Exhibit 10.1
SECURITIES ACQUISITION AND PUT AGREEMENT
     THIS SECURITIES ACQUISITION AND PUT AGREEMENT (the “Agreement”) is made and
entered into on November 21, 2006, by and among TRANSCONTINENTAL REALTY
INVESTORS, INC., a Nevada corporation (“TCI” or the “Company”), LEMAN
DEVELOPMENT, LTD., a Texas limited partnership (“Leman”), acting by, through and
under its General Partner, WINDMILL/KAUFMAN, LTD., a Texas limited partnership
(“WKL”), in turn acting by, through and under its General Partner, SIEPELA
DEVELOPMENT CORPORATION, a Texas corporation (“Siepela”); and KAUFMAN LAND
PARTNERS, LTD., a Texas limited partnership (“KLP”), acting by, through and
under its General Partner, KAUFMAN LAND MANAGEMENT, LLC, a Texas limited
liability company (“Kaufman LLC”) (Leman and KLP and their respective successors
and assigns hereunder are sometimes collectively called “Holders,” and all of
the signatories hereto are collectively called the “Parties”); and
WITNESSETH:
     WHEREAS, the Holders are also parties to two separate contracts (the
“Contracts”) covering and relating to the purchase and sale of certain real
property and related assets consisting of approximately 3,242 acres of land,
more or less, known as part of Windmill Farms, Kaufman County, Texas (the “Real
Property”);
     WHEREAS, pursuant to the Contracts, Prime Income Asset Management, Inc., a
Nevada corporation (“PIAMI”), and/or TCI and/or one or more of their respective
affiliates, are purchasing the Real Property and related assets from Holders
upon the terms and conditions set forth in the Contracts;
     WHEREAS, pursuant to the payment provisions of the Contracts, PIAMI is
obligated to deliver, in partial payment for the Real Property, certain shares
of a newly-designated Series D Cumulative Preferred Stock of TCI;
     WHEREAS, TCI is authorized by its Articles of Incorporation, as amended, to
issue up to 10,000,000 shares of ‘Preferred Stock, par value $0.01 per share;’
     WHEREAS, TCI’s Board of Directors has the authority from time to time to
designate one or more series of any number of shares of Preferred Stock by
filing one or more Certificates of Designation for such stock with the Secretary
of State of Nevada;
     WHEREAS, TCI has designated a new series of Preferred Stock of TCI
denominated as the Series D Cumulative Preferred Stock and to issue such
Series D Preferred Stock to enable an affiliate of TCI to meet the terms of the
Contracts;
     WHEREAS, PIAMI has assigned the Purchaser’s rights under the Contracts to
TCL, and TCI has agreed to issue the Preferred Stock to Leman and Kaufman as
part of the “Purchase Price” thereunder;

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     WHEREAS, as a material inducement to the Holders to accept the Series D
Preferred Stock issued by TCI, and in accordance with the terms of the
Contracts, each of the Holders desires the right to require, upon the occurrence
of certain contingencies, that TCI repurchase the shares of Series D Preferred
Stock from the Holders as set forth below;
     WHEREAS, the Parties hereto desire to delineate certain other rights,
obligations and governance arrangements with respect to such Series D Preferred
Stock.
     ACCORDINGLY, for an in consideration of the foregoing premises, the mutual
promises, covenants, representations and warranties contained herein, and to
facilitate the delivery of the Series D Preferred Stock as part of the
consideration for the Real Property under the Contracts, and for other good and
valuable consideration, the receipt, sufficiency and adequacy of which are
hereby acknowledged by all of the Parties hereto, the Parties hereto do hereby
agree as follows:
     1. Adoption of Recitals. All of the recitals set forth above are hereby
adopted, confirmed, ratified and approved in the same manner as if fully
recopied herein.
     2. Designation of Preferred Stock. Prior to or contemporaneously with the
execution of this Agreement, the Company has or will designate a new series of
its Preferred Stock pursuant to that certain Certificate of Designations
substantially in the form annexed hereby as Exhibit “A” (the “Certificate of
Designations”), pursuant to which the Company shall designate a new Series D
Cumulative Preferred Stock consisting of 100,000 shares and having a liquidation
value of $100 per share (the “Series D Preferred Stock”), to be issued by TCI
pursuant to the terms and conditions hereof and in conformity with the
Certificate of Designations. The Series D Preferred Stock will have, among other
rights, the right to cumulative cash dividends based upon a $100 per share
valuation at the rates set forth in the Certificate of Designation, payable
quarterly; the right to payment of $100 per share plus accrued and unpaid
dividends in the event of dissolution, liquidation or winding-up of TCI before
any distribution is made by TCI to its junior stockholders; and the right to
mandatory redemption at any time after September 30, 2011 at a price of $100 per
share plus accrued and unpaid dividends. The Series D Preferred Stock shall have
no right to conversion into any other securities of the Company and voting
rights only as required by law, all as set forth in the Certificate of
Designations.
     3. Distribution of Securities. Prior to or contemporaneously with the
closing under the Contracts (the “Closing”), the Company shall file the
Certificate of Designations with the Secretary of State of Nevada, and at such
Closing, TCI shall issue and deliver 100,000 shares of the Series D Preferred
Stock to Leman and Kaufman of the number of shares of Series D Preferred Stock
set forth opposite their respective names below:

              No. of Shares of Series D Name   Preferred Stock
Leman
    10,500  
KLP
    89,500  
 
