Exhibit 10.1
STANDBY EQUITY DISTRIBUTION AGREEMENT
 
    THIS AGREEMENT dated as of March 26, 2010 (this “Agreement”) between YA
GLOBAL MASTER SPV LTD., a Cayman Islands company (the “Investor”), and SUPERTEL
HOSPITALITY, INC., a corporation organized and existing under the laws of the
State of Virginia (the “Company”).
 
    WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company shall issue and sell to the Investor,
from time to time as provided herein, and the Investor shall purchase from the
Company up to the amount of the Company’s common stock, par value $0.01 per
share (the “Common Stock”) which the Company may sell under its registration
statement on Form S-3 (File No. 333-147310) but not to exceed $10,000,000 except
as otherwise provided herein; and
 
    WHEREAS, the offer and sale of the shares of Common Stock issuable hereunder
has been registered on the Company’s registration statement on Form S-3 (File
No. 333-147310) under the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder (the “Securities Act”).
 
    NOW, THEREFORE, the parties hereto agree as follows:
 
Article I. Certain Definitions
 
Section 1.01      “Additional Shares” shall have the meaning set forth in
Section 2.02(e).
 
Section 1.02      “Advance” shall mean the portion of the Commitment Amount
requested by the Company in the Advance Notice.
 
Section 1.03      “Advance Notice” shall mean a written notice in the form of
Exhibit A attached hereto to the Investor executed by an officer of the Company
and setting forth the Advance amount that the Company requests from the
Investor.
 
Section 1.04      “Advance Notice Date” shall mean each date the Company
delivers (in accordance with Section 2.02(b) of this Agreement) to the Investor
an Advance Notice requiring the Investor to advance funds to the Company,
subject to the terms of this Agreement.  No Advance Notice Date shall be less
than 5 Trading Days after the prior Advance Notice Date.
 
Section 1.05      “Base Prospectus” shall mean the Company’s prospectus
accompanying the Registration Statement.
 
Section 1.06      “Closing” shall mean one of the closings of a purchase and
sale of Common Stock pursuant to Section 2.03.
 
Section 1.07      “Commitment Amount” shall mean the aggregate amount of up to
$10,000,000, subject to adjustment in accordance with Section 2.05; provided
that, the Company shall not effect any sales under this Agreement and the
Investor shall not have the obligation to purchase shares of Common Stock under
this Agreement to the extent that after giving effect to such purchase and sale
the aggregate number of shares of Common Stock issued under this Agreement would
exceed 4,400,464 shares of Common Stock (which is less than 20% of the
22,002,322 outstanding shares of Common Stock as of the date of this  Agreement)
except that such limitation shall not apply in the event that the Company (i)
obtains the approval of its stockholders as required by the applicable rules of
the Principal Market for the Common Stock for issuances of Common Stock in
excess of such amount or (ii) obtains a written opinion from outside counsel to
the Company that such approval is not required, which opinion shall be
reasonably satisfactory to the Investor.
 
Section 1.08      “Commitment Period” shall mean the period commencing on the
Effective Date, and expiring upon the termination of this Agreement in
accordance with Section 10.02.
 
Section 1.09      “Common Stock” shall have the meaning set forth in the
recitals of the Agreement.
 
Section 1.10      “Condition Satisfaction Date” shall have the meaning set forth
in Section 7.01.
 
Section 1.11      “Consolidation Event” shall have the meaning set forth in
Section 6.06.
 
Section 1.12      “Damages” shall mean any loss, claim, damage, liability, costs
and expenses (including, without limitation, reasonable attorney’s fees and
disbursements and costs and expenses of expert witnesses and investigation).
 
Section 1.13      “Effective Date” shall mean the date hereof.
 
Section 1.14      “Environmental Laws” shall have the meaning set forth in
Section 4.12.
 
Section 1.15      “Exchange Act” shall mean the Securities Exchange Act of 1934,
as amended, and the rules and regulations promulgated thereunder.
 
Section 1.16      “Excluded Day” shall have the meaning set forth in Section
2.02(e).
 
Section 1.17      “Initial Disclosure” shall have the meaning set forth in
Section 6.10.
 
Section 1.18      “Market Price” shall mean the lowest daily VWAP of the Common
Stock during the relevant Pricing Period that is greater than or equal to the
Minimum Market Price.
 
Section 1.19      “Material Adverse Effect” shall mean any condition,
circumstance, or situation that may result in, or reasonably be expected to
result in (i) a material adverse effect on the legality, validity or
enforceability of this Agreement or the transactions contemplated herein, (ii) a
material adverse effect on the results of operations, assets, business or
condition (financial or otherwise) of the Company and its subsidiaries, taken as
a whole, or (iii) a material adverse effect on the Company’s ability to perform
in any material respect on a timely basis its obligations under this Agreement.
 
Section 1.20      “Maximum Advance Amount” shall be $500,000 or such other
amount as may be agreed upon by the mutual consent of the parties.
 
Section 1.21      “Minimum Acceptable Price” shall mean, with respect to each
Advance, a price equal to the greater of (i) a price chosen by the Company and
set out in the Advance Notice, (ii) a price equal to fifty percent (50%) of the
VWAP on the Trading Day immediately preceding the date of such Advance Notice,
or (iii) a price equal to the then current par value of the Common Stock.
 
Section 1.22      “Minimum Market Price” shall mean the product obtained by
multiplying the Minimum Acceptable Price by 1.042.
 
Section 1.23      “Net Advance Amount” shall mean the final amount of an Advance
(in each case as reduced, if necessary, pursuant to Section 2.02 and as
increased, if necessary, by the purchase price paid for any Additional Shares
purchased on Excluded Days pursuant to Section 2.02(e)).
 
Section 1.24      “Ownership Limitation” shall have the meaning set forth in
Section 2.02(a).
 
Section 1.25      “Person” shall mean an individual, a corporation, a
partnership, an association, a trust or other entity or organization, including
a government or political subdivision or an agency or instrumentality thereof.
 
Section 1.26      “Preferred Stock” shall have the meaning set forth in Section
4.05.
 
Section 1.27      “Pricing Period” shall mean the 5 consecutive Trading Days
after the Advance Notice Date.
 
Section 1.28      “Principal Market” shall mean the Nasdaq Global Select Market,
the Nasdaq Global Market, the Nasdaq Capital Market, the NYSE Euronext, or the
New York Stock Exchange, whichever is at the time the principal trading exchange
or market for the Common Stock.
 
Section 1.29      “Prospectus” shall mean the Base Prospectus, as supplemented
by any Prospectus Supplement.
 
Section 1.30      “Prospectus Supplement” shall mean any prospectus supplement
to the Base Prospectus filed with the SEC pursuant to Rule 424(b) under the
Securities Act.
 
Section 1.31      “Purchase Price” shall be set at 96% of the Market Price
during the Pricing Period.
 
Section 1.32      “Registration Statement” shall mean the Company’s shelf
registration statement filed by the Company with the SEC under the Securities
Act on Form S-3 (Registration Number 333-147310), with respect to Common Stock,
Preferred Stock and warrants to be offered and sold by the Company, as such
Registration Statement may be amended and supplemented from time to time and
including any information deemed to be a part thereof pursuant to Rule 430B
under the Securities Act or another registration statement on a form promulgated
by the SEC for which the Company then qualifies and which form shall be
available for the registration of the offer and sale of the Shares to the
Investor and any successor shelf registration statement filed by the Company
with the SEC under the Securities Act on a form promulgated by the SEC for which
the Company then qualifies and which form shall be available for the
registration of the sale of Shares to the Investor.
 
Section 1.33      “SEC” shall have the meaning set forth in the recitals of this
Agreement.
 
Section 1.34      “SEC Documents” shall have the meaning set forth in Section
4.07.
 
Section 1.35      “Securities Act” shall have the meaning set forth in the
recitals of this Agreement.
 
Section 1.36      “Settlement Document” shall have the meaning set forth in
Section 2.03(a).
 
Section 1.37      “Shares” shall mean the shares of Common Stock to be issued
from time to time hereunder pursuant to Advances.
 
Section 1.38      “Share Issuance Date” shall mean the second (2nd) Trading Day
after receipt by the Company of the Settlement Document with respect to each
Advance.
 
Section 1.39      “Trading Day” shall mean any day during which the Principal
Market shall be open for business.
 
Section 1.40      “VWAP” means, for any date, the daily volume weighted average
price of the Common Stock for such date on the Principal Market as reported by
Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York City time) to
4:00 p.m. (New York City time)).
 
Article II. Advances
 
Section 2.01      Advances. Subject to the terms and conditions of this
Agreement (including, without limitation, the provisions of Article VII hereof),
the Company, at its sole and exclusive option, may issue and sell to the
Investor, and the Investor shall purchase from the Company, shares of the
Company’s Common Stock by the delivery, in the Company’s sole discretion, of
Advance Notices.
 
Section 2.02      Mechanics.
 
