SIXTH AMENDMENT TO THE SECOND AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF BLUEROCK RESIDENTIAL HOLDINGS, L.P. DESIGNATION OF 7.125% SERIES D CUMULATIVE PREFERRED UNITS October 11, 2016

EX-10.1 6 v450438_ex10-1.htm EXHIBIT 10.1

Exhibit 10.1

SIXTH AMENDMENT TO THE

SECOND AMENDED AND RESTATED

AGREEMENT OF LIMITED PARTNERSHIP OF

BLUEROCK RESIDENTIAL HOLDINGS, L.P.

DESIGNATION OF 7.125% SERIES D

CUMULATIVE PREFERRED UNITS

October 11, 2016

Pursuant to Section 4.02 and Article XI of the Second Amended and Restated Agreement of Limited Partnership of Bluerock Residential Holdings, L.P. (the “Partnership Agreement”), the General Partner hereby amends the Partnership Agreement as follows in connection with the issuance of up to 3,105,000 shares of 7.125% Series D Cumulative Preferred Stock, $0.01 par value per share (the “Series D Preferred Stock”) of Bluerock Residential Growth REIT, Inc. and the issuance to the General Partner of Series D Preferred Units (as defined below) in exchange for the contribution by the General Partner of the net proceeds from the issuance and sale of the Series D Preferred Stock:

1. Designation and Number. A series of Preferred Units (as defined below), designated the “7.125% Series D Cumulative Preferred Units” (the “Series D Preferred Units”), is hereby established. The number of authorized Series D Preferred Units shall be 4,000,000.

2. Defined Terms. Capitalized terms used herein and not otherwise defined shall have the meanings given to such terms in the Partnership Agreement. The following defined terms used in this Amendment to the Partnership Agreement shall have the meanings specified below:

“Articles Supplementary” means the Articles Supplementary of the General Partner filed with the State Department of Assessments and Taxation of the State of Maryland on October 11, 2016, designating the terms, rights and preferences of the Series D Preferred Stock.

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

“Business Day” shall have the meaning provided in Section 5(a).

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

“Change of Control/Delisting Conversion Date” shall have the meaning provided in the Articles Supplementary.

“Change of Control/Delisting Conversion Right” shall have the meaning provided in Section 9(b)(i).

“Class A Common Share Price” shall have the meaning provided in the Articles Supplementary.

“Common Stock” means shares of the General Partner’s Class A common stock, par value $0.01 per share.

“Common Unit Economic Balance” shall have the meaning provided in Section 10(g).

“Distribution Period” hall have the meaning provided in Section 5(a).

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

“Economic Capital Account Balance” shall have the meaning provided in Section 10(g).

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

“Liquidating Gains” shall have the meaning provided in Section 10(g).

“Loss” shall have the meaning provided in Section 10(h).

“Net Operating Income” shall have the meaning provided in Section 10(f).

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

“Partnership Agreement” shall have the meaning provided in the recital above.

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

“Profit” shall have the meaning provided in Section 10(h).

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

“Regular Redemption Right” shall have the meaning provided in Section 7(b)(i).

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

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

“Series D Preferred Stock” shall have the meaning provided in the recital above.

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

“Share Cap” shall have the meaning provided in the Articles Supplementary.

“Special Redemption Price” shall have the meaning provided in Section 7(c)(i).

“Special Redemption Right” shall have the meaning provided in Section 7(c)(i).