       
Total:
    100,000  

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     4. Representations and Warranties of Leman and KLP as to Shares of Series D
Preferred Stock. Each of Leman and KLP separately represents, warrants and
acknowledges to TCI as follows:
     (a) Accredited Investor. Each of Leman and KLP is an “accredited investor”
within the meaning of Regulation D, Rule 501 (a), promulgated under the
Securities Act of 1933, as amended, and each of Leman and KLP is acquiring the
shares of Series D Preferred Stock (the “Shares”) for its own account and not
with a view to the distribution thereof, in whole or part. Each of Leman and KLP
hereby confers authority upon TCI (i) not to transfer any of the Shares until
TCI has received written confirmation from counsel acceptable to TCI to the
effect that any such transfer does not require that the Series D Preferred Stock
or such transfer be registered under the Securities Act of 1933, as amended
(provided that no such opinion shall be required in the case of a transfer to
TCI), and (ii) to affix to the face of the certificate or certificates
representing the Shares a legend with respect to the representations set forth
herein in the following form or in such other similar form as shall be approved
by counsel to TCI:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED. THE SHARES HAVE BEEN ACQUIRED FOR INVESTMENT
AND MAY NOT BE PLEDGED OR HYPOTHECATED, AND MAY NOT BE SOLD OR TRANSFERRED IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SHARES UNDER THE
SECURITIES ACT OF 1933, OR AN OPINION OF COUNSEL OF THE COMPANY THAT
REGISTRATION IS NOT REQUIRED UNDER SAID ACT.
     (b) Authorization. Each of Leman and KLP has all requisite power and
authority to enter into and perform this Agreement and to acquire the securities
to be issued in connection herewith, and Leman and KLP have each obtained all
requisite consents, approvals, permits and authorizations for each of Leman and
KLP to participate in the Closing of this Agreement and to receive the Shares to
be issued to each.
     (c) Validity and Binding Effect. This Agreement constitutes each of Leman’s
and KLP’s valid and legally binding obligations, enforceable according to its
terms, except as such enforcement may be limited or affected by the availability
of equitable remedies such as specific performance, and by applicable
bankruptcy, insolvency, reorganization, moratorium or other laws relating to or
affecting the enforcement of creditors’ rights, including court decisions and
general equity principles relating thereto.
     (d) Acquisition Entirely for Own Account. The Shares to be acquired by each
of Leman and/or KLP will be acquired for investment for each of Leman’s and
KLP’s respective own accounts, not as a nominee or agent, and not with a view to
the resale or distribution of any part thereof. Neither Leman nor KLP has any
present intention of selling, granting any participation in, or otherwise
distributing any of the Shares. Neither

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of Leman or KLP has any contract, undertaking, agreement or arrangement with any
person to sell, transfer or grant participations to such person or to any third
person, with respect to any of the Shares.
     (e) Disclosure of Information. Each of Leman and KLP acknowledges that TCI
is a reporting company under the Securities Exchange Act of 1934 and as such is
required to and does file with the Securities and Exchange Commission (“SEC”)
annual reports on Form 10-K, quarterly reports on Form 10-Q, other periodic
reports on Form 8-K, proxy statements and other information which is available
for public review on the SEC’s website at www.sec.gov. Information is also
available on TCI’s website at www.transconrealty-invest.com. Each of Leman and
KLP has reviewed the publicly-available information it considers necessary or
appropriate for deciding whether to acquire the securities. Each of Leman and
KLP further represents that it has had an opportunity to ask questions and
receive answers from representatives of TCI regarding the terms and conditions
of the offering of the Shares.
     (f) Investment Experience. Each of Leman and KLP (a) is an investor in
securities of companies investing in real estate and acknowledges that it
understands that an investment in real estate is inherently somewhat speculative
and any anticipated returns are dependent upon a number of factors beyond the
control of TCI; (b) is able to fend for itself and bear the economic risk of its
investment; and (c) has such knowledge and experience in financial or business
matters that it is capable of evaluating the merits and risks of the investment
in the Shares.
     (g) Restricted Securities. Each of Leman and KLP understands that the
Shares each is acquiring ate characterized as “restricted securities” under the
securities laws of the United States in as much as they are being acquired from
TCI in a transaction not involving a public offering and that under such laws
and applicable regulations such securities may be resold without registration
under the Securities Act of 1933, as amended (the “Act’), only in certain
limited circumstances. In this connection, each of Leman and KLP represents that
it is familiar with SEC Rule 144, as presently in effect, understands the resale
limitations imposed thereby and by the Act, and understands that although TCI is
a reporting company under the Securities Exchange Act of 1934, Rule 144 will not
be available for resales of the Shares. Each of Leman and KLP also understands
and acknowledges that there will be no available public market for the Shares
and that although TCI has a class of equity securities listed and traded on the
New York Stock Exchange, the securities being acquired by Leman and/or KLP will
not be listed or traded on the New York Stock Exchange or any other
self-regulated organization or exchange.
     (h) Further Limitations on Disposition. Without in any way limiting the
representations set forth above, and subject to any requirement of law that its
property remain within its control, each of Leman and KLP further agrees not to
make any disposition of all or any portion of the Shares to any party other than
TCI during the first two years after the date of this Agreement, unless:

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     (i) There is then in effect a registration statement under the Act covering
such proposed disposition, and such disposition is made in accordance with such
registration statement; or
     (ii) Each of Leman and KLP, as applicable, shall have notified TCI of the
proposed disposition and shall have furnished TCI with a detailed statement of
the circumstances surrounding the proposed disposition, and (ii) if reasonably
requested by TCI, each of Leman and TCI, shall have furnished TCI with an
opinion of counsel reasonably satisfactory to TCI that such disposition will not
require registration of such shares under the Act; or
     (iii) The transfer is made without consideration by either of Leman or KLP,
as the case may be, to an affiliate of, or successor entity to, either of Leman
or KLP, as the case may be, if the transferee agrees in writing to be subject to
the terms hereof to the same extent as if he were the original recipient
hereunder.
     5. Representations and Warranties of TCI. TCI hereby represents and
warrants to each Leman and KLP as follows:
(a) Organization and Authority. TCI is a corporation duly authorized, validly
existing and in good standing under the laws of the State of Nevada. TCI has the
full power and authority (corporate and other) to execute and file the
Certificate of Designations and to perform its obligations under the Certificate
of Designations and under this Agreement to be performed by TCI. The execution,
filing and performance of the Certificate of Designations, the issuance of the
Series D Preferred Stock thereunder and the execution, delivery and performance
of this Agreement have been duly authorized by all necessary corporate action of
TCI. The Series D Preferred Stock is duly and validly issued and is fully paid
and nonassessable. The consideration received by TCI for the Series D Preferred
Stock is adequate. All necessary filings have been made with the Nevada
Secretary of State for the Certificate of Designations and issuance of the
Series D Preferred Stock. The execution, filing and performance of the
Certificate of Designations, the issuance of the Series D Preferred Stock and
the execution, deliver and performance of this Agreement do not conflict with or
result in the breach of any organizational documents of TCI or of any contract
or agreement binding on TCI, and the Certificate of Designations, the Series D
Preferred Stock and this Agreement represent the valid and binding obligation of
TCI, enforceable against TCI in accordance with their respective terms, subject
only to bankruptcy laws and other laws of general application.
     (b) Availability of Public Documents. TCI is subject to the informational
filing requirements of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”), and in accordance therewith, is required to file reports, proxy
statements and other information with the SEC. TCI is current in its filings
with the SEC under the Exchange Act which may be accessed at www.sec.gov.
Certain of such filings may also be accessed through TCI’s website at
www.transconrealtyinvest.com.
     (c) No Restrictive Covenants. Except for any applicable restrictions under

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Nevada state law as of the date of this Agreement, TCI is not a party to any
agreement or instrument that contains a restriction or limitation on TCI’s
ability to pay dividends on the Series D Preferred Stock or to redeem or
repurchase such Series D Preferred Stock in accordance with the terms of the
Certificate of Designations or of this Agreement. TCI is not a party to any
agreement or instrument that requires TCI to maintain any minimum level of net
worth or of liquidity except for property specific loan covenants requiring TCI
to maintain certain debt coverage ratios on specific properties. As long as the
Series D Preferred Stock shall remain outstanding, TCI shall not enter into
covenants that would materially restrict TCI’s ability to pay dividends on the
Series D Preferred Stock or to redeem or repurchase such Series D Preferred
Stock in accordance with the terms of the Certificate of Designations or of this
Agreement.
     6. Accounting Practices; Delivery to Holders of Certain Public Filings and
Financial Information. As long as any shares of Series D Preferred Stock shall
remain outstanding, as soon as same are filed with the SEC and in any event
within fifteen (15) calendar days thereafter, TCI will cause to be mailed to
each of Leman and KLP at their respective addresses for notices a copy of TCI’s
Form 10-K and Forms 10-Q, without exhibits. To the extent that TCI’s filing of
any such report is delayed beyond any filing date or extension date permitted
under the Securities Exchange Act of 1934, or to the extent that TCI shall cease
to file with SEC the periodic reports set forth above for any reason, TCI shall
instead deliver to a representative selected by the Holders of a majority of the
outstanding Series D Preferred Stock (a) as soon as practicable and in any event
within one hundred fifteen (115) calendar days after the close of each fiscal
year of TCI consolidated audited Financial Statements prepared in accordance
with GAAP, US, all in reasonable detail and with an opinion expressed by TCI’s
independent public accountants that such Financial Statement have been prepared
in accordance with GAAP, US, and fairly present the financial condition and
results of operations of TCI and its consolidated subsidiaries as of the dates
and for period indicated, and such opinion shall contain no qualifications as to
whether TCI will continue as a going concern; and (b) as soon as practical and
in any event within sixty (60) calendar days after the close of each fiscal
quarter of TCI, unaudited Financial Statements prepared in accordance with GAAP,
US (subject to normal year end adjustments which are not material individually
or in the aggregate).
     7. Put Option. Any Holder of the Series D Preferred Stock shall have the
option to demand that TCI purchase from such Holder, and on exercise of such
option, TCI shall purchase from such Holder at the “Put Price” (as defined
below), all of the shares of Series D Preferred Stock held by such Holder at any
time and from time to time after the occurrence of a “Put Event” (as defined
below), subject to the limitations set forth in this Agreement (such option and
reciprocal obligation to purchase are hereinafter referred to as the “Put”).
Such Holder may exercise the Put at any time and from time to time by written
notice of such exercise to TCI (the “Put Notice”) delivered at any time after
the “Put Event” The Put Notice shall be the affected Holder’s demand that TCI
repurchase from such Holder all, but not less than all, of the shares of
Series D Preferred Stock then held by such Holder at a price of $100 per share
plus any accrued and unpaid dividends through the date of the payment of such
price (such amount is herein determined to be the “Put Price”). Any Put Notice
shall set forth a date, which shall not be less than thirty (30) calendar days
nor more than sixty (60) calendar days after the date of such Put Notice and
which shall be a “Business Day,” for the purchase and sale of the shares of
Series D Preferred Stock with respect to which the Put is exercised (a “Put
Closing Date”). On or before