(a)   Advance Notice.  At any time during the Commitment Period, the Company may
require the Investor to purchase shares of Common Stock by delivering an Advance
Notice to the Investor, subject to the conditions set forth in Article VII;
provided, however, that (i) the amount for each Advance as designated by the
Company in the applicable Advance Notice shall not be more than the Maximum
Advance Amount, (ii) the aggregate amount of the Advances pursuant to this
Agreement shall not exceed the Commitment Amount, (iii) in no event shall the
number of shares of Common Stock issuable to the Investor pursuant to an Advance
cause the aggregate number of shares of Common Stock beneficially owned (as
calculated pursuant to Section 13(d) of the Exchange Act) by the Investor and
its affiliates to exceed 4.99% of the then outstanding Common Stock (the
“Ownership Limitation”) (as of the date of this Agreement, Investor and its
affiliates held 0% of the outstanding Common Stock), and (iv) under no
circumstances shall the aggregate offering price or number of Shares, as the
case may be, exceed the aggregate offering price or number of Shares available
for issuance under the Registration Statement (the “Registration Limitation”). 
There shall be a minimum of 5 Trading Days between each Advance Notice Date. 
Notwithstanding any other provision in this Agreement, the Company acknowledges
and agrees that upon receipt of an Advance Notice, the Investor may sell shares
that it is unconditionally obligated to purchase under such Advance Notice prior
to taking possession of such shares.
 
(b)   Date of Delivery of Advance Notice.  Advance Notices shall be delivered in
accordance with the instructions set forth on the bottom of Exhibit A or such
other instructions that the Investor may provide to the Company.  An Advance
Notice shall be deemed delivered on (i) the Trading Day it is received by the
Investor if such notice is received prior to 5:00 pm Eastern Time, or (ii) the
immediately succeeding Trading Day if it is received after 5:00 pm Eastern Time
on a Trading Day or at any time on a day which is not a Trading Day.  No Advance
Notice may be deemed delivered on a day that is not a Trading Day. The Company
acknowledges and agrees that the Investor shall be entitled to treat any email
it receives from officers whose email addresses are identified by the Company
purporting to be an Advance Notice as a duly executed and authorized Advance
Notice from the Company.
 
(c)   Ownership Limitation.  In connection with each Advance Notice delivered by
the Company, any portion of an Advance that would cause the Investor to exceed
the Ownership Limitation shall automatically be withdrawn with no further action
required by the Company.
 
(d)   Registration Limitation.  In connection with each Advance Notice, any
portion of an Advance that would exceed the Registration Limitation shall
automatically be deemed to be withdrawn by the Company with no further action
required by the Company.
 
(e)   Minimum Acceptable Price.       Upon the issuance by the Company of an
Advance Notice with a Minimum Acceptable Price (i) the Company shall
automatically reduce the amount of the Advance set forth in such Advance Notice
by twenty percent (20%) for each Trading Day during the Pricing Period that the
VWAP of the Common Stock is below the Minimum Market Price (each such day, an
“Excluded Day”), and (ii) each Excluded Day shall be excluded from the Pricing
Period for purposes of determining the Market Price.  The number of shares of
Common Stock to be delivered to the Investor at the Closing shall correspond
with the Advance Notice amount as reduced pursuant to clause (i) above, except
that the Investor shall have the right to purchase shares of Common Stock in an
amount up to twenty percent (20%) of the Advance set forth in such Advance
Notice for each such Excluded Day (the “Additional Shares”) at a price equal to
such Minimum Acceptable Price.
 
Section 2.03      Closings.  Each Closing shall take place on each Share
Issuance Date in accordance with the procedures set forth below.  In connection
with each Closing the Company and the Investor shall fulfill each of its
obligations as set forth below:
 
(a)   Within 1 Trading Day after the end of the applicable Pricing Period, the
Investor shall deliver to the Company a written document (each a “Settlement
Document”) setting forth (i) the amount of the Advance (taking into account any
adjustments pursuant to Section 2.01(c), Section 2.01(d) or Section 2.01(e),
(ii) the Net Advance Amount, (iii) the Minimum Acceptable Price (if any) for the
Advance, (iv) the number of Excluded Days (if any) taken into account in
determining the Pricing Period, (v) the Purchase Price for the Shares, (vi) the
Market Price for the Advance (as supported by a report by Bloomberg, LP
indicating the VWAP for each of the Trading Days during the Pricing Period),
(vii) the number of Additional Shares, if any, to be purchased and (viii) the
amount payable to the Company, in each case, taking into account the terms and
conditions of this Agreement.  The Settlement Document shall be substantially in
the form attached hereto as Exhibit B and shall be delivered in accordance with
the instructions set forth on the top of Exhibit B or such other instructions
that the Company may provide to the Investor in writing.
 
(b)   Upon receipt of the Settlement Document with respect to each Advance, the
Company shall, by signing the Settlement Document and returning it to the
Investor, confirm that it has obtained all permits and qualifications required
for the issuance and transfer of the shares of Common Stock applicable to such
Advance, or shall have the availability of exemptions therefrom and that the
sale and issuance of such shares of Common Stock shall be legally permitted by
all laws and regulations to which the Company is subject.
 
(c)   On each Share Issuance Date the Company will, or will cause its transfer
agent to, electronically transfer such number of shares of Common Stock
registered in the name of the Investor as shall equal (x) the amount of the
Advance specified in such Advance Notice (as may be reduced according to the
terms of this Agreement), divided by the Purchase Price and (y) the Additional
Shares, if any, by crediting the Investor’s account or its designee’s account at
the Depository Trust Company through its Deposit Withdrawal Agent Commission
System or by such other means of delivery as may be mutually agreed upon by the
parties hereto (which in all cases shall be freely tradable, registered shares
in good deliverable form) against payment by the Investor of the Net Advance
Amount in same day funds to an account designated by the Company.  No fractional
shares shall be issued, and any fractional amounts shall be rounded to the next
higher whole number of shares.  Any certificates evidencing shares of Common
Stock delivered pursuant hereto shall be free of restrictive legends except for
legends customary for REIT ownership limitations.
 
(d)   On or prior to each Share Issuance Date, each of the Company and the
Investor shall deliver to the other all documents, instruments and writings
required to be delivered by either of them pursuant to this Agreement in order
to implement and effect the transactions contemplated herein.
 
Section 2.04      Hardship.  In the event the Investor sells shares of the
Company’s Common Stock after receipt of an Advance Notice and the Company fails
to perform its obligations as mandated in Section 2.03, the Company agrees that
in addition to and in no way limiting the rights and obligations set forth in
Article V hereto and in addition to any other remedy to which the Investor is
entitled at law or in equity, including, without limitation, specific
performance, it will hold the Investor harmless against any loss, claim, damage,
or expense (including reasonable legal fees and expenses), as incurred, arising
out of or in connection with such default by the Company and acknowledges that
irreparable damage would occur in the event of any such default.  It is
accordingly agreed that the Investor shall be entitled to an injunction or
injunctions to prevent such breaches of this Agreement and to specifically
enforce, without the posting of a bond or other security, the terms and
provisions of this Agreement.
 
Section 2.05      Increase in Commitment Amount.  At any time prior to the one
year anniversary of the Effective Date (the “Commitment Increase Date”) the
Company may notify the Investor in writing that it wishes to increase the
Commitment Amount to $20,000,000 (provided that the Company has the ability to
register the additional Commitment Amount on the Registration Statement)
effective upon the Commitment Increase Date and the Commitment Amount shall
automatically be deemed increased.
 
Section 2.06      Promissory Notes.  After the completion of the first Advance
under this Agreement and thereafter during the Commitment Period, the Company
may at any time and from time to time request the Investor to purchase
promissory notes (each, a “Note”) issued by the Company with a principal amount
of up to $2,000,000.  The Investor shall consider each request in good faith and
may decide in its sole discretion whether or not to purchase such Notes.  Any
such Notes purchased by the Investor will be on terms mutually acceptable to
both the Company and the Investor and will be subject to certain conditions
precedent, including without limitation, the completion of due diligence by the
Investor to its satisfaction.
 
Article III. Representations and Warranties of Investor
 
Investor hereby represents and warrants to, and agrees with, the Company that
the following are true and correct as of the date hereof and as of each Share
Issuance Date:
 
Section 3.01      Organization and Authorization.  The Investor is duly
incorporated or organized and validly existing in the jurisdiction of its
incorporation or organization and has all requisite power and authority to
purchase and hold the securities issuable hereunder.  The decision to invest and
the execution and delivery of this Agreement by such Investor, the performance
by such Investor of its obligations hereunder and the consummation by such
Investor of the transactions contemplated hereby have been duly authorized and
requires no other proceedings on the part of the Investor.  The undersigned has
the right, power and authority to execute and deliver this Agreement and all
other instruments on behalf of the Investor.  This Agreement has been duly
executed and delivered by the Investor and, assuming the execution and delivery
hereof and acceptance thereof by the Company, will constitute the legal, valid
and binding obligations of the Investor, enforceable against the Investor in
accordance with its terms.
 
Section 3.02      Evaluation of Risks.  The Investor has such knowledge and
experience in financial, tax and business matters as to be capable of evaluating
the merits and risks of, and bearing the economic risks entailed by, an
investment in the Company and of protecting its interests in connection with
this transaction.  It recognizes that its investment in the Company involves a
high degree of risk.
 
Section 3.03      No Legal Advice From the Company.  The Investor acknowledges
that it had the opportunity to review this Agreement and the transactions
contemplated by this Agreement with his or its own legal counsel and investment
and tax advisors.  The Investor is relying solely on such counsel and advisors
and not on any statements or representations of the Company or any of its
representatives or agents for legal, tax or investment advice with respect to
this investment, the transactions contemplated by this Agreement or the
securities laws of any jurisdiction.
 
