) at the following addresses (or at such other address for a Party as shall be specified by like notice):
Transaction Committee of the CRII Board
1245 Brickyard Road Suite 250
Salt Lake City, UT 84106
Phil White
| | E-mail: | jgardner@gardnerbatt.com |
phil@inflectionfinancial.com
with copies (which shall not constitute notice) to:
Goodwin Procter LLP
100 Northern Avenue
Boston, Massachusetts 02210
Blake Liggio
| | Email: | gmenna@goodwinlaw.com |
bliggio@goodwinlaw.com
| | (b) | if to CCI or Merger Sub to: |
Special Committee of the CCI Board
1245 Brickyard Road Suite 250
Salt Lake City, UT 84106
Attn: Gentry Jensen, Chair
E-mail: gjensen@cordovaoutdoors.com
with copies (which shall not constitute notice) to:
Robert H. Bergdolt
DLA Piper LLP (US)
4141 Parklake Avenue, Suite 300
Raleigh, NC 27612
Section 10.3
Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced under any present or future Law, or public policy, (a) such term or other provision shall be fully separable, (b) this Agreement shall be construed and enforced as if such invalid, illegal or unenforceable provision had never comprised a part hereof, and (c) all other conditions and provisions of this Agreement shall remain in full force and effect and shall not be affected by the illegal, invalid or unenforceable term or other provision or by its severance herefrom so long as the economic or legal substance of the transactions contemplated by this Agreement is not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the Parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the Parties as closely as possible in a mutually acceptable manner in order that transactions contemplated by this Agreement be consummated as originally contemplated to the fullest extent possible.
Section 10.4
Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original and all of which together shall be deemed one and the same agreement, and shall become effective when one or more counterparts have been signed by each of the Parties and delivered (electronically by email or facsimile) to the other Parties. Signatures to this Agreement transmitted by facsimile transmission, by electronic mail in portable document form (pdf), or by any other electronic means intended to preserve the original graphic and pictorial appearance of a document, will have the same effect as physical delivery of the paper document bearing the original signature.
Section 10.5
Entire Agreement; No Third-Party Beneficiaries. This Agreement (including the Exhibits, the CCI Disclosure Letter and the CRII Disclosure Letter) and the Confidentiality Agreement (a) constitute the entire agreement and supersede all prior agreements and understandings, both written and oral, between the Parties with respect to the subject matter of this Agreement and (b) except for the provisions of Section 7.7 (Indemnification; Directors’ and Officers’ Insurance), which, from and after the Merger Effective Time, shall be for the benefit of the Indemnified Parties, are not intended to confer upon any Person other than the Parties hereto any rights or remedies. The representations and warranties in this Agreement are the product of negotiations among the Parties and any inaccuracies in such representations and warranties are subject to waiver by the Parties in accordance with Section 10.6 without notice or liability to any other Person. Consequently, Persons other than the Parties may not rely upon the representations and warranties in this Agreement as characterizations of actual facts or circumstances as of the date of this Agreement or as of any other date.
Section 10.6
Amendment; Extension; Waiver. At any time prior to the Merger Effective Time, the Parties may, to the extent permitted under applicable Law and except as otherwise set forth herein, (a) amend any provision of this Agreement, (b) extend the time for the performance of any of the obligations or other acts of the other Parties, (c) waive any inaccuracies in the representations and warranties of the other Party contained in this Agreement or in any document delivered pursuant to this Agreement or (d) waive compliance with any of the agreements or conditions contained in this Agreement. Any such amendment of this Agreement shall be valid only if specifically set forth in an instrument in writing signed on behalf of all Parties. Any such grant by a Party of an extension or waiver in respect of any provision of this Agreement shall be valid only if specifically set forth in an instrument in writing by such Party. The failure of any Party to this Agreement to assert any of its rights under this Agreement or otherwise shall not constitute a waiver of those rights.
Section 10.7
Governing Law; Venue.
(a)
This Agreement, and all claims or causes of actions (whether at Law, in contract or in tort) that may be based upon, arise out of or related to this Agreement or the negotiation, execution or performance of this Agreement, shall be governed by, and construed in accordance with, the laws of the State of Maryland without giving effect to its conflicts of laws principles (whether the State of Maryland or any other jurisdiction that would cause the application of the Laws of any jurisdiction other than the State of Maryland).
(b)
All disputes arising out of or relating to this Agreement shall be heard and determined exclusively in any Maryland state or federal court. Each of the Parties hereby irrevocably and unconditionally (i) submits to the exclusive jurisdiction of any such Maryland state or federal court for the purpose of any Action arising out of or relating to this Agreement brought by any Party, (ii) agrees not to commence any such Action except in such courts, (iii) agrees that any claim in respect of any Action may be heard and determined in any such Maryland state or federal court, (iv) waives, to the fullest extent permitted by applicable Law, any objection which it may now or hereafter have to the laying of venue of any such Action, (v) waives, to the fullest extent permitted by applicable Law, the defense of an inconvenient forum to the maintenance of such dispute and (vi) agrees, with respect to any Action filed in a Maryland state court, to jointly request an assignment to the Maryland Business and Technology Case Management Program. Each of the Parties agrees that a final judgment in any such dispute shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by Law. Each Party irrevocably consents to service of process in the manner provided for notices in Section 10.2. Nothing in this Agreement will affect the right of any Party to serve process in any other manner permitted by Law.
