CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT

 

CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT dated as of June 4, 2013 by and
between American Realty Capital Properties, Inc., a Maryland corporation (the
“Company”), and each investor identified on the signature pages hereto
(individually, an “Investor” and collectively, the “Investors”). Unless
otherwise defined, capitalized terms used in this Agreement are defined in
Section 7; references to an “Exhibit” are, unless otherwise specified, to an
Exhibit attached to this Agreement; references to a “Schedule” are, unless
otherwise specified, to a Schedule attached to this Agreement; references to a
“Section” are, unless otherwise specified, to a section of this Agreement. In
consideration of the mutual covenants and agreements set forth herein and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Company and the Investors respectively agree, as
follows:

 

1.          Agreement to Sell and Purchase the Preferred Shares.

 

1.1.          At the Closing provided for in Section 2, subject to the terms and
conditions of this Agreement, each Investor, severally and not jointly, will
purchase, and the Company will sell to each Investor, (i) that aggregate number
of the Company’s Series C Convertible Preferred Stock, par value $.01 per share,
having the rights, restrictions, privileges and preferences set forth in the
form of Articles Supplementary attached as Exhibit A hereto (the “Preferred
Stock”), set forth on such Investor’s signature page to this Agreement (which
aggregate amount for all Investors together shall be 28,398,213 shares of
Preferred Stock and shall collectively be referred to herein as the “Preferred
Shares”).

 

1.2.          The purchase price per Preferred Share shall be $15.76.

 

2.          Closing of Sale of Preferred Shares. The purchase and delivery of
the Preferred Shares to be purchased by the Investors shall take place at the
offices of Proskauer Rose LLP, 11 Times Square, New York, New York 10036, at a
closing (the “Closing”) on the Closing Date. At the Closing, the Company will
deliver or cause to be delivered to each of the Investors the Preferred Shares
to be purchased by it against payment of the purchase price forth on such
Investor’s signature page to this Agreement. Payment of such purchase price by
each Investor shall be by wire transfer of immediately available funds to such
account(s) designated by the Company to the Investors in writing at least one
business day prior to the Closing. If at the Closing (i) the Company fails to
tender to the Investors any of the Preferred Shares to be purchased as provided
in this Section 2 or (ii) the Investors fail to tender the purchase price for
the Preferred Shares to the Company, the Investors or the Company, as the case
may be, shall, at their election, be relieved of all further obligations under
this Agreement, without thereby waiving any other rights each may have by reason
of such failure or such non-fulfillment.

 

3.          Conditions to Closing.

 

3.1.          Conditions Precedent to Obligations of the Investors on the
Closing Date. The obligation of the Investors to purchase and pay for the
Preferred Shares to be sold to it at the, Closing is subject to the fulfillment
prior to or at the Closing of the following conditions, any or all of which may
be waived in writing at the option of the Investors:

 

 

 

 

(a)          Representations and Warranties. The representations and warranties
of the Company contained in Section 4 hereof (other than those that relate to a
particular date or period earlier than the Closing Date) shall be correct in all
material respects when made and at the time of the Closing, after giving effect
to the sale of the Preferred Shares and the other transactions contemplated to
be consummated at the Closing by this Agreement and the other Transaction
Documents, except that any representation or warranty that relates to a
particular date or period earlier than the Closing Date shall have been true in
all material respects as of such date or period.

 

(b)          Performance. The Company shall have performed and complied with, in
all material respects, all agreements and conditions contained in this Agreement
required to be performed or complied with by it prior to or at the Closing.

 

(c)          Closing Certificates. The Company shall have delivered to the
Investors an Officer’s Certificate, dated the Closing Date, certifying that the
conditions specified in Section 3.1 (a) and (b) have been fulfilled.

 

(d)          Legal Investment. On the Closing Date, the purchase of the
Preferred Shares by the Investors shall be permitted by the laws and regulations
of the jurisdiction to which each of the Investors is subject (including,
without limitation, Section 5 of the Securities Act) and shall not be enjoined
(temporarily or permanently) under, prohibited by or contrary to any injunction,
order or decree applicable to any of the Investors.

 

(e)          Proceedings and Documents. All corporate, partnership and other
proceedings contemplated by this Agreement and the other Transaction Documents
shall be reasonably satisfactory to the Investors in form and substance, and the
Investors shall have received all such counterpart originals or certified or
other copies of such documents as the Investors may reasonably request.

 

(f)          Related Matters. As of the Closing, none of the Company’s Charter
Documents shall have been modified or amended since the date such documents were
delivered to the Investor by the Company except for any such amendment or
supplement to the Company’s Charter as is contemplated or necessitated by this
transaction, substantially in the form of Exhibit A.

 

(g)          No Adverse U.S. Legislation, Action or Decision. No legislation,
order, rule, ruling or regulation shall have been enacted or made by or on
behalf of any governmental body, department or agency of the United States, nor
shall any decision of any court of competent jurisdiction within the United
States have been rendered which, in the reasonable judgment of the Investors,
could have a Material Adverse Effect on the Company and the Subsidiaries on a
consolidated basis. There shall be no action, suit, investigation or proceeding
pending or threatened, against or affecting any of the Investors, any of their
respective properties or rights, or any of their respective Affiliates,
associates, officers or directors, before any court, arbitrator or
administrative or governmental body which (i) seeks to restrain, enjoin, prevent
the consummation of or otherwise affect the transactions contemplated by this
Agreement and the other Transaction Documents, or (ii) questions the validity or
legality of any such transactions or seeks to recover damages or to obtain other
relief in connection with any such transactions, and there shall be no valid
basis for any such action, proceeding or investigation.

 

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(h)          Governmental and Third Party Permits, Consents, Etc. The Company
shall have duly applied for and obtained all approvals, orders, licenses,
consents and other authorizations (collectively, the “Approvals”) from each
federal, state and local government and governmental agency, department or body,
or pursuant to any agreement to which the Company is a party or to which it or
any of its assets is subject, which may be required in connection with this
Agreement and the other Transaction Documents.

 

(i)          The NASDAQ Capital Market Listing. As of the Closing, the listing
of shares of the Common Stock on The NASDAQ Capital Market shall not have been
terminated, nor shall the Company have been notified that such listing may be
terminated or that any termination is contemplated.

 

(j)          Additional Certificates. The Investors shall have received a
certificate, dated the Closing Date, from the Secretary (or Assistant Secretary)
of the Company, substantially in the form of Exhibit B.

 

(k)          Securities Purchase Agreement. The Company shall have
simultaneously consummated the transactions contemplated by the Securities
Purchase Agreement.

 

3.2.          Conditions Precedent to Obligations of the Company on the Closing
Date. The Company’s obligation to issue the Preferred Shares at the Closing is
subject to the fulfillment prior to or at the Closing of the following
conditions, any or all of which may be waived in writing at the option of the
Company:

 

(a)          Representations and Warranties. The representations and warranties
of the Investors in Section 5 hereof (other than those that relate to a
particular date or period earlier than the Closing Date) shall be correct in all
material respects on the Closing Date and any representations or warranty that
relates to a particular date or period earlier than the Closing Date shall have
been true in all material respects as of such earlier date or period.

 

(b)          Performance. Each of the Investors shall have performed and
complied with, in all material respect, all agreements and conditions contained
in this Agreement required to be performed or complied with prior to or at the
Closing.

 

(c)          Closing Certificate. Each of the Investors shall have delivered to
the Company an Officer’s Certificate, dated the Closing Date, certifying that
the conditions specified in Section 3.2(a) and (b) have been fulfilled.

 

(d)          Related Matters. At the Closing, the Company shall have received
payment in full for the Preferred Shares issued pursuant to this Agreement.

 

(e)          No Adverse U.S. Legislation, Action or Decision. No legislation,
order, rule, ruling or regulation shall have been enacted or made by or on
behalf of any governmental body, department or agency of the United States, nor
shall any decision of any court of competent jurisdiction within the United
States have been rendered which, in the Company’s reasonable judgment, could
have a Material Adverse Effect on the Company and its Subsidiaries on a
consolidated basis. There shall be no action, suit, investigation or proceeding
pending or threatened against or affecting the Company, any of its properties or
rights, or any of its Affiliates, associates, officers or directors, before any
court, arbitrator or administrative or governmental body which (1) seeks to
restrain, enjoin, prevent the consummation of or otherwise affect the
transactions contemplated by this Agreement and the Other Transaction Documents,
or (ii) questions the validity or legality of any such transactions or seeks to
recover damages or to obtain other relief in connection with any such
transactions, and there shall be no valid basis for any such action, proceeding
or investigation.

 

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(f)          Governmental and Third Party Permits, Consents, Etc. Each of the
Investor shall have duly applied for and obtained all Approvals from each
federal, state and local government and Governmental agency, department or body,
or pursuant to any agreement to which the Investor, is a party or to which it or
any of its assets is subject, which are be required in connection with this
Agreement and the other Transaction Documents.

 

(g)          Proceeding and Documents. All corporate, partnership and other
proceedings contemplated by this Agreement and the other Transaction Documents
shall be reasonably satisfactory in form and substance to the Company and the
Company shall have received all such counterpart originals or certified or other
copies of such documents as the Company may reasonably request.

 

(h)          Additional Certificates. The Company shall have received a
certificate, dated the Closing Date, from the Secretary (or Assistant Secretary)
of each of the Investors, substantially in the form of Exhibit C.

 

(i)          Legal Investment. On the Closing Date, the purchase by each of the
Investors of the Preferred Shares shall be permitted by the laws and regulation
of the jurisdiction to which each such Investor is subject (including, without
limitation, Section 5 of the Securities Act) and shall not be enjoined
(temporarily or permanently) under, prohibited by or contrary to any injunction,
order or decree applicable to the Investor.

 

(j)          The NASDAQ Capital Market Listing. As of the Closing, the listing
of shares of Common Stock on The NASDAQ Capital Market shall not have been
terminated, nor shall the Company have been notified that such listing may be
terminated or that any termination is contemplated.

 

3.3.          Additional Closing Delivery. At the Closing, the Company and each
Investor shall execute and deliver a contingent value rights agreement,
substantially in the form of Exhibit E, which shall provide that such Investor
shall be issued a number of contingent value rights equal to the number of
Common Shares issued to such Investor hereunder.

 

4.          Representations and Warranties of the Company. The Company hereby
represents and warrants as of the date hereof (except for the representations
and warranties that speak as of a specific date, which shall be made as of such
date) to the Investors as follows:

 

4.1.          Organization and Qualification. The Company and each “significant
subsidiary” (as such term is defined in Rule 1-02 of Regulation S-X of the
Securities Act) (a “Significant Subsidiary”) of which the Company owns, directly
or indirectly, an interest, if any, is an entity duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation, with the requisite power and legal authority to own and use its
properties and assets and to carry on its business as currently conducted. The
Company is not in violation of any of the provisions of its certificate or
articles of incorporation, bylaws or other organizational or charter documents.
The Company is duly qualified to do business and is in good standing as a
foreign corporation or other entity in each jurisdiction in which the nature of
the business conducted or property owned by it makes such qualification
necessary, except where the failure to be so qualified or in good standing, as
the case may be, would not, individually or in the aggregate, have or reasonably
be expected to result in a Material Adverse Effect.

 

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4.2.          Authorization; Enforcement. The Company has the requisite
corporate power and authority to enter into and to consummate the transactions
contemplated by each of the Transaction Documents to which it is a party and
otherwise to carry out its obligations hereunder and thereunder. The execution
and delivery of each of the Transaction Documents to which it is a party by the
Company and the consummation by it of the transactions contemplated hereby and
thereby have been duly authorized by all necessary corporate action on the part
of the Company and no further consent or action is required by the Company, its
Board of Directors or its stockholders. Each of the Transaction Documents to
which it is a party has been (or upon delivery will be) duly executed by the
Company and is, or when delivered in accordance with the terms hereof, will
constitute, the valid and binding obligation of the Company enforceable against
the Company in accordance with its terms, except (i) as limited by general
equitable principles and applicable bankruptcy, insolvency, reorganization,
moratorium and other laws of general application affecting enforcement of
creditors’ rights generally, (ii) as limited by laws relating to the
availability of specific performance, injunctive relief or other equitable
remedies and (iii) insofar as indemnification and contribution provisions may be
limited by applicable law.

 

4.3.          No Conflicts. The execution, delivery and performance of the
Transaction Documents to which it is a party by the Company and the consummation
by the Company of the transactions contemplated hereby and thereby do not, and
will not, (i) conflict with or violate any provision of the Company’s
certificate or articles of incorporation, bylaws or other organizational or
charter documents, (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 (with
or without notice, lapse of time or both) of, or result in the creation of any
lien, security interest, charge or encumbrance upon any of the properties or
assets of the Company or any Significant Subsidiary under the terms or
conditions of, any agreement, credit facility, debt or other instrument
(evidencing a Company debt or otherwise) or other understanding to which the
Company or any Significant Subsidiary is a party or by which any property or
asset of the Company is bound, or affected, except to the extent that such
conflict, default, termination, amendment, acceleration or cancellation right
would not reasonably be expected to have a Material Adverse Effect, or (iii)
result in a violation of any law, rule, regulation, order, judgment, injunction,
decree or other restriction of any court or governmental authority to which the
Company or any Significant Subsidiary is subject (including, assuming the
accuracy of the representations and warranties of the Investors set forth in
Section 5 hereof, federal and state securities laws and regulations and the
rules and regulations of any self-regulatory organization to which the Company
or its securities are subject, including all applicable Trading Markets), or by
which any property or asset of the Company or any Significant Subsidiary is
bound or affected, except to the extent that such violation would not reasonably
be expected to have a Material Adverse Effect.

 

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4.4.          The Preferred Shares. The Preferred Shares and the shares of
Common Stock issuable upon conversion of the Preferred Shares are duly
authorized and, when issued and paid for in accordance with the applicable
Transaction Documents, will be duly and validly issued, fully paid and
nonassessable, free and clear of all Liens and will not be subject to preemptive
or similar rights of stockholders (other than those imposed by the Investors).
No vote of any class or series of capital stock of or any equity interests in
the Company is necessary to approve the issuance of the Preferred Shares or the
shares of Common Stock issuable upon conversion of the Preferred Shares.