Section 3.04      Investment Purpose. The securities are being purchased by the
Investor for its own account, and for investment purposes.  The Investor agrees
not to assign or in any way transfer the Investor’s rights to the securities or
any interest therein and acknowledges that the Company will not recognize any
purported assignment or transfer except in accordance with applicable Federal
and state securities laws.  No other Person has or will have a direct or
indirect beneficial interest in the securities.  The Investor agrees not to
sell, hypothecate or otherwise transfer the Investor’s securities unless the
securities are registered under Federal and applicable state securities laws or
unless, in the opinion of counsel satisfactory to the Company, an exemption from
such laws is available.
 
Section 3.05      Accredited Investor.  The Investor is an “Accredited Investor”
as that term is defined in Rule 501(a)(3) of Regulation D of the Securities Act.
 
Section 3.06      Information.  The Investor and its advisors (and its counsel),
if any, have been furnished with all materials relating to the business,
finances and operations of the Company and information it deemed material to
making an informed investment decision.  The Investor and its advisors, if any,
have been afforded the opportunity to ask questions of the Company and its
management.  Neither such inquiries nor any other due diligence investigations
conducted by such Investor or its advisors, if any, or its representatives shall
modify, amend or affect the Investor’s right to rely on the Company’s
representations and warranties contained in this Agreement.  The Investor
understands that its investment involves a high degree of risk.  The Investor is
in a position regarding the Company, which, based upon employment, family
relationship or economic bargaining power, enabled and enables such Investor to
obtain information from the Company in order to evaluate the merits and risks of
this investment.  The Investor has sought such accounting, legal and tax advice,
as it has considered necessary to make an informed investment decision with
respect to this transaction.
 
Section 3.07      Receipt of Documents. The Investor and its counsel have
received and read in their entirety: (i) this Agreement and the Exhibits annexed
hereto; (ii) all due diligence and other information request by them to verify
the accuracy and completeness of such representations, warranties and covenants;
(iii) the Company’s Form 10-K for the year ended December 31, 2009; and
(iv) answers to all questions the Investor submitted to the Company regarding an
investment in the Company; and the Investor has relied on the information
contained therein and has not been furnished any other documents, literature,
memorandum or prospectus.
 
Section 3.08      Not an Affiliate.  The Investor is not an officer, director or
a Person that directly, or indirectly through one or more intermediaries,
controls or is controlled by, or is under common control with the Company or any
“Affiliate” of the Company (as that term is defined in Rule 405 of the
Securities Act).
 
Section 3.09      Trading Activities.  The Investor’s trading activities with
respect to the Company’s Common Stock shall be in compliance with all applicable
federal and state securities laws, rules and regulations and the rules and
regulations of the Principal Market on which the Common Stock is listed or
traded.  Neither the Investor nor its affiliates has an open short position in
the Common Stock, the Investor agrees that it shall not, and that it will cause
its affiliates not to, (a) engage in any short sales of the Common Stock or (b)
beneficially own or purchase during the Commitment Period any Common Stock
except for Common Stock purchased pursuant to this Agreement; provided that the
Company acknowledges and agrees that upon receipt of an Advance Notice the
Investor has the right to sell the shares to be purchased by the Investor
pursuant to the Advance Notice prior to taking possession of such Shares.
 
Section 3.10      Standstill Agreement.  The Investor agrees that for a period
of one year from the expiration of the Commitment Period, it will not, provided
the Company has delivered to the Investor all Shares relating to prior Advance
and has not defaulted on any other obligations it has to the Investor and unless
(x) specifically consented to in advance in writing by the Board of Directors of
the Company or (y) required in order to fulfill its obligations to purchase and
sell the Shares as set forth in Article II of this Agreement, directly or
indirectly, in any manner:
 
(a)   make, or in any way participate in, directly or indirectly, alone or in
concert with others, any “solicitation” of “proxies” to vote (as such terms are
used in the proxy rules promulgated pursuant to Section 14 of the Exchange Act),
whether subject to or exempt from the proxy rules, or seek to advise or
influence in any manner whatsoever any person or entity with respect to the
voting of any equity securities of the Company;
 
(b)   form, join or in any way intentionally participate in a “group” within the
meaning of Section 13(d)(3) of the Exchange Act with respect to any voting
equity securities of the Company, other than a group comprised solely of the
Investor and any of its controlling persons;
 
(c)   acquire, offer to acquire or agree to acquire, alone or in concert with
others, by purchase, exchange or otherwise, (i) any of the assets, tangible and
intangible, of the Company or any of its subsidiaries or (ii) direct or indirect
rights, warrants or options to acquire any assets of the Company or any of its
subsidiaries, in each case except for such assets as are then being offered for
sale by the Company or any of its subsidiaries or otherwise are not material to
the operations of the Company or any of its subsidiaries, either individually or
in the aggregate;
 
(d)   otherwise act, alone or in concert with others, to seek to propose to the
Company, any of its subsidiaries or any of their respective shareholders any
merger, business combination, restructuring, recapitalization or other
transaction involving the Company or any of its subsidiaries or otherwise seek,
alone or in concert with others, to control, change or influence the management,
the Board or the policies of the Company or any of its subsidiaries or nominate
any person as a director who is not nominated by the then incumbent directors,
or propose any matter to be voted upon by the shareholders of the Company or any
of its subsidiaries; or
 
(e)   publicly announce an intention to do, or enter into any arrangement or
understanding with others to do, any of the actions restricted or prohibited
under this Section 3.10.
 
Article IV. Representations and Warranties of the Company
 
Except as stated below, on the disclosure schedules attached hereto or in the
SEC Documents (as defined herein), the Company hereby represents and warrants
to, and covenants with, the Investor that the following are true and correct as
of the date hereof and shall be true and correct as of each Share Issuance Date:
 
Section 4.01      Registration Statement and Prospectus.
 
(a)        The Company meets the requirements for use of Form S-3 under the
Securities Act for the offering of the Shares, including, but not limited, to
the transactions requirements for an offering made by the issuer set forth in
Instruction I.B.6 to From S-3.
 
(b)        The Registration Statement, including the Base Prospectus contained
therein, was prepared by the Company in conformity with the requirements of the
Securities Act and all applicable U.S. federal securities laws rules and
regulations.  Any amendment or supplement to the Registration Statement or
Prospectus required by this Agreement will be so prepared and filed by the
Company and, as applicable, the Company will use its reasonable best efforts to
cause it to become effective as soon as reasonably practicable.  No stop order
suspending the effectiveness of the Registration Statement has been issued, and
no proceeding for that purpose has been instituted or, to the knowledge of the
Company, threatened by the SEC.  Any reference herein to the Registration
Statement, the Prospectus, or any amendment or supplement thereto shall be
deemed to refer to and include the documents incorporated (or deemed to be
incorporated) by reference therein pursuant to Item 12 of Form S‑3 under the
Securities Act, and any reference herein to the terms “amend,” “amendment” or
“supplement” with respect to the Registration Statement or Prospectus shall be
deemed to refer to and include the filing after the execution hereof of any
document with the SEC deemed to be incorporated by reference therein.
 
(c)        The Company has not distributed and, prior to the completion of the
distribution of the Shares, shall not distribute any offering material in
connection with the offering and sale of the Shares other than the Registration
Statement, the Base Prospectus as supplemented by any Prospectus Supplement or
such other materials, if any, permitted by the Securities Act.
 
Section 4.02      No Misstatement or Omission.  Each part of the Registration
Statement, when such part became or becomes effective, and the Prospectus, on
the date of filing thereof with the SEC and at each Advance Notice Date and
Closing Date, conformed or will conform in all material respects with the
requirements of the Securities Act and the rules and regulations promulgated
thereunder; each part of the Registration Statement, when such part became or
becomes effective, did not or will not contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein not misleading; and the Prospectus, on the date
of filing thereof with the SEC and at each Advance Notice Date and Share
Issuance Date, did not or will not include an untrue statement of a material
fact or omit to state a material fact necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading; except
that the foregoing shall not apply to statements or omissions in any such
document made in reliance on information furnished in writing to the Company by
the Investor expressly stating that such information is intended for use in the
Registration Statement, the Prospectus, or any amendment or supplement thereto.
 
Section 4.03      Organization and Qualification.  The Company is duly
incorporated or organized and validly existing in the jurisdiction of its
incorporation or organization and has all requisite corporate power to own its
properties and to carry on its business as now being conducted.  The Company is
duly qualified as a foreign corporation to do business and is in good standing
in every jurisdiction in which the nature of the business conducted by it makes
such qualification necessary, except to the extent that the failure to be so
qualified or be in good standing would not have a Material Adverse Effect on the
Company as a whole.
 
Section 4.04      Authorization, Enforcement, Compliance with Other
Instruments.  (i) The Company has the requisite corporate power and authority to
enter into and perform this Agreement and any related agreements, in accordance
with the terms hereof and thereof, (ii) the execution and delivery of this
Agreement and any related agreements by the Company and the consummation by it
of the transactions contemplated hereby and thereby, have been duly authorized
by the Company’s Board of Directors and no further consent or authorization is
required by the Company, its Board of Directors or its stockholders, (iii) this
Agreement and any related agreements have been duly executed and delivered by
the Company, (iv) this Agreement and assuming the execution and delivery thereof
and acceptance by the Investor, any related agreements, constitute the valid and
binding obligations of the Company enforceable against the Company in accordance
with their terms, except as such enforceability may be limited by general
principles of equity or applicable bankruptcy, insolvency, reorganization,
moratorium, liquidation or similar laws relating to, or affecting generally, the
enforcement of creditors’ rights and remedies.
 