Section 10.8
Assignment. Except as may be required to satisfy the obligations contemplated by Section 7.7 (Indemnification; Directors’ and Officers’ Insurance), neither this Agreement nor any of the rights, interests or obligations under this Agreement shall be assigned or delegated, in whole or in part, by operation of Law or otherwise, by any of the Parties without the prior written consent of the other Parties. This Agreement shall be binding upon, inure to the benefit of, and be enforceable by, the Parties and their respective successors and assigns, and any attempted or purported assignment or delegation in violation of this Section 10.8 shall be null and void.
Section 10.9
Specific Performance. The Parties agree that irreparable damage would occur if any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached, and that monetary damages, even if available, would not be an adequate remedy therefor. It is accordingly agreed that, prior to the effective time of any termination of this Agreement pursuant to Article 9, each Party shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement, and each Party hereby waives any requirement for the securing or posting of any bond in connection with such remedy, this being in addition to any other remedy to which such Party is entitled at Law or in equity. In the event that any Action should be brought in equity to enforce the provisions of this Agreement, no Party shall allege, and each Party hereby waives the defense, that there is an adequate remedy at law. Notwithstanding the foregoing, the CRII Parties shall not be entitled to seek specific performance with respect to compliance with Section 7.15.
Section 10.10
Waiver of Jury Trial. EACH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY ACTION DIRECTLY OR INDIRECTLY ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT, ANY INSTRUMENT OR OTHER DOCUMENT DELIVERED PURSUANT TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. EACH PARTY (A) CERTIFIES THAT NO REPRESENTATIVE OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH PARTY WOULD NOT, IN THE EVENT OF ANY ACTION, SEEK TO ENFORCE THE FOREGOING WAIVER, (B) ACKNOWLEDGES THAT IT UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER AND THAT IT MAKES THIS WAIVER VOLUNTARILY AND (C) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT, BY, AMONG OTHER THINGS, THE MUTUAL WAIVER AND CERTIFICATIONS IN THIS SECTION 10.10.
Section 10.11
Authorship. The Parties agree that the terms and language of this Agreement are the result of negotiations between the Parties and their respective advisors and, as a result, there shall be no presumption that any ambiguities in this Agreement shall be resolved against any Party. Any controversy over construction of this Agreement shall be decided without regard to events of authorship or negotiation.
IN WITNESS WHEREOF, the Parties have caused this Agreement to be signed by their respective duly authorized officers, all as of the date first written above.
| | COTTONWOOD COMMUNITIES, INC. |
| | | | |
| | By: | /s/ Enzio Cassinis |
| | Name: | Enzio Cassinis |
| | Title: | Chief Executive Officer |
| | | | |
| | COTTONWOOD COMMUNITIES GP SUBSIDIARY, LLC |
| | | | |
| | By: | COTTONWOOD COMMUNITIES, INC., its sole member |
| | | | |
| | | By: | /s/ Enzio Cassinis |
| | | Name: | Enzio Cassinis |
| | | Title: | Chief Executive Officer |
| | | | |
| | COTTONWOOD COMMUNITIES O.P., LP |
| | | | |
| | By: | COTTONWOOD COMMUNITIES, INC., its general partner |
| | | | |
| | | By: | /s/ Enzio Cassinis |
| | | Name: | Enzio Cassinis |
| | | Title: | Chief Executive Officer |
| | | | |
| | COTTONWOOD RESIDENTIAL II, INC. |
| | | | |
| | By: | /s/ Daniel Shaeffer
|
| | Name: | |
| | Title: | |
| | | | |
| | COTTONWOOD RESIDENTIAL O.P., LP |
| | | | |
| | By: | COTTONWOOD RESIDENTIAL II, INC., its general partner |
| | | | |
| | | By: | /s/ Daniel Shaeffer |
| | | Name: | Daniel Shaeffer |
| | | Title: | Chief Executive Officer |
EXHIBIT A
COTTONWOOD COMMUNITIES, INC.
ARTICLES SUPPLEMENTARY
SERIES 2016 PREFERRED STOCK
Cottonwood Communities, Inc., a Maryland corporation (the “Corporation”), hereby certifies to the State Department of Assessments and Taxation of Maryland that:
FIRST: Under a power contained in Section 7.3 of the Articles of Amendment and Restatement of the Corporation (the “Charter”), the Board of Directors of the Corporation (the “Board of Directors”) has classified 14,500,000 shares of the authorized but unissued preferred stock of the Corporation, $0.01 par value per share (the “Preferred Stock”), with the preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends or other distributions, qualifications and terms and conditions of redemption as follows, which upon any restatement of the Charter shall be made part of Article VII, with any necessary or appropriate changes to the enumeration of lettering of sections or subsections hereof:
1. Designation and Number. A series of Preferred Stock, designated the Series 2016 Preferred Stock (the “Series 2016 Preferred Stock”), is hereby established. The number of authorized shares of Series 2016 Preferred Stock shall be 14,500,000.
2. Definitions. For purposes of the Series 2016 Preferred Stock, the following terms shall have the respective meanings indicated below.
(a) Business Day. The term “Business Day” shall mean each day, other than a Saturday or Sunday, which is not a day on which banks in the State of New York are required to close.
(b) Dividend Payment Date. The term “Dividend Payment Date” shall have the meaning as provided in Section 4 herein.