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the selected Put Closing Date, each Holder exercising the Put shall deliver the
certificates evidencing the shares of Series D Preferred Stock held by such
Holder and being sold on such Put Closing Date, duly endorsed, free and clear of
all “Encumbrances,” as defined in subpart (a) below, to TCI at its principal
executive office, and TCI shall on the Put Closing Date pay to such Holder an
amount equal to the Put Price multiplied by the number of shares of Series D
Preferred Stock that are represented by the certificates so delivered to TCI on
or before the Put Closing Date. The amount payable by TCI to any Holder upon
exercise of the Put shall be paid by cashier’s check or by wire transfer of
funds. If TCI is unable to purchase all of the shares of Series D Preferred
Stock to be sold pursuant to the Put on the applicable Put Closing Date because
it does not have adequate equity accounts to effect such repurchase under the
Nevada General Corporation Law, TCI shall notify such Holders of the number of
Shares TCI is so unable to purchase, and TCI shall purchase (on a pro rata basis
among all Holders making the Put on the basis of the number of shares held) all
of the shares of Series D Preferred Stock that TCI is then permitted to purchase
without violating the capital requirements of the Nevada General Corporation
Law, and TCI shall purchase the remaining shares covered by a Put as soon
thereafter as is possible without violating such equity requirements. For these
purposes the Board of Directors of the Corporation shall make and shall be
deemed to have made all reasonable findings of fact, consistent with their
fiduciary obligations, in support and in favor of making funds available for
purchase of the Shares covered by a Put under the Nevada General Corporation
Law. To the extent that TCI is not able to purchase all Series D Preferred Stock
covered by the Put Notice because of inadequate equity to do so, or because of
any other legal constraints that are not the result of any action or omission of
the exercising Holder, the obligation to pay the remaining Put Price shall, to
the extent permitted by applicable law, become a general unsecured obligation of
TCI to the exercising Holder, and the accrual rate for calculating cumulative
dividends on such shares shall increase as provided in Section 8 below.
     By presenting a Put Notice to TCI, each signatory to such Put Notice makes
in form and substance each and every one of the following representations,
warranties and covenants to TCI with respect to the shares of Series D Preferred
Stock subject to such Put Notice:
     (a) Shares identified in and subject to the Put Notice are owned of record
and beneficially by such stockholder free and clear of any “Encumbrance” (as
defined below), except for any restrictions on transfer under this Agreement and
applicable state and federal securities laws. Upon conclusion of the transfer to
TCI there will be no Encumbrances whatsoever, fixed or contingent, that directly
or indirectly (i) provide for the sale, pledge or other transfer or disposition
of any of the shares held by such stockholder, any interest therein or any
rights with respect thereto or which relate to the disposition, exercise or
control of such shares, or (ii) obligate such stockholder to grant, offer, or
enter into any of the foregoing. Except for restrictions on transfer under
applicable federal and state securities laws, on the Put Closing Date, TCI will
acquire valid and indefeasible title to such shares of such Series D Preferred
Stock free and clear of any Encumbrance. For the purposes of this subpart, the
term “Encumbrance” shall mean any security interest, pledge, option, lien,
claim, commitment, proxy, equity right (including without limitation community
property rights), restriction on transfer or encumbrance of any nature
whatsoever, other than restrictions under federal and state securities laws.

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     (b) The consummation of the Put does not violate any agreement, law, rule,
regulation, ordinance, order, writ, injunction, judgment or decree to which such
Holder is a party or by which such Holder is bound that would cause any damage
or cost to TCI upon payment of the Put Price by TCI.
     (c) Such Holder has the power and authority to consummate the Put and to
perform its obligations in connection with the Put set forth herein, all permits
and approvals from all appropriate governmental regulatory agencies as may be
deemed necessary for the lawful consummation of the Put by the Holders have been
obtained (except for any such permits or approvals required under applicable
state and federal securities laws), and if the stockholder is not an individual
person, the exercise of the Put by such stockholder has been approved by the
partners or governing body of such stockholder or such other persons or entities
as required under such stockholders’ governing documents.
     If at the time of the required closing of the Put, there shall be any
order, statute, rule, regulation, executive order, injunction, stay, decree,
judgment or restraining order applicable to or binding on a Holder from any
court or other governmental or regulatory authority or instrumentality that
prohibits the affected Holder from consummating the transactions contemplated
hereby, then the Holder affected by such matter shall disclose the same in
writing to TCI before such closing, and TCI shall remain obligated to close
hereunder on delivery of the certificates evidencing the Shares covered by the
Put, duly endorsed to TCI, but closing shall be delayed until the Holder is
lawfully able to close hereunder. Further, if there shall be then pending any
action, proceeding or investigation involving such Holder before or by any court
or governmental or regulatory or instrumentality or other person challenging, or
seeking damages in connection with, the Put transaction contemplated hereby,
then in any such event the Holder affected by such matter shall disclose the
same in writing to TCI before such closing, and TCI shall remain obligated to
close hereunder on delivery of the certificates evidencing the Shares covered by
the Put, duly endorsed to TCI, but TCI may and shall be fully protected by
interpleading all sums due from TCI hereunder or by otherwise depositing such
sums into the control of the court or other authority having jurisdiction over
the dispute. Failure by the Holder exercising the Put to disclose to TCI any
matter required to be disclosed under this paragraph shall be a continuing
representation and warranty by such Holder that no such matter exists, and the
Holder who fails in such disclosure obligation shall indemnify and hold TCI
harmless, and at TCI’s option, defend TCI, against any loss, cost, liability,
damage or expense, including reasonable attorneys’ fees, arising from such
breach.
     For the purposes of this Agreement, the following terms shall have the
meanings ascribed to each below unless otherwise specifically defined herein:
     (a) “Business Day” shall be and mean any day other than a Saturday, Sunday
or a day on which federally-chartered commercial banks are authorized by law to
be closed.
     (b) “Capital Lease” shall be and mean a lease that would be capitalized on
a balance sheet of a lessee prepared in accordance with GAAP, US