Section 4.05      Capitalization.  The authorized capital stock of the Company
consists of 100,000,000 shares of Common Stock and 40,000,000 shares of
preferred stock, $.01 par value per share (“Preferred Stock”), of which
22,002,322 shares of Common Stock and 1,135,770 shares of Preferred Stock are
issued and outstanding.  All of such outstanding shares have been validly issued
and are fully paid and nonassessable.  Except as disclosed in the SEC Documents
or on Schedule 4.05, no shares of Common Stock are subject to preemptive rights
or any other similar rights or any liens or encumbrances suffered or permitted
by the Company.  Except as disclosed in the SEC Documents, as of the date
hereof, (i) there are no outstanding options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, any shares of capital stock of the
Company, or contracts, commitments, understandings or arrangements by which the
Company is or may become bound to issue additional shares of capital stock of
the Company or options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into, any shares of capital stock of the Company, (ii) there are no
outstanding debt securities (iii) there are no outstanding registration
statements other than the Registration Statement, registration statement on Form
S-3 (No. 333-153465), registration statement on Form S-3 (333-138304) or
registration statements on Form S-8, and (iv) there are no agreements or
arrangements under which the Company is obligated to register the sale of any of
their securities under the Securities Act except for shares issued in redemption
of operating units of the Company’s operating partnership or shares issuable
upon exercise of options issued to directors, officers and employees.  Except as
disclosed on Schedule 4.05, there are no securities or instruments containing
anti-dilution or similar provisions that will be triggered by this Agreement or
any related agreement or the consummation of the transactions described herein
or therein.  The Company has furnished or made available to the Investor true
and correct copies of the Company’s Articles of Incorporation, as amended and as
in effect on the date hereof (the “Articles of Incorporation”), and the
Company’s By-laws, as in effect on the date hereof (the “By-laws”), and the
terms of all securities convertible into or exercisable for Common Stock and the
material rights of the holders thereof in respect thereto.
 
Section 4.06      No Conflict.  The execution, delivery and performance of this
Agreement by the Company and the consummation by the Company of the transactions
contemplated hereby will not (i) result in a violation of the Articles of
Incorporation, any certificate of designations of any outstanding series of
Preferred Stock of the Company or By-laws or (ii) conflict with or constitute a
default (or an event which with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any material agreement, indenture or instrument
to which the Company is a party, or result in a violation of any law, rule,
regulation, order, judgment or decree (including federal and state securities
laws and regulations and the rules and regulations of the Principal Market on
which the Common Stock is quoted) applicable to the Company or by which any
material property or asset of the Company is bound or affected and which would
cause a Material Adverse Effect.  Except as disclosed in the SEC Documents,
neither the Company nor its subsidiaries is in violation of any term of or in
default under its Articles of Incorporation or By-laws or their organizational
charter or by-laws, respectively, or any material contract, agreement, mortgage,
indebtedness, indenture, instrument, judgment, decree or order or any statute,
rule or regulation applicable to the Company or its subsidiaries.  The business
of the Company is not being conducted in violation of any material law,
ordinance, regulation of any governmental entity.  Except as specifically
contemplated by this Agreement and as required under the Securities Act and any
applicable state securities laws, and as required by the rules of the Principle
Market, the Company is not required to obtain any consent, authorization or
order of, or make any filing or registration with, any court or governmental
agency in order for it to execute, deliver or perform any of its obligations
under or contemplated by this Agreement in accordance with the terms hereof or
thereof except as such consent, authorization or order has been obtained prior
to the date hereof.  The Company is unaware of any fact or circumstance which
might give rise to any of the foregoing.
 
Section 4.07      SEC Documents; Financial Statements.  The Common Stock is
registered pursuant to Section 12(b) of the Exchange Act and the Company has
filed all reports, schedules, forms, statements and other documents required to
be filed by it with the SEC under the Securities Exchange Act for the two years
preceding the date hereof (or such shorter period as the Company was required by
law or regulation to file such material) (all of the foregoing filed prior to
the date hereof or amended after the date hereof and all exhibits included
therein and financial statements and schedules thereto and documents
incorporated by reference therein, being hereinafter referred to as the “SEC
Documents”) on timely basis or has received a valid extension of such time of
filing and has filed any such SEC Document prior to the expiration of any such
extension.  The Company has delivered to the Investors or their representatives,
or made available through the SEC’s website at http://www.sec.gov, true and
complete copies of the SEC Documents.  As of their respective dates, the SEC
Documents complied in all material respects with the requirements of the
Exchange Act and the rules and regulations of the SEC promulgated thereunder
applicable to the SEC Documents, and none of the SEC Documents, at the time they
were filed with the SEC, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading.  As of their respective dates, the
financial statements of the Company included in the SEC Documents complied as to
form in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto.  Such financial
statements have been prepared in accordance with generally accepted accounting
principles, consistently applied, during the periods involved (except (i) as may
be otherwise indicated in such financial statements or the notes thereto, or
(ii) in the case of unaudited interim statements, to the extent they may exclude
footnotes or may be condensed or summary statements) and fairly present in all
material respects the financial position of the Company as of the dates thereof
and the results of its operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments).  No other information provided by or on behalf of the Company to
the Investor which is not included in the SEC Documents contains any untrue
statement of a material fact or omits to state any material fact necessary in
order to make the statements therein, in the light of the circumstance under
which they are or were made, not misleading.
 
Section 4.08      No Default.  Except as disclosed in the SEC Documents, the
Company is not in default in the performance or observance of any material
obligation, agreement, covenant or condition contained in any indenture,
mortgage, deed of trust or other material instrument or agreement to which it is
a party or by which it is or its property is bound and neither the execution,
nor the delivery by the Company, nor the performance by the Company of its
obligations under this Agreement or any of the exhibits or attachments hereto
will conflict with or result in the breach or violation of any of the terms or
provisions of, or constitute a default or result in the creation or imposition
of any lien or charge on any assets or properties of the Company under its
Articles of Incorporation, By-Laws, any material indenture, mortgage, deed of
trust or other material agreement applicable to the Company or instrument to
which the Company is a party or by which it is bound, or any statute, or any
decree, judgment, order, rules or regulation of any court or governmental agency
or body having jurisdiction over the Company or its properties, in each case
which default, lien or charge is likely to cause a Material Adverse Effect.
 
Section 4.09      Absence of Events of Default.  Except for matters described in
the SEC Documents and/or this Agreement, no Event of Default, as defined in the
respective agreement to which the Company is a party, and no event which, with
the giving of notice or the passage of time or both, would become an Event of
Default (as so defined), has occurred and is continuing, which would have a
Material Adverse Effect.
 
Section 4.10      Intellectual Property Rights.  The Company owns or possess
adequate rights or licenses to use all material trademarks, trade names, service
marks, service mark registrations, service names, patents, patent rights,
copyrights, inventions, licenses, approvals, governmental authorizations, trade
secrets and rights necessary to conduct their respective businesses as now
conducted.  The Company does not have any knowledge of any infringement by the
Company of trademark, trade name rights, patents, patent rights, copyrights,
inventions, licenses, service names, service marks, service mark registrations,
trade secret or other similar rights of others, and, to the knowledge of the
Company, there is no claim, action or proceeding being made or brought against,
or to the Company’s knowledge, being threatened against, the Company regarding
trademark, trade name, patents, patent rights, invention, copyright, license,
service names, service marks, service mark registrations, trade secret or other
infringement; and the Company is unaware of any facts or circumstances which
might give rise to any of the foregoing.
 
Section 4.11      Employee Relations.  The Company is not involved in any labor
dispute nor, to the knowledge of the Company or any of its subsidiaries, is any
such dispute threatened.  None of the Company’s employees is a member of a union
and the Company believes that its relations with its employees are good.
 
Section 4.12      Environmental Laws.  The Company is (i) in compliance with any
and all applicable material foreign, federal, state and local laws and
regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants (“Environmental Laws”), (ii) has received all permits, licenses or
other approvals required of it under applicable Environmental Laws to conduct
its business and (iii) is in compliance with all terms and conditions of any
such permit, license or approval in each case except where such noncompliance or
nonreceipt would not, individually or in the aggregate, have a Material Adverse
Effect.
 
Section 4.13      Title.  Except as set forth in the SEC Documents, the Company
has good and marketable title to its properties and material assets owned by it,
free and clear of any pledge, lien, security interest, encumbrance, claim or
equitable interest other than such as are not material to the business of the
Company.  Any real property and facilities held under lease by the Company held
under valid, subsisting and enforceable leases with such exceptions as are not
material and do not interfere with the use made and proposed to be made of such
property and buildings by the Company.
 
Section 4.14      Insurance.  The Company is insured by insurers of recognized
financial responsibility against such losses and risks and in such amounts as
management of the Company believes to be prudent and customary in the businesses
in which the Company is engaged.  The Company has not been refused any insurance
coverage sought or applied for and the Company has no reason to believe that it
will not be able to renew its existing insurance coverage as and when such
coverage expires or to obtain similar coverage from similar insurers as may be
necessary to continue its business at a cost that would not have a Material
Adverse Effect.
 
Section 4.15      Regulatory Permits.  The Company possesses all material
certificates, authorizations and permits issued by the appropriate federal,
state or foreign regulatory authorities necessary to conduct its businesses and
has not received any notice of proceedings relating to the revocation or
modification of any such certificate, authorization or permit in each case
except where such noncompliance or nonreceipt would not, individually or in the
aggregate, have a Material Adverse Effect.
 