(c) Dividend Period. The term “Dividend Period” shall mean the respective period commencing on and including the first day of each month and ending on and including the day preceding the first day of the next succeeding Dividend Period (other than the initial Dividend Period and the Dividend Period during which any shares of Series 2016 Preferred Stock shall be redeemed or otherwise acquired by the Corporation).
(d) Dividend Record Date. The term “Dividend Record Date” shall have the meaning as provided in Section 4 herein.
(e) Junior Stock. The term “Junior Stock” shall have the meaning as provided in Section 3 herein.
(f) Parity Stock. The term “Parity Stock” shall have the meaning as provided in Section 3 herein.
(g) Purchase Price. The term “Purchase Price” shall have the meaning as provided in Section 5 herein.
(h) Redemption Deadline. The term “Redemption Deadline” shall have the meaning as provided in Section 6 herein.
(i) Senior Stock. The term “Senior Stock” shall have the meaning as provided in Section 3 herein.
(j) Series 2016 Preferred Stock. The term “Series 2016 Preferred Stock” shall have the meaning as provided in Section 1 herein.
(k) Series 2017 Preferred Stock. The term “Series 2017 Preferred Stock” shall mean the Series 2017 Preferred Stock, $.01 par value per share, of the Corporation.
(l) Series 2019 Preferred Stock. The term “Series 2019 Preferred Stock” shall mean the Series 2019 Preferred Stock, $.01 par value per share, of the Corporation.
3. Rank. The Series 2016 Preferred Stock shall, with respect to priority of payment of dividends and other distributions and rights upon voluntary or involuntary liquidation, dissolution or winding up of the Corporation, rank: (a) senior to all classes or series of Common Stock and to any other class or series of stock of the Corporation issued in the future, unless the terms of such stock expressly provide that it ranks senior to, or on parity with, the Series 2016 Preferred Stock with respect to priority of payment of dividends and other distributions or rights upon voluntary or involuntary liquidation, dissolution or winding up of the Corporation (together with the Common Stock, the “Junior Stock”); (b) on a parity with the Series 2017 Preferred Stock, the Series 2019 Preferred Stock and any other class or series of stock of the Corporation, the terms of which expressly provide that it ranks on a parity with the Series 2016 Preferred Stock with respect to priority of payment of dividends and other distributions and rights upon voluntary or involuntary liquidation, dissolution or winding up of the Corporation (the “Parity Stock”); and (c) junior to any class or series of stock of the Corporation which ranks senior to the Series 2016 Preferred Stock with respect to priority of payment of dividends and other distributions or rights upon voluntary or involuntary liquidation, dissolution or winding up of the Corporation (the “Senior Stock”).
4. Dividends.
(a) Subject to the preferential rights of the holders of any class or series of stock of the Corporation ranking senior to the Series 2016 Preferred Stock with respect to priority of dividend payments, holders of shares of the Series 2016 Preferred Stock shall be entitled to receive, when and as authorized by the Board of Directors and declared by the Corporation, out of funds legally available for the payment of dividends, cash dividends at the rate of 6.50% per annum of $10.00 per share (equivalent to a fixed annual rate of $0.65 per share); provided, however, that, commencing February 1, 2021, such rate shall increase to 7.00% per annum of $10.00 per share (equivalent to a fixed annual rate of $0.70 per share). The dividends on each share of Series 2016 Preferred Stock shall be cumulative from the first date on which such share of Series 2016 Preferred Stock is issued or the end of the most recent Dividend Period for which dividends on the Series 2016 Preferred Stock (including such share) have been aggregated and paid and shall be payable monthly in arrears on or before the first day of each month or, if not a Business Day, the next succeeding Business Day (each, a “Dividend Payment Date”). Dividends shall be payable to holders of record as they appear in the stock records of the Corporation at the close of business on the applicable record date or dates, which shall be each day of the month immediately preceding the month in which the applicable Dividend Payment Date falls or such other date or dates designated by the Board of Directors for the determination of the holders of Series 2016 Preferred Stock entitled to receive dividends (each, a “Dividend Record Date”).
(b) No dividends on shares of Series 2016 Preferred Stock shall be authorized by the Board of Directors or declared by the Corporation or paid or set apart for payment by the Corporation at such time as the terms and provisions of any agreement of the Corporation, including any agreement relating to its indebtedness, prohibits such authorization, declaration, payment or setting apart for payment or provides that such authorization, declaration payment or setting apart for payment would constitute a breach thereof or a default thereunder, or if such authorization, declaration, payment or setting apart for payment shall be restricted or prohibited by law.
(c) Notwithstanding the foregoing Section 4(b), dividends on the Series 2016 Preferred Stock shall accrue whether or not the Corporation has earnings, whether there are funds legally available for the payment of such dividends and whether or not such dividends are authorized by the Board of Directors or declared by the Corporation. No interest, or sum of money in lieu of interest, shall be payable in respect of any dividend payment or payments on the Series 2016 Preferred Stock which may be in arrears. When dividends are not paid in full (or a sum sufficient for such full payment is not so set apart) upon the Series 2016 Preferred Stock and the shares of any class or series of Parity Stock, all dividends declared upon the Series 2016 Preferred Stock and any class or series of Parity Stock shall be declared pro rata so that the amount of dividends declared per share of Series 2016 Preferred Stock and such class or series of Parity Stock shall in all cases bear to each other the same ratio that accumulated dividends per share on the Series 2016 Preferred Stock and such class or series of Parity Stock (which shall not include any accrual in respect of unpaid dividends for prior dividend periods if such Parity Stock does not have a cumulative dividend) bear to each other.