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

4. Rank. The Series D Preferred Units will, with respect to distribution rights and rights upon liquidation, dissolution or winding up of the Partnership, rank (a) senior to all classes or series of Common Units of the Partnership and any class or series of Preferred Units expressly designated as ranking junior to the Series D Preferred Units as to distribution rights and rights upon liquidation, dissolution or winding up of the Partnership (together with the Common Units, the “Junior Units”); (b) on a parity with any class or series of Preferred Units issued by the Partnership expressly designated as ranking on a parity with the Series D Preferred Units, including the Series A Preferred Units, Series B Preferred Units, and Series C Preferred Units, as to distribution rights and rights upon liquidation, dissolution or winding up of the Partnership (the “Parity Preferred Units”); and (c) junior to any class or series of Preferred Units issued by the Partnership expressly designated as ranking senior to the Series D Preferred Units with respect to distribution rights and rights upon liquidation, dissolution or winding up of the Partnership. The term “Preferred Units” does not include convertible or exchangeable debt securities of the Partnership, which will rank senior to the Series D Preferred Units prior to conversion or exchange. The Series D Preferred Units will also rank junior in right or payment to the Partnership’s existing and future indebtedness.

5. Distributions.

(a) Subject to the preferential rights of holders of any class or series of Preferred Units of the Partnership expressly designated as ranking senior to the Series D Preferred Units as to distributions, the holders of Series D Preferred Units shall be entitled to receive, when, as and if authorized by the General Partner and declared by the Partnership, out of funds of the Partnership legally available for payment of distributions, cumulative cash distributions at the rate of 7.125% per annum of the Base Liquidation Preference (as defined below) per unit (equivalent to a fixed annual amount of $1.78125 per unit) (the “Series D Preferred Return”) from and including the date of original issue of the Series D Preferred Units (or the first day following the end of the most recent Distribution Period for which distributions on the Series D Preferred Units have been paid). Distributions on the Series D Preferred Units shall accrue and be cumulative from (and including) the date of original issue of any Series D Preferred Units or the first day following the end of the most recent Distribution Period for which distributions have been paid, and shall be payable quarterly, in equal amounts, in arrears, on or about the 5^th day of each January, April, July and October of each year (or, if not a business day, the immediately preceding Business Day (each a “Series D Preferred Distribution Payment Date”) for the period ending on such Series D Preferred Distribution Payment Date, commencing on January 5, 2017. A “Distribution Period” is the respective period commencing on and including January 1, April 1, July 1 and October 1 of each year and ending on and including the day preceding the first day of the next succeeding Distribution Period (other than the initial Distribution Period and the Distribution Period during which any Series D Preferred Units shall be redeemed or otherwise acquired by the Partnership). 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. The amount of any distribution payable on the Series D Preferred Units for any Distribution Period will be computed on the basis of twelve 30-day months and a 360-day year. Distributions will be payable to holders of record of the Series D Preferred Units as they appear on the records of the Partnership at the close of business on the 25^th day of the month preceding the applicable Series D Preferred Distribution Payment Date, i.e., December 25, March 25, June 25 and September 25 (each, a “Distribution Record Date”).

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

(c) Notwithstanding anything to the contrary contained herein, distributions on the Series D Preferred Units will accrue whether or not the restrictions referred to in Section 5(b) exist, whether or not the Partnership has earnings, whether or not there are funds legally available for the payment of such distributions and whether or not such distributions are authorized or declared. No interest, or sum of money in lieu of interest, will be payable in respect of any distribution on the Series D Preferred Units which may be in arrears. When distributions are not paid in full upon the Series D Preferred Units and any Parity Preferred Units (or a sum sufficient for such full payment is not so set apart), all distributions declared upon the Series D Preferred Units and any Parity Preferred Units shall be declared pro rata so that the amount of distributions declared per Series D Preferred Unit and such Parity Preferred Units shall in all cases bear to each other the same ratio that accumulated distributions per Series D Preferred Unit and such Parity Preferred Units (which shall not include any accrual in respect of unpaid distributions for prior distributions periods if such Parity Preferred Units do not have a cumulative distribution) bear to each other.