 

4.5.          Capitalization. The authorized, issued and outstanding capital
stock of the Company is as set forth in the Company’s Quarterly Report on Form
10-Q for the quarter ended March 31, 2013 and filed with the SEC on May 6, 2013.
As of the date hereof, (i) 154,888,410 shares of Common Stock are issued and
outstanding, (ii) 545,454 shares of the Company’s Series A Convertible Preferred
Stock are issued and outstanding, (iii) 283,018 shares of the Company’s Series B
Convertible Preferred Stock are issued and outstanding and (iv) no shares of
Manager’s Stock are issued and outstanding. As of the Closing, (i) 184,300,174
shares of Common Stock will be issued and outstanding, (ii) 545,454 shares of
the Company’s Series A Convertible Preferred Stock will be issued and
outstanding, (iii) 283,018 shares of the Company’s Series B Convertible
Preferred Stock will be issued and outstanding, (iv) 28,398,213 shares of the
Series C Preferred Stock will be issued and outstanding and (v) no shares of
Manager’s Stock will be issued and outstanding. Additionally, as of the date
hereof, 9,612,586 common units of limited partnership interest in the form of
“OP Units” in ARC Properties Operating Partnership, L.P. were issued and
outstanding. As of the date hereof, and as of the Closing, all outstanding
shares of capital stock are duly authorized, validly issued, fully paid and
nonassessable and have been issued in compliance in all material respects with
all applicable securities laws. Except as disclosed in the SEC Reports filed
prior to the date hereof, the Company did not have outstanding at March 31, 2013
any other Options, script rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities, rights or obligations
convertible into or exercisable or exchangeable for, or entered into any
agreement giving any Person any right to subscribe for or acquire, any Preferred
Shares, or securities or rights convertible or exchangeable into Preferred
Shares. Except as disclosed in SEC Reports, and except for customary adjustments
as a result of stock dividends, stock splits, combinations of shares,
reorganizations, recapitalizations, reclassifications or other similar events,
there are no anti-dilution or price adjustment provisions contained in any
security issued by the Company (or in any agreement providing rights to security
holders) and the issuance and sale of the Preferred Shares will not obligate the
Company to issue Preferred Shares or other securities to any Person (other than
the Investors) and will not result in a right of any holder of securities to
adjust the exercise, conversion, exchange or reset price under such securities.
To the knowledge of the Company , except as disclosed in the SEC Reports filed
prior to the date hereof and any Schedules 13D or 13G filed with the SEC
pursuant to Rule 13d-1 of the Exchange Act by reporting persons or in Schedule
4.5 hereto, no Person or group of related Persons beneficially owns (as
determined pursuant to Rule 13d-3 under the Exchange Act), or has the right to
acquire, by agreement with or by obligation binding upon the Company ,
beneficial ownership of in excess of 5% of the outstanding Common Stock.

 

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4.6.          SEC Reports; Financial Statements. Except as set forth in SEC
Reports filed prior to the date hereof or on Schedule 4.6 hereto, the Company
has filed all reports required to be filed by it under the Exchange Act,
including pursuant to Section 13(a) or 15(d) thereof, for the 12 months
preceding the date hereof on a timely basis or has received a valid extension of
such time of filing and has filed any such SEC Reports prior to the expiration
of any such extension and has filed all reports required to be filed by it under
the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for the
two years preceding the date hereof. Such reports required to be filed by the
Company under the Exchange Act, including pursuant to Section 13(a) or 15(d)
thereof, together with any materials filed or furnished by the Company under the
Exchange Act, whether or not any such reports were required, including the
exhibits thereto and documents incorporated by reference therein, being
collectively referred to herein as the “SEC Reports” and, together with this
Agreement and the Schedules to this Agreement, the “Disclosure Materials”. As of
their respective dates (or, if amended or superseded by a filing prior to the
date hereof, then on the date of such filing), the SEC Reports filed by the
Company complied in all material respects with the requirements of the
Securities Act and the Exchange Act and the rules and regulations of the SEC
promulgated thereunder, and none of the SEC Reports, when filed (or, if amended
or superseded by a filing prior to the date hereof, then on the date of such
filing) by the Company, 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. The financial statements of the Company
included in the SEC Reports comply in all material respects with applicable
accounting requirements and the rules and regulations of the SEC with respect
thereto as in effect at the time of filing (or, if amended or superseded by a
filing prior to the Closing Date, then on the date of such filing). Such
financial statements have been prepared in accordance with United States
generally accepted accounting principles applied on a consistent basis during
the periods involved (“GAAP”), except as may be otherwise specified in such
financial statements, the notes thereto and except that unaudited financial
statements may not contain all footnotes required by GAAP or may be condensed or
summary statements, and fairly present in all material respects the consolidated
financial position of the Company and its consolidated Subsidiaries as of and
for the dates thereof and the results of operations and cash flows for the
periods then ended, subject, in the case of unaudited statements, to normal,
year-end audit adjustments. Except for agreements related to the GE Portfolio
Acquisition, all material agreements to which the Company is a party or to which
the property or assets of the Company are subject are included as part of or
identified in the SEC Reports, to the extent such agreements are required to be
included or identified pursuant to the rules and regulations of the SEC.

 

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4.7.          Material Changes; Undisclosed Events, Liabilities or Developments;
Solvency. Since the date of the latest audited financial statements included
within the SEC Reports, except as disclosed in the SEC Reports (other than
forward-looking statements, risk factors and others statements cautionary in
nature) filed prior to the date hereof or in Schedule 4.7 hereto, (i) there has
been no event, occurrence or development that, individually or in the aggregate,
has had or that would result in a Material Adverse Effect, (ii) the Company has
not incurred any material liabilities other than (A) trade payables and accrued
expenses incurred in the ordinary course of business consistent with past
practice and (B) liabilities not required to be reflected in the Company’s
financial statements pursuant to GAAP or required to be disclosed in filings
made with the SEC, (iii) the Company has not altered its method of accounting or
changed its auditors, (iv) the Company has not declared or made any dividend or
distribution of cash or other property to its stockholders, in their capacities
as such, or purchased, redeemed or made any agreements to purchase or redeem any
shares of its capital stock, and (v) the Company has not issued any equity
securities to any officer, director or Affiliate, except pursuant to existing
Company stock-based plans. The Company has not taken any steps to seek
protection pursuant to any bankruptcy law nor does the Company have any
knowledge or reason to believe that its creditors intend to initiate involuntary
bankruptcy proceedings or any actual knowledge of any fact which would
reasonably lead a creditor to do so. The Company is not as of the date hereof,
and after giving effect to the transactions contemplated hereby to occur at the
applicable Closing, will not be Insolvent (as defined below). For purposes of
this Section 4.7, “Insolvent” means (i) the present fair saleable value of the
Company’s assets is less than the amount required to pay the Company’s total
Indebtedness, (ii) the Company is unable to pay its debts and liabilities,
subordinated, contingent or otherwise, as such debts and liabilities become
absolute and matured, (iii) the Company intends to incur or believes that it
will incur debts that would be beyond its ability to pay as such debts mature or
(iv) the Company has unreasonably small capital with which to conduct the
business in which it is engaged as such business is now conducted and is
proposed to be conducted.

 

4.8.          No General Solicitation; Placement Agent's Fees. Neither the
Company, nor any of its Affiliates, nor any Person acting on its or their
behalf, has engaged in any form of general solicitation or general advertising
(within the meaning of Regulation D) in connection with the offer or sale of the
Preferred Shares. The Company shall be responsible for the payment of any
placement agent’s fees, financial advisory fees, or brokers’ commission (other
than for persons engaged by any Investor or its investment advisor) relating to
or arising out of the issuance of the Preferred Shares pursuant to this
Agreement. The Company shall pay, and hold each Investor harmless against, any
liability, loss or expense (including, without limitation, reasonable attorney's
fees and out-of-pocket expenses) arising in connection with any such claim for
fees arising out of the issuance of the Preferred Shares pursuant to this
Agreement. The Company may elect to appoint RCS Capital, as a structuring agent
(the “Agent”) in connection with the sale of the Preferred Shares. Other than
the Agent, the Company has not engaged any placement agent or other agent in
connection with the sale of the Preferred Shares.

 

4.9.          Private Placement; Investment Company. Neither the Company nor any
of its Affiliates nor, any Person acting on the Company’s behalf has, directly
or indirectly, at any time within the past six months, made any offer or sale of
any security or solicitation of any offer to buy any security under
circumstances that would (i) eliminate the availability of the exemption from
registration under Regulation D under the Securities Act in connection with the
offer and sale by the Company of the Preferred Shares as contemplated hereby or
(ii) cause the offering of the Preferred Shares pursuant to the Transaction
Documents to be integrated with prior offerings by the Company for purposes of
any applicable law, regulation or stockholder approval provisions, including,
without limitation, under the rules and regulations of any Trading Market.
Assuming the accuracy of the representations and warranties of the Investors set
forth in Section 5, no registration under the Securities Act is required for the
offer and sale of the Preferred Shares by the Company to the Investors as
contemplated hereby. The sale and issuance of the Preferred Shares hereunder
does not contravene the rules and regulations of any Trading Market on which the
Common Stock is listed or quoted. The Company is not required to be registered
as, and is not an Affiliate of, an “investment company” within the meaning of
the Investment Company Act of 1940, as amended

 

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4.10.         Listing and Maintenance Requirements. The Company has not, in the
twelve months preceding the date hereof, received notice (written or oral) from
any Trading Market on which the Common Stock is or has been listed or quoted to
the effect that the Company is not in compliance with the listing or maintenance
requirements of such Trading Market. The Company is, and has no reason to
believe that it will not in the foreseeable future continue to be, in compliance
with all such listing and maintenance requirements.

 

4.11.         Registration Rights. Except as disclosed in the SEC Reports, the
Company has not granted or agreed to grant to any Person any rights (including
“piggy-back” registration rights) to have any securities of the Company
registered with the SEC or any other governmental authority that have not
expired or been satisfied or waived. No Person has registration or “piggy-back”
rights that would preempt or “cut-back” the registration rights granted to the
Investors under this Agreement.

 

4.12.         Absence of Litigation. Except as disclosed in the SEC Reports
(other than forward-looking statements, risk factors and others statements
cautionary in nature) filed prior to the date hereof, to the Company's
knowledge, there is no action, suit, claim, Proceeding, inquiry or
investigation, before or by any court, public board, government agency,
self-regulatory organization or body pending or, to the Company’s knowledge,
threatened against or affecting the Company that could, individually or in the
aggregate, to have a Material Adverse Effect.

 

4.13.         Application of Takeover Protections. The Company and its Board of
Directors have taken all necessary action, if any, to render inapplicable any
control share acquisition, business combination, poison pill (including any
distribution under a rights agreement) or other similar anti-takeover provision
under the Company’s Charter Documents or the laws of its state of incorporation
that is or could become applicable to any of the Investors as a result of the
Investors and the Company fulfilling their obligations or exercising their
rights under the Transaction Documents, including, without limitation, as a
result of the Company’s issuance of the Preferred Shares and the Investors’
ownership of the Preferred Shares

 

4.14.         Compliance. Except as would not, individually or in the aggregate,
reasonably be expected to have or result in a Material Adverse Effect, (i) the
Company is not in default under or in violation of (and no event has occurred
that has not been waived that, with notice or lapse of time or both, would
result in a default by the Company under), nor has the Company received written
notice of a claim that it is in default under or that it is in violation of, any
indenture, loan or credit agreement or any other agreement or instrument to
which it is a party or by which it or any of its properties is bound (whether or
not such default or violation has been waived), (ii) the Company is not in
violation of any order of any court, arbitrator or governmental body, or (iii) 
the Company is not and has not been in violation of any statute, rule or
regulation of any governmental authority.

 

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4.15.         Domestically Controlled REIT. To the Company’s knowledge and
belief, the Company is, and the Company expects that it will be immediately
after the Closing and after any conversion of the Preferred Stock, a
“domestically controlled qualified investment entity” (within the meaning of
Section 897(h)(4) of the Code, and, for the avoidance of doubt, taking into
account the ownership of the Common Stock of the Company), provided that in
applying Section 897(h)(4)(B) of the Code for purposes of this representation,
it shall be assumed that all persons who own stock in the Company as a result of
the transactions contemplated by this Agreement and by the Articles
Supplementary (including any conversion of the Preferred Shares) are foreign
persons.

 

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

 

4.17.         Sarbanes-Oxley Act. The Company is in compliance in all respects
with applicable requirements of the Sarbanes-Oxley Act of 2002 and applicable
rules and regulations promulgated by the SEC thereunder, except where such
noncompliance would not have, individually or in the aggregate, a Material
Adverse Effect.

 

5.          Representations and Warranties of the Investors. Each Investor
hereby, as to itself only and for no other Investor, represents and warrants to
the Company, severally and not jointly, as follows:

 

5.1.          Organization; Authority. Such Investor is an entity duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization with the requisite corporate, partnership or
other power and authority to enter into and to consummate the transactions
contemplated by the Transaction Documents and otherwise to carry out its
obligations hereunder and thereunder. The purchase by such Investor of the
Preferred Shares hereunder has been duly authorized by all necessary corporate,
partnership or other action on the part of such Investor. This Agreement has
been duly executed and delivered by such Investor and constitutes the valid and
binding obligation of such Investor, enforceable against it in accordance with
its terms, except (i) as limited by general equitable principles and applicable
bankruptcy, insolvency, reorganization, moratorium and other laws of general
application affecting enforcement of creditors’ rights generally, (ii) as
limited by laws relating to the availability of specific performance, injunctive
relief or other equitable remedies and (iii) insofar as indemnification and
contribution provisions may be limited by applicable law.

 

5.2.          No Public Sale or Distribution. Such Investor is acquiring the
Preferred Shares in the ordinary course of business for its own account and not
with a view towards, or for resale in connection with, the public sale or
distribution thereof, except pursuant to sales registered under the Securities
Act or under an exemption from such registration and in compliance with
applicable federal and state securities laws, and such Investor does not have a
present arrangement to effect any distribution of the Preferred Shares to or
through any person or entity; provided, however, that by making the
representations herein, such Investor does not agree to hold any of the
Preferred Shares for any minimum or other specific term and reserves the right
to dispose of the Preferred Shares at any time in accordance with or pursuant to
a registration statement or an exemption under the Securities Act.

 

10

 

 

5.3.          Investor Status. At the time such Investor was offered the
Preferred Shares, it was, and at the date hereof it is, an “accredited investor”
as defined in Rule 501(a) under the Securities Act or a “qualified institutional
buyer” as defined in Rule 144A(a) under the Securities Act. Such Investor is not
a registered broker dealer registered under Section 15(a) of the Exchange Act,
or a member of the Financial Regulatory Authority, Inc. (“FINRA”) or an entity
engaged in the business of being a broker dealer. Except as otherwise disclosed
in writing to the Company on Exhibit D-2 (attached hereto) on or prior to the
date of this Agreement, such Investor is not affiliated with any broker dealer
registered under Section 15(a) of the Exchange Act, or a member of FINRA or an
entity engaged in the business of being a broker dealer.

 

5.4.          General Solicitation. Such Investor is not purchasing the
Preferred Shares as a result of any advertisement, article, notice or other
communication regarding the Preferred Shares published in any newspaper,
magazine or similar media, broadcast over television or radio, disseminated over
the Internet or presented at any seminar or any other general solicitation or
general advertisement.

 

5.5.          Experience of Such Investor. Such Investor, either alone or
together with its representatives has such knowledge, sophistication and
experience in business and financial matters so as to be capable of evaluating
the merits and risks of the prospective investment in the Preferred Shares, and
has so evaluated the merits and risks of such investment. Such Investor
understands that it must bear the economic risk of this investment in the
Preferred Shares indefinitely, and is able to bear such risk and is able to
afford a complete loss of such investment.