(d) Except as provided in the immediately preceding paragraph, unless full cumulative dividends on the Series 2016 Preferred Stock have been or contemporaneously are declared and paid in cash or declared and a sum sufficient for the payment thereof is set apart for payment (for purposes of these Articles Supplementary, “set apart for payment” shall mean the Corporation has determined it has sufficient cash available to pay such declared dividends) for all past Dividend Periods that have ended, no dividends (other than a dividend in shares of Junior Stock or in options, warrants or rights to subscribe for or purchase any such shares of Junior Stock) shall be declared and paid or declared and set apart for payment nor shall any other distribution be declared and made upon the Junior Stock or the Parity Stock, nor shall any shares of Junior Stock or Parity Stock be redeemed, purchased or otherwise acquired for any consideration (or any monies be paid to or made available for a sinking fund for the redemption of any such shares) by the Corporation (except (i) by conversion into or exchange for Junior Stock, (ii) the purchase of shares of Junior Stock or Parity Stock pursuant to the Charter to the extent necessary to preserve the Corporation’s qualification as a REIT for federal income tax purposes or (iii) the purchase or other acquisition of shares of Parity Stock pursuant to a purchase or exchange offer made on the same terms to holders of all outstanding shares of Series 2016 Preferred Stock). Holders of shares of the Series 2016 Preferred Stock shall not be entitled to any dividend, whether payable in cash, property or stock, in excess of full cumulative dividends on the Series 2016 Preferred Stock as provided above. Any dividend payment made on shares of the Series 2016 Preferred Stock shall first be credited against the earliest accrued but unpaid dividend due with respect to such shares which remains payable. Accrued but unpaid dividends on the Series 2016 Preferred Stock shall accrue as of the Dividend Payment Date on which they first become payable.
5. Liquidation Preference. Upon any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, the holders of shares of Series 2016 Preferred Stock are entitled to be paid out of the assets of the Corporation legally available for distribution to its stockholders, after payment of or provision for the Corporation’s debts and other liabilities and subject to the preferential rights of the holders of any class or series of stock of the Corporation ranking senior to the Series 2016 Preferred Stock with respect to rights upon voluntary or involuntary liquidation, dissolution or winding up of the Corporation, a liquidation preference of $10.00 per share (the “Purchase Price”), plus an amount equal to any accrued and unpaid dividends (whether or not authorized or declared) thereon to and including the date of payment, but without interest, before any distribution of assets is made to holders of Junior Stock. If the assets of the Corporation legally available for distribution to stockholders are insufficient to pay in full the liquidation preference on the Series 2016 Preferred Stock and the liquidation preference on the shares of any class or series of Parity Stock, all assets distributed to the holders of the Series 2016 Preferred Stock and any class or series of Parity Stock shall be distributed pro rata so that the amount of assets distributed per share of Series 2016 Preferred Stock and such class or series of Parity Stock shall in all cases bear to each other the same ratio that the liquidation preference per share on the Series 2016 Preferred Stock and such class or series of Parity Stock bear to each other. After payment of the full amount of the liquidation distributions to which they are entitled, the holders of Series 2016 Preferred Stock shall have no right or claim to any of the remaining assets of the Corporation. The consolidation or merger of the Corporation with or into another entity, a merger of another entity with or into the Corporation, a statutory share exchange by the Corporation or a sale, lease, transfer or conveyance of all or substantially all of the Corporation’s property or business shall not be deemed to constitute a liquidation, dissolution or winding up of the Corporation. In determining whether a distribution (other than upon voluntary or involuntary liquidation, dissolution or winding up of the Corporation) by dividend, redemption or other acquisition of shares of stock of the Corporation or otherwise is permitted under the Maryland General Corporation Law, no effect shall be given to amounts that would be needed, if the Corporation were to be dissolved at the time of the distribution, to satisfy the preferential rights upon dissolution of holders of the Series 2016 Preferred Stock.
6. Mandatory Redemption. Unless the shares of Series 2016 Preferred Stock have been redeemed for cash pursuant to Section 7 below, the Corporation shall, on January 31, 2022 (the “Redemption Deadline”), to the extent there are funds legally available therefor and subject to the preferential rights of the holders of any class or series of stock of the Corporation ranking senior to the Series 2016 Preferred Stock with respect to priority of distributions, redeem all shares of Series 2016 Preferred Stock for cash at a redemption price per share equal to the Purchase Price plus an amount equal to all accrued and unpaid dividends thereon to, and including, the redemption date. Notwithstanding the foregoing, the Corporation may, in the sole discretion of the Board of Directors, extend the Redemption Deadline to January 31, 2023.
7. Optional Redemption.
(a) The Corporation may, at its option, redeem shares of Series 2016 Preferred Stock, in whole or from time to time in part, for cash at a redemption price per share equal to the Purchase Price plus an amount equal to all accrued and unpaid dividends thereon to, and including, the redemption date. Notwithstanding the foregoing, in the event of a redemption of shares of Series 2016 Preferred Stock after a Dividend Record Date and on or prior to the related Dividend Payment Date, the dividend payable on such Dividend Payment Date in respect of such shares called for redemption shall be payable on such Dividend Payment Date to the holders of record at the close of business on such Dividend Record Date and shall not be payable as part of the redemption price for such shares.