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     (c) “Financial Statements” as of any date means the following consolidated
financial statements of TCI: Balance Sheet(s), Consolidated Statement(s) of
Operations, Consolidated Statement(s) of Stockholders Equity, and Consolidated
Statement(s) of Cash Flows of TCI as of the date specified, prepared in
conformity with GAAP, US, together with related notes thereto, as required by
GAAP, US for the fiscal year then ended (in the case of annual statements) or
the fiscal quarter then ended (in the case of quarterly statements).
     (d) “Form 10-K” and “Form 10-Q” shall be and mean the annual and quarterly
reports required to be filed by TCI with the Securities and Exchange Commission
and any similar reports required to be filed in the future which contain annual
financial statements or quarterly financial statements, as the case may be.
     (e) “Encumbrance” shall have the meaning ascribed in Paragraph 7, subpart
(a) above.
     (f) “GAAP, US” shall be and mean accounting principles and practices
generally accepted in the United States of America, together with the standards
of the Public Company Accounting Oversight Board (United States), which assesses
the accounting principles used and evaluates the overall presentation of
financial statements and schedules from time to time, all applied on a basis
consistent from year to year except for changes required by such principles and
practices from time to time.
     (g) “In Arrears” shall mean, with respect to any quarterly dividend accrued
on the Series D Preferred Stock, that such dividend has not been paid in full
for any reason on or before its respective “Dividend Reference Date,” as that
term is defined in the Certificate of Designations (and for this purpose partial
payment of any accrued quarterly dividend shall be considered nonpayment);
     (h) “Liabilities” shall be and mean those liabilities required to be listed
as liabilities under GAAP, US on the Consolidated Balance Sheet of TCI and shall
include (i) all consolidated obligations for borrowed money, (ii) all
obligations evidenced by bonds, debentures, notes or similar instruments of
indebtedness (but shall not include any preferred stock), (iii) all obligations
to pay the deferred purchase price of property or services, except trade
accounts payable arising in the ordinary course of business, (iv) all
obligations as lessee under any “Capital Leases,” and (v) all non-contingent
obligations to reimburse any other person or entity for amounts which have
actually been drawn under a letter of credit or similar instrument, but shall
not include any guaranty of indebtedness of others or accommodation pledges of
assets or customary trade payables that may under GAAP, US be disclosed in notes
to the Financial Statements rather than as liabilities on such Consolidated
Balance Sheet.
     (i) “Liquidation Event” shall be and mean (i) any reorganization,
consolidation or merger of TCI in which TCI is not the continuing or surviving

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corporation, or (ii) any sale or other transfer of more than eighty percent
(80%) of the TCI’s assets (in one transaction or a series of related
transactions taking place within the same twelve-month period, and such
transactions must be treated as sales under GAAP, US to be sales for purposes of
determining whether a Liquidation Event has occurred); or (iii) approval by the
stockholders of the Corporation of a plan or proposal for the liquidation or
dissolution of the Corporation.
     (j) “Net Worth” and/or “Stockholders’ Equity” shall be and mean the sum of
TCI’s stockholders’ equity accounts as reflected from time to time on its
consolidated balance sheet under GAAP, US, including preferred stock, common
stock, paid-in capital, retained earnings and other accumulations less treasury
stock, accumulated deficit or accumulated other comprehensive loss.
     (k) “Put Event” shall be and mean any one or more of the following events
or conditions (provided, however, that no event or condition described in
subparts (i), (ii), (iii), (iv) or (v) below, to the extent that such event or
condition arises after July 31, 2011, shall be a “Put Event”):
     (i) A total of three quarterly dividends on the Series D Preferred Stock
shall be In Arrears, whether or not such dividends are consecutive, whether or
not funds are available for payment and whether or not such dividends have been
declared, and such condition shall have continued for thirty calendar days after
the Dividend Reference Date applicable to the third quarterly dividend; or
     (ii) At least two quarterly dividends on the Series D Preferred Stock
(whether or not such dividends are consecutive, whether or not funds are
available for payment and whether or not such dividends have been declared)
shall have been In Arrears as of any Test Date, and such condition of arrearage
shall have occurred on five separate Test Dates, whether or not consecutive; or
     (iii) the ratio of TCI’s Liabilities to TCI’s Stockholders’ Equity shall
exceed 10 to 1 at the end of any calendar quarter or fiscal year as calculated
from the Financial Statements for such calendar quarter or end of a fiscal year
as applicable; or
     (iv) the Stockholders’ Equity of TCI shall be less than $150 million at the
end of any calendar quarter or fiscal year end as calculated from the Financial
Statements for such calendar quarter or fiscal year end as applicable; or
     (v) a Liquidation Event of TCI has occurred;
     (vi) TCI shall fail to honor any of its obligations under any one or more
of the following paragraphs of the Certificate of Designations, and such failure
shall continue for a period of thirty (30) days after written notice of such
failure and the action necessary to cure the same is given to TCI: Paragraphs
3(b), 5, 6, 7, 8 or 10 (provided that no Put Event may first arise under this
paragraph (k)(vi) after December 31, 2011).