(d) Except as provided in the immediately preceding paragraph, unless full cumulative distributions on the Series D Preferred Units 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 all past Distribution Periods that have ended, no distributions (other than a distribution in Junior Units or in options, warrants or rights to subscribe for or purchase any such Junior Units) shall be declared and paid or declared and set apart for payment nor shall any other distribution be declared and made upon the Junior Units or the Parity Preferred Units, nor shall any Junior Units or Parity Preferred Units 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 Units) by the Partnership (except (i) by conversion into or exchange for Junior Units, (ii) the purchase of Series D Preferred Units, Junior Units or Parity Preferred Units in connection with a redemption of stock pursuant to the Charter to the extent necessary to preserve the Corporation’s qualification as a REIT or (iii) the purchase of Parity Preferred Units pursuant to a purchase or exchange offer made on the same terms to holders of all outstanding Series D Preferred Units). Holders of the Series D Preferred Units shall not be entitled to any distribution, whether payable in cash, property or units, in excess of full cumulative distributions on the Series D Preferred Units as provided above. Any distribution made on the Series D Preferred Units shall first be credited against the earliest accrued but unpaid distribution due with respect to such units which remains payable. Accrued but unpaid distributions on the Series D Preferred Units will accrue as of the Series D Preferred Distribution Payment Date on which they first become payable.

(e) For the avoidance of doubt, in determining whether a distribution (other than upon voluntary or involuntary liquidation) by distribution, redemption or other acquisition of the Partnership Units is permitted under Delaware law, no effect shall be given to the amounts that would be needed, if the Partnership were to be dissolved at the time of the distribution, to satisfy the preferential rights upon distribution of holders of Partnership Units whose preferential rights are superior to those receiving the distribution.

6. Liquidation Preference. Upon any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Partnership, the holders of Series D Preferred Units are entitled to be paid out of the assets of the Partnership legally available for distribution to its partners, after payment of or provision for the Partnership’s debts and other liabilities, a liquidation preference of $25.00 per unit (the “Base Liquidation Preference”), plus an amount equal to any accrued but unpaid distributions (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 Units. If the assets of the Partnership legally available for distribution to partners are insufficient to pay in full the liquidation preference on the Series D Preferred Units and the liquidation preference on any Parity Preferred Units, all assets distributed to the holders of the Series D Preferred Units and any Parity Preferred Units shall be distributed pro rata so that the amount of assets distributed per Series D Preferred Units and such Parity Preferred Units shall in all cases bear to each other the same ratio that the liquidation preference per Series D Preferred Unit and such Parity Preferred Units bear to each other. Written notice of any distribution in connection with any such liquidation, dissolution or winding up of the affairs of the Partnership, stating the payment date or dates when, and the place or places where, the amounts distributable in such circumstances shall be payable, shall be given by first class mail, postage pre-paid, not less than 30 nor more than 60 days prior to the payment date stated therein, to each record holder of the Series D Preferred Units at the respective addresses of such holders as the same shall appear on the records of the Partnership. After payment of the full amount of the liquidating distributions to which they are entitled, the holders of Series D Preferred Units will have no right or claim to any of the remaining assets of the Partnership. The consolidation or merger of the Partnership with or into another entity, a merger of another entity with or into the Partnership, a statutory exchange by the Partnership or a sale, lease, transfer or conveyance of all or substantially all of the Partnership’s property or business shall not be deemed to constitute a liquidation, dissolution or winding up of the affairs of the Partnership.

7. Redemption.

(a) The Series D Preferred Units are not redeemable except as otherwise provided in this Section 7.

(b) Redemption by the Partnership.

(i) On and after October 13, 2021, if and when the General Partner exercises its option to redeem Series D Preferred Shares as provided in Section 5 of the Articles Supplementary, the Partnership may redeem some or all of the Series D Preferred Units, for cash, at a redemption price equal to the Base Liquidation Preference (such right, the “Regular Redemption Right”).