(b) The redemption date shall be selected by the Corporation and shall be not less than 15 nor more than 60 days after the date on which the Corporation sends notice of the redemption. Such notice shall be sent by first class mail, postage pre-paid, to each record holder of the Series 2016 Preferred Stock at the respective mailing addresses of such holders as the same shall appear on the stock transfer records of the Corporation and shall state: (i) the redemption date; (ii) the redemption price payable on the redemption date, including, without limitation, a statement as to whether or not accrued and unpaid dividends shall be payable as part of the redemption price or payable on the next Dividend Payment Date to the record holder at the close of business on the relevant Dividend Record Date as described above; and (iii) that dividends on the shares to be redeemed shall cease to accrue on such redemption date. If less than all of the shares of Series 2016 Preferred Stock held by any holder are to be redeemed, the notice mailed to such holder shall also specify the number of shares of Series 2016 Preferred Stock held by such holder to be redeemed. No failure to give such notice or any defect therein or in the mailing thereof shall affect the validity of the proceedings for the redemption of any shares of Series 2016 Preferred Stock except as to the holder to whom notice was defective or not given.
(c) If fewer than all of the outstanding shares of Series 2016 Preferred Stock are to be redeemed, the Corporation shall redeem those shares pro rata unless the Board of Directors elects to provide the holders of such shares a “first come, first serve” redemption option.
(d) If notice of redemption of any shares of Series 2016 Preferred Stock has been given and if the funds necessary for such redemption have been set apart by the Corporation for the benefit of the holders of any shares of Series 2016 Preferred Stock so called for redemption, then, from and after the redemption date, dividends shall cease to accrue on such shares of Series 2016 Preferred Stock, such shares of Series 2016 Preferred Stock shall be redeemed in accordance with the notice and shall no longer be deemed outstanding and all rights of the holders of such shares of Series 2016 Preferred Stock shall terminate, except the right to receive the redemption price payable upon such redemption without interest thereon. No further action on the part of the holders of such shares shall be required.
(e) Unless full cumulative dividends on the Series 2016 Preferred Stock for all past Dividend Periods that have ended shall have been or contemporaneously are declared and paid in cash or declared and a sum sufficient for the payment thereof is set apart for payment, no shares of Series 2016 Preferred Stock shall be redeemed unless all outstanding shares of Series 2016 Preferred Stock are simultaneously redeemed, and the Corporation shall not purchase or otherwise acquire directly or indirectly any shares of Series 2016 Preferred Stock (except (i) by conversion into or exchange for Junior Stock, (ii) the purchase of shares of Series 2016 Preferred Stock pursuant to the Charter to the extent necessary to preserve the Corporation’s qualification as a REIT for federal income tax purposes or (iii) the purchase or other acquisition of shares of Series 2016 Preferred Stock pursuant to a purchase or exchange offer made on the same terms to holders of all outstanding shares of Series 2016 Preferred Stock).
8. Voting Rights. Holders of the Series 2016 Preferred Stock shall not have any voting rights.
9. Status of Redeemed Series 2016 Preferred Stock. All shares of Series 2016 Preferred Stock redeemed or otherwise acquired in any manner by the Corporation shall be retired and shall be restored to the status of authorized but unissued Preferred Stock, without designation as to class or series.
SECOND: The shares of Series 2016 Preferred Stock have been classified and designated by the Board of Directors under the authority contained in the Charter.
THIRD: These Articles Supplementary have been approved by the Board of Directors in the manner and by the vote required by law.
FOURTH: The undersigned Chief Executive Officer and President of the Corporation acknowledges these Articles Supplementary to be the corporate act of the Corporation and, as to all matters or facts required to be verified under oath, the undersigned Chief Executive Officer and President acknowledges that to the best of his knowledge, information and belief, these matters and facts are true in all material respects and that this statement is made under the penalties for perjury.
[SIGNATURES ON FOLLOWING PAGE]
IN WITNESS WHEREOF, the Corporation has caused these Articles Supplementary to be executed under seal in its name and on its behalf by its Chief Executive Officer and President and attested to by its Secretary on this __th day of _____, 2021.
| | COTTONWOOD COMMUNITIES, INC. |
| | | |
| | |
| | By:
| Enzio A. Cassinis
|
| | | Chief Executive Officer and President |
| [CORPORATE SEAL] | |
| | |
| Attest: | |
| | |
| | |
| Gregg Christensen, | |
| Secretary | |
EXHIBIT B
COTTONWOOD COMMUNITIES, INC.
ARTICLES SUPPLEMENTARY
SERIES 2017 PREFERRED STOCK
Cottonwood Communities, Inc., a Maryland corporation (the “Corporation”), hereby certifies to the State Department of Assessments and Taxation of Maryland that:
FIRST: Under a power contained in Section 7.3 of the Articles of Amendment and Restatement of the Corporation (the “Charter”), the Board of Directors of the Corporation (the “Board of Directors”) has classified 5,000,000 shares of the authorized but unissued preferred stock of the Corporation, $0.01 par value per share (the “Preferred Stock”), with the preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends or other distributions, qualifications and terms and conditions of redemption as follows, which upon any restatement of the Charter shall be made part of Article VII, with any necessary or appropriate changes to the enumeration of lettering of sections or subsections hereof:
1. Designation and Number. A series of Preferred Stock, designated the Series 2017 Preferred Stock (the “Series 2017 Preferred Stock”), is hereby established. The number of authorized shares of Series 2017 Preferred Stock shall be 5,000,000.
