ITEM 3.02 UNREGISTERED SALES OF EQUITY SECURITIES.
Securities for Services
Quarterly Reimbursement under Administrative Services Agreement
On October 31, 2017, Bluerock Residential Growth REIT, Inc. (the "Company")
entered into an Administrative Services Agreement (the "Administrative Services
Agreement") with Bluerock Residential Holdings, L.P. (the "Operating
Partnership"), Bluerock TRS Holdings, LLC, a Delaware limited liability company
and wholly-owned subsidiary of the Operating Partnership (the "OP Sub"), and
Bluerock REIT Operator, LLC, a Delaware limited liability company and
wholly-owned subsidiary of the Company (the "REIT Operator," and collectively
with the Company, the Operating Partnership and the OP Sub, the "Company
Parties," and each, a "Company Party"), and Bluerock Real Estate, L.L.C., a
Delaware limited liability company ("BRRE") and its affiliate, Bluerock Real
Estate Holdings, LLC, a Delaware limited liability company ("BREH," and together
with BRRE, the "BRRE Entities"). Pursuant to the Administrative Services
Agreement, the BRRE Entities provide the Company with certain human resources,
investor relations, marketing, legal and other administrative services (the
"Services") to facilitate the transition of the Company's management of its
operations, and enable the Company to benefit from operational efficiencies
created by access to such Services, following the internalization of the
Company's management. Under the Administrative Services Agreement, the BRRE
Entities are each entitled to quarterly reimbursement by the Company Parties for
all costs incurred in performing the Services (each, a "Quarterly ASA
Reimbursement"), the calculation of which is reviewed by the Company's board of
directors (the "Board"), and which is payable either in cash or in long-term
incentive plan units of the Operating Partnership ("LTIP Units"), at the
election of the Board.
The Board, including its independent directors, having reviewed the calculation
of the Quarterly ASA Reimbursement for the three months ended June 30, 2022 as
provided by the BRRE Entities, authorized and approved payment of the Quarterly
ASA Reimbursement for the three months ended June 30, 2022 in a number of LTIP
Units equal to (i) the dollar amount of the portion of the Quarterly ASA
Reimbursement payable in such LTIP Units (calculated by the BRRE Entities as
$284,275.04), divided by (ii) the volume weighted average price per share of the
Company's Class A common stock, $0.01 par value per share (the "Class A Common
Stock"), on the NYSE American on the twenty (20) trading days prior to the
Issuance Date (the "Q2 ASA Reimbursement LTIP Units"), with such Q2 ASA
Reimbursement LTIP Units to vest and become nonforfeitable on the first
anniversary of the Issuance Date (as hereinafter defined).
On August 9, 2022 (the "Issuance Date"), the BRRE Entities calculated, as set
forth in the Administrative Services Agreement, that 10,868 Q2 ASA Reimbursement
LTIP Units would be issued to the BRRE Entities in payment of the Quarterly ASA
Reimbursement, and the Operating Partnership issued 10,868 Q2 ASA Reimbursement
LTIP Units to the BRRE Entities in payment thereof.
The Board authorized the Company, as the General Partner of the Operating
Partnership, to cause the Operating Partnership to issue the Q2 ASA
Reimbursement LTIP Units to the BRRE Entities in reliance upon exemptions from
registration provided by Section 4(a)(2) of the Securities Act of 1933 and
Regulation D. Each of the BRRE Entities has a substantive, pre-existing
relationship with the Company and is an "accredited investor" as defined in
Regulation D.
The Q2 ASA Reimbursement LTIP Units shall vest and become nonforfeitable on the
first anniversary of the Issuance Date, and may convert to units of limited
partnership interest in the Operating Partnership ("OP Units") upon reaching
capital account equivalency with the OP Units held by the Company, and may then
be redeemed for cash or, at the option of the Company and after a one year
holding period (including any period during which the Q2 ASA Reimbursement LTIP
Units were held), settled in shares of Class A Common Stock. The BRRE Entities
will be entitled to receive "distribution equivalents" with respect to the Q2
ASA Reimbursement LTIP Units at the time distributions are paid to the holders
of Class A Common Stock.
Quarterly Reimbursement under Leasehold Cost-Sharing Agreement
On February 15, 2019, the Company entered into a Leasehold Cost-Sharing
Agreement (the "Cost-Sharing Agreement") with the BRRE Entities with respect to
the corporate space subleased by the Company and the BRRE Entities (the
"Sublease") located at 1345 Avenue of the Americas, New York, New York (the "NY
Premises"), which serves as the Company's headquarters. The Sublease permits the
Company, the BRRE Entities and certain of their respective subsidiaries and/or
affiliates to share occupancy of the NY Premises. The Cost-Sharing Agreement
provides for the allocation and sharing between the Company and the BRRE
Entities of the costs under the Sublease, including costs associated with tenant
improvements (collectively, "Sublease Costs").
Pursuant to the Cost-Sharing Agreement, the BRRE Entities are entitled to
quarterly reimbursement by the Company for the Company's share of Sublease Costs
attributable to such quarter (each, a "Quarterly CSA Reimbursement"), the
calculation of which is reviewed by the Board, and which is payable either in
cash or in LTIP Units, at the election of the Board.