(ii) Unless full cumulative distributions on all Series D Preferred Units shall have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment thereof set apart for payment for all past distribution periods, the Partnership shall not purchase or otherwise acquire directly or indirectly for any consideration, nor shall any monies be paid to or be made available for a sinking fund for the redemption of, any Series D Preferred Units (except by conversion into or exchange for, or options, warrants or rights to purchase or subscribe for Junior Units of the Partnership); provided, however, that the foregoing shall not prevent the redemption or purchase of Series D Preferred Units by the Partnership in order to ensure that the General Partner remains qualified as a REIT for federal income tax purposes, or the purchase or acquisition of Series D Preferred Units pursuant to a purchase or exchange offer made on the same terms to holders of all outstanding Series D Preferred Units.

(iii) Immediately prior to any redemption of Series D Preferred Units, the Partnership shall pay, in cash, any accrued but unpaid distributions on the Series D Preferred Units to, and including, the date fixed for redemption (such date, the “Redemption Date”), unless a Redemption Date falls after a Distribution Record Date and prior to the corresponding Series D Preferred Distribution Payment Date, in which case each holder of Series D Preferred Units at the close of business on such Distribution Record Date shall be entitled to the distribution payable on such units on the corresponding Series D Preferred Distribution Payment Date (including any accrued but unpaid distributions for prior distribution periods) notwithstanding the redemption of such units before such Series D Preferred Distribution Payment Date. Except as provided above, the Partnership will make no payment or allowance for unpaid distributions, whether or not in arrears, on Series D Preferred Units for which a notice of redemption has been given.

(iv) Notice of redemption of the Series D Preferred Units shall be consistent with the notice procedures set forth in Section 5 of the Articles Supplementary.

(v) Holders of Series D Preferred Units to be redeemed shall surrender such Series D Preferred Units at the place or places designated in such notice and, upon surrender of the units, such Series D Preferred Units shall be redeemed by the Partnership at the redemption price plus any accrued but unpaid distributions payable upon such redemption. If notice of redemption of any of the Series D Preferred Units has been given and if the funds necessary for such redemption have been set apart by the Partnership for the benefit of the holders of any Series D Preferred Units so called for redemption, then, from and after the Redemption Date, distributions will cease to accrue on such Series D Preferred Units, such Series D Preferred Units shall no longer be deemed outstanding and all rights of the holders of such Series D Preferred Units will terminate, except the right to receive the redemption price and any accrued but unpaid distributions to, and including, the Redemption Date; provided, however, if the Redemption Date falls after a Distribution Record Date and prior to the corresponding Series D Preferred Distribution Payment Date, each holder of Series D Preferred Units so called for redemption at the close of business on such Distribution Record Date shall be entitled to the distribution payable on such units on the corresponding Series D Preferred Distribution Payment Date notwithstanding the redemption of such units before such Series D Preferred Distribution Payment Date.

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

(i) Upon the occurrence of a Change of Control/Delisting, if and when the General Partner exercises its option to redeem Series D Preferred Shares as provided in Section 6 of the Articles Supplementary, the Partnership will redeem all or any part of the Series D Preferred Units at any time within 120 days after the date on which the Change of Control/Delisting has occurred (the “Special Redemption Right”), for cash equal to the Base Liquidation Preference (the “Special Redemption Price”). If, prior to the Change of Control/Delisting Conversion Date, the Partnership exercises its Regular Redemption Right or Special Redemption Right in connection with a Change of Control/Delisting, holders of the Series D Preferred Units shall not be permitted to exercise their Change of Control/Delisting Conversion Right (as defined in Section 9(b)(i) below).

(iii) Immediately prior to any redemption of Series D Preferred Units, the Partnership shall pay, in cash, any accrued but unpaid distributions on the Series D Preferred Units to, and including, the Redemption Date, unless a Redemption Date falls after a Distribution Record Date and prior to the corresponding Series D Preferred Distribution Payment Date, in which case each holder of Series D Preferred Units at the close of business on such Distribution Record Date shall be entitled to the distribution payable on such units on the corresponding Series D Preferred Distribution Payment Date (including any accrued but unpaid distributions for prior distribution periods) notwithstanding the redemption of such units before such Series D Preferred Distribution Payment Date. Except as provided above, the Partnership will make no payment or allowance for unpaid distributions, whether or not in arrears, on Series D Preferred Units for which a notice of redemption has been given.