 

5.6.          Access to Information. Such Investor acknowledges that it has
reviewed the Disclosure Materials, and all other materials such Investor deemed
necessary for the purpose of making an investment decision with respect to the
Preferred Shares, including information regarding the GE Portfolio Acquisition
and the CapLease Acquisition, and has been afforded: (i) the opportunity to ask
such questions as it has deemed necessary of, and to receive answers from,
representatives of the Company concerning the Company’s business, management and
financial affairs and terms and conditions of the offering of the Preferred
Shares and the merits and risks of investing in the Preferred Shares;
(ii) access to information (including material non-public information) about the
Company and its Subsidiaries and their respective financial condition, results
of operations, business, properties, management and prospects sufficient to
enable it to evaluate its investment; and (iii) the opportunity to obtain such
additional information that the Company possesses or can acquire without
unreasonable effort or expense that is necessary to make an informed investment
decision with respect to the investment. Such Investor has evaluated the risks
of investing in the Preferred Shares, understands there are substantial risks of
loss incidental to the investment and has determined that it is a suitable
investment for the Investor.

 

11

 

 

5.7.          No Governmental Review. Such Investor understands that no United
States federal or state agency or any other government or governmental agency
has passed on or made any recommendation or endorsement of the Preferred Shares
or the fairness or suitability of the investment in the Preferred Shares nor
have such authorities passed upon or endorsed the merits of the offering of the
Preferred Shares.

 

5.8.          No Conflicts. The execution, delivery and performance by such
Investor of this Agreement and the consummation by such Investor of the
transactions contemplated hereby will not (i) result in a violation of the
organizational documents of such Investor 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 agreement, indenture or instrument to which
such Investor is a party, or (iii) result in a violation of any law, rule,
regulation, order, judgment or decree (including federal and state securities
laws) applicable to such Investor, except in the case of clauses (ii) and (iii)
above, for such that are not material and do not otherwise affect the ability of
such Investor to consummate the transactions contemplated hereby.

 

5.9.          Prohibited Transactions; Confidentiality. No Investor, directly or
indirectly, and no Person acting on behalf of or pursuant to any understanding
with any Investor, has engaged in any purchases or sales in the securities,
including derivatives, of the Company (including, without limitation, any Short
Sales (a “Transaction”) involving any of the Company’s securities) since the
time that such Investor was first contacted by the Company, the Agent or any
other Person regarding an investment in the Company. Such Investor covenants
that neither it nor any Person acting on its behalf or pursuant to any
understanding with such Investor will engage, directly or indirectly, in any
Transactions in the securities of the Company (including Short Sales) prior to
the time the transactions contemplated by this Agreement are publicly disclosed.
“Short Sales” include, without limitation, all “short sales” as defined in Rule
200 promulgated under Regulation SHO under the Exchange Act and all types of
direct and indirect stock pledges, forward sale contracts, options, puts, calls,
short sales, swaps, derivatives and similar arrangements (including on a total
return basis), and sales and other transactions through non-U.S. broker-dealers
or foreign regulated brokers.

 

5.10.         Restricted Securities. The Investors understand that the Preferred
Shares are characterized as “restricted securities” under the U.S. federal
securities laws inasmuch as they are being acquired from the Company 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 only in certain limited circumstances

 

5.11.         Legends. It is understood that, except as provided in Section 6.1,
certificates evidencing the Preferred Shares may bear any legend as required by
the Blue Sky laws of any state and a restrictive legend in substantially the
form set forth in Section 6.1 (and, with respect to Preferred Shares held in
book-entry form, the Transfer Agent will record such a legend or other notation
on the share register of the Company)

 

5.12.         No Legal, Tax or Investment Advice. Such Investor understands that
nothing in this Agreement or any other materials presented by or on behalf of
the Company to the Investor in connection with the purchase of the Preferred
Shares constitutes legal, tax or investment advice. Such Investor has consulted
such legal, tax and investment advisors as it, in its sole discretion, has
deemed necessary or appropriate in connection with its purchase of the Preferred
Shares. Such Investor understands that the Agent has acted solely as the agent
of the Company in this placement of the Preferred Shares, and that the Agent
makes no representation or warranty with regard to the merits of this
transaction or as to the accuracy of any information such Investor may have
received in connection therewith. Such Investor acknowledges that he has not
relied on any information or advice furnished by or on behalf of the Agent.

 

12

 

 

5.13.         Certain Information. Each Investor acknowledges that the Company
may have material, non-public information not known to the Investors regarding
the Preferred Shares and the Company, including, without limitation, (i)
information, including actual and pro forma financial information, with respect
to (A) the GE Portfolio Acquisition and (B) the CapLease Acquisition and (ii)
information received by the Company on a privileged basis from the attorneys and
financial advisers representing the Company and its Board of Directors. Each
Investor understands, based on its experience, the disadvantage to which such
Investor is subject due to the disparity of information between the Company and
such Investor and, notwithstanding this, such Investor has deemed it appropriate
to enter into this Agreement and engage in the transactions contemplated hereby.

 

6.          Restrictions on Transfer; Other Agreements of the Parties.

 

6.1.          Restrictive Legends. In addition to the legend required by Section
4.07 of the Charter to the extent applicable, any certificate or other document
issued in respect of any Preferred Shares shall be endorsed with the legend set
forth below, as appropriate:

 

(i)           “THE SECURITIES REPRESENTED HEREBY HAVE NOTBEEN REGISTERED UNDER
THE UNITED STATES SECURITIES ACTOF 1933, AS AMENDED (THE “SECURITIES ACT”), OR
REGISTERED OR QUALIFIED UNDER THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE
SOLD, ‘TRANSFERRED, ASSIGNED, PLEDGED, OR HYPOTHECATED (1) ABSENT AN EFFECTIVE
REGISTRATION THEREOF UNDER SUCH ACT (2) ABSENT AN OPINION OF COUNSEL, WHICH
OPINION IS REASONABLY SATISFACTORY IN FORM AND SUBSTANCE TO THE COMPANY AND ITS
COUNSEL, TO THE EFFECT THAT SUCH REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR
THE SECURITIES LAWS OF SUCH STATES OR THAT SUCH TRANSACTION COMPLIES WITH THE
RULES PROMULGATED BY THE SECURITIES AND EXCHANGE COMMISSION UNDER SAID ACT OR
SUCH STATES OR, (3) EXCEPT IN A TRANSACTION IN COMPLIANCE WITH RULE 144 UNDER
THE SECURITIES ACT.” and

 

(ii)         any legend required by any applicable state securities law.

 

The Company shall maintain a copy of this Agreement and any amendments thereto
on file in its principal offices, and will make such copy available during
normal business hours for inspection to any party thereto or will provide such
copy to the Investor or any transferee upon its or their request.

 

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Whenever the legend requirements imposed by this Section 6.1 shall terminate, as
provided in Section 6.2, the respective holders of Preferred Shares for which
such legend requirements have terminated shall be entitled to receive from the
Company, at the Company’s expense, certificates representing the Preferred
Shares without such legend.

 

6.2.          Notice of Transfer, Opinions of Counsel. Each holder of the
Preferred Shares bearing the restrictive legend set forth in Section 6.1 above
(a “Restricted Security”), agrees with respect to any transfer of such
Restricted Security to give to the Company (a) written notice describing the
transferee and the circumstances, if any, necessary to establish the
availability of an exemption from the registration requirements of the
Securities Act or any state law and (b) upon reasonable request by the Company
to such transferring holder, an opinion of counsel (at the expense of such
holder), which is knowledgeable in securities law matters (including in-house
counsel), in form and substance reasonably satisfactory to the Company to the
effect that the proposed transfer of such Restricted Security may be effected
without registration of such Restricted Security under the Securities Act or any
state law. If for any reason the Company (after having been furnished with the
opinion required to be furnished pursuant to this Section 6.2), shall fail to
notify such holder within ten business days after such holder shall have
delivered such notice of opinion. to the Company that, in its or its counsel’s
opinion, the transfer may not be legally effective (the “Illegal Transfer
Notice”), such holders shall thereupon be entitled to transfer the Restricted
Security as proposed. If the holder of the Restricted Security delivers to the
Company an opinion of counsel (including in-house counselor regular counsel to
such Investor or its investment adviser) which is in form and substance
reasonably satisfactory to the Company that subsequent transfers of such
Restricted Security will not require registration under the Securities Act or
any state law, and the Company does not provide the holders with an Illegal
Transfer Notice as set forth above, the Company will within a reasonable period
after such contemplated transfer, at the expense of such holder, deliver new
certificates for such Restricted Security which do not bear the Securities Act
legend set forth in Section 6.1(i) above. The restrictions imposed by this
Section 6 upon the transferability of any particular Restricted Security shall
cease and terminate when such Restricted Security has been sold pursuant to an
effective registration statement under the Securities Act or transferred
pursuant to Rule 144 promulgated under the Securities Act. The holder of any
Restricted Security as to which such restrictions shall have terminated shall be
entitled to receive from the Company at the expense of such holder, a new
security of the same type but not bearing the restrictive Securities Act legend
set forth in Section 6.1 and not containing any other reference to the
restrictions imposed by this Section 6. Notwithstanding any of the foregoing, no
opinion of counsel will be required to be rendered pursuant to this Section 6.2
with respect to the transfer of any securities on which the restrictive legend
has been removed in accordance with this Section 6.2. As used in this Section
6.2, the term “transfer” encompasses any sale, transfer or other disposition of
an ,y securities referred to herein.

 

6.3.          Further Assurances. Each Investor agrees to promptly provide any
and all information reasonably requested by the Company in connection with the
Company’s compliance with the terms of its charter, including with respect to
the ownership limitations therein, and its continued qualification as a real
estate investment trust under the Code.

 

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6.4.          Ownership Limits.

 

(a)          Each Investor acknowledges and agrees that, in no event will the
Company be obligated to issue to Investors an aggregate number of shares of
Common Stock pursuant to the Securities Purchase Agreement and upon conversion
of the Preferred Shares issued pursuant to this Agreement that exceeds 19.9% of
the number of shares of Common Stock outstanding on the Trading Day immediately
preceding the date hereof (as appropriately adjusted for share splits, share
dividends, combinations, recapitalizations and the like).

 

(b)          Each Investor acknowledges and agrees that its ownership interests
in the Company is subject to the “Aggregate Share Ownership Limit” (as defined
in the Charter), calculated in accordance with Section 4.07 of Charter, and the
rights, obligations and remedies related thereto.

 

7.          Definitions. As used herein the following terms have the following
respective meanings:

 

“Affiliate,” means any Person that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common control with a
Person, as such terms are used in and construed under Rule 144 under the
Securities Act.

 

“Agent” has the meaning set forth in Section 4.8.

 

“Agreement” means this Agreement, as amended, modified or supplemented from time
to time, together with any exhibits, schedules, appendices or other attachments
thereto.

 

“Approvals” has the meaning ascribed thereto in Section 3.1(1) hereof.

 

“CapLease Acquisition” means the Company’s pending acquisition of CapLease, Inc.
pursuant to that certain Agreement and Plan of Merger, dated as of March 28,
2013, between the Company, CapLease, Inc. and certain of their subsidiaries.

 

“CapLease Closing” means the consummation of the CapLease Acquisition.

 

“Charter” means the charter of the Company, as amended to date and presently in
effect.

 

“Charter Documents” has the meaning ascribed thereto in Section 4.1 hereof.

 

“Closing” has the meaning ascribed thereto in Section 2 hereof.

 

“Closing Date” means the date and time of the Closing, which shall occur on the
third (3rd) Business Day following the date of this Agreement or such other date
and time as is mutually agreed to by the Company and each Investor.

 

“Code” means the Internal Revenue Code of 1986, as amended.

 

“Common Stock” means the common stock of the Company, par value $0.01 per share.

 

15

 

 

“Common Share Exchange Price” means the lower of (i) a 2% discount to the VWAP
of the Common Stock for the 10 trading days prior to CapLease Closing and (ii)
$15.76.

 

“Company” has the meaning ascribed thereto in the introduction hereof.

 

“Contingent Obligation” means, as to any Person, any direct or indirect
liability, contingent or otherwise, of that Person with respect to any
indebtedness, lease, dividend or other obligation of another Person if the
primary purpose or intent of the Person incurring such liability, or the primary
effect thereof, is to provide assurance to the obligee of such liability that
such liability will be paid or discharged, or that any agreements relating
thereto will be complied with, or that the holders of such liability will be
protected (in whole or in part) against loss with respect thereto.

 

“Convertible Securities” means any stock or securities (other than Options)
convertible into or exercisable or exchangeable for Common Stock.

 

“CVR Period VWAP” has the meaning set forth in Section 6.3(a) hereof

 

“Disclosure Materials” has the meaning set forth in Section 4.6 hereof.

 

“Effective Date” means the date that the Registration Statement is first
declared effective by the SEC.

 

“Effectiveness Period” has the meaning set forth in Section 8.1(b).

 

“Eligible Market” means any of the New York Stock Exchange, the NYSE MKT, the
NASDAQ Global Select Market, the NASDAQ Global Market, the NASDAQ Capital Market
or OTC Bulletin Board.

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

 

“Filing Date” means the date that is fifteen (15) days after the Closing Date
or, if such date is not a Business Day, the next date that is a Business Day.

 

“FINRA” has the meaning set forth in Section 5.3 hereof.

 

“GAAP” has the meaning set forth in Section 4.6 hereof.

 

“Governmental Authority” means any governmental or quasi-governmental authority
including, without limitation, any federal, state, territorial, county,
municipal or other governmental or quasi-governmental agency, board, branch,
bureau, commission, court, department or other instrumentality or political unit
or subdivision, whether domestic or foreign.

 

“Illegal Transfer Notice” has the meaning ascribed thereto in Section 6.2
hereof.

 

16

 

 

“GE Portfolio Acquisition” means the Company’s pending acquisition of a property
portfolio from certain subsidiaries of GE Capital pursuant to that certain
purchase and sale agreement dated May 31, 2013.

 

“Indebtedness” of any Person means, without duplication (A) all indebtedness for
borrowed money, (B) all obligations issued, undertaken or assumed as the
deferred purchase price of property or services (other than trade payables
entered into in the ordinary course of business), (C) all reimbursement or
payment obligations with respect to letters of credit, surety bonds and other
similar instruments, (D) all obligations evidenced by notes, bonds, debentures
or similar instruments, including obligations so evidenced incurred in
connection with the acquisition of property, assets or businesses, (E) all
indebtedness created or arising under any conditional sale or other title
retention agreement, or incurred as financing, in either case with respect to
any property or assets acquired with the proceeds of such indebtedness (even
though the rights and remedies of the seller or bank under such agreement in the
event of default are limited to repossession or sale of such property), (F) all
monetary obligations under any leasing or similar arrangement which, in
connection with generally accepted accounting principles, consistently applied
for the periods covered thereby, is classified as a capital lease, (G) all
indebtedness referred to in clauses (A) through (F) above secured by (or for
which the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any mortgage, lien, pledge, charge, security
interest or other encumbrance upon or in any property or assets (including
accounts and contract rights) owned by any Person, even though the Person which
owns such assets or property has not assumed or become liable for the payment of
such indebtedness, and (H) all Contingent Obligations in respect of indebtedness
or obligations of others of the kinds referred to in clauses (A) through (G)
above.