Section 4.16      Internal Accounting Controls.  The Company maintains a system
of internal accounting controls sufficient to provide reasonable assurance that
(i) transactions are executed in accordance with management’s general or
specific authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain asset accountability, (iii) access to
assets is permitted only in accordance with management’s general or specific
authorization and (iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
 
Section 4.17      No Material Adverse Breaches, etc.  Except as set forth in the
SEC Documents, the Company is not subject to any charter, corporate or other
legal restriction, or any judgment, decree, order, rule or regulation which in
the judgment of the Company’s officers has or is expected in the future to have
a Material Adverse Effect.
 
Section 4.18      Absence of Litigation.  Except as set forth in the SEC
Documents, there is no action, suit, proceeding, inquiry or investigation before
or by any court, public board, government agency, self-regulatory organization
or body pending against or affecting the Company, or the Common Stock, wherein
an unfavorable decision, ruling or finding would have a Material Adverse Effect.
 
Section 4.19      Subsidiaries.  Except as disclosed in the SEC Documents, the
Company does not presently own or control, directly or indirectly, any interest
in any other corporation, partnership, association or other business entity.
 
Section 4.20      Tax Status.  Except as disclosed in the SEC Documents, the
Company has made or filed all federal and state income and all other tax
returns, reports and declarations required by any jurisdiction to which it is
subject and (unless and only to the extent that the Company has set aside on its
books provisions reasonably adequate for the payment of all unpaid and
unreported taxes) has paid all taxes and other governmental assessments and
charges that are material in amount, shown or determined to be due on such
returns, reports and declarations, except those being contested in good faith
and has set aside on its books provision reasonably adequate for the payment of
all taxes for periods subsequent to the periods to which such returns, reports
or declarations apply.  There are no unpaid taxes in any material amount claimed
to be due by the taxing authority of any jurisdiction, and the officers of the
Company know of no basis for any such claim.
 
Section 4.21      Certain Transactions.  Except as set forth in the SEC
Documents none of the officers, directors, or employees of the Company is
presently a party to any transaction with the Company (other than for services
as employees, officers and directors), including any contract, agreement or
other arrangement providing for the furnishing of services to or by, providing
for rental of real or personal property to or from, or otherwise requiring
payments to or from any officer, director or such employee or, to the knowledge
of the Company, any corporation, partnership, trust or other entity in which any
officer, director, or any such employee has a substantial interest or is an
officer, director, trustee or partner.
 
Section 4.22      The Shares.  The Shares have been duly authorized and, when
issued, delivered and paid for pursuant to this Agreement, will be validly
issued and fully paid and non-assessable, free and clear of all encumbrances and
will be issued in compliance with all applicable United States federal and state
securities laws; the capital stock of the Company, including the Common Stock,
conforms in all material respects to the description thereof contained in the
Registration Statement (No. 333-147310) filed on Form S-3 and the Common Stock,
including the Shares, will conform to the description thereof contained in the
Prospectus as amended or supplemented.  Neither the stockholders of the Company,
nor any other Person have any preemptive rights or rights of first refusal with
respect to the Shares or other rights to purchase or receive any of the Shares
or any other securities or assets of the Company, and no Person has the right,
contractual or otherwise, to cause the Company to issue to it, or register
pursuant to the Securities Act, any shares of capital stock or other securities
or assets of the Company upon the issuance or sale of the Shares.  The Company
is not obligated to offer the Shares on a right of first refusal basis or
otherwise to any third parties including, but not limited to, current or former
shareholders of the Company, underwriters, brokers, agents or other third
parties.
 
Section 4.23      Use of Proceeds.  The Company shall use the net proceeds from
this offering as disclosed in the Prospectus.
 
Section 4.24      Dilution.  The Company is aware and acknowledges that issuance
of shares of the Company’s Common Stock could cause dilution to existing
shareholders and could significantly increase the outstanding number of shares
of Common Stock.
 
Section 4.25      Acknowledgment Regarding Investor’s Purchase of Shares. The
Company acknowledges and agrees that the Investor is acting solely in the
capacity of an arm’s length investor with respect to this Agreement and the
transactions contemplated hereunder. The Company further acknowledges that the
Investor is not acting as a financial advisor or fiduciary of the Company (or in
any similar capacity) with respect to this Agreement and the transactions
contemplated hereunder and any advice given by the Investor or any of its
representatives or agents in connection with this Agreement and the transactions
contemplated hereunder is merely incidental to the Investor’s purchase of the
Common Stock hereunder.  The Company is aware and acknowledges that it may not
be able to request Advances under this Agreement if there is not an effective
Registration Statement or if any issuances of Common Stock pursuant to any
Advances would violate any rules of the Principal Market.
 
Article V.  Indemnification
 
The Investor and the Company represent to the other the following with respect
to itself:
 
Section 5.01      Indemnification by the Company.  The Company agrees to
indemnify and hold harmless the Investor and the Investor’s affiliates,
directors, officers, employees and agents and each person who controls the
Investor within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act against any and all losses, claims, damages, expenses or
liabilities, joint or several, to which they or any of them may become subject
under the Securities Act, the Exchange Act or other federal or state statutory
law or regulation, at common law or otherwise, insofar as such losses, claims,
damages, expenses or liabilities (or actions in respect thereof) arise out of or
are based upon any untrue statement or alleged untrue statement of a material
fact contained in the Registration Statement for the registration of the Shares
as originally filed or in any amendment thereof, or in the Prospectus, or in any
Prospectus Supplement, or in any amendment thereof or supplement thereto, or
arise out of or are based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading, and agrees to reimburse each such indemnified
party, as incurred, for any legal or other expenses reasonably incurred by them
in connection with investigating, defending or settling any such loss, claim,
damage, liability, expense or action; provided, however, that the Company will
not be liable in any such case to the extent that any such loss, claim, damage
or liability arises out of or is based upon any such untrue statement or alleged
untrue statement or omission or alleged omission made therein in reliance upon
and in conformity with written information furnished to the Company by or on
behalf of the Investor specifically for inclusion therein.
 
Section 5.02      Indemnification by the Investor.  The Investor agrees to
indemnify and hold harmless the Company, each of its directors, each of its
officers who signs the Registration Statement, and each person who controls the
Company within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act to the same extent as the foregoing indemnity to the Investor, but
only with reference to written information relating to such Investor furnished
to the Company by or on behalf of the Investor specifically for inclusion in the
documents referred to in the foregoing indemnity.
 
Section 5.03      Notice of Claim.  Promptly after receipt by an indemnified
party under this Article V of notice of the commencement of any action, such
indemnified party will, if a claim in respect thereof is to be made against the
indemnifying party under this Article V, notify the indemnifying party in
writing of the commencement thereof; but the failure so to notify the
indemnifying party (i) will not relieve it from liability under Section 5.01 or
Section 5.02 above unless and to the extent the indemnifying party did not
otherwise learn of such action and such failure results in the forfeiture by the
indemnifying party of substantial rights and defenses and (ii) will not, in any
event, relieve the indemnifying party from any obligations to any indemnified
party other than the indemnification obligation provided in Section 5.01 or
Section 5.02 above. In the case of parties indemnified pursuant to Section 5.01
above, counsel to the indemnified parties shall be selected by the Company, and,
in the case of parties indemnified pursuant to Section 5.02 above, counsel to
the indemnified parities shall be selected by the Investor.  An indemnifying
party may participate at its own expense in the defense of any such action;
provided, however, that counsel to the indemnifying party shall not (except with
the consent of the indemnified party) also be counsel to the indemnified party.
In no event shall the indemnifying parties be liable for fees and expenses of
more than one counsel (in addition to any local counsel) separate from their own
counsel for all indemnified parties in connection with any one action or
separate but similar or related actions in the same jurisdiction arising out of
the same general allegations or circumstances. An indemnifying party will not,
without the prior written consent of the indemnified parties, settle or
compromise or consent to the entry of any judgment with respect to any pending
or threatened claim, action, suit or proceeding in respect of which
indemnification or contribution may be sought under this Agreement (whether or
not the indemnified parties are actual or potential parties to such claim or
action) unless (i) such settlement, compromise or consent includes an
unconditional release of each indemnified party from all liability arising out
of such claim, action, suit or proceeding and (ii) such settlement, compromise
or consent does not include a statement as to or an admission of fault,
culpability or a failure to act by or on behalf of any indemnified party.
 