2. Definitions. For purposes of the Series 2017 Preferred Stock, the following terms shall have the respective meanings indicated below.
(a) Business Day. The term “Business Day” shall mean each day, other than a Saturday or Sunday, which is not a day on which banks in the State of New York are required to close.
(b) Dividend Payment Date. The term “Dividend Payment Date” shall have the meaning as provided in Section 4 herein.
(c) Dividend Period. The term “Dividend Period” shall mean the respective period commencing on and including the first day of each month and ending on and including the day preceding the first day of the next succeeding Dividend Period (other than the initial Dividend Period and the Dividend Period during which any shares of Series 2017 Preferred Stock shall be redeemed or otherwise acquired by the Corporation).
(d) Dividend Record Date. The term “Dividend Record Date” shall have the meaning as provided in Section 4 herein.
(e) Junior Stock. The term “Junior Stock” shall have the meaning as provided in Section 3 herein.
(f) Parity Stock. The term “Parity Stock” shall have the meaning as provided in Section 3 herein.
(g) Purchase Price. The term “Purchase Price” shall have the meaning as provided in Section 5 herein.
(h) Redemption Deadline. The term “Redemption Deadline” shall have the meaning as provided in Section 6 herein.
(i) Senior Stock. The term “Senior Stock” shall have the meaning as provided in Section 3 herein.
(j) Series 2016 Preferred Stock. The term “Series 2016 Preferred Stock” shall mean the Series 2016 Preferred Stock, $.01 par value per share, of the Corporation.
(k) Series 2017 Preferred Stock. The term “Series 2017 Preferred Stock” shall have the meaning as provided in Section 1 herein.
(l) Series 2019 Preferred Stock. The term “Series 2019 Preferred Stock” shall mean the Series 2019 Preferred Stock, $.01 par value per share, of the Corporation.
3. Rank. The Series 2017 Preferred Stock shall, with respect to priority of payment of dividends and other distributions and rights upon voluntary or involuntary liquidation, dissolution or winding up of the Corporation, rank: (a) senior to all classes or series of Common Stock and to any other class or series of stock of the Corporation issued in the future, unless the terms of such stock expressly provide that it ranks senior to, or on parity with, the Series 2017 Preferred Stock with respect to priority of payment of dividends and other distributions or rights upon voluntary or involuntary liquidation, dissolution or winding up of the Corporation (together with the Common Stock, the “Junior Stock”); (b) on a parity with the Series 2016 Preferred Stock, the Series 2019 Preferred Stock and any other class or series of stock of the Corporation, the terms of which expressly provide that it ranks on a parity with the Series 2017 Preferred Stock with respect to priority of payment of dividends and other distributions and rights upon voluntary or involuntary liquidation, dissolution or winding up of the Corporation (the “Parity Stock”); and (c) junior to any class or series of stock of the Corporation which ranks senior to the Series 2017 Preferred Stock with respect to priority of payment of dividends and other distributions or rights upon voluntary or involuntary liquidation, dissolution or winding up of the Corporation (the “Senior Stock”).
4. Dividends.
(a) Subject to the preferential rights of the holders of any class or series of stock of the Corporation ranking senior to the Series 2017 Preferred Stock with respect to priority of dividend payments, holders of shares of the Series 2017 Preferred Stock shall be entitled to receive, when and as authorized by the Board of Directors and declared by the Corporation, out of funds legally available for the payment of dividends, cash dividends at the rate of 7.50% per annum of $10.00 per share (equivalent to a fixed annual rate of $0.75 per share); provided, however, that, commencing February 1, 2022, such rate shall increase to 8.00% per annum of $10.00 per share (equivalent to a fixed annual rate of $0.80 per share). The dividends on each share of Series 2017 Preferred Stock shall be cumulative from the first date on which such share of Series 2017 Preferred Stock is issued or the end of the most recent Dividend Period for which dividends on the Series 2017 Preferred Stock (including such share) have been aggregated and paid and shall be payable monthly in arrears on or before the first day of each month or, if not a Business Day, the next succeeding Business Day (each, a “Dividend Payment Date”). Dividends shall be payable to holders of record as they appear in the stock records of the Corporation at the close of business on the applicable record date or dates, which shall be each day of the month immediately preceding the month in which the applicable Dividend Payment Date falls or such other date or dates designated by the Board of Directors for the determination of the holders of Series 2017 Preferred Stock entitled to receive dividends (each, a “Dividend Record Date”).
(b) No dividends on shares of Series 2017 Preferred Stock shall be authorized by the Board of Directors or declared by the Corporation or paid or set apart for payment by the Corporation at such time as the terms and provisions of any agreement of the Corporation, including any agreement relating to its indebtedness, prohibits such authorization, declaration, payment or setting apart for payment or provides that such authorization, declaration, payment or setting apart for payment would constitute a breach thereof or a default thereunder, or if such authorization, declaration, payment or setting apart for payment shall be restricted or prohibited by law.