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Breaches or events of default under this Agreement or under the Certificate of
Designations that are not included within the definition of “Put Event” above
shall give rise only to actions by the affected Holders for specific performance
and for damages, as appropriate, but such other breaches or defaults shall not
give rise to a Put under this Agreement; only the Put Events shall give rise to
a Put.
The terms or phrases “Put Exercise,” “Put Notice,” “Put Price,” “Put Closing
Date” and “Put” shall have the meanings ascribed in the first portion of this
paragraph above. For the purposes of this Agreement, except as otherwise
expressly provided or unless the context clearly requires, all terms defined in
this Agreement include the plural as well as the singular, all accounting terms
not otherwise defined herein shall have the meanings ascribed to them in
accordance with GAAP, US and the words “herein,” “hereof” and “hereunder” and
other words of similar import refer to this Agreement as a whole, and not to any
particular paragraph, section, subpart or other subdivision.
     (l) “Test Date” shall be and include each October 31, January 31, April 30
and July 31 during the time that any of the Series D Preferred Stock remains
outstanding, provided that the final Test Date shall be July 31, 2011.
     8. Exercise of Put; TCI’s Failure to Close. In the event that a Holder
delivers a Put Notice to TCI and otherwise complies with its obligations in
connection with the Put, and TCI does not for any reason on the Put Closing Date
specified in the Put Notice [which must be at least thirty (30) calendar days
after receipt by TCI of such Put Notice] consummate the Put by the purchase of
all of the shares of Series D Preferred Stock covered by the Put at the Put
Price, unless such Put Notice is rescinded by the Holder submitting the same,
then TCI shall pay, in addition to the accrual rate for the dividends on any
shares covered by such Put for which TCI has not paid the Put Price, late
charges calculated on the aggregate Put Price not so paid at the “Default Rate.”
The Default Rate shall be five percent (5%) per annum. Therefore, if TCI shall
not be able to close on the Put for any reason other than a breach by the
Holder, dividends shall continue to accrue on Series D Preferred Stock covered
by the Put and in addition TCI shall incur to the Holders a late charge
calculated by applying to the $100 per share value of the Series D Preferred
Stock covered by the Put a simple interest rate equal to 5% per annum. The total
of dividends and late charges accruing shall never exceed fifteen percent (15%)
per annum. In addition, any affected Holder may:
     (a) elect to rescind the Put Notice, in whole or in part, and retain such
of the shares of Series D Preferred Stock specified in the Put Notice as TCI is
not able to or does not repurchase; or
     (b) elect to bring legal action for damages or a specific performance; or
     (c) elect to defer TCI’s compliance with the remaining terms of the Put
Notice until such time as TCI is able to purchase such remaining shares of
Series D Preferred Stock.

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In all instances, at all times while TCI has not repurchased such additional
shares of Series D Preferred Stock, such shares shall continue to accrue
dividends plus interest at the Default Rate as set forth above until repurchased
in accordance with the Put Notice (unless the Put Notice is withdrawn by the
Holder).
     9. Expiry of this Agreement. This Agreement shall expire and be without
further force or effect on January 31, 2012, except that all terms and
provisions of this Agreement shall remain in full force and effect as to any Put
that has been exercised as of such expiry date but that has not been closed and
funded, and any cause of action that has accrued in favor of any party under
this Agreement prior to such expiry date shall survive the expiration of this
Agreement.
     10. Assignment. This Agreement shall be binding upon and inure to the
benefit of the Parties hereto and their permitted successors and transferees.
     (a) Assignment by Holder; Right of First Refusal on Certain Transfers. Any
Holder is free, without the joinder or consent of TCI, to assign all or any part
of its rights (but not its obligations) under this Agreement in connection with
the any transfer of that Holder’s Series D Preferred Stock that is a permitted
transfer hereunder. In connection with any such permitted transfer by any
Holder, the transferring Holder shall remain fully responsible for its
obligations hereunder. Otherwise, any transfer of the rights of a Holder
hereunder may be made only with the consent of TCI. It is provided, however,
that prior to making any transfer of any rights under this Agreement in
connection with a transfer of Series D Preferred Stock, and if such transfer is
for valuable consideration, the Holder desiring to effect such transfer shall
first give written notice of such proposed transfer for value to TCI (a “Notice
of Sale”), including a copy of a letter of intent or contract for the proposed
transaction, a statement of the identity of the person or entity to which such
proposed transfer is being made, and a statement of the terms and conditions of
the proposed transaction. On receipt of such Notice of Sale, TCI shall have, for
a period of twenty (20) days after its receipt of such Notice if Sale, the
preferential right or option to purchase the Series D Preferred Stock affected
by the proposed transfer on the same terms and conditions as the transaction
that the affected Holder desires to accept, as set forth in the Notice of Sale.
To exercise such right and option, TCI must give written notice of such exercise
to the affected Holder within such twenty (20) day period, and TCI must deposit
on giving such notice an amount equal to ten percent (10%) of the cash
consideration involved in the proposed transfer into its attorneys’ trust
account as earnest money for the transaction, such earnest money to paid to the
Holder as liquidated damages should TCI default after exercise. At the same time
TCI must provide the affected Holder verification by TCI’s attorneys of such
deposit with the notice of exercise. On giving such notice, TCI shall be
obligated to close on the terms and conditions set out in the Notice of Sale
(being the same terms offered by the third party), except that TCI shall be
obligated to close such transaction within thirty (30) days of the Notice of
Sale. If TCI fails to exercise the right and option, or if TCI exercises the
right and option and then fails to close the purchase timely as set forth above,
the affected Holder may sell, transfer or otherwise dispose of the offered
shares and related rights under this Agreement to the party specified in the
original Notice of Sale for the consideration and upon the term and conditions
stated herein, and not otherwise; provided that such sale, transfer or other
disposition must be completed at any