Section 5.04      Contribution.  In the event that the indemnity provided in
Section 5.01 or Section 5.02 is unavailable to or insufficient to hold harmless
an indemnified party for any reason, the Company and the Investor severally
agree to contribute to the aggregate losses, claims, damages and liabilities
(including legal or other expenses reasonably incurred in connection with
investigating or defending the same) (collectively “Losses”) to which the
Company and the Investor may be subject in such proportion as is appropriate to
reflect the relative benefits received by the Company on the one hand and by the
Investor on the other from transactions contemplated by this Agreement. If the
allocation provided by the immediately preceding sentence is unavailable for any
reason, the Company and the Investor severally shall contribute in such
proportion as is appropriate to reflect not only such relative benefits but also
the relative fault of the Company on the one hand and of the Investor on the
other in connection with the statements or omissions which resulted in such
Losses as well as any other relevant equitable considerations.  Benefits
received by the Company shall be deemed to be equal to the total proceeds from
the offering (net of underwriting discounts and commissions but before deducting
expenses) received by it, and benefits received by the Investor shall be deemed
to be equal to the total discounts received by the Investor.  Relative fault
shall be determined by reference to, among other things, whether any untrue or
any alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information provided by the Company
on the one hand or the Investor on the other, the intent of the parties and
their relative knowledge, access to information and opportunity to correct or
prevent such untrue statement or omission.  The Company and the Investor agree
that it would not be just and equitable if contribution were determined by pro
rata allocation or any other method of allocation which does not take account of
the equitable considerations referred to above.  The aggregate amount of losses,
liabilities, claims, damages and expenses incurred by an indemnified party and
referred to above in this Article V shall be deemed to include any legal or
other expenses reasonably incurred by such indemnified party in investigating,
preparing or defending against any litigation, or any investigation or
proceeding by any governmental agency or body, commenced or threatened, or any
claim whatsoever based upon any such untrue or alleged untrue statement or
omission or alleged omission.  Notwithstanding the provisions of this Section
5.04, the Investor shall not be required to contribute any amount in excess of
the amount by which the Purchase Price for Shares actually purchased pursuant to
this Agreement exceeds the amount of any damages which the Investor has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission.  No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this Article V, each person who
controls the Investor within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act and each director, officer, employee and agent of
the Investor shall have the same rights to contribution as the Investor, and
each person who controls the Company within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act, each officer of the Company
who shall have signed the Registration Statement and each director of the
Company shall have the same rights to contribution as the Company, subject in
each case to the applicable terms and conditions of this Section 5.04.
 
Section 5.05      Remedies.  The remedies provided for in this Article V are not
exclusive and shall not limit any rights or remedies which may otherwise be
available to any indemnified person at law or in equity.  The obligations of the
parties to indemnify or make contribution under this Article V shall survive
termination.
 
Article VI.
Covenants of the Company
 
Section 6.01      Effective Registration Statement.  During the Commitment
Period, the Company shall notify the Investor promptly if (i) the Registration
Statement shall cease to be effective under the Securities Act, (ii) the Common
Stock shall cease to be authorized for listing on the Principal Market, (iii)
the Common Stock ceases to be registered under Section 12(g) of the Exchange Act
or (iv) the Company fails to file in a timely manner all reports and other
documents required of it as a reporting company under the Exchange Act.
 
Section 6.02      Corporate Existence.  The Company will take all steps
necessary to preserve and continue the corporate existence of the Company.
 
Section 6.03      Notice of Certain Events Affecting Registration; Suspension of
Right to Make an Advance.  The Company will immediately notify the Investor, and
confirm in writing, upon its becoming aware of the occurrence of any of the
following events: (i) receipt of any request for additional information by the
SEC or any other Federal or state governmental authority for amendments or
supplements to the Registration Statement, the Prospectus or for any additional
information; (ii) the issuance by the SEC or any other Federal or state
governmental authority of  any stop order suspending the effectiveness of the
Registration Statement or the initiation of any proceedings for that purpose;
(iii) receipt of any notification with respect to the suspension of the
qualification or exemption from qualification of any of the Common Stock for
sale in any jurisdiction or the initiation or threatening of any proceeding for
such purpose; (iv) the happening of any event that makes any statement made in
the Registration Statement or Prospectus of any document incorporated or deemed
to be incorporated therein by reference untrue in any material respect or that
requires the making of any changes in the Registration Statement, Prospectus or
documents so that, in the case of the Registration Statement, it will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading, and that in the case of the Prospectus, it will not contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading, or of the
necessity to amend the Registration Statement or supplement the Prospectus to
comply with the Securities Act or any other law; and (v) the Company’s
reasonable determination that a post-effective amendment to the Registration
Statement would be appropriate; and the Company will promptly make available to
the Investor any such supplement or amendment to the related prospectus.  The
Company shall not deliver to the Investor any Advance Notice during the
continuation of any of the foregoing events.
 
Section 6.04      Prospectus Supplements.  The Company agrees that on such dates
as the Securities Act shall require, the Company will file a Prospectus
Supplement or other appropriate form as determined by counsel with the SEC under
the applicable paragraph of Rule 424(b) under the Securities Act, which
Prospectus Supplement will set forth, within the relevant period, the amount of
Shares sold to the Investor, the net proceeds to the Company and the discount
paid by the Investor with respect to such Shares.  The Company shall provide the
Investor at least 24 hours to comment on a draft of each such Prospectus
Supplement (and shall give due consideration to all such comments) and shall
deliver or make available to the Investor, without charge, an electronic copy of
each form of Prospectus Supplement, together with the Base Prospectus.  The
Company consents to the use of the Prospectus (and of any Prospectus Supplement
thereto) in accordance with the provisions of the Securities Act and with the
securities or “blue sky” laws of the jurisdictions in which the Shares may be
sold by the Investor, in connection with the offering and sale of the Shares and
for such period of time thereafter as the Prospectus is required by the
Securities Act to be delivered in connection with sales of the Shares.  If
during such period of time any event shall occur that in the judgment of the
Company and its counsel is required to be set forth in the Prospectus or should
be set forth therein in order to make the statements made therein, in the light
of the circumstances under which they were made, not misleading, or if it is
necessary to supplement or amend the Prospectus to comply with the Securities
Act or any other applicable law or regulation, the Company shall forthwith
prepare and file with the SEC an appropriate Prospectus Supplement to the
Prospectus and shall expeditiously furnish or make available to the Investor an
electronic copy thereof.
 
Section 6.05      Listing of Shares.  The Company will use commercially
reasonable efforts to cause the Shares to be listed on the Principal Market and
to qualify the Shares for sale under the securities laws of such jurisdictions
as the Investor designates; provided that the Company shall not be required in
connection therewith to qualify as a foreign corporation or to file a general
consent to service of process in any jurisdiction.
 
Section 6.06      Consolidation; Merger.  If an Advance Notice has been
delivered to the Investor and the transaction contemplated in such Advance
Notice has not yet been closed in accordance with Section 2.03 hereof, then the
Company shall not effect any merger or consolidation of the Company with or
into, or a transfer of all or substantially all the assets of the Company to
another entity (a “Consolidation Event”) unless the resulting successor or
acquiring entity (if not the Company) assumes by written instrument the
obligation to deliver to the Investor such shares of stock and/or securities as
the Investor is entitled to receive pursuant to such Advance Notice.
 
Section 6.07      Issuance of the Company’s Common Stock.  The sale of the
shares of Common Stock shall be made in accordance with the provisions and
requirements of the Securities Act and any applicable state securities law.
 
Section 6.08      Expenses.  The Company, whether or not the transactions
contemplated hereunder are consummated or this Agreement is terminated, will pay
all expenses incident to the performance of its obligations hereunder, including
but not limited to (i) the preparation, printing and filing of the Registration
Statement and each amendment and supplement thereto, of each Prospectus and of
each amendment and supplement thereto; (ii) the preparation, issuance and
delivery of any Shares issued pursuant to this Agreement, (iii) all fees and
disbursements of the Company’s counsel, accountants and other advisors, (iv) the
qualification of the Shares under securities laws in accordance with the
provisions of this Agreement, including filing fees in connection therewith,
(v) the printing and delivery of copies of the Prospectus and any amendments or
supplements thereto, (vi) the fees and expenses incurred in connection with the
listing or qualification of the Shares for trading on the Principal Market, or
(vii) filing fees of the SEC and the Financial Industry Regulatory Authority,
Inc.
 
Section 6.09      Market Activities.          The Company will not, directly or
indirectly, take any action designed to cause or result in, or that constitutes
or might reasonably be expected to constitute, the stabilization or manipulation
of the price of any security of the Company under applicable laws and
regulations to facilitate the sale or resale of the Common Stock.
 
Section 6.10      Comfort Letters.  At the reasonable request of the Investor
the Company will request that its independent accountants furnish to the
Investor a letter, in form and substance reasonably satisfactory to the
Investor, containing statements and information of the type ordinarily included
in accountants’ “comfort letters” to underwriters with respect to the financial
statements of the Company dated the date of and provided within a reasonable
period of time after (i) the date hereof, (ii) the date the Registration
Statement or the Prospectus shall be amended (other than (1) in connection with
the filing of a prospectus supplement that contains solely the information
required pursuant to Section 6.04 hereof, (2) in connection with the filing of
any report or other document under Section 13, 14 or 15(d) of the Exchange Act
by the Company or (3) by a prospectus supplement relating to the offering of
other securities (including, without limitation, other shares of Common Stock))
and (iii) the date of filing or amending each Annual Report on Form 10-K and
Quarterly Report on Form 10-Q for a period in which an Advance was delivered
pursuant to this Agreement and which are incorporated by reference in the
Registration Statement.
 
Section 6.11      Opinion of Counsel at Closing.  Investor shall receive an
opinion letter from counsel to the Company on the date hereof in the form
attached hereto as Exhibit C.
 
Section 6.12      Current Report.  Promptly after the date hereof (and prior to
the Company delivering an Advance Notice to the Investor hereunder), the Company
shall file with the SEC a report on Form 8-K or such other appropriate form as
determined by counsel to the Company, relating to the transactions contemplated
by this Agreement and prior to the Company delivering an Advance Notice to the
Investor the Company shall file a preliminary Prospectus Supplement pursuant to
Rule 424(b) of the Securities Act disclosing all information relating to the
transaction contemplated hereby required to be disclosed therein (collectively,
the “Initial Disclosure”) and shall provide the Investor with 24 hours to review
the Initial Disclosure prior to filing.
 