 

“Indemnified Party” has the meaning ascribed thereto in Section 9.1(c) hereof.

 

“Indemnifying Party” has the meaning ascribed thereto in Section 9.1(c) hereof.

 

“Investor” has the meaning ascribed thereto in the introduction hereof.

 

“Lien” means any mortgage, lien (statutory or otherwise), charge, pledge,
hypothecation, conditional sales agreement, adverse claim, title retention
agreement or other security interest, encumbrance or other title defect in or on
any interest or title of any vendor, lessor, lender or other secured party to or
of such Person under any conditional sale, trust receipt or other title
retention agreement with respect to any Property or asset of such Person.

 

“Losses” has the meaning ascribed thereto in Section 8.1(a) hereof.

 

“Material Adverse Effect” means (i) a material adverse effect on the results of
operations, assets, business, prospects or financial condition of the Company
and the Subsidiaries taken as a whole on a consolidated basis or (ii) material
and adverse impairment of the Company's ability to perform its obligations under
any of the Transaction Documents, provided, that, none of the following alone
shall be deemed, in and of itself, to constitute a Material Adverse Effect: (i)
a change in the market price or trading volume of the Common Stock or (ii)
changes in general economic conditions or changes affecting the industry in
which the Company operates generally (as opposed to Company-specific changes) so
long as such changes do not have a disproportionate effect on the Company and
its Subsidiaries taken as a whole.

 

17

 

 

“Officer’s Certificate” means a certificate executed on behalf of the Company by
the Chief Financial Officer of the Company.

 

“Options” means any outstanding rights, warrants or options to subscribe for or
purchase Common Stock or Convertible Securities.

 

“Person” means an individual, a limited liability company, a partnership, a
joint venture, a corporation, a trust, an unincorporated organization, a
government or any department or agency thereof and any other legal entity.

 

“Plan Assets Regulation” has the meaning set forth in Section 4.11 hereof.

 

“Preferred Stock” has the meaning set forth in Section 1.1 hereof.

 

“Preferred Shares” has the meaning set forth in Section 1.1 hereof.

 

“Proceeding” means an action, claim, suit, investigation or proceeding
(including, without limitation, a partial proceeding, such as a deposition),
whether commenced or threatened in writing.

 

“Property” means any interest in any kind of property or asset, whether real,
personal or mixed, or tangible or intangible.

 

“Prospectus” means the prospectus included in the Registration Statement
(including, without limitation, a prospectus that includes any information
previously omitted from a prospectus filed as part of an effective registration
statement in reliance upon Rule 430A promulgated under the Securities Act), as
amended or supplemented by any prospectus supplement, with respect to the terms
of the offering of any portion of the Registrable Securities covered by the
Registration Statement, and all other amendments and supplements to the
Prospectus including post-effective amendments, and all material incorporated by
reference or deemed to be incorporated by reference in such Prospectus.

 

“Registrable Securities” means the Preferred Stock and any Common Stock issued
or issuable pursuant to the Transaction Documents, together with any securities
issued or issuable upon any stock split, dividend or other distribution,
recapitalization or similar event with respect to the foregoing.

 

“Registration Statement” means each registration statement required to be filed
under Section 8 with respect to the Registrable Securities, including (in each
case) the Prospectus, amendments and supplements to such registration statement
or Prospectus, including pre- and post-effective amendments, all exhibits
thereto, and all material incorporated by reference or deemed to be incorporated
by reference in such registration statement

 

“Restricted Security” has the meaning ascribed thereto in Section 6.2 hereof.

 

18

 

 

“Rule 144,” “Rule 415,” and “Rule 424” means Rule 144, Rule 415 and Rule 424,
respectively, promulgated by the SEC pursuant to the Securities Act, as such
rules may be amended from time to time, or any similar rule or regulation
hereafter adopted by the SEC having substantially the same effect as such Rule.

 

“Rule 144A” means Rule 144A as promulgated by the SEC under the Securities Act,
and any successor rule or regulation thereto.

 

“SEC” means the United States Securities and Exchange Commission.

 

“SEC Reports” has the meaning set forth in Section 4.6 hereof.

 

“Securities Act” means the Securities Act of 1933, and the rules and regulations
of the SEC promulgated thereunder, as from time to time amended.

 

“Securities Purchase Agreement” means that certain Securities Purchase
Agreement, dated as of the date hereof, between the Company and certain
Investors/

 

“Selling Expenses” means all underwriting discounts, selling fees or commissions
and stock transfer taxes applicable to any sale of Registrable Securities.

 

“Short Sales” has the meaning set forth in Section 5.9 hereof.

 

“Subsidiary” means any direct or indirect subsidiary of the Company.

 

“Trading Day” means (i) a day on which the Common Stock is traded on a Trading
Market (other than the OTC Bulletin Board), or (ii) if the Common Stock is not
listed or quoted on a Trading Market (other than the OTC Bulletin Board), a day
on which the Common Stock is traded in the over-the-counter market, as reported
by the OTC Bulletin Board, or (iii) if the Common Stock is not listed or quoted
on any Trading Market, a day on which the Common Stock is quoted in the
over-the-counter market as reported by the Pink Sheets LLC (or any similar
organization or agency succeeding to its functions of reporting prices);
provided, that, in the event that the Common Stock is not listed or quoted as
set forth in (i), (ii) and (iii) hereof, then Trading Day shall mean a Business
Day.

 

“Trading Market” means whichever of the New York Stock Exchange, the NYSE MKT,
the NASDAQ Global Select Market, the NASDAQ Global Market, the NASDAQ Capital
Market or OTC Bulletin Board on which the Common Stock is listed or quoted for
trading on the date in question.

 

“Transaction” has the meaning set forth in Section 5.9 hereof.

 

“Transaction Documents” means, collectively, this Agreement, the schedules and
exhibits attached hereto, and any and all agreements, certificates, instruments
and other documents of the Company required thereby or executed and delivered
pursuant hereto.

 

19

 

 

“Transfer Agent” means Computershare Trust Company, N.A., or any successor
transfer agent for the Company.

 

8.          Registration Rights.

 

8.1.          Registration Statement.

 

(a)          On or prior to the Filing Date, the Company shall prepare and file
with the SEC a Registration Statement or, if a Registration Statement is then
effective, a supplement to the Prospectus, in either case covering the resale of
all Registrable Securities for an offering to be made on a continuous basis
pursuant to Rule 415 (or any successor provision); provided, that the Company
may, in its sole discretion, extend the Filing Date for up to ten (10) days. The
Registration Statement shall be on Form S-3 (except if the Company is not then
eligible to register for resale the Registrable Securities on Form S-3, in which
case such registration shall be on another appropriate form in accordance with
the Securities Act and the Exchange Act). This Prospectus or supplement thereto,
as applicable, shall contain (except if otherwise directed by the Investors or
requested by the SEC) the “Plan of Distribution” in substantially the form
(subject to any changes that may be made in accordance with Section 8.2(a))
attached hereto as Exhibit F.

 

(b)          Company shall use its reasonable best efforts to keep the
Registration Statement continuously effective under the Securities Act until the
earlier of the date that all Registrable Securities covered by such Registration
Statement have been sold or can be sold publicly without any volume limitations
under Rule 144 (the “Effectiveness Period”).

 

(c)          Notwithstanding anything in this Agreement to the contrary, after
120 consecutive Trading Days of continuous effectiveness of the initial
Registration Statement filed and declared effective (or Prospectus filed, as
appropriate) pursuant to this Agreement, the Company may, by written notice to
the Investors, suspend sales under a Registration Statement after the Effective
Date thereof and/or require that the Investors immediately cease the sale of
Registrable Securities pursuant thereto and/or defer the filing of any
subsequent Registration Statement if the Company is engaged in a material
merger, acquisition or sale and the Company’s Board of Directors determines in
good faith, by appropriate resolutions, that, as a result of such activity,
(A) it would be materially detrimental to the Company (other than as relating
solely to the price of the Common Stock) to maintain a Registration Statement at
such time or (B) it is in the best interests of the Company to suspend sales
under such registration at such time. Upon receipt of such notice, each Investor
shall immediately discontinue any sales of Registrable Securities pursuant to
such registration until such Investor is advised in writing by the Company that
the current Prospectus or amended Prospectus, as applicable, may be used. In no
event, however, shall this right be exercised to suspend sales beyond the period
during which (in the good faith determination of the Company’s Board of
Directors) the failure to require such suspension would be materially
detrimental to the Company. The Company’s rights under this Section 8.1(c) may
be exercised for a period of no more than 20 Trading Days at a time and not more
than three times in any twelve-month period. Immediately after the end of any
suspension period under this Section 8.1(c), the Company shall take all
necessary actions (including filing any required supplemental Prospectus) to
restore the effectiveness of the applicable Registration Statement and the
ability of the Investors to publicly resell their Registrable Securities
pursuant to such effective Registration Statement.

 

20

 

 

8.2.          Registration Procedures. In connection with the Company’s
registration obligations hereunder, the Company shall:

 

(a)          Not less than three Trading Days prior to the filing of a
Registration Statement or any related Prospectus or any amendment or supplement
thereto, furnish to the Investors copies of all such documents proposed to be
filed, which documents (other than any document that is incorporated or deemed
to be incorporated by reference therein) will be subject to the review of such
Investors. The Company shall reflect in each such document when so filed with
the SEC such comments regarding the description of the transactions contemplated
by this Agreement or the Preferred Stock Purchase Agreement, the Investors and
the plan of distribution as the Investors may reasonably and promptly propose no
later than two Trading Days after the Investors have been so furnished with
copies of such documents as aforesaid.

 

(b)           (i) Subject to Section 8.1(c), prepare and file with the SEC such
amendments, including post-effective amendments, to each Registration Statement
and the Prospectus used in connection therewith as may be necessary to keep the
Registration Statement continuously effective, as to the applicable Registrable
Securities for the Effectiveness Period and prepare and file with the SEC such
additional Registration Statements in order to register for resale under the
Securities Act all of the Registrable Securities; (ii) cause the related
Prospectus to be amended or supplemented by any required Prospectus supplement,
and as so supplemented or amended to be filed pursuant to Rule 424 (or any
successor provision); and (iii) comply in all material respects with the
provisions of the Securities Act and the Exchange Act with respect to the
disposition of all Registrable Securities covered by the Registration Statement
during the applicable period in accordance with the intended methods of
disposition by the Investors thereof set forth in the Registration Statement as
so amended or in such Prospectus as so supplemented.

 

(c)          Notify the Investors as promptly as reasonably possible, and (if
requested by the Investors confirm such notice in writing no later than two
Trading Days thereafter, of any of the following events: (i) the SEC issues any
stop order suspending the effectiveness of any Registration Statement or
initiates any Proceedings for that purpose; (ii) the Company receives notice of
any suspension of the qualification or exemption from qualification of any
Registrable Securities for sale in any jurisdiction, or the initiation or threat
of any Proceeding for such purpose; or (iii) the financial statements included
in any Registration Statement become ineligible for inclusion therein or any
Registration Statement or Prospectus or other document contains any untrue
statement of a material fact or omits 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.

 

21

 

 

(d)          Use its reasonable best efforts to avoid the issuance of or, if
issued, obtain the withdrawal of (i) any order suspending the effectiveness of
any Registration Statement, or (ii) any suspension of the qualification (or
exemption from qualification) of any of the Registrable Securities for sale in
any jurisdiction, as soon as possible.

 

(e)          Promptly deliver to each Investor, without charge, as many copies
of the Prospectus or Prospectuses (including each form of prospectus) and each
amendment or supplement thereto as such Persons may reasonably request. The
Company hereby consents to the use of such Prospectus and each amendment or
supplement thereto by each of the selling Investors in connection with the
offering and sale of the Registrable Securities covered by such Prospectus and
any amendment or supplement thereto to the extent permitted by federal and state
securities laws and regulations.

 

(f)          (i) In the manner required by each Trading Market, prepare and file
with such Trading Market an additional shares listing application (or
applications) covering all of the Registrable Securities; (ii) take all steps
necessary to cause such Common Stock to be approved for listing on each Trading
Market as soon as possible thereafter; (iii) provide to each Investor evidence
of such listing; and (iv) except as a result of events provided for in Section
8.1(c), during the Effectiveness Period, maintain the listing of such Common
Stock on each such Trading Market or another Eligible Market.

 

(g)          Prior to any public offering of Registrable Securities, use
reasonable best efforts to register or qualify or cooperate with the selling
Investors in connection with the registration or qualification (or exemption
from such registration or qualification) of such Registrable Securities for
offer and sale under the securities or Blue Sky laws of such jurisdictions
within the United States as any Investor requests in writing, to keep each such
registration or qualification (or exemption therefrom) effective for so long as
required, but not to exceed the duration of the Effectiveness Period, and to do
any and all other acts or things reasonably necessary or advisable to enable the
disposition in such jurisdictions of the Registrable Securities covered by a
Registration Statement; provided, however, that the Company shall not be
obligated to file any general consent to service of process or to qualify as a
foreign corporation or as a dealer in securities in any jurisdiction in which it
is not so qualified or to subject itself to taxation in respect of doing
business in any jurisdiction in which it is not otherwise so subject.

 

(h)          Cooperate with the Investors to facilitate the timely preparation
and delivery of certificates or book-entry records, as required by the
Investors, representing Registrable Securities to be delivered to a transferee
pursuant to a Registration Statement, which certificates or records, as
applicable, shall be free, to the extent permitted by this Agreement and under
law, of all restrictive legends, and to enable such certificates to be in such
denominations and registered in such names as any such Investors may reasonably
request.

 

(i)          Upon the occurrence of any event described in Section 8.2(c)(iii),
as promptly as reasonably possible, prepare a supplement or amendment, including
a post-effective amendment, to the Registration Statement or a supplement to the
related Prospectus or any document incorporated or deemed to be incorporated
therein by reference, and file any other required document so that, as
thereafter delivered, neither the Registration Statement nor such Prospectus
will 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,
in the light of the circumstances under which they were made, not misleading.

 

22

 

 

(j)          Cooperate with any reasonable due diligence investigation
undertaken by the Investors in connection with the sale of Registrable
Securities, including, without limitation, by making available documents and
information; provided, that, the Company will not deliver or make available to
any Investor material, nonpublic information unless such Investor requests in
advance in writing to receive material, nonpublic information and agrees in
writing to keep such information confidential.

 

(k)          Comply with all rules and regulations of the SEC applicable to the
registration of the Common Stock.