(iv) Notice of redemption of the Series D Preferred Units shall be consistent with the notice procedures set forth in Section 6 of the Articles Supplementary.

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

9. Conversion.

(a) The Series D Preferred Units are not convertible or exchangeable for any other property or securities, except as provided herein.

(b) Conversion Upon a Change of Control/Delisting

(i) Upon the occurrence of a Change of Control/Delisting, each holder of the Series D Preferred Units shall have the right (the “Change of Control/Delisting Conversion Right”), subject to the Regular Redemption Right and Special Redemption Right of the Partnership, to convert some or all of the Series D Preferred Units held by such holder on the relevant Change of Control/Delisting Conversion Date into a number of Common Units per Series D Preferred Unit equal to the lesser of (A) the quotient obtained by dividing (1) the sum of (x) the Base Liquidation Preference, plus (y) any accrued but unpaid distributions thereon to, and including, the Change of Control/Delisting Conversion Date, unless the Change of Control/Delisting Conversion Date is after a Distribution Record Date for Series D Preferred Distribution Payment Date for which distributions have been declared and prior to the corresponding Series D Preferred Distribution Payment Date, in which case no additional amount for such accrued but unpaid distribution will be included in this sum and such declared distribution will instead be paid, on such Series D Preferred Distribution Payment Date, to the holder of record of the Series D Preferred Units to be converted as of 5:00 p.m. New York time, on such Distribution Record Date), by (2) the Class A Common Share Price, and (B) the Share Cap.

(ii) Notice of occurrence of the Change of Control/Delisting shall be consistent with the notice procedures set forth in Section 7(b) of the Articles Supplementary.

(iii) Exercise of the Change of Control/Delisting Conversion Right shall be consistent with the procedures set forth in Section 7 of the Articles Supplementary.

(iv) No fractional Common Units shall be issued upon conversion of the Series D Preferred Units. In lieu of fractional units, holders of the Series D Preferred Units shall be entitled to receive the cash value of such fractional units based on the Class A Common Share Price.

(v) The Partnership will deliver all Common Units (including, without limitation, cash in lieu of fractional Common Units) and any other property owning upon conversion no later than the fourth (4th) Business Day following the Change of Control/Delisting Conversion Date.

10. Allocation of Profit and Loss.

Article V, Section 5.01 of the Partnership Agreement is hereby deleted in its entirety and the following new Section 5.01 is inserted in its place:

(a) Profit. After giving effect to the special allocations set forth in Section 5.01(c), (d), and (e) hereof, and subject to Section 5.01(f), Profit of the Partnership for each fiscal year of the Partnership shall be allocated to the Partners in accordance with their respective Percentage Interests.

(b) Loss. After giving effect to the special allocations set forth in Section 5.01(c), (d), and (e) hereof, and subject to Section 5.01(f), Loss of the Partnership for each fiscal year of the Partnership shall be allocated to the Partners in accordance with their respective Percentage Interests.