(c) Notwithstanding the foregoing Section 4(b), dividends on the Series 2017 Preferred Stock shall accrue whether or not the Corporation has earnings, whether there are funds legally available for the payment of such dividends and whether or not such dividends are authorized by the Board of Directors or declared by the Corporation. No interest, or sum of money in lieu of interest, shall be payable in respect of any dividend payment or payments on the Series 2017 Preferred Stock which may be in arrears. When dividends are not paid in full (or a sum sufficient for such full payment is not so set apart) upon the Series 2017 Preferred Stock and the shares of any class or series of Parity Stock, all dividends declared upon the Series 2017 Preferred Stock and any class or series of Parity Stock shall be declared pro rata so that the amount of dividends declared per share of Series 2017 Preferred Stock and such class or series of Parity Stock shall in all cases bear to each other the same ratio that accumulated dividends per share on the Series 2017 Preferred Stock and such class or series of Parity Stock (which shall not include any accrual in respect of unpaid dividends for prior dividend periods if such Parity Stock does not have a cumulative dividend) bear to each other.
(d) Except as provided in the immediately preceding paragraph, unless full cumulative dividends on the Series 2017 Preferred Stock have been or contemporaneously are declared and paid in cash or declared and a sum sufficient for the payment thereof is set apart for payment (for purposes of these Articles Supplementary, “set apart for payment” shall mean the Corporation has determined it has sufficient cash available to pay such declared dividends) for all past Dividend Periods that have ended, no dividends (other than a dividend in shares of Junior Stock or in options, warrants or rights to subscribe for or purchase any such shares of Junior Stock) shall be declared and paid or declared and set apart for payment nor shall any other distribution be declared and made upon the Junior Stock or the Parity Stock, nor shall any shares of Junior Stock or Parity Stock be redeemed, purchased or otherwise acquired for any consideration (or any monies be paid to or made available for a sinking fund for the redemption of any such shares) by the Corporation (except (i) by conversion into or exchange for Junior Stock, (ii) the purchase of shares of Junior Stock or Parity Stock pursuant to the Charter to the extent necessary to preserve the Corporation’s qualification as a REIT for federal income tax purposes or (iii) the purchase or other acquisition of shares of Parity Stock pursuant to a purchase or exchange offer made on the same terms to holders of all outstanding shares of Series 2017 Preferred Stock). Holders of shares of the Series 2017 Preferred Stock shall not be entitled to any dividend, whether payable in cash, property or stock, in excess of full cumulative dividends on the Series 2017 Preferred Stock as provided above. Any dividend payment made on shares of the Series 2017 Preferred Stock shall first be credited against the earliest accrued but unpaid dividend due with respect to such shares which remains payable. Accrued but unpaid dividends on the Series 2017 Preferred Stock shall accrue as of the Dividend Payment Date on which they first become payable.
5. Liquidation Preference. Upon any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, the holders of shares of Series 2017 Preferred Stock are entitled to be paid out of the assets of the Corporation legally available for distribution to its stockholders, after payment of or provision for the Corporation’s debts and other liabilities and subject to the preferential rights of the holders of any class or series of stock of the Corporation ranking senior to the Series 2017 Preferred Stock with respect to rights upon voluntary or involuntary liquidation, dissolution or winding up of the Corporation, a liquidation preference of $10.00 per share (the “Purchase Price”), plus an amount equal to any accrued and unpaid dividends (whether or not authorized or declared) thereon to and including the date of payment, but without interest, before any distribution of assets is made to holders of Junior Stock. If the assets of the Corporation legally available for distribution to stockholders are insufficient to pay in full the liquidation preference on the Series 2017 Preferred Stock and the liquidation preference on the shares of any class or series of Parity Stock, all assets distributed to the holders of the Series 2017 Preferred Stock and any class or series of Parity Stock shall be distributed pro rata so that the amount of assets distributed per share of Series 2017 Preferred Stock and such class or series of Parity Stock shall in all cases bear to each other the same ratio that the liquidation preference per share on the Series 2017 Preferred Stock and such class or series of Parity Stock bear to each other. After payment of the full amount of the liquidation distributions to which they are entitled, the holders of Series 2017 Preferred Stock shall have no right or claim to any of the remaining assets of the Corporation. The consolidation or merger of the Corporation with or into another entity, a merger of another entity with or into the Corporation, a statutory share exchange by the Corporation or a sale, lease, transfer or conveyance of all or substantially all of the Corporation’s property or business shall not be deemed to constitute a liquidation, dissolution or winding up of the Corporation. In determining whether a distribution (other than upon voluntary or involuntary liquidation, dissolution or winding up of the Corporation) by dividend, redemption or other acquisition of shares of stock of the Corporation or otherwise is permitted under the Maryland General Corporation Law, no effect shall be given to amounts that would be needed, if the Corporation were to be dissolved at the time of the distribution, to satisfy the preferential rights upon dissolution of holders of the Series 2017 Preferred Stock.
6. Mandatory Redemption. Unless the shares of Series 2017 Preferred Stock have been redeemed for cash pursuant to Section 7 below, the Corporation shall, on January 31, 2022 (the “Redemption Deadline”), to the extent there are funds legally available therefor and subject to the preferential rights of the holders of any class or series of stock of the Corporation ranking senior to the Series 2017 Preferred Stock with respect to priority of distributions, redeem all shares of Series 2017 Preferred Stock for cash at a redemption price per share equal to the Purchase Price plus an amount equal to all accrued and unpaid dividends thereon to, and including, the redemption date. Notwithstanding the foregoing, the Corporation may, in the sole discretion of the Board of Directors, extend the Redemption Deadline for up to two successive periods of one year each.