 

(l)           It shall be a condition precedent to the obligations of the
Company to complete the registration or Prospectus supplement filing pursuant to
this Agreement with respect to the Registrable Securities of any particular
Investor that such Investor furnish to the Company the information specified in
Exhibits D-1, D-2 and D-3 hereto and such other information regarding itself,
the Registrable Securities and other Common Stock held by it and the intended
method of disposition of the Registrable Securities held by it (if different
from the Plan of Distribution set forth on Exhibit F hereto) as shall be
reasonably required to effect the registration of such Registrable Securities or
file a Prospectus supplement with respect to the Registrable Securities and
shall complete and execute such documents in connection with the foregoing as
the Company may reasonably request.

 

(m)           The Company shall comply with all applicable rules and regulations
of the SEC under the Securities Act and the Exchange Act, including, without
limitation, Rule 172 (or any successor provision) under the Securities Act, file
any final Prospectus, including any supplement or amendment thereof, with the
SEC pursuant to Rule 424 (or any successor provision) under the Securities Act,
reasonably promptly inform the Investors in writing if, at any time during the
Effectiveness Period, the Company does not satisfy the conditions specified in
Rule 172 (or any successor provision) and, as a result thereof, the Investors
are required to make available a Prospectus in connection with any disposition
of Registrable Securities and take such other actions as may be reasonably
necessary to facilitate the registration of the Registrable Securities
hereunder.

 

23

 

 

8.3.          Registration Expenses. The Company shall pay all fees and expenses
(other than Selling Expenses) incurred in connection with the performance of or
compliance with Section 8 of this Agreement by the Company, including without
limitation (a) all registration and filing fees and expenses, including without
limitation those related to filings with the SEC, any Trading Market and in
connection with applicable state securities or Blue Sky laws, (b) printing
expenses (including without limitation expenses of printing certificates for
Registrable Securities), (c) messenger, telephone and delivery expenses,
(d) fees and disbursements of counsel for the Company, (e) fees and expenses of
all other Persons retained by the Company in connection with the consummation of
the transactions contemplated by this Agreement, and (f) all listing fees to be
paid by the Company to the Trading Market. All Selling Expenses incurred in
connection with the sale of Registrable Securities shall be borne by the
Investor or other holder selling such Registrable Securities. Each Investor or
other holder of Registrable Securities shall pay the expenses of its own counsel
and other advisers.

 

9.          Indemnification; Miscellaneous.

 

9.1.          Indemnification by the Company.

 

(a)          Indemnification by the Company. The Company shall, notwithstanding
any termination of this Agreement, indemnify and hold harmless each Investor,
each Investor’s officers, directors, agents and employees and each Person who
controls any such Investor (within the meaning of Section 15 of the Securities
Act or Section 20 of the Exchange Act), to the fullest extent permitted by
applicable law, from and against any and all Losses, as incurred, arising out of
or based on (i) any misrepresentation or breach of any representation or
warranty made by the Company in the Transaction Documents or any other
certificate, instrument or document contemplated hereby or thereby or (ii) any
untrue or alleged untrue statement of a material fact contained in the
Registration Statement, any Prospectus or any form of Company prospectus or in
any amendment or supplement thereto or in any Company preliminary prospectus, or
arising out of or relating to any omission or alleged omission of a material
fact required to be stated therein or necessary to make the statements therein
(in the case of any Prospectus or form of prospectus or supplement thereto, in
the light of the circumstances under which they were made) not misleading,
except to the extent that (A) such untrue statements, alleged untrue statements,
omissions or alleged omissions are based solely upon information regarding such
Investor furnished in writing to the Company by such Investor or its agent for
use therein, or to the extent that such information relates to such Investor or
such Investor's proposed method of distribution of Registrable Securities and
was reviewed and expressly approved by such Investor or its agent in writing
expressly for use in the Registration Statement, such Prospectus or such form of
prospectus or in any amendment or supplement thereto (it being understood that
the information provided by the Investor to the Company in Exhibits D-1, D-2 and
D-3 and the Plan of Distribution set forth on Exhibit F, as the same may be
modified by such Investor and other information provided by the Investor to the
Company in or pursuant to the Transaction Documents constitutes information
reviewed and expressly approved by such Investor in writing expressly for use in
the Registration Statement and Prospectus, as applicable), or (B) with respect
to any Prospectus, if the untrue statement or omission of material fact
contained in such Prospectus was corrected on a timely basis in the Prospectus,
as then amended or supplemented, if such corrected Prospectus was timely made
available by the Company to the Investor, and the Investor or its agent seeking
indemnity hereunder was advised in writing not to use the incorrect Prospectus
prior to the use giving rise to Losses.

 

24

 

 

 

(b)          Indemnification by Investors. Each Investor shall, severally and
not jointly, notwithstanding any termination of this Agreement, indemnify and
hold harmless the Company, its directors, officers, agents and employees and
each Person who controls the Company (within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act), to the fullest extent
permitted by applicable law, from and against all Losses (i) arising out of or
based on any misrepresentation or breach of any representation or warranty made
by such Investor in the Transaction Documents or any other certificate,
instrument or document contemplated hereby or thereby or (ii) arising out of (A)
any violation or purported violation of securities laws by such Investor in
connection with any resale of Common Stock and (B) any untrue statement of a
material fact contained in the Registration Statement, any Prospectus, or any
form of prospectus, or in any amendment or supplement thereto, or arising out of
or relating to any omission of a material fact required to be stated therein or
necessary to make the statements therein (in the case of any Prospectus or form
of prospectus or supplement thereto, in the light of the circumstances under
which they were made) not misleading, but only to the extent that such untrue
statements or omissions are based solely upon information regarding such
Investor furnished to the Company by such Investor or its agent in writing
expressly for use therein, or to the extent that such information relates to
such Investor or such Investor’s proposed method of distribution of Registrable
Securities and was reviewed and expressly approved in writing by such Investor
or its agent expressly for use in the Registration Statement, such Prospectus or
such form of prospectus or in any amendment or supplement thereto (it being
understood that the information provided by the Investor to the Company in
Exhibits D-1, D-2 and D-3 and the Plan of Distribution set forth on Exhibit F,
as the same may be modified by such Investor and other information provided by
the Investor to the Company in or pursuant to the Transaction Documents
constitutes information reviewed and expressly approved by such Investor in
writing expressly for use in the Registration Statement and Prospectus, as
applicable). In no event shall the liability of any selling Investor hereunder
be greater in amount than the dollar amount of the net proceeds received by such
Investor upon the sale of the Registrable Securities giving rise to such
indemnification obligation.

 

(c)          Conduct of Indemnification Proceedings. If any Proceeding shall be
brought or asserted against any Person entitled to indemnity hereunder (an
“Indemnified Party”), such Indemnified Party shall promptly notify the Person
from whom indemnity is sought (the “Indemnifying Party”) in writing, and the
Indemnifying Party shall assume the defense thereof, including the employment of
counsel reasonably satisfactory to the Indemnified Party and the payment of all
fees and expenses incurred in connection with defense thereof; provided, that,
the failure of any Indemnified Party to give such notice shall not relieve the
Indemnifying Party of its obligations or liabilities pursuant to this Agreement,
except (and only) to the extent that it shall be finally determined by a court
of competent jurisdiction (which determination is not subject to appeal or
further review) that such failure shall have proximately and materially
adversely prejudiced the Indemnifying Party.

 

25

 

 

 

An Indemnified Party shall have the right to employ separate counsel in any such
Proceeding and to participate in the defense thereof, but the fees and expenses
of such counsel shall be at the expense of such Indemnified Party or Parties
unless: (i) the Indemnifying Party has agreed in writing to pay such fees and
expenses; or (ii) the Indemnifying Party shall have failed promptly to assume
the defense of such Proceeding and to employ counsel reasonably satisfactory to
such Indemnified Party in any such Proceeding; or (iii) the named parties to any
such Proceeding (including any impleaded parties) include both such Indemnified
Party and the Indemnifying Party, and such Indemnified Party shall have been
advised by counsel that a conflict of interest is likely to exist if the same
counsel were to represent such Indemnified Party and the Indemnifying Party (in
which case, if such Indemnified Party notifies the Indemnifying Party in writing
that it elects to employ separate counsel at the expense of the Indemnifying
Party, the Indemnifying Party shall not have the right to assume the defense
thereof and the reasonable fees and expenses of separate counsel shall be at the
expense of the Indemnifying Party). It shall be understood, however, that the
Indemnifying Party shall not, in connection with any one such Proceeding
(including separate Proceedings that have been or will be consolidated before a
single judge) be liable for the fees and expenses of more than one separate firm
of attorneys at any time for all Indemnified Parties, which firm shall be
appointed by a majority of the Indemnified Parties. The Indemnifying Party shall
not be liable for any settlement of any such Proceeding effected without its
written consent, which consent shall not be unreasonably withheld. No
Indemnifying Party shall, without the prior written consent of the Indemnified
Party, effect the settlement or compromise of, or consent to the entry of any
judgment with respect to, any pending or threatened Proceeding in respect of
which indemnification or contribution may be sought hereunder (whether or not
such Indemnified Party is an actual or potential party to such action or claim)
unless such settlement, compromise or judgment (A) includes an unconditional
release of such Indemnified Party from all liability arising out of such action
or claim and (B) does not include a statement as to or an admission of fault,
culpability or a failure to act, by or on behalf of the Indemnified Party.

 

All reasonable fees and expenses of the Indemnified Party (including reasonable
fees and expenses to the extent incurred in connection with investigating or
preparing to defend such Proceeding in a manner not inconsistent with this
Section 9.1(c)) shall be paid to the Indemnified Party, as incurred, within 20
Trading Days of written notice thereof to the Indemnifying Party (regardless of
whether it is ultimately determined that an Indemnified Party is not entitled to
indemnification hereunder; provided, that, the Indemnifying Party may require
such Indemnified Party to undertake to reimburse all such fees and expenses to
the extent it is finally judicially determined that such Indemnified Party is
not entitled to indemnification hereunder).

 

(d)          Contribution. If a claim for indemnification under Section 9.1(a)
or  (b) is unavailable to an Indemnified Party (by reason of public policy or
otherwise), then each Indemnifying Party, in lieu of indemnifying such
Indemnified Party, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such Losses, in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party and
Indemnified Party in connection with the actions, statements or omissions that
resulted in such Losses as well as any other relevant equitable considerations.
The relative fault of such Indemnifying Party and Indemnified Party shall be
determined by reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact or omission
or alleged omission of a material fact, has been taken or made by, or relates to
information supplied by, such Indemnifying Party or Indemnified Party, and the
parties’ relative intent, knowledge, access to information and opportunity to
correct or prevent such action, statement or omission. The amount paid or
payable by a party as a result of any Losses shall be deemed to include, subject
to the limitations set forth in Section 9.1(c), any reasonable attorneys’ or
other reasonable fees or expenses incurred by such party in connection with any
Proceeding to the extent such party would have been indemnified for such fees or
expenses if the indemnification provided for in this Section 9.1 was available
to such party in accordance with its terms.

 

The parties hereto agree that it would not be just and equitable if contribution
pursuant to this Section 9.1(d) were determined by pro rata allocation or by any
other method of allocation that does not take into account the equitable
considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 9.1(d), no Investor shall be
required to contribute, in the aggregate, any amount in excess of the amount by
which the net proceeds actually received by such Investor from the sale of the
Registrable Securities subject to the Proceeding exceed the amount of any
damages that such 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. The indemnity and contribution
agreements contained in this Section 9.1are in addition to any liability that
the Indemnifying Parties may have to the Indemnified Parties.

 

26

 

 

9.2.          Dispositions. Each Investor agrees that it will comply with the
prospectus delivery requirements of the Securities Act as applicable to it in
connection with sales of Registrable Securities pursuant to the Registration
Statement and, to the extent any such sales are made under the Registration
Statement, shall sell its Registrable Securities in accordance with the Plan of
Distribution set forth in the Prospectus. Each Investor further agrees that,
upon receipt of a notice from the Company of the occurrence of any event of the
kind described in Section 8.2(c), such Investor will discontinue disposition of
such Registrable Securities under the Registration Statement until such Investor
is advised in writing by the Company that the use of the Prospectus, or amended
Prospectus, as applicable, may be resumed. The Company may provide appropriate
stop orders to enforce the provisions of this paragraph. Each Investor,
severally and not jointly with the other Investors, agrees that the removal of
the restrictive legend from certificates or book-entry records representing
Preferred Shares as set forth in this Section 9.2 is predicated upon the
Company’s reliance that the Investor will comply with the provisions of this
subsection. Both the Company and the Transfer Agent, and their respective
directors, officers, employees and agents, may rely on this subsection.

 

9.3.           Termination. This Agreement may be terminated by the Company or
any Investor, by written notice to the other parties, if the Closing has not
been consummated by the tenth (10th) Trading Day following the date of this
Agreement; provided, however, that the right to terminate this Agreement
pursuant to this Section 9.3 shall not be available to any party if the failure
of such party to perform any of its obligations under this Agreement has been a
principal cause of, or resulted in, the failure of the Closing to be consummated
on or before such date. No termination pursuant to this Section 9.3 will affect
the right of any party to sue for any breach by the other party (or parties).

 

9.4.          Fees and Expenses. Except as expressly set forth in the
Transaction Documents to the contrary, each party shall pay the fees and
expenses of its advisers, counsel, accountants and other experts, if any, and
all other expenses incurred by such party incident to the negotiation,
preparation, execution, delivery and performance of this Agreement. The Company
shall pay all Transfer Agent fees, stamp taxes and other taxes and duties levied
in connection with the sale and issuance of the Preferred Shares.

 

27

 

 

The Company, whether or not the transactions contemplated hereunder are
consummated or this Agreement is terminated, in accordance with the provisions
of Section 9.3 hereunder, will pay to Luxor Capital Group, LP, an Investor, on
the Closing Date in immediately available funds to an account designated in
writing by it all reasonable and customary out-of-pocket expenses incurred by it
and incident to the negotiation and performance of its obligations hereunder,
including reasonable fees and documented disbursements of its counsel
(“Reimbursable Expenses”), which Reimbursable Expenses, together with all
Reimbursable Expenses (as defined in the Securities Purchase Agreement) pursuant
to the Securities Purchase Agreement, in the aggregate, will not exceed
$200,000.

 

9.5.          Entire Agreement. The Transaction Documents, together with the
exhibits and schedules thereto, contain the entire understanding of the parties
with respect to the subject matter hereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters, which the parties
acknowledge have been merged into such documents, exhibits and schedules. At or
after the Closing, and without further consideration, the Company will execute
and deliver to the Investors such further documents as may be reasonably
requested in order to give practical effect to the intention of the parties
under the Transaction Documents.

 

9.6.          Notices. All notices, consents, approvals, waivers or other
communications (each, a “Notice”) required or permitted hereunder, except as
herein otherwise specifically provided, shall be in writing and shall be: (i)
delivered personally or by commercial messenger; (ii) sent via a recognized
overnight courier service, or (iii) sent by facsimile or e-mail transmission,
provided confirmation of receipt is received by sender and such Notice is sent
or delivered contemporaneously by an additional method provided in this Section
9.6; in each case so long as such Notice is addressed to the intended recipient
thereof as set forth below:

 

If to the Company:

 

American Realty Capital Properties, Inc.