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time within, but not after ninety (90) days after the date that the Notice of
Sale is delivered to TCI. If not completed within the appropriate period
designated above, the Notice of Sale theretofore given shall in all respects be
a nullity and shall be treated as though it never had been given and any
resulting transfer shall be of no force, effect or validity for any purpose
whatsoever. If such other disposition is not consummated on the same terms as
stated in the Notice of Sale, such disposition shall be of no force, effect or
validity for any purpose whatsoever and the notice thereof shall be rendered
ineffective. The right of first refusal provisions of this paragraph shall not
apply in any way to (x) any pledge of any of the Series D Preferred Shares and
related rights under this Agreement; provided that in event of any such pledge,
the Holder shall obtain the related lender’s agreement to be bound by the terms
of this Agreement in making any disposition of such Shares and legal rights, by
foreclosure or otherwise; (y) any transfer of Series D Preferred Shares and
related rights under this Agreement by a Holder to TCI; and (z) any transfer of
Series D Preferred Shares and related rights under this Agreement by a Holder
(i) if such Holder is a legal entity, to the shareholders, members, partners or
other beneficial owners of such Holder in connection with the dissolution of
such Holder; or (ii) to the spouse or descendants of such Holder, or (iii) to
any trust, partnership or limited liability company created solely for his
benefit or of a Holder, his spouse and/or descendants, or (iv) to any
beneficiary of such a trust; provided that this exception under subpart
(iv) shall apply only to distributions or transfers from such a trust to its
beneficiaries pursuant to the terms of the trust. In the case of any transfer to
which these right of first refusal provisions apply, the purchaser from such
Holder shall take the Series D Preferred Stock and related rights under this
Agreement free from any further right of first refusal under this paragraph;
that is, TCI shall have only one opportunity to exercise the right of first
refusal and if the transaction to a third party closes, the right shall be
without further force or effect. In the case of any transfer to which these
right of first refusal provisions do not apply because of the exceptions in
subsections (i) through (iv) above, the transferee from such Holder shall take
the Series D Preferred Stock and related rights under this Agreement subject to
the right of first refusal under this paragraph, so that TCI shall in every case
have at least one opportunity to exercise the right. As used in this paragraph,
the term “descendants” shall include descendants by adoption if the adoption was
a court adoption of a minor under fourteen (14) years of age.
     (b) Assignment by TCI. TCI is free, without the joinder or consent of any
Holder, to transfer all or any part of its rights under this Agreement in
connection with any reorganization or sale of all or substantially all of TCI’s
assets, including any merger, conversion in entity form or other change in
organization. In connection with any such transfer by TCI, TCI shall remain
fully responsible for its obligations hereunder and any successor entity shall
likewise assume such obligations. Otherwise, any transfer of the rights of TCI
hereunder may be made only with the consent of a majority in interest of the
holders of the Series D Preferred Stock.
     11. Miscellaneous. The following provisions form a part a part of this
Agreement:
     (a) Costs and Expenses. Except as otherwise expressly provided for in this
Agreement, each Party hereto shall bear its own costs, expenses and fees
incurred or assumed by such party in the preparation or execution of this
Agreement and in compliance with the covenants and conditions herein, whether or
not the transactions contemplated hereby shall be consummated.

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     (b) Further Cooperation. To the extent that either Party’s further approval
or other action is deemed necessary or desirable by any other party hereto in
order to effectuate the terms, conditions and purposes of this Agreement and the
matters covered hereby, each of the Parties hereto hereby agrees to execute all
reasonable documents and take all actions reasonably requested by any other
Party.
     (c) Notices. Any notice or other communication required or permitted to be
given by this Agreement or any other document or instrument referred to herein
which has been executed in connection herewith must be given in writing (which
may be by facsimile or electronic transmission followed by mail or personal
delivery), and must be personally delivered or mailed by prepaid, first class or
certified or registered mail to the Party to whom such notice or communication
is directed at the address of such Party set forth opposite his or its name on
the signature page to this Agreement. Subject to the other provisions of this
Agreement, any Party may change its address (or redesignate the person to whom
such notice shall be delivered) for purposes of this Agreement by giving notice
of such change to the other Party pursuant to this provision. In all instances,
any notice or other communication required or permitted to be given by this
Agreement shall only be effective upon actual receipt thereof by the person
intended to receive same. Although not required for effectiveness of the notice,
a copy should also be delivered to counsel for the respective Parties as
follows:

         
 
  For TCI:   Steven C. Metzger
 
      Metzger & McDonald PLLC
 
      3626 N. Hall Street, Suite 800
 
      Dallas, TX 75219-5133
 
      214-224-7555 (Facsimile)
 
       
 
  For Leman and KLP:   Rudy Beuttenmuller
 
      Thomas, Sinclair, Beuttenmuller, P. C.
 
      5335 Spring Valley Road
 
      Dallas, TX 75254
 
      972-991-2121 (Facsimile)

     (d) Amendments. Neither this Agreement nor any term hereby may be changed,
waived, discharged or terminated orally, but only by written agreement among the
Parties hereto.
     (e) Headings. The headings of sections or paragraphs of this Agreement are
inserted for convenience of reference only and shall not be deemed to constitute
apart of this Agreement.
     (f) Binding Effect . All terms and provisions of this Agreement shall be
binding upon and inure to the benefit and be enforceable by the heirs, legal
representatives, successors and assigns of the Parties hereto whenever
applicable to such Party.