7. Optional Redemption.
(a) The Corporation may, at its option, redeem shares of Series 2017 Preferred Stock, in whole or from time to time in part, for cash at a redemption price per share equal to 102% of the Purchase Price plus an amount equal to all accrued and unpaid dividends thereon to, and including, the redemption date; provided, however, that, if the redemption occurs on or after January 31, 2022, the redemption price per share shall equal the Purchase Price plus an amount equal to all accrued and unpaid dividends thereon to, and including, the redemption date. Notwithstanding the foregoing, in the event of a redemption of shares of Series 2017 Preferred Stock after a Dividend Record Date and on or prior to the related Dividend Payment Date, the dividend payable on such Dividend Payment Date in respect of such shares called for redemption shall be payable on such Dividend Payment Date to the holders of record at the close of business on such Dividend Record Date and shall not be payable as part of the redemption price for such shares.
(b) The redemption date shall be selected by the Corporation and shall be not less than 15 nor more than 60 days after the date on which the Corporation sends notice of the redemption. Such notice shall be sent by first class mail, postage pre-paid, to each record holder of the Series 2017 Preferred Stock at the respective mailing addresses of such holders as the same shall appear on the stock transfer records of the Corporation and shall state: (i) the redemption date; (ii) the redemption price payable on the redemption date, including, without limitation, a statement as to whether or not accrued and unpaid dividends shall be payable as part of the redemption price or payable on the next Dividend Payment Date to the record holder at the close of business on the relevant Dividend Record Date as described above; and (iii) that dividends on the shares to be redeemed shall cease to accrue on such redemption date. If less than all of the shares of Series 2017 Preferred Stock held by any holder are to be redeemed, the notice mailed to such holder shall also specify the number of shares of Series 2017 Preferred Stock held by such holder to be redeemed. No failure to give such notice or any defect therein or in the mailing thereof shall affect the validity of the proceedings for the redemption of any shares of Series 2017 Preferred Stock except as to the holder to whom notice was defective or not given.
(c) If fewer than all of the outstanding shares of Series 2017 Preferred Stock are to be redeemed, the Corporation shall redeem those shares pro rata unless the Board of Directors elects to provide the holders of such shares a “first come, first serve” redemption option.
(d) If notice of redemption of any shares of Series 2017 Preferred Stock has been given and if the funds necessary for such redemption have been set apart by the Corporation for the benefit of the holders of any shares of Series 2017 Preferred Stock so called for redemption, then, from and after the redemption date, dividends shall cease to accrue on such shares of Series 2017 Preferred Stock, such shares of Series 2017 Preferred Stock shall be redeemed in accordance with the notice and shall no longer be deemed outstanding and all rights of the holders of such shares of Series 2017 Preferred Stock shall terminate, except the right to receive the redemption price payable upon such redemption without interest thereon. No further action on the part of the holders of such shares shall be required.
(e) Unless full cumulative dividends on the Series 2017 Preferred Stock for all past Dividend Periods that have ended shall have been or contemporaneously are declared and paid in cash or declared and a sum sufficient for the payment thereof is set apart for payment, no shares of Series 2017 Preferred Stock shall be redeemed unless all outstanding shares of Series 2017 Preferred Stock are simultaneously redeemed, and the Corporation shall not purchase or otherwise acquire directly or indirectly any shares of Series 2017 Preferred Stock (except (i) by conversion into or exchange for Junior Stock, (ii) the purchase of shares of Series 2017 Preferred Stock pursuant to the Charter to the extent necessary to preserve the Corporation’s qualification as a REIT for federal income tax purposes or (iii) the purchase or other acquisition of shares of Series 2017 Preferred Stock pursuant to a purchase or exchange offer made on the same terms to holders of all outstanding shares of Series 2017 Preferred Stock).
8. Voting Rights. Holders of the Series 2017 Preferred Stock shall not have any voting rights.
9. Status of Redeemed Series 2017 Preferred Stock. All shares of Series 2017 Preferred Stock redeemed or otherwise acquired in any manner by the Corporation shall be retired and shall be restored to the status of authorized but unissued Preferred Stock, without designation as to class or series.
SECOND: The shares of Series 2017 Preferred Stock have been classified and designated by the Board of Directors under the authority contained in the Charter.
THIRD: These Articles Supplementary have been approved by the Board of Directors in the manner and by the vote required by law.
FOURTH: The undersigned Chief Executive Officer and President of the Corporation acknowledges these Articles Supplementary to be the corporate act of the Corporation and, as to all matters or facts required to be verified under oath, the undersigned Chief Executive Officer and President acknowledges that to the best of his knowledge, information and belief, these matters and facts are true in all material respects and that this statement is made under the penalties for perjury.
[SIGNATURES ON FOLLOWING PAGE]
IN WITNESS WHEREOF, the Corporation has caused these Articles Supplementary to be executed under seal in its name and on its behalf by its Chief Executive Officer and President and attested to by its Secretary on this __th day of _____, 2021.
| | COTTONWOOD COMMUNITIES, INC. |
| | | |
| | |
| | By: | Enzio A. Cassinis |
| | | Chief Executive Officer and President |
| | | |
| [CORPORATE SEAL] | |
| | |
| Attest: | |
| | |
| | |
| Gregg Christensen, | |
| Secretary | |