405 Park Avenue

New York, New York 10022

Facsimile: (212) 421-5799 

Email: mweil@rcsecurities.com

Attention: Edward M. Weil, Jr.

 

with a copy to:

 

Proskauer Rose LLP

Eleven Times Square

New York, New York 10036

Facsimile No.: (212) 969-2900

Email: pfass@proskauer.com

Attention: Peter M. Fass, Esq.

 

If to Investor:

 

At its addresses on the signature page hereto;

 

Any party may change its address specified above by giving each party Notice of
such change in accordance with this Section 7.4. Any Notice shall be deemed
given upon actual receipt (or refusal of receipt.

 

28

 

 

9.7.          Amendments; Waivers. No provision of this Agreement may be waived
or amended except in a written instrument signed, in the case of an amendment,
by the Company and each of the Investors or, in the case of a waiver, by the
party against whom enforcement of any such waiver is sought. No waiver of any
default with respect to any provision, condition or requirement of this
Agreement shall be deemed to be a continuing waiver in the future or a waiver of
any subsequent default or a waiver of any other provision, condition or
requirement hereof, nor shall any delay or omission of any party to exercise any
right hereunder in any manner impair the exercise of any such right.
Notwithstanding the foregoing, a waiver or consent to depart from the provisions
hereof with respect to a matter that relates exclusively to the rights of
Investors under Section 8 may be given by Investors holding at least a majority
of the Registrable Securities to which such waiver or consent relates.

 

9.8.          Construction. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof. The language used in this Agreement will be deemed
to be the language chosen by the parties to express their mutual intent, and no
rules of strict construction will be applied against any party.

 

9.9.          Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and permitted assigns.
The Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of the Investors. Any Investor may assign its
rights under this Agreement to any Person to whom such Investor assigns or
transfers any Preferred Shares, provided (i) such transferor agrees in writing
with the transferee or assignee to assign such rights, and a copy of such
agreement is furnished to the Company after such assignment, (ii) the Company is
furnished with written notice of (x) the name and address of such transferee or
assignee and (y) the Registrable Securities with respect to which such
registration rights are being transferred or assigned, (iii) following such
transfer or assignment, the further disposition of such securities by the
transferee or assignee is restricted under the Securities Act and applicable
state securities laws, (iv) such transferee agrees in writing to be bound, with
respect to the transferred Preferred Shares, by the provisions hereof that apply
to the “Investors” and (v) such transfer shall have been made in accordance with
the applicable requirements of this Agreement and with all laws applicable
thereto.

 

9.10.          No Third-Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective successors and permitted
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person, except that each Indemnified Party is an intended third
party beneficiary of Section 9.1 and (in each case) may enforce the provisions
of such Section applicable to them directly against the parties with obligations
thereunder.

 

29

 

 

9.11.          Governing Law; Venue; Waiver of Jury Trial. THE CORPORATE LAWS OF
THE STATE OF MARYLAND SHALL GOVERN ALL ISSUES CONCERNING THE RELATIVE RIGHTS OF
THE COMPANY AND ITS STOCKHOLDERS. ALL QUESTIONS CONCERNING THE CONSTRUCTION,
VALIDITY, ENFORCEMENT AND INTERPRETATION OF THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. THE COMPANY
AND INVESTORS HEREBY IRREVOCABLY SUBMIT TO THE NON-EXCLUSIVE JURISDICTION OF THE
STATE AND FEDERAL COURTS SITTING IN THE CITY OF NEW YORK, BOROUGH OF MANHATTAN
FOR THE ADJUDICATION OF ANY DISPUTE BROUGHT BY THE COMPANY OR ANY INVESTOR
HEREUNDER, IN CONNECTION HEREWITH OR WITH ANY TRANSACTION CONTEMPLATED HEREBY OR
DISCUSSED HEREIN (INCLUDING WITH RESPECT TO THE ENFORCEMENT OF ANY OF THE
TRANSACTION DOCUMENTS), AND HEREBY IRREVOCABLY WAIVE, AND AGREE NOT TO ASSERT IN
ANY SUIT, ACTION OR PROCEEDING BROUGHT BY THE COMPANY OR ANY INVESTOR, ANY CLAIM
THAT IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF ANY SUCH COURT, OR THAT
SUCH SUIT, ACTION OR PROCEEDING IS IMPROPER. EACH PARTY HEREBY IRREVOCABLY
WAIVES PERSONAL SERVICE OF PROCESS AND CONSENTS TO PROCESS BEING SERVED IN ANY
SUCH SUIT, ACTION OR PROCEEDING BY MAILING A COPY THEREOF VIA REGISTERED OR
CERTIFIED MAIL OR OVERNIGHT DELIVERY (WITH EVIDENCE OF DELIVERY) TO SUCH PARTY
AT THE ADDRESS IN EFFECT FOR NOTICES TO IT UNDER THIS AGREEMENT AND AGREES THAT
SUCH SERVICE SHALL CONSTITUTE GOOD AND SUFFICIENT SERVICE OF PROCESS AND NOTICE
THEREOF. NOTHING CONTAINED HEREIN SHALL BE DEEMED TO LIMIT IN ANY WAY ANY RIGHT
TO SERVE PROCESS IN ANY MANNER PERMITTED BY LAW. THE COMPANY AND INVESTORS
HEREBY WAIVE ALL RIGHTS TO A TRIAL BY JURY.

 

9.12.          Survival. The representations and warranties contained herein
shall survive the Closing for a period of one year following the Closing Date.

 

9.13.          Execution. This Agreement may be executed in two or more
counterparts, all of which when taken together 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, it being understood that both
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission or email attachment, such signature shall
create a valid and binding obligation of the party executing (or on whose behalf
such signature is executed) with the same force and effect as if such facsimile
or email-attached signature page were an original thereof.

 

9.14.          Severability. If any provision of this Agreement is held to be
invalid or unenforceable in any respect, the validity and enforceability of the
remaining terms and provisions of this Agreement shall not in any way be
affected or impaired thereby and the parties will attempt to agree upon a valid
and enforceable provision that is a reasonable substitute therefor, and upon so
agreeing, shall incorporate such substitute provision in this Agreement.

 

9.15.          Replacement of Stock Certificates. If any certificate or
instrument evidencing any Preferred Shares is mutilated, lost, stolen or
destroyed, the Company shall issue or cause to be issued in exchange and
substitution for and upon cancellation thereof, or in lieu of and substitution
therefor, a new certificate or instrument, but only upon receipt of evidence
reasonably satisfactory to the Company of such loss, theft or destruction and
the execution by the holder thereof of a customary lost certificate affidavit of
that fact and an agreement to indemnify and hold harmless the Company for any
losses in connection therewith. The applicants for a new certificate or
instrument under such circumstances shall also pay any reasonable third-party
costs associated with the issuance of such replacement Stock Certificates.

 

30

 

 

9.16.          Remedies. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, each of the
Investors and the Company will be entitled to seek specific performance under
the Transaction Documents. The parties agree that monetary damages may not be
adequate compensation for any loss incurred by reason of any breach of
obligations described in the foregoing sentence and hereby agree to waive in any
action for specific performance of any such obligation (other than in connection
with any action for a temporary restraining order) the defense that a remedy at
law would be adequate.

 

9.17.          Payment Set Aside. To the extent that the Company makes a payment
or payments to any Investor hereunder or any Investor enforces or exercises its
rights hereunder, and such payment or payments or the proceeds of such
enforcement or exercise or any part thereof are subsequently invalidated,
declared to be fraudulent or preferential, set aside, recovered from, disgorged
by or are required to be refunded, repaid or otherwise restored to the Company
by a trustee, receiver or any other person under any law (including, without
limitation, any bankruptcy law, state or federal law, common law or equitable
cause of action), then to the extent of any such restoration the obligation or
part thereof originally intended to be satisfied shall be revived and continued
in full force and effect as if such payment had not been made or such
enforcement or setoff had not occurred.

 

9.18.          Adjustments in Share Numbers and Prices. In the event of any
stock split, subdivision, dividend or distribution payable in Preferred Shares
(or other securities or rights convertible into, or entitling the holder thereof
to receive directly or indirectly Preferred Shares), combination or other
similar recapitalization or event occurring after the date hereof, each
reference in any Transaction Document to a number of shares or a price per share
shall be amended to appropriately account for such event.

 

9.19.          Independent Nature of Investors' Obligations and Rights. The
obligations of each Investor under any Transaction Document are several and not
joint with the obligations of any other Investor, and no Investor shall be
responsible in any way for the performance of the obligations of any other
Investor under any Transaction Documents. The decision of each Investor to
purchase Preferred Shares pursuant to this Agreement has been made by such
Investor independently of any other Investor and independently of any
information, materials, statements or opinions as to the business, affairs,
operations, assets, properties, liabilities, results of operations, condition
(financial or otherwise) or prospects of the Company which may have been made or
given by any other Investor or by any agent or employee of any other Investor,
and no Investor or any of its agents or employees shall have any liability to
any other Investor (or any other person) relating to or arising from any such
information, materials, statements or opinions. Nothing contained herein or in
any Transaction Document, and no action taken by any Investor pursuant thereto,
shall be deemed to constitute the Investors as a partnership, an association, a
joint venture or any other kind of entity, or create a presumption that the
Investors are in any way acting in concert or as a group with respect to such
obligations or the transactions contemplated by the Transaction Document. Each
Investor acknowledges that no other Investor has acted as agent for such
Investor in connection with making its investment hereunder and that no other
Investor will be acting as agent of such Investor in connection with monitoring
its investment hereunder. Each Investor shall be entitled to independently
protect and enforce its rights, including without limitation the rights arising
out of this Agreement or out of the other Transaction Documents, and it shall
not be necessary for any other Investor to be joined as an additional party in
any Proceeding for such purpose.

 

[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

 

31

 

 

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.

 

  Company:       American Realty Capital Properties, Inc.       By: /s/ Nicholas
S. Schorsch     Name: Nicholas S. Schorsch     Title: Chairman and Chief
Executive Officer

 

 

 

 

Investor Signature Page

 

By its execution and delivery of this signature page, the undersigned Investor
hereby joins in and agrees to be bound by the terms and conditions of the
Convertible Preferred Stock Purchase Agreement, dated as of June 4, 2013 (the
“Purchase Agreement”), by and among American Realty Capital Properties, Inc. and
the Investors (as defined therein), as to the number of Preferred Shares set
forth below, and authorizes this signature page to be attached to the Purchase
Agreement or counterparts thereof.

 

  Name of Investor:       Orange Capital LLC       By: /s/ Daniel Lewis    
Name:   Daniel Lewis     Title:     Managing Member

 

  Address: 1370 Avenue of the Americas   23rd Floor     New York, New York 10019

 

  Telephone No.: 212-375-6040   Facsimile No.: 212-375-6042   Email Address:
dlewis@orangecap.com

  Number of Shares:  

  Aggregate Purchase Price: $20,000,000

 

Delivery Instructions (if different than above):

 

c/o: _________________________________________________________

 

Address: ________settlement@orangecap.com____________________________

 

       ________________________________________________________

 

Telephone No.: _______________________________________________________

 

Facsimile No. : _______________________________________________________

 

 

 

 

 

Investor Signature Page

 

By its execution and delivery of this signature page, the undersigned Investor
hereby joins in and agrees to be bound by the terms and conditions of the
Convertible Preferred Stock Purchase Agreement, dated as of June 4, 2013 (the
“Purchase Agreement”), by and among American Realty Capital Properties, Inc. and
the Investors (as defined therein), as to the number of Preferred Shares set
forth below, and authorizes this signature page to be attached to the Purchase
Agreement or counterparts thereof.

 

  Name of Investor:       White Desert A, LLC       By: /s/ Norris Nissim    
Name:   Norris Nissim     Title:     General Counsel, Luxor    
              Capital Group, LP, its investment manager

 

  Address: 1114 Avenue of the Americas

     Fl. 29     New York, New York 10036

 

  Telephone No.: 212-763-8041   Facsimile No.:   Email Address:
legal@luxorcap.com

  Number of Shares: 4,123,862

  Aggregate Purchase Price: $63,796,146

 

Delivery Instructions (if different than above):

 

c/o: _________________________________________________________

 

Address: ________________________________________________________

 

       ________________________________________________________

 

Telephone No.: _______________________________________________________

 

Facsimile No. : _______________________________________________________

 

 

 

  

Investor Signature Page

 

By its execution and delivery of this signature page, the undersigned Investor
hereby joins in and agrees to be bound by the terms and conditions of the
Convertible Preferred Stock Purchase Agreement, dated as of June 4, 2013 (the
“Purchase Agreement”), by and among American Realty Capital Properties, Inc. and
the Investors (as defined therein), as to the number of Preferred Shares set
forth below, and authorizes this signature page to be attached to the Purchase
Agreement or counterparts thereof.

 

  Name of Investor:       White Desert B, LLC       By: /s/ Norris Nissim    
Name:   Norris Nissim     Title:     General Counsel, Luxor    
              Capital Group, LP, its investment manager

 

  Address: 1114 Avenue of the Americas

    Fl. 29     New York, New York 10036

 

  Telephone No.: 212-763-8041   Facsimile No.:   Email Address:
legal@luxorcap.com

  Number of Shares: 1,461,558

  Aggregate Purchase Price: $22,610,302

 

Delivery Instructions (if different than above):

 

c/o: _________________________________________________________

 

Address: ________________________________________________________

 

       ________________________________________________________

 

Telephone No.: _______________________________________________________

 

Facsimile No. : _______________________________________________________

 

 

 

 

  

Investor Signature Page

 

By its execution and delivery of this signature page, the undersigned Investor
hereby joins in and agrees to be bound by the terms and conditions of the
Convertible Preferred Stock Purchase Agreement, dated as of June 4, 2013 (the
“Purchase Agreement”), by and among American Realty Capital Properties, Inc. and
the Investors (as defined therein), as to the number of Preferred Shares set
forth below, and authorizes this signature page to be attached to the Purchase
Agreement or counterparts thereof.

 

  Name of Investor:       Luxor Wavefront, LP       By: /s/ Norris Nissim    
Name:   Norris Nissim     Title:     General Counsel, Luxor    
              Capital Group, LP, its investment manager

 

  Address: 1114 Avenue of the Americas

    Fl. 29     New York, New York 10036

 

  Telephone No.: 212-763-8041   Facsimile No.:   Email Address:
legal@luxorcap.com

  Number of Shares: 2,463,600

  Aggregate Purchase Price: $38,111,892

 

Delivery Instructions (if different than above):

 

c/o: _________________________________________________________

 

Address: ________________________________________________________

 

       ________________________________________________________

 

Telephone No.: _______________________________________________________

 

Facsimile No. : _______________________________________________________

 

 

 

   

Investor Signature Page

 

By its execution and delivery of this signature page, the undersigned Investor
hereby joins in and agrees to be bound by the terms and conditions of the
Convertible Preferred Stock Purchase Agreement, dated as of June 4, 2013 (the
“Purchase Agreement”), by and among American Realty Capital Properties, Inc. and
the Investors (as defined therein), as to the number of Preferred Shares set
forth below, and authorizes this signature page to be attached to the Purchase
Agreement or counterparts thereof.