(c) Minimum Gain Chargeback. Notwithstanding any provision to the contrary, (i) any expense of the Partnership that is a “nonrecourse deduction” within the meaning of Regulations Section 1.704-2(b)(1) shall be allocated in accordance with the Partners’ respective Percentage Interests, (ii) any expense of the Partnership that is a “partner nonrecourse deduction” within the meaning of Regulations Section 1.704-2(i)(2) shall be allocated to the Partner that bears the “economic risk of loss” of such deduction in accordance with Regulations Section 1.704-2(i)(1), (iii) if there is a net decrease in Partnership Minimum Gain within the meaning of Regulations Section 1.704-2(f)(1) for any Partnership taxable year, then, subject to the exceptions set forth in Regulations Section 1.704-2(f)(2),(3), (4) and (5), items of gain and income shall be allocated among the Partners in accordance with Regulations Section 1.704-2(f) and the ordering rules contained in Regulations Section 1.704-2(j), and (iv) if there is a net decrease in Partner Nonrecourse Debt Minimum Gain within the meaning of Regulations Section 1.704-2(i)(4) for any Partnership taxable year, then, subject to the exceptions set forth in Regulations Section 1.704(2)(g), items of gain and income shall be allocated among the Partners in accordance with Regulations Section 1.704-2(i)(4) and the ordering rules contained in Regulations Section 1.704-2(j). The manner in which it is reasonably expected that the deductions attributable to nonrecourse liabilities will be allocated for purposes of determining a Partner’s share of the nonrecourse liabilities of the Partnership within the meaning of Regulations Section 1.752-3(a)(3) shall be in accordance with a Partner’s Percentage Interest.

(d) Qualified Income Offset. If a Partner receives in any taxable year an adjustment, allocation or distribution described in subparagraphs (4), (5) or (6) of Regulations Section 1.704-1(b)(2)(ii)(d) that causes or increases a deficit balance in such Partner’s Capital Account that exceeds the sum of such Partner’s shares of Partnership Minimum Gain and Partner Nonrecourse Debt Minimum Gain, as determined in accordance with Regulations Sections 1.704-2(g) and 1.704-2(i), such Partner shall be allocated specially for such taxable year (and, if necessary, later taxable years) items of income and gain in an amount and manner sufficient to eliminate such deficit Capital Account balance as quickly as possible as provided in Regulations Section 1.704-1(b)(2)(ii)(d). After the occurrence of an allocation of income or gain to a Partner in accordance with this Section 5.01(d), to the extent permitted by Regulations Section 1.704-1(b), items of expense or loss shall be allocated to such Partner in an amount necessary to offset the income or gain previously allocated to such Partner under this Section 5.01(d).

(e) Capital Account Deficits. Loss shall not be allocated to a Limited Partner to the extent that such allocation would cause a deficit in such Partner’s Capital Account (after reduction to reflect the items described in Regulations Section 1.704-1(b)(2)(ii)(d)(4), (5) and (6)) to exceed the sum of such Partner’s shares of Partnership Minimum Gain and Partner Nonrecourse Debt Minimum Gain. Any Loss in excess of that limitation shall be allocated to the General Partner. After the occurrence of an allocation of Loss to the General Partner in accordance with this Section 5.01(e), to the extent permitted by Regulations Section 1.704-1(b), Profit shall be allocated to such Partner in an amount necessary to offset the Loss previously allocated to each Partner under this Section 5.01(e).

(f) Priority Allocations With Respect To Preferred Units. After giving effect to the allocations set forth in Sections 5.01(c), (d), and (e) hereof, but before giving effect to the allocations set forth in Sections 5.01(a) and 5.01(b), Net Operating Income shall be allocated to the General Partner until the aggregate amount of Net Operating Income allocated to the General Partner under this Section 5.01(f) for the current and all prior years equals the aggregate amount of the Series A Preferred Return, Series B Preferred Return, Series C Preferred Return, and Series D Preferred Return paid to the General Partner for the current and all prior years; provided, however, that the General Partner may, in its discretion, allocate Net Operating Income based on accrued Series A Preferred Return, Series B Preferred Return, Series C Preferred Return, and Series D Preferred Return with respect to the January Series A Preferred Distribution Payment Date, Series B Preferred Distribution Payment Date, Series C Preferred Distribution Payment Date, or Series D Preferred Distribution Payment Date if the General Partner sets the Distribution Record Date for such Series A Preferred Distribution Payment Date, Series B Preferred Distribution Payment Date, Series C Preferred Distribution Payment Date, or Series D Preferred Distribution Payment Date on or prior to December 31 of the previous year. For purposes of this Section 5.01(f), “Net Operating Income” means the excess, if any, of the Partnership’s gross income over its expenses (but not taking into account depreciation, amortization, or any other noncash expenses of the Partnership), calculated in accordance with the principles of Section 5.01(h) hereof.