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     (g) Entire Agreement. This Agreement constitutes the entire agreement among
the Parties hereto, supersedes and any and all prior understandings and
arrangements, and may not be modified or amended except on or after the date
hereof by a writing executed by the party against whom such modification or
amendment is sought to be enforced. The failure of any of the Parties to this
Agreement to insist upon strict adherence to any term of this Agreement on one
or more occasions shall not be deemed to be a waiver or deprive such person or
entity of the light thereafter to insist upon strict adherence to that term or
any other term of this Agreement. No waiver of this Agreement, the obligations
or conditions hereon, shall be valid unless the writing is signed by the Party
against whom said waiver is sought to be enforced.
     (h) Governing Law and Enforcement. This Agreement shall be construed and
enforced in accordance with the laws of the State of Texas, the state in which
it was negotiated, executed and delivered; provided, that matters relating to
the corporate powers of TCI, the internal governance of TCI, TCI’s right or
ability to pay dividends and to effect repurchases of its share and the
obligations and/or duties of TCI’s governing body shall be governed by the laws
of the State of Nevada. Should any clause, sentence or paragraph of this
Agreement be judicially or administratively declared to be invalid,
unenforceable or void under the laws of the State of Texas or Nevada, as
applicable, or the United States of America or any agency or subdivision
thereof, such decision shall not have the effect of invalidating or voiding the
remainder of this Agreement, so long as the offending provision does not go to
the benefit of the economic bargain of the Parties. To the extent that any
offending provision does not go to the benefit of such economic bargain, the
Parties hereto agree that the part or parts of this Agreement so held to be
invalid, unenforceable or void shall be deemed to have been deleted herefrom,
the remainder shall have been included herein and a provision with effect as
close as possible to the deleted provision but that is enforceable shall be
substituted therefor by the body making the determination of invalidity or
unenforceability. The Holders shall be entitled to specific enforcement of their
rights under this Agreement, to recover damages caused by reason of any breach
of any provision of this Agreement and to exercise all other rights granted by
law. The Parties agree and acknowledge that money damages will not be an
adequate remedy for any breach of the provisions of this Agreement and that the
Holders may in their sole discretion apply to any court of law or equity of
competent jurisdiction (without posting any bond or other security) for specific
performance and for other injunctive or equitable relief in order to enforce or
prevent violation of the provisions of this Agreement. In the event any Party
hereto shall fail to perform any of its obligations under this Agreement, such
Party hereby agrees to pay all reasonable expenses, including reasonable
attorneys’ fees, in such reasonable amount as may be awarded by a court of
competent jurisdiction to any Party hereto which is successful in enforcing this
Agreement.
     (i) No Third Party Beneficiaries. This Agreement does not create and shall
not be construed as creating any rights enforceable by any person other than the
undersigned Parties and their respective lawful successors and assigns and other
persons named herein and does not imply or release and shall not be construed as
implying or

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releasing that any rights are enforceable against any person or entity other
than the undersigned parties and their respective successors and assigns and the
persons named herein.
     (j) Counterparts. This Agreement may be executed in several counterparts,
each of which shall be deemed to be an original for all purposes, and all of
which shall constitute one and the same instrument, and it shall not be
necessary for the proof of this Agreement that any party produces or accounts
for more than one such counterpart.
     (k) Facsimile: Electronic Transmission. This Agreement or any notices
hereunder may be transmitted by facsimile or by electronic transmission, and it
is the intent of the parties for the facsimile or electronically reproduced
autograph by a receiving facsimile machine or computer to be an original
signature, and for the facsimile or any electronic reproduction and any complete
photocopy of this Agreement or notice to be deemed an original counterpart.
REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE FOLLOWS

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     IN WITNESS WHEREOF, each of the undersigned has caused this Agreement to be
executed, in one or more counterparts, each of which shall be deemed to be an
original, by their respective, duly-authorized representatives as of the date
and year first above written.
Addresses, Telephone Nos. and
Facsimile Nos. for Notices
See Section 10(c) above for additional
notice addresses for legal counsel.

                  TCI:    
 
                TRANSCONTINENTAL REALTY INVESTORS, INC.,
a Nevada corporation    
1800 Valley View Lane, Suite 300
           
Dallas, TX 75234
  By:   /s/ Steven A. Shelley    
 
           
469-522-4200 (Telephone)
      Name: Steven A. Shelley    
469-522-4360 (Facsimile)
      Title Vice President    
 
                LEMAN:    
 
                LEMAN DEVELOPMENT, LTD., a Texas limited partnership, by,
through and under its general partner    
 
                By: WINDMILL/KAUFMAN, LTD., a Texas limited partnership, general
partner, acting by, through and under its general partner    
5001 LBJ Freeway, Suite 830
           
Dallas, Texas 75244
           
972-960-2777 (Telephone)
      By: SIEPELA DEVELOPMENT    
972-960-2660 (Facsimile)
      CORPORATION, a Texas    
 
      corporation, general partner    

                  By:   /s/ James A. Siepela       James A. Siepela, President 
           

                  KLP:    
 
                KAUFMAN LAND PARTNERS, LTD., a Texas limited partnership, acting
by, through and under its general partner    
 
            5001 LBJ Freeway, Suite 830   By: KAUFMAN LAND MANAGEMENT LLC, a    
Dallas, Texas 75244
          Texas limited liability company, general partner    
972-960-2777 (Telephone)
           
972-960-2660 (Facsimile)
           

            By:   /s/ James A. Siepela       James A. Siepela, Manager          
 

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