The Board, including its independent directors, having reviewed the calculation
of the Quarterly CSA Reimbursement for the three months ended June 30, 2022 as
provided by the BRRE Entities, authorized and approved payment of the Quarterly
CSA Reimbursement for the three months ended June 30, 2022 in a number of LTIP
Units equal to (i) the dollar amount of the portion of the Quarterly CSA
Reimbursement payable in such LTIP Units (calculated by the BRRE Entities as
$191,269.47), divided by (ii) the volume weighted average price per share of
Class A Common Stock on the NYSE American on the twenty (20) trading days prior
to the Issuance Date (the "Q2 CSA Reimbursement LTIP Units"), with such Q2 CSA
Reimbursement LTIP Units to vest and become nonforfeitable on the first
anniversary of the Issuance Date.
On the Issuance Date of August 9, 2022, the BRRE Entities calculated, as set
forth in the Cost-Sharing Agreement, that 7,313 Q2 CSA Reimbursement LTIP Units
would be issued to the BRRE Entities in payment of the Quarterly CSA
Reimbursement, and the Operating Partnership issued 7,313 Q2 CSA Reimbursement
LTIP Units to the BRRE Entities in payment thereof.
The Board authorized the Company, as the General Partner of the Operating
Partnership, to cause the Operating Partnership to issue the Q2 CSA
Reimbursement LTIP Units to the BRRE Entities in reliance upon exemptions from
registration provided by Section 4(a)(2) of the Securities Act of 1933 and
Regulation D. Each of the BRRE Entities has a substantive, pre-existing
relationship with the Company and is an "accredited investor" as defined in
Regulation D.
The Q2 CSA Reimbursement LTIP Units shall vest and become nonforfeitable on the
first anniversary of the Issuance Date, and may convert to OP Units upon
reaching capital account equivalency with the OP Units held by the Company, and
may then be redeemed for cash or, at the option of the Company and after a one
year holding period (including any period during which the Q2 CSA Reimbursement
LTIP Units were held), settled in shares of Class A Common Stock. The BRRE
Entities will be entitled to receive "distribution equivalents" with respect to
the Q2 CSA Reimbursement LTIP Units at the time distributions are paid to the
holders of Class A Common Stock.
Quarterly Payment of Certain Salaries in Equity
As previously disclosed in the Form 10-K filed by the Company with the
Securities and Exchange Commission (the "SEC") on February 24, 2020, the amended
and restated employment agreements with each of R. Ramin Kamfar ("Mr. Kamfar")
and Jordan B. Ruddy ("Mr. Ruddy") set forth, respectively, the terms and
conditions of Mr. Kamfar's service as our Chief Executive Officer and Chairman
of our Board of Directors, and Mr. Ruddy's service as our Chief Operating
Officer and President, and provide that each of Messrs. Kamfar and Ruddy will
receive an annual base salary in an amount to be determined annually by the
compensation committee (the "Compensation Committee") of the Board, subject to
certain minimum amounts (collectively, the "Base Salaries," and each, a "Base
Salary"). As previously disclosed in the Form 8-K filed by the Company with the
SEC on March 4, 2022 (the "Prior 8-K"), for the fiscal year ending December 31,
2022, the Compensation Committee approved a Base Salary for Mr. Kamfar of
$750,000, and a Base Salary for Mr. Ruddy of $400,000. The Compensation
Committee further approved, and each of Mr. Kamfar and Mr. Ruddy formally
elected and agreed to receive, and the Company agreed to pay, (a) 98.0% of the
Base Salary of Mr. Kamfar for the fiscal year ending December 31, 2022, and (b)
83.0% of the Base Salary of Mr. Ruddy for such fiscal year, in Company equity
rather than in cash, as more specifically set forth in the Prior 8-K. The
payment of the Base Salaries to each of Mr. Kamfar and Mr. Ruddy primarily in
Company equity rather than in cash reflects a change in the form of payment
only; the amounts of Mr. Kamfar and Mr. Ruddy's respective Base Salaries for the
fiscal year ending December 31, 2022 remain unchanged.
On August 9, 2022 (the "Q3 LTIP Date of Grant"), the Company granted (a) to Mr.
Kamfar, 7,025 LTIP Units in payment of 98.0% of the portion of the Base Salary
payable to Mr. Kamfar for the period from July 1, 2022 through September 30,
2022, and (b) to Mr. Ruddy, 3,174 LTIP Units in payment of 83.0% of the portion
of the Base Salary payable to Mr. Ruddy for such period; in each case, as a
grant of equity incentive compensation under the Company's Fourth Amended and
Restated 2014 Equity Incentive Plan for Individuals (the "Plan") in the form of
LTIP Units, with the remainder, in each case, payable in cash. The number of
LTIP Units granted to each of Mr. Kamfar and Mr. Ruddy on the Q3 LTIP Date of
Grant was determined by dividing the dollar value of each such grant by the
volume-weighted average closing price per share of Class A Common Stock for the
twenty (20) trading days preceding the Q3 LTIP Date of Grant. Each such grant to
each of Messrs. Kamfar and Ruddy was evidenced by an LTIP Unit Vesting
Agreement. Each LTIP Unit so granted will become vested and nonforfeitable on
the first anniversary of the Q3 LTIP Date of Grant, and was issued in accordance
with, and will be subject to, the terms of the Plan.
The LTIP Units so granted may convert to OP Units upon reaching capital account
equivalency with the OP Units held by the Company, and may then be redeemed for
cash or, at the option of the Company and after a one year holding period
(including any period during which the LTIP Units were held), settled in shares
of Class A Common Stock.
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