 

  Name of Investor:       Luxor Capital Partners, LP       By: /s/ Norris Nissim
    Name:   Norris Nissim     Title:     General Counsel, Luxor    
              Capital Group, LP, its investment manager

 

  Address: 1114 Avenue of the Americas

    Fl. 29     New York, New York 10036

 

  Telephone No.: 212-763-8041   Facsimile No.:   Email Address:
legal@luxorcap.com

  Number of Shares: 7,788,084

  Aggregate Purchase Price: $120,481,660

 

Delivery Instructions (if different than above):

 

c/o: _________________________________________________________

 

Address: ________________________________________________________

 

       ________________________________________________________

 

Telephone No.: _______________________________________________________

 

Facsimile No. : _______________________________________________________

   

 

 

 

Investor Signature Page

 

By its execution and delivery of this signature page, the undersigned Investor
hereby joins in and agrees to be bound by the terms and conditions of the
Convertible Preferred Stock Purchase Agreement, dated as of June 4, 2013 (the
“Purchase Agreement”), by and among American Realty Capital Properties, Inc. and
the Investors (as defined therein), as to the number of Preferred Shares set
forth below, and authorizes this signature page to be attached to the Purchase
Agreement or counterparts thereof.

 

  Name of Investor:       BHR Master Fund, Ltd.       By: /s/ William Brown    
Name:   William Brown     Title:     Partner, President & COO

 

  Address: 545 Madison Avenue

    10th Floor     New York, New York 10022

 

  Telephone No.: 212-378-0834   Facsimile No.: 646-556-8076   Email Address:
wbrown@bhrcap.com

  Number of Shares: 2,424,047

  Aggregate Purchase Price: $37,500,007.09

 

Delivery Instructions (if different than above):

 

c/o: _________________________________________________________

 

Address: ________________________________________________________

 

       ________________________________________________________

 

Telephone No.: _______________________________________________________

 

Facsimile No. : _______________________________________________________

 

 

 

 

Investor Signature Page

 

By its execution and delivery of this signature page, the undersigned Investor
hereby joins in and agrees to be bound by the terms and conditions of the
Convertible Preferred Stock Purchase Agreement, dated as of June 4, 2013 (the
“Purchase Agreement”), by and among American Realty Capital Properties, Inc. and
the Investors (as defined therein), as to the number of Preferred Shares set
forth below, and authorizes this signature page to be attached to the Purchase
Agreement or counterparts thereof.

 

  Name of Investor:       BHR OC Master Fund, Ltd.       By: /s/ William Brown  
  Name:   William Brown     Title:     Partner, President & COO

 

  Address: 545 Madison Avenue

    10th Floor     New York, New York 10022

 

  Telephone No.: 212-378-0834   Facsimile No.: 646-556-8076   Email Address:
wbrown@bhrcap.com

  Number of Shares: 808,015

  Aggregate Purchase Price: $12,499,992.05

 

Delivery Instructions (if different than above):

 

c/o: _________________________________________________________

 

Address: ________________________________________________________

 

       ________________________________________________________

 

Telephone No.: _______________________________________________________

 

Facsimile No. : _______________________________________________________

  

 

 

 

Investor Signature Page

 

By its execution and delivery of this signature page, the undersigned Investor
hereby joins in and agrees to be bound by the terms and conditions of the
Convertible Preferred Stock Purchase Agreement, dated as of June 4, 2013 (the
“Purchase Agreement”), by and among American Realty Capital Properties, Inc. and
the Investors (as defined therein), as to the number of Preferred Shares set
forth below, and authorizes this signature page to be attached to the Purchase
Agreement or counterparts thereof.

 

  Name of Investor:       Senator Global Opportunity Fund LP       By: /s/ Evan
Gartenlaub     Name:   Evan Gartenlaub     Title:     General Counsel

 

  Address: Attn: General Counsel

    510 Madison Avenue, 28th Fl     New York, New York 10022

 

  Telephone No.: 212-376-4300   Facsimile No.: 855-376-4346   Email Address:
egartenlaub@senatorlp.com

  Number of Shares:

  Aggregate Purchase Price: $23,800,000

 

Delivery Instructions (if different than above):

 

c/o: _________________________________________________________

 

Address: ________________________________________________________

 

       ________________________________________________________

 

Telephone No.: _______________________________________________________

 

Facsimile No. : _______________________________________________________

 

 

 

 

Investor Signature Page

 

By its execution and delivery of this signature page, the undersigned Investor
hereby joins in and agrees to be bound by the terms and conditions of the
Convertible Preferred Stock Purchase Agreement, dated as of June 4, 2013 (the
“Purchase Agreement”), by and among American Realty Capital Properties, Inc. and
the Investors (as defined therein), as to the number of Preferred Shares set
forth below, and authorizes this signature page to be attached to the Purchase
Agreement or counterparts thereof.

 

  Name of Investor:       Senator Global Opportunity Intermediate Fund LP.      
By: /s/ Evan Gartenlaub     Name:   Evan Gartenlaub     Title:     General
Counsel

 

  Address: Attn: General Counsel

    510 Madison Avenue, 28th Fl     New York, New York 10022

 

  Telephone No.: 212-376-4300   Facsimile No.: 855-376-4346   Email Address:
egartenlaub@senatorlp.com

  Number of Shares:

  Aggregate Purchase Price: $46,200,000

 

Delivery Instructions (if different than above):

 

c/o: _________________________________________________________

 

Address: ________________________________________________________

 

       ________________________________________________________

 

Telephone No.: _______________________________________________________

 

Facsimile No. : _______________________________________________________

  

 

 

 

Investor Signature Page

 

By its execution and delivery of this signature page, the undersigned Investor
hereby joins in and agrees to be bound by the terms and conditions of the
Convertible Preferred Stock Purchase Agreement, dated as of June 4, 2013 (the
“Purchase Agreement”), by and among American Realty Capital Properties, Inc. and
the Investors (as defined therein), as to the number of Preferred Shares set
forth below, and authorizes this signature page to be attached to the Purchase
Agreement or counterparts thereof.

 

  Name of Investor:       Perry Arc LLC       By: /s/ Michael C. Neus    
Name:   Michael C. Neus     Title:     Manager

 

  Address: c/o Perry Capital LLC

    767 Fifth Avenue, 19th Floor     New York, New York 10153

 

  Telephone No.: 212-583-4123   Facsimile No.: 855-583-4146   Email Address:
mneus@senatorlp.com

  Number of Shares:

  Aggregate Purchase Price: $60,000,000

 

Delivery Instructions (if different than above):

 

c/o: _________________________________________________________

 

Address: ________________________________________________________

 

       ________________________________________________________

 

Telephone No.: _______________________________________________________

 

Facsimile No. : _______________________________________________________

   

 

 

 

  [NAME OF INVESTOR]       By:       Name:     Title:

 

 

 

 

Schedule 4.6

 

·Current Report on Form 8-K, filed with the Securities and Exchange Commission
on April 22, 2013, was filed late.

 

·The Company plans to file separate Current Reports on Form 8-K including the
financial statements for (a) the GE Portfolio Acquisition and (b) the CapLease
Acquisition.

 

32

 

 

Schedule 4.7

 

·On May 28, 2013, the Company entered into an Agreement and Plan of Merger (the
“Merger Agreement”) with CapLease, Inc., a Maryland corporation (“CapLease”),
Safari Acquisition, LLC, a Delaware limited liability company and wholly owned
subsidiary of the Company (“Merger Sub”), Caplease, LP, a Delaware limited
partnership and the operating partnership of the Company (the “CapLease
Operating Partnership”), CLF OP General Partner LLC, a Delaware limited
liability company and the sole general partner of the CapLease Operating
Partnership, and ARC Properties Operating Partnership, L.P., a Delaware limited
partnership and the operating partnership of Parent (the “Operating
Partnership”). The Merger Agreement provides for (i) the merger of CapLease with
and into Merger Sub, with Merger Sub surviving as a wholly owned subsidiary of
the Company, and (ii) the merger of the CapLease Operating Partnership with and
into the Operating Partnership, with the Operating Partnership surviving.

 

·On May 31, 2013, the Company, through the Operating Partnership, entered into a
purchase and sale agreement to acquire a portfolio comprised of 471 properties
including 468 restaurants (including three other revenue generating assets) and
three retail tenants located in 44 states representing 2,136,025 square feet.
The sellers of the properties are subsidiaries of GE Capital.

 

33

 

  

EXHIBIT A

 

AMERICAN REALTY CAPITAL PROPERTIES, INC.

 

 

Articles Supplementary Classifying and Designating a
Series of Preferred Stock as
Series C Convertible Preferred Stock
and Fixing Distribution and
Other Preferences and Rights of Such Series

 

American Realty Capital Properties, Inc., a Maryland corporation (the
“Corporation”), hereby certifies to the State Department of Assessments and
Taxation (the “SDAT”) of Maryland that:

 

FIRST: Pursuant to authority expressly vested in the Board of Directors by
Section 4.03 of the charter of the Corporation (the “Charter”), the Board of
Directors adopted resolutions classifying and designating Twenty-Eight Million
Three Hundred Ninety-Eight Thousand Two Hundred Thirteen (28,398,213) shares of
authorized but unissued shares of preferred stock, par value $0.01 per share, of
the Corporation (the “Preferred Stock”), as Series C Convertible Preferred Stock
with a liquidation preference of Fifteen Dollars and Sixty-Seven Cents ($15.67)
per share, possessing the preferences, conversion and other rights, voting
powers, restrictions, limitations as to dividends and other distributions,
qualifications, and terms and conditions of redemption, as described below,
which, upon any restatement of the Charter, shall become part of Article IV of
the Charter, with any necessary or appropriate renumbering or relettering of the
sections or subsections hereof:

 

SECTION 1.          NUMBER OF SHARES AND DESIGNATION. This series of Preferred
Stock shall be designated as Series C Convertible Preferred Stock (the “Series C
Preferred Shares”), and the number of Series C Preferred Shares shall be
28,398,213.

 

SECTION 2.           DEFINITIONS. The following terms shall have the meanings
indicated:

 

“Act” shall mean the Securities Act of 1933, as amended.

 

“Additional Shares” shall have the meaning set forth in Section 7(d)(iv).

 

“Adjustment Price” shall have the meaning set forth in Section 7(d)(iv).

 

“Annual Dividend Rate” shall have the meaning set forth in Section 3(a).

 

“Board of Directors” or “Board” shall mean the Board of Directors of the
Corporation or any committee authorized by such Board of Directors to perform
any of its responsibilities with respect to the Series C Preferred Shares.

 

“Business Day” shall mean any day other than Saturday, Sunday or a day on which
state or federally chartered banking institutions in New York, New York are not
required to be open.

 

 

 

 

“CapLease Acquisition” means the Corporation’s pending acquisition of CapLease,
Inc. pursuant to that certain Agreement and Plan of Merger, dated as of March
28, 2013, between the Corporation, CapLease, Inc. and certain of their
subsidiaries.

 

“Change in Control” shall mean any merger or consolidation of the Corporation in
which one or more entities that are not affiliates of the Corporation acquire
more than 50% of the Corporation’s outstanding voting equity securities or as a
result of which stockholders of the Corporation immediately before such merger
or consolidation hold, immediately after such merger or consolidation, less than
50% of the surviving entity’s outstanding common stock.

 

“Closing Price” means, for any date, the closing price per Common Share for such
date (or, if not a Trading Day, the nearest preceding date that is a Trading
Day) on the primary Eligible Market or exchange or quotation system on which the
Common Shares are then listed or quoted.

 

“Common Shares” shall mean the shares of common stock, par value $0.01 per
share, of the Corporation.

 

“Common Share Events” shall have the meaning set forth in Section 7(d).

 

“Constituent Person” shall have the meaning set forth in Section 7(e).

 

“Contingent Value Rights Agreement” means that certain Contingent Value Rights
Agreement, dated as of June 4, 2013, between the Corporation and certain
Investors (as defined therein).

 

“Conversion Notice” shall have the meaning set forth in Section 5(a).

 

“Continuation Right” shall have the meaning set forth in Section 4.

 

“Conversion Price” shall mean the conversion price per Common Share for which
each Series C Preferred Share is convertible. The initial conversion price shall
be lowest of (i) a 2% discount to the VWAP of the common stock for the 10
Trading Days prior to the Election Date, (ii) a 2% discount to the closing price
on the Election Date and (iii) $15.67 (as such amount may be adjusted pursuant
to Section 7 hereof, the “Fixed Conversion Price”).

 

“Convertible Preferred Stock Purchase Agreement” means that certain Convertible
Preferred Stock Purchase Agreement, dated as of June 4, 2013, between the
Corporation and certain Investors (as defined therein).

 

“Current Market Price” shall mean, with respect to the Common Shares, on any
date specified herein, the average of the Market Price during the period of the
most recent ten consecutive trading days ending on such date.

 

“Dividend Payment Date” shall mean, with respect to each Dividend Period, the
fifteenth (15th) day of each month, commencing on June 15, 2013; provided,
however, that if any Dividend Payment Date falls on any day other than a
Business Day, the dividend payment due on such Dividend Payment Date shall be
paid on the first Business Day immediately following such Dividend Payment Date.

 

 

 

 

“Dividend Payment Record Date” shall have the meaning set forth in Section 3(a).

 

“Dividend Periods” shall mean monthly dividend periods commencing on the first
day of each month and ending on and including the day preceding the first day of
the next succeeding Dividend Period (other than the initial Dividend Period,
which shall commence on the Issue Date and end on and include June 15, 2013).

 

“Election Date” shall have the meaning set forth in Section 5(a).

 

“Eligible Market” means any of the New York Stock Exchange, the NYSE MKT, the
NASDAQ Global Select Market, the NASDAQ Global Market, the NASDAQ Capital Market
or OTC Bulletin Board

 

“Exchange Cap” shall have the meaning set forth in Section 13(c).

 

“Exchange Cap Shares” shall have the meaning set forth in Section 13(d).

 

“Face Amount” means $15.67 (as may be adjusted from time to time).

 

“Issue Date” shall mean the first date on which any Series C Preferred Shares
are issued and sold.

 

“Junior Shares” shall have the meaning set forth in Section 9(c).

 

“Liquidation” shall mean (A) a dissolution or winding up of the Corporation,
whether voluntary or involuntary, (B) a consolidation or merger of the
Corporation with and into one or more entities which are not affiliates of the
Corporation which results in a Change in Control, or (C) a sale or transfer of
all or substantially all of the Corporation’s assets other than to an affiliate
of the Corporation.

 

“Liquidation Preference” shall have the meaning set forth in Section 4(a).