Section 6.13      Black-out Periods.  Notwithstanding any other provision of
this Agreement, the Company shall not deliver an Advance Notice during the
period beginning on the last day of each fiscal quarter of the Company and
ending at the close of business 2 Trading Days after the Company files its
Current Report of Form 8-K releasing the Company’s earnings report for such
fiscal quarter or during any other period in which the Company is, or could be
deemed to be, in possession of material non-public information.
 
Article VII.
Conditions for Advance and Conditions to Closing
 
Section 7.01      Conditions Precedent to the Right of the Company to Deliver an
Advance Notice.  The right of the Company to deliver an Advance Notice is
subject to the satisfaction by the Company, on each Advance Notice Date and
Advance Settlement Date (a “Condition Satisfaction Date”), of each of the
following conditions:
 
(a)   Accuracy of the Company’s Representations and Warranties.  The
representations and warranties of the Company shall be true and correct in all
material respects (except for representations and warranties that speak as of a
specific date), as such may be modified by any disclosure schedule delivered by
the Company to the Investor on or prior to the applicable Condition Satisfaction
Date.
 
(b)   Registration of the Common Stock with the SEC.  The Registration Statement
is effective and the Company is not aware of any of the events set forth in
Section 6.03 hereof.  The Initial Disclosure shall have been filed with the SEC,
all Prospectus Supplements shall have been filed with the SEC, as required
pursuant to Section 6.04 hereof and an electronic copy of such Prospectus
Supplement together with the Base Prospectus shall have been delivered or made
available to the Investor.  The Company shall have filed with the SEC in a
timely manner all reports, notices and other documents required of a “reporting
company” under the Exchange Act and applicable SEC regulations.
 
(c)   Authority.  The Company shall have obtained all permits and qualifications
required by any applicable state for the offer and sale of the shares of Common
Stock, or shall have the availability of exemptions therefrom.  The sale and
issuance of the shares of Common Stock shall be legally permitted by all laws
and regulations to which the Company is subject.
 
(d)   No Material Notices. None of the following events shall have occurred and
be continuing:  (i) receipt by the Company of any request for additional
information from the SEC or any other federal or state governmental,
administrative or self regulatory authority during the period of effectiveness
of the Registration Statement, the response to which would require any
amendments or supplements to the Registration Statement  or Prospectus; (ii) the
issuance by the SEC or any other federal or state governmental authority of any
stop order suspending the effectiveness of the Registration Statement or the
initiation of any proceedings for that purpose; (iii) receipt by the Company of
any notification with respect to the suspension of the qualification or
exemption from qualification of any of the Shares for sale in any jurisdiction
or the initiation or threatening of any proceeding for such purpose; (iv) the
occurrence of any event that makes any statement made in the Registration
Statement or the Prospectus or any document incorporated or deemed to be
incorporated therein by reference untrue in any material respect or that
requires the making of any changes in the Registration Statement, Prospectus or
documents so that, in the case of the Registration Statement, it will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading, and that in the case of the Prospectus, it will not contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading; and (v) the
Company’s reasonable determination that a post-effective amendment to the
Registration Statement would be required. There shall not exist any fundamental
changes to the information set forth in the Registration Statement which would
require the Company to file a post-effective amendment to the Registration
Statement.
 
(e)   Performance by the Company.  The Company shall have performed, satisfied
and complied in all material respects with all covenants, agreements and
conditions required by this Agreement to be performed, satisfied or complied
with by the Company at or prior to each Condition Satisfaction Date.
 
(f)    No Injunction.  No statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated or endorsed
by any court or governmental authority of competent jurisdiction that prohibits
or directly and adversely affects any of the transactions contemplated by this
Agreement, and no proceeding shall have been commenced that may have a Material
Adverse Effect.
 
(g)   No Suspension of Trading in or Delisting of Common Stock.  The Common
Stock is trading on a Principal Market and all of the shares issuable pursuant
to such Advance Notice will be listed or quoted for trading on such Principal
Market and the Company believes, in good faith, that trading of the Common Stock
on a Principal Market will continue uninterrupted for the foreseeable future. 
The issuance of shares of Common Stock with respect to the applicable Advance
Notice will not violate the shareholder approval requirements of the Principal
Market.  The Company shall not have received any notice threatening the
continued listing of the Common Stock on the Principal Market (unless the
concerns of the Principal Market have been addressed and the Investor is
reasonably satisfied that the Principal Market no longer is considering or
intends to take such action).
 
(h)   Maximum Advance Amount.  The amount of an Advance requested by the Company
shall not exceed the Maximum Advance Amount.
 
(i)    Authorized.  There shall be a sufficient number of authorized but
unissued and otherwise unreserved shares of Common Stock for the issuance of all
of the shares issuable pursuant to such Advance Notice.
 
(j)    Executed Advance Notice.  The Investor shall have received the Advance
Notice executed by an officer of the Company and the representations contained
in such Advance Notice shall be true and correct as of each Condition
Satisfaction Date.
 
Article VIII.
Non-Disclosure of Non-Public Information
 
Nothing herein shall require the Company to disclose non-public information to
the Investor or its advisors or representatives, provided, however, that
notwithstanding anything herein to the contrary, during any period from and
including the delivery of an Advance Notice through and including the occurrence
of the related Share Issuance Date, the Company will immediately notify the
Investor or its advisors or representatives of any event or the existence of any
circumstance (without any obligation to disclose the specific event or
circumstance) of which it becomes aware, constituting non-public information
(whether or not requested of the Company specifically or generally during the
course of due diligence by such persons or entities), which, if not disclosed in
the prospectus included in the Registration Statement would cause such
prospectus to include a material misstatement or to omit a material fact
required to be stated therein in order to make the statements, therein, in light
of the circumstances in which they were made, not misleading.
 
Article IX.
Choice of Law/Jurisdiction
 
This Agreement shall be governed by and interpreted in accordance with the laws
of the State of New York without regard to the principles of conflict of laws.
 
Article X. Assignment; Termination
 
Section 10.01    Assignment.  Neither this Agreement nor any rights or
obligations of either party hereunder may be assigned to any other Person.
 
Section 10.02    Termination.
 
(a)   Unless earlier terminated as provided hereunder, this Agreement shall
terminate automatically on the earliest of (i) the first day of the month next
following the 24-month anniversary of the date hereof, or (ii) the date on which
the Investor shall have made payment of Advances pursuant to this Agreement in
the aggregate amount of the Commitment Amount.
 
(b)   The Company may terminate this Agreement at any time upon prior written
notice to the Investor; provided that (i) there are no Advances outstanding, and
(ii) the Company has paid all amounts owed to the Investor pursuant to this
Agreement.  This Agreement may be terminated at any time by the mutual written
consent of the parties, effective as of the date of such mutual written consent
unless otherwise provided in such written consent.  In the event of any
termination of this Agreement by the Company hereunder, so long as the Investor
owns any shares of Common Stock issued hereunder, the Company shall not for 20
Trading Days from the date of such termination voluntarily delist the Common
Stock from the Principal Markets .
 
(c)   The obligation of the Investor to make an Advance to the Company pursuant
to this Agreement shall terminate permanently in the event that (i) there shall
occur any stop order or suspension of the effectiveness of the Registration
Statement for an aggregate of fifty (50) Trading Days, other than due to the
acts of the Investor, during the Commitment Period, or (ii) the Company shall at
any time fail materially to comply with the requirements of Article VI and such
failure is not cured within 30 days after receipt of written notice from the
Investor, provided, however, that this termination provision shall not apply to
any period commencing upon the filing of a post-effective amendment to such
Registration Statement and ending upon the date on which such post effective
amendment is declared effective by the SEC.
 
(d)   Nothing in this Section 10.02 shall be deemed to release the Company or
the Investor from any liability for any breach under this Agreement, or to
impair the rights of the Company and the Investor to compel specific performance
by the other party of its obligations under this Agreement.  The indemnification
provisions contained in Article V shall survive termination hereunder.
 
Article XI. Notices
 
Any notices, consents, waivers, or other communications required or permitted to
be given under the terms of this Agreement must be in writing and will be deemed
to have been delivered(i) upon receipt, when delivered personally; (ii) upon
receipt, when sent by facsimile (provided confirmation of transmission is
mechanically or electronically generated and kept on file by the sending party);
or (iii) one business day after deposit with a nationally recognized overnight
delivery service, in each case properly addressed to the party to receive the
same.  The addresses and facsimile numbers for such communications, except for
Advance Notices which shall be delivered in accordance with Section 2.02(b)
hereof, shall be:
 
If to the Company, to:
 
Supertel Hospitality, Inc.
 
 
 
309 North 5th Street
 
 
 
Norfolk, Nebraska 68701
 
 
 
Attention:         Kelly Walters
President and Chief Executive Officer
 
 
 
Telephone:        (402) 371-2520
 
 
 
Facsimile:          (402) 371-4229
 
 
 
 
 
With a copy to:
 
McGrath North Mullin & Kratz, PC LLO
 
 
 
Suite 3700 First National Tower
 
 
 
1601 Dodge Street
Omaha, Nebraska 68102
 
 
 
Attention:          Guy Lawson
 
 
 
Telephone:        (402) 341-3070
 
 
 
Facsimile:          (402) 952-1802
 
 
 
 
 
If to the Investor(s):
 
YA Global Master SPV Ltd.
 
