ITEM
1.01 Entry into a Material Definitive Agreement
On
July 28, 2016, Performance Realty Management, LLC (“Performance Realty”) was issued 439,401 shares of common stock
in the Company pursuant to a Designation and Acceptance of Rights (the “Designation”) entered into between Performance
Realty, the Company, and the “Designor” under the Designation - Sean Zarinegar, who is the Chairman of the Board and
Chief Financial Officer for American Housing Income Trust, Inc. (the “Company”).
The
Designation had been unanimously approved by the Company’s Board of Directors with Mr. Zarinegar abstaining from vote. This
issuance resulted in Performance Realty owning 1,439,401 shares of issued and outstanding common stock in the Company, of which
1,000,000 shares issued on September 28, 2015 were registered as selling shareholder shares with the Company’s registration
statement on Form S-11 with an effective date of June 22, 2016. This issuance did not adjust Mr. Zarinegar’s beneficial
ownership in the Company; however, it did increase Performance Realty’s beneficial ownership to 1,439,401, or 16% (based
on the adjusted issued and outstanding shares set forth herein).
On
August 15, 2016, as part of a restructuring of related parties, Performance Realty and the Company closed on a Stock Exchange
and Restructuring Agreement (the “Exchange Agreement”). Pursuant to the Articles of Amendment to Articles of Organization
of Performance Realty dated April 1, 2016, the Class A Units have preference over the common units in Performance Realty, on,
amongst other things, “…any future reorganization or stock exchange on a pro rata basis, as determined by [Mr. Zarinegar,
as Manager].” Furthermore, pursuant to the disclosures in the Private Offering for Performance Realty under Rule 506(b)
of Regulation D, which resulted in the issuance of 144 (rounded up) Class A Units to forty-eight holders, and Section 3.3(t) of
the Operating Agreement for Performance Realty, which had been attached as an exhibit to the Private Offering, Mr. Zarinegar,
as Manager, was granted limited power of attorney by each Class A Unit holder to vote their respective proxy on any future exchange,
such as the one agreed to in the Exchange Agreement. As a result of the closing of the Exchange Agreement, those prior members
of Performance Realty at Exhibit A of the Exchange Agreement were issued shares of common stock in the Company, which was subsequently
modified through the Consent of the Board of Directors regarding the issuance, and which will be forth in the updated Selling
Shareholder chart in the Post-Effective Amendment No. 1 to the Registration Statement on Form S-11.
Prior
to the Exchange Agreement, Performance Realty had represented that its business model and intent was to expand on its property
management services for other real estate investment trusts, or other property holding and operating companies, similar to the
services rendered as manager of American Realty Partners, LLC, an Arizona limited liability company and wholly-owned subsidiary
of the Company. However, Mr. Zarinegar, as authorized under the Operating Agreement for Performance Realty, determined, exercising
his sound business judgment and discretion, that the Class A Unit holders would benefit from an issuance of shares in the Company
considering the trajectory of the Company’s acquisitions, and the fact that the Company is publicly reporting with the United
States Securities and Exchange Commission (the “SEC”) and trades on the OTCQB marketplace.
The
Company had determined that the exchange of units for stock between related parties under the Exchange Agreement was beneficial
to its overall capital structure. For United States federal income tax purposes, the transactions contemplated in the Exchange
Agreement were intended to qualify as a tax-free reorganization under Section 368 of the Internal Revenue Code of 1986, as amended
(together with all rules and regulations issued thereunder (the “Code”)) and the Exchange Agreement was intended to
be adopted as a plan of reorganization for purposes of Section 368 of the Code. Notwithstanding this intention, Performance Realty
and the Company have advised the Class A Unit members of Performance Realty that it was not passing on whether the exchange actually
qualifies for a tax-free event under the Code; rather, the parties advised the Performance Realty members of the intended treatment
set forth herein.
On
August 8, 2016, the Company and Performance Realty executed the First Amended and Restated Operating Agreement for Performance
Management Realty, LLC (the “Amended OA”). The Amended OA reflects the Company’s acquisition of all of Performance
Realty’s Class A Membership Units as a result of the Stock Exchange and Restructuring Agreement dated August 1, 2016. The
Amended OA is attached here as an exhibit.