(g) Special Allocations Regarding LTIP Units. Notwithstanding the provisions of Sections 5.01(a) and (b) hereof, Liquidating Gains shall first be allocated to the LTIP Unitholders until their Economic Capital Account Balances, to the extent attributable to their ownership of LTIP Units, are equal to (i) the Common Unit Economic Balance, multiplied by (ii) the number of their LTIP Units. For this purpose, “Liquidating Gains” means net capital gains realized in connection with the actual or hypothetical sale of all or substantially all of the assets of the Partnership, including but not limited to net capital gain realized in connection with an adjustment to the value of Partnership assets under Section 704(b) of the Code. The “Economic Capital Account Balance” of the LTIP Unit holders will be equal to their respective Capital Account balance to the extent attributable to their ownership of LTIP Units. Similarly, the “Common Unit Economic Balance” shall mean (i) the Capital Account balance of the General Partner, plus the amount of the General Partner’s share of any Partner Nonrecourse Debt Minimum Gain or Partnership Minimum Gain, in either case to the extent attributable to the General Partner’s direct or indirect ownership of Common Units and computed on a hypothetical basis after taking into account all allocations through the date on which any allocation is made under this Section 5.01(g), divided by (ii) the number of Common Units directly or indirectly owned by the General Partner. Any such allocations shall be made among the LTIP Unitholders in proportion to the amounts required to be allocated to each under this Section 5.01(g). The parties agree that the intent of this Section 5.01(g) is to make the Capital Account balance associated with each LTIP Unit be economically equivalent to the Capital Account balance associated with Common Units directly or indirectly owned by the General Partner (on a per-Unit basis).

(h) Definition of Profit and Loss. “Profit” and “Loss” and any items of income, gain, expense or loss referred to in this Agreement shall be determined in accordance with federal income tax accounting principles, as modified by Regulations Section 1.704-1(b)(2)(iv), except that Profit and Loss shall not include items of income, gain and expense that are specially allocated pursuant to Sections 5.01(c), 5.01(d), 5.01(e), or 5.01(f) hereof. All allocations of income, Profit, gain, Loss and expense (and all items contained therein) for federal income tax purposes shall be identical to all allocations of such items set forth in this Section 5.01, except as otherwise required by Section 704(c) of the Code and Regulations Section 1.704-1(b)(4). With respect to properties acquired by the Partnership, the General Partner shall have the authority to elect the method to be used by the Partnership for allocating items of income, gain and expense as required by Section 704(c) of the Code with respect to such properties, and such election shall be binding on all Partners.

(i) Allocations Between Transferor and Transferee. If a Partner transfers any part or all of its Partnership Interest, the distributive shares of the various items of Profit and Loss allocable among the Partners during such fiscal year of the Partnership shall be allocated between the transferor and the transferee Partner either (i) as if the Partnership’s fiscal year had ended on the date of the transfer, or (ii) based on the number of days of such fiscal year that each was a Partner without regard to the results of Partnership activities in the respective portions of such fiscal year in which the transferor and the transferee were Partners. The General Partner, in its sole and absolute discretion, shall determine which method shall be used to allocate the distributive shares of the various items of Profit and Loss between the transferor and the transferee Partner.

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

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

	GENERAL PARTNER:

	BLUEROCK RESIDENTIAL GROWTH REIT, INC.
	a Maryland corporation

	By:	/s/ Michael L. Konig
	Name:	Michael L. Konig
	Title:	Chief Operating Officer, Secretary and General Counsel

[Signature page for Amendment re: Series D Preferred Units – October 2016]