 
 
101 Hudson Street –Suite 3700
 
 
 
Jersey City, NJ 07302
 
 
 
Attention:          Mark Angelo
 
 
 
Portfolio Manager
 
 
 
Telephone:        (201) 985-8300
 
 
 
Facsimile:          (201) 985-8266
 
 
 
 
 
With a Copy to:
 
David Gonzalez, Esq.
 
 
 
Yorkville Advisors, LLC
 
 
 
101 Hudson Street – Suite 3700
 
 
 
Jersey City, NJ 07302
 
 
 
Telephone:        (201) 985-8300
 
 
 
Facsimile:          (201) 985-8266
 

 
 
Each party shall provide written notice to the other party of any change in
address or facsimile number.
 
Article XII. Miscellaneous
 
Section 12.01    Counterparts.  This Agreement may be executed in two or more
identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party.  In the event any signature page is
delivered by facsimile transmission, the party using such means of delivery
shall cause 4 additional original executed signature pages to be physically
delivered to the other party within 5 days of the execution and delivery hereof,
though failure to deliver such copies shall not affect the validity of this
Agreement.
 
Section 12.02    Reporting Entity for the Common Stock.  The reporting entity
relied upon for the determination of the trading price or trading volume of the
Common Stock on any given Trading Day for the purposes of this Agreement shall
be Bloomberg, L.P. or any successor thereto.  The written mutual consent of the
Investor and the Company shall be required to employ any other reporting entity.
 
Section 12.03    Fees and Expenses.  Each of the parties shall pay its own fees
and expenses (including the fees of any attorneys, accountants, appraisers or
others engaged by such party) in connection with this Agreement and the
transactions contemplated hereby, except that the Company shall pay (a) a
structuring fee of $25,000 to Yorkville Advisors, LLC, of which $10,000 has been
paid and the remaining $15,000 shall be paid on the date hereof, and (b) a fee
of $15,000 to Yorkville Advisors, LLC which has been paid to cover expenses.
 
Section 12.04    Brokerage.  Each of the parties hereto represents that it has
had no dealings in connection with this transaction with any finder or broker
who will demand payment of any fee or commission from the other party.  The
Company on the one hand, and the Investor, on the other hand, agree to indemnify
the other against and hold the other harmless from any and all liabilities to
any Person claiming brokerage commissions or finder’s fees on account of
services purported to have been rendered on behalf of the indemnifying party in
connection with this Agreement or the transactions contemplated hereby.
 
Section 12.05    Integration.  This Agreement, along with any exhibits or
amendments hereto, encompasses the entire agreement of the parties and
supersedes all previous understandings and agreements between the parties,
whether oral or written.
 
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IN WITNESS WHEREOF, the parties hereto have caused this Standby Equity
Distribution Agreement to be executed by the undersigned, thereunto duly
authorized, as of the date first set forth above.
 
 
 
COMPANY:
 
 
 
Supertel Hospitality, Inc.
 
 
 
 
 
 
 
By:  /s/  Kelly A. Walters
 
 
 
Name:  Kelly A. Walters
 
 
 
Title:  President & CEO
 
 
 
 
 
 
 
 
 
 
 
INVESTOR:
 
 
 
YA Global Master SPV Ltd.
 
 
 
 
 
 
 
By:       Yorkville Advisors, LLC
 
 
 
Its:        Investment Manager
 
 
 
 
 
 
 
By:  /s/ Mark Angelo
 
 
 
Name:  Mark Angelo
 
 
 
Title:  Portfolio Manager
 
 
 
 
 

 
 

--------------------------------------------------------------------------------

EXHIBIT A - ADVANCE NOTICE
SUPERTEL HOSPITALITY, INC.
 
The undersigned, _______________________ hereby certifies, with respect to the
sale of shares of Common Stock of SUPERTEL HOSPITALITY, INC. (the “Company”)
issuable in connection with this Advance Notice, delivered pursuant to the
Standby Equity Distribution Agreement (the “Agreement”), as follows:
 
1.         The undersigned is the duly elected ______________ of the Company.
 
2.         There are no fundamental changes to the information set forth in the
Registration Statement which would require the Company to file a post effective
amendment to the Registration Statement.
 
3.         The Company has performed in all material respects all covenants and
agreements to be performed by the Company and has complied in all material
respects with all obligations and conditions contained in this Agreement on or
prior to the Advance Notice Date, and shall continue to perform in all material
respects all covenants and agreements to be performed by the Company through the
applicable Share Issuance Date.  All conditions to the delivery of this Advance
Notice are satisfied as of the date hereof.
 
4.         The undersigned hereby represents, warrants and covenants that it has
made all filings (“SEC Filings”) required to be made by it pursuant to
applicable securities laws (including, without limitation, all filings required
under the Securities Exchange Act of 1934, which include Forms 10-Q or 10-QSB,
10-K or 10-KSB, 8-K, etc.).  No SEC Filings or other public disclosures made by
the Company, including, without limitation, all press releases, analysts
meetings and calls, etc. (collectively, the “Public Disclosures”) contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading.
 
5.         The Advance requested is _____________________.
 
6.         The Minimum Acceptable Price is ________________.
 
7.         4.99% of the outstanding Common Stock of the Company as of the date
hereof is _____________.
 
The undersigned has executed this Certificate this ____ day of
_________________.
 
Supertel Hospitality, Inc.
 
By:                                                          
 

--------------------------------------------------------------------------------

EXHIBIT B
 
FORM OF SETTLEMENT DOCUMENT
 
VIA EMAIL
 
Supertel Hospitality, Inc.
 
Attn:
 
Email:
 
1.
 
Below please find the settlement information with respect to the Advance Notice
dated:
 
 
 
(a) Amount of Advance
 
$
 
(b) Amount of Advance after adjusting for Ownership Limitation, Registration
Limitation and Minimum Acceptable Price, if applicable:
 
$
 
(c) Additional Aggregate Purchase Price Paid for Shares on Excluded Days
pursuant to Section 2.01(e) at the Minimum Acceptable Price, if 6 below applies:
 
$
 
(d) Net Advance Amount:
 
$
 
 
 
 
 
 
 
2.
 
Market Price:
 
$
 
 
 
 
 
 
 
3.
 
Purchase Price (Market Price X 96%) per share:
 
$
 
4.
 
Minimum Acceptable Price:
 
$
 
 
 
 
 
 
 
5.
 
Number of Shares due to Investor computed by dividing 1(b) above by 3 above:
 
 
 
6.
 
Additional Shares to be Purchased Pursuant to Excluded Days pursuant to Section
2.01(d) at the Minimum Acceptable Price:
 
 
 
7.
 
Aggregate Number of Shares due to Investor:
 
 
 

Please issue the number of Shares due to the Investor to the account of the
Investor as follows:

[to come]
 
The Investor shall disburse the total amount of the Advance as follows:

[to come]
 
Approved By Supertel Hospitality, Inc.: __________________________________
 
Name:
 
Sincerely,
 
YA GLOBAL MASTER SPV, LTD.
 

 

--------------------------------------------------------------------------------

 
EXHIBIT C
 
FORM OF OPINION
 
1.         The Company is a corporation validly existing and in good standing
under the laws of the State of Virginia, with corporate power and authority to
own, lease and operate its properties and to conduct its business as described
in the Company’s latest Form 10-K or 10-Q filed by the Company under the
Securities Exchange Act of 1934, as amended, (the “Exchange Act”) and the rules
and regulations of the Commission thereunder (the “Public Filings”) and to enter
into and perform its obligations under the Standby Equity Distribution
Agreement.
 
2.         The Company has the requisite corporate power and authority to enter
into and perform its obligations under the Standby Equity Distribution Agreement
and to issue the Common Shares in accordance with their terms.  The execution
and delivery of the Standby Equity Distribution Agreement by the Company and the
consummation by it of the transactions contemplated thereby have been duly
authorized by all necessary corporate action, and no further consent or
authorization of the Company or its Board of Directors or stockholders is
required.  Each of the Standby Equity Distribution Agreement has been duly
executed and delivered, and each of the Standby Equity Distribution Agreement
constitute valid and binding obligations of the Company enforceable against the
Company in accordance with their respective terms, except as my be limited by
general principles of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally, the enforcement of creditors’ rights and remedies.
 
3.         The Common Shares are duly authorized and, upon issuance in
accordance with the terms of the Standby Equity Distribution Agreement, will be
duly and validly issued, fully paid and nonassessable, free of any liens,
encumbrances and preemptive or similar rights contained, to our knowledge, in
any agreement filed by the Company as an exhibit to the Company’s Public
Filings.
 
4.         The execution, delivery and performance of the Standby Equity
Distribution Agreement by the Company (other than performance by the Company of
its obligations under the indemnification sections of such agreements, as to
which no opinion need be rendered) will not (i) result in a violation of the
Company’s Articles of Incorporation or By-Laws; (ii) conflict with, or
constitute a default (or an event that with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement or, indenture filed by
the Company as an exhibit to the Company’s Public Filings; or (iii) to our
knowledge, result in a violation of any federal or Virginia law, rule or
regulation, order, judgment or decree applicable to the Company.
 
5.         To our knowledge without independent investigation and other then as
set forth in the Public Filings, there are no legal or governmental proceedings
pending to which the Company is a party or of which any property or assets of
the Company is subject which is required to be disclosed in any Public Filings.