 

“Market Price” shall mean, with respect to the Common Shares on any date, the
last reported sales price, regular way on such day, or, in case no such sale
takes place on such day, the average of the closing bid and asked prices,
regular way on such day, in either case as reported in the principal
consolidated transaction reporting system with respect to securities listed or
admitted to trading on The NASDAQ Capital Market (“NASDAQ”) or, if the Common
Shares are not listed or admitted for trading on NASDAQ, as reported in the
principal consolidated transaction reporting system with respect to securities
listed on the principal national securities exchange on which the Common Shares
are listed or admitted for trading or, if the Common Shares are not listed or
admitted for trading on any national securities exchange, the last quoted price
or, if not so quoted, the average of the high bid and low asked prices in the
over-the-counter market, as reported by the principal automated quotation system
that may then be in use or, if the Common Shares are not quoted by any such
system, the average of the closing bid and asked prices as furnished by a
professional market maker regularly making a market in the Common Shares
selected for such purpose by the Board of Directors or, if there is no such
professional market maker, such amount as an independent investment banking firm
selected by the Board of Directors determines to be the value of a Common Share.

 

 

 

 

“Merger Liquidation” shall have the meaning set forth in Section 4(a).

 

“NASDAQ” shall have the meaning set forth in the definition of Market Price.

 

“Non-Electing Share” shall have the meaning set forth in Section 7(e).

 

“Parity Shares” shall have the meaning set forth in Section 9(b).

 

“Person” shall mean any individual, firm, partnership, corporation, limited
liability company or other entity, and shall include any successor (by merger or
otherwise) of such entity.

 

“Preferred Stock” shall have the meaning set forth in the Charter.

 

“Redemption Date” shall have the meaning set forth in Section 5(a).

 

“Redemption Notice” shall have the meaning set forth in Section 5(a).

 

“Redemption Premium” shall have the meaning set forth in Section 5(a).

 

“Redemption Trigger Date” shall mean the earliest of: (i) the closing of the
CapLease Acquisition; (ii) the Trading Day after (a) the date of an announcement
that CapLease, Inc. has accepted a competing offer or (b) the CapLease
Acquisition is otherwise terminated; and (iii) December 31, 2013.

 

“SDAT” shall mean the State Department of Assessments and Taxation of Maryland.

 

“Securities” shall have the meaning set forth in Section 7(d)(iii).

 

“Securities Purchase Agreement” means that certain Securities Purchase
Agreement, dated as of June 4, 2013, between the Corporation and certain
Investors (as defined therein).

 

“Senior Shares” shall have the meaning set forth in Section 9(a).

 

“Series A Preferred Shares” shall mean the Series A Convertible Preferred Stock
of the Corporation, par value $0.01 per share.

 

“Series B Preferred Shares” shall mean the Series B Convertible Preferred Stock
of the Corporation, par value $0.01 per share.

 

“Series C Preferred Shares” shall have the meaning set forth in Section 1.

 

 

 

 

“Set apart for payment” shall be deemed to include, without any action other
than the following, the recording by the Corporation in its accounting ledgers
of any accounting or bookkeeping entry which indicates, pursuant to a
declaration of a dividend or other distribution by the Board of Directors, the
allocation of funds to be so paid on any series or class of shares of capital
stock of the Corporation; provided, however, that if any funds for any class or
series of Junior Shares or any class or series of Parity Shares are placed in a
separate account of the Corporation or delivered to a disbursing, paying or
other similar agent, then “set apart for payment” with respect to the Series C
Preferred Shares shall mean placing such funds in a separate account or
delivering such funds to a disbursing, paying or other similar agent.

 

“Shares” shall have the meaning set forth in the Charter.

 

“Trading Day” shall mean any day on which the securities in question are traded
on the NASDAQ or, if such securities are not listed or admitted for trading on
the NASDAQ, on the principal national securities exchange on which such
securities are listed or admitted for trading.

 

“Trading Market” means whichever of the New York Stock Exchange, the NYSE MKT,
the NASDAQ Global Select Market, the NASDAQ Global Market, the NASDAQ Capital
Market or OTC Bulletin Board on which the Common Shares is listed or quoted for
trading on the date in question.

 

“Transaction” shall have the meaning set forth in Section 7(e).

 

“VWAP” means the dollar volume-weighted average price for the Common Shares on
its Trading Market during the period beginning at 9:30:01 a.m., New York City
time (or such other time as the Trading Market publicly announces is the
official open of trading), and ending at 4:00:00 p.m., New York City time (or
such other time as the Trading Market publicly announces is the official close
of trading), as reported by Bloomberg, L.P. through its “Volume at Price”
function or, if the foregoing does not apply, the dollar volume-weighted average
price of such security in the over-the-counter market on the electronic bulletin
board for such security during the period beginning at 9:30:01 a.m., New York
City time (or such other time as the Trading Market publicly announces is the
official open of trading), and ending at 4:00:00 p.m., New York City Time (or
such other time as the Trading Market publicly announces is the official close
of trading), as reported by Bloomberg, L.P., or, if no dollar volume-weighted
average price is reported for such security by Bloomberg, L.P. for such hours,
the average of the highest closing bid price and the lowest closing ask price of
any of the market makers for such security as reported in the “pink sheets” by
Pink Sheets LLC (formerly the National Quotation Bureau, Inc.). If the VWAP
cannot be calculated for the Common Shares on a particular date on any of the
foregoing bases, the VWAP of the Common Shares shall be the fair market value of
the Common Shares on such date as determined by the Board of Directors in good
faith.

 

 

 

 

SECTION 3.           DIVIDENDS.

 

(a)                The holders of Series C Preferred Shares shall be entitled to
receive, when, as and if authorized by the Board of Directors and declared by
the Corporation out of funds legally available for that purpose, dividends
payable in cash at a per share rate per annum equal to 5.81% of the Face Amount
(the “Annual Dividend Rate”). Such dividends shall be cumulative from the Issue
Date, whether or not in any Dividend Period or Periods there shall be funds of
the Corporation legally available for the payment of such dividends, and shall
be payable monthly, when, as and if authorized and declared, in arrears on
Dividend Payment Dates, commencing on the first Dividend Payment Date after the
Issue Date. Each such dividend shall be payable in arrears to the holders of
record of the Series C Preferred Shares, as they appear on the stock records of
the Corporation at the close of business on each record date, which shall not be
more than 30 days preceding the applicable Dividend Payment Date (the “Dividend
Payment Record Date”), as shall be fixed by the Board of Directors. Accrued and
unpaid dividends for any past Dividend Periods may be authorized and declared
and paid at any time, without reference to any regular Dividend Payment Date, to
holders of record on such date, which shall not be more than 45 days preceding
the payment date thereof, as may be fixed by the Board of Directors. The amount
of accrued and unpaid dividends on any Series C Preferred Share at any date
shall be the amount of any dividends thereon calculated at the applicable rate
to and including such date, whether or not earned or declared, which have not
been paid in cash.

 

(b)               The amount of dividends payable for each full Dividend Period
for the Series C Preferred Shares shall be computed by dividing the Annual
Dividend Rate by twelve. The amount of dividends payable for the initial
Dividend Period, or any other period shorter or longer than a full Dividend
Period, on the Series C Preferred Shares shall be computed on the basis of
twelve 30-day months and a 360-day year. Holders of Series C Preferred Shares
shall not be entitled to any dividends, whether payable in cash, property or
stock, in excess of cumulative dividends, as herein provided, on the Series C
Preferred Shares, except for any other amounts provided herein.

 

(c)                So long as any Series C Preferred Shares are outstanding, no
dividends, except as described in the immediately following sentence, shall be
authorized and declared and paid or set apart for payment on any series or class
or classes of Parity Shares for any period unless full cumulative dividends have
been or contemporaneously are authorized and declared and paid or authorized and
declared and a sum sufficient for the payment thereof set apart for such payment
on the Series C Preferred Shares for all Dividend Periods prior to the dividend
payment date for such class or classes or series of Parity Shares. When
dividends are not paid in full or a sum sufficient for such payment is not set
apart, as aforesaid, all dividends authorized and declared upon Series C
Preferred Shares and all dividends authorized and declared upon any other series
or class or classes of Parity Shares shall be authorized and declared ratably in
proportion to the respective amounts of dividends accumulated and unpaid on the
Series C Preferred Shares and such class or classes or series of Parity Shares.

 

(d)               So long as any Series C Preferred Shares are outstanding, no
dividends shall be authorized and declared and paid or set apart for payment or
other distribution authorized and declared and made upon Junior Shares (other
than dividends or other distributions (i) paid in respect of the Common Shares
issued pursuant to the Securities Purchase Agreement or stock issued pursuant to
the Contingent Value Rights Agreement or (ii) paid solely in Junior Shares, or
options, warrants or rights to subscribe for or purchase Junior Shares), nor
shall any Junior Shares be redeemed, purchased or otherwise acquired (other than
(i) a redemption, purchase or other acquisition of Common Shares made for
purposes of and in compliance with requirements of an employee incentive or
benefit plan of the Corporation or any subsidiary or (ii) a purchase or other
acquisition of Common Shares made in connection with the restrictions on
ownership and transfer set forth in Section 4.07 of the Charter), for any
consideration (or any moneys to be paid to or made available for a sinking fund
for the redemption of any shares of such stock) by the Corporation, directly or
indirectly (except by conversion into or exchange for Junior Shares), unless in
each case the full cumulative dividends on all outstanding Series C Preferred
Shares and any other Parity Shares shall have been paid or set apart for payment
for all past Dividend Periods with respect to the Series C Preferred Shares and
all past dividend periods with respect to such Parity Shares.

 

 

 

 

SECTION 4.           LIQUIDATION PREFERENCE.

 

(a)                In the event of any Liquidation, before any payment or
distribution of the assets of the Corporation (whether capital or surplus) shall
be made to or set apart for the holders of Junior Shares, the holders of Series
C Preferred Shares shall be entitled (subject to the Continuation Right of such
holders described below) to receive an amount equal to the greater of (i) (A)
Fifteen Dollars and Sixty-Seven Cents ($15.67) per Series C Preferred Share plus
dividends (whether or not earned or declared) accrued and unpaid thereon to the
date of final distribution to such holder (the “Liquidation Preference”) plus
(B) the Redemption Premium or (ii) an amount per Series C Preferred Share equal
to the amount that would have been payable had each Series C Preferred Share
been converted into Common Shares immediately prior to such Liquidation. The
foregoing amounts shall be subject to equitable adjustment whenever there shall
occur a stock dividend, stock split, combination, reorganization,
recapitalization, reclassification or other similar event involving a change in
the capital structure of the Series C Preferred Shares. Until the holders of the
Series C Preferred Shares have been paid the Liquidation Preference in full, no
payment will be made to any holder of Junior Shares upon Liquidation. If, upon
any such Liquidation, the assets of the Corporation, or proceeds thereof,
distributable among the holders of Series C Preferred Shares shall be
insufficient to pay in full the preferential amount aforesaid and liquidating
payments on any other shares of any class or series of Parity Shares, then such
assets, or the proceeds thereof, shall be distributed among the holders of such
Series C Preferred Shares and such other Parity Shares ratably in accordance
with the amounts that would be payable on such Series C Preferred Shares and
such other Parity Shares if all amounts payable thereon were paid in full.

 

In connection with a Merger Liquidation (as defined below), each holder of
Series C Preferred Shares shall have the right (a “Continuation Right”) to
elect, by delivering written notice to the Corporation not less than five
Business Days prior to the Merger Liquidation, to require the Corporation to
make provision for the Series C Preferred Shares to be assumed by the surviving
entity as described in Section 7(e); provided, however, notwithstanding the
election by any of the holders of the Series C Preferred Shares of the
Continuation Right, the Corporation shall have the right, in connection with any
Merger Liquidation, to elect, by delivering written notice to the holders of
Series C Preferred Shares at any time prior to the Merger Liquidation, to redeem
any or all of the outstanding Series C Preferred Shares for an amount per Series
C Preferred Share equal to the Liquidation Preference plus the Redemption
Premium. A “Merger Liquidation” shall be a Liquidation which constitutes a
consolidation or merger of the Corporation with one or more entities that are
not affiliates of the Corporation and as a result of which the Corporation is
not the Surviving Entity. Upon a merger or consolidation of the Corporation with
one or more entities that are affiliates of the Corporation, the Corporation
shall make provision for the Series C Preferred Shares to be assumed by the
surviving entity as described in Section 7(e).

 

 

 

 

(b)               Subject to the rights of the holders of any Parity Shares,
upon any Liquidation of the Corporation, after payment shall have been made in
full to the holders of Series C Preferred Shares and any Parity Shares, as
provided in this Section 4, any other series or class or classes of Junior
Shares shall, subject to the respective terms thereof, be entitled to receive
any and all assets remaining to be paid or distributed, and the holders of the
Series C Preferred Shares and any Parity Shares shall not be entitled to share
therein.

 

SECTION 5.           REDEMPTION

 

The Series C Preferred Shares shall be redeemable by the Corporation subject to
the provisions of this Section 5.

 

(a)                Within three Business Days following the Redemption Trigger
Date, the Corporation shall notify each holder of Series C Preferred Shares in
writing of its intent to redeem the Series C Preferred Shares (the “Redemption
Notice”) or its intent to convert the Series C Preferred Shares (the “Conversion
Notice”) into Common Shares (the third Business Day following the Redemption
Trigger Date, the “Election Date”).

 

The Corporation shall redeem for cash on the date specified in the Redemption
Notice (which date shall be not more than ten (10) days after the date of the
Redemption Notice) (the “Redemption Date”), out of funds legally available
therefor, all, but not less than all, of the outstanding Series C Preferred
Shares at a price per Series C Preferred Share equal to the Liquidation
Preference plus a premium (the “Redemption Premium”) equal to twenty percent
(20%) of the Liquidation Preference.

 

(b)               From and after the Redemption Date, (i) except as otherwise
provided herein, dividends on the Series C Preferred Shares so called for
redemption shall cease to accrue, (ii) said shares shall no longer be deemed to
be outstanding and (iii) all rights of the holders thereof as holders of Series
C Preferred Shares shall cease (except the rights to receive the cash payable
upon such redemption, without interest thereon, and to receive any dividends
payable thereon). The Corporation’s obligation to provide cash in accordance
with the preceding sentence shall be deemed fulfilled if, on or before the
Redemption Date, the Corporation shall deposit with a bank or trust company
(which may be an affiliate of the Corporation) that has an office in the Borough
of Manhattan, City of New York and that has, or is an affiliate of a bank or
trust company that has, a capital and surplus of at least $50,000,000, any cash
necessary for such redemption, in trust, with irrevocable instructions that such
cash be applied to the redemption of the Series C Preferred Shares so called for
redemption. No interest shall accrue for the benefit of the holder of Series C
Preferred Shares to be redeemed on any cash so set apart by the Corporation.

 

SECTION 6.          REACQUIRED SHARES TO BE RETIRED. All Series C Preferred
Shares that have been issued and reacquired in any manner by the Corporation
shall be restored to the status of authorized but unissued shares of Preferred
Stock, without designation as to class or series.

 

 

 

 

SECTION 7.           CONVERSION. Series C Preferred Shares shall automatically
convert into Common Shares, as follows: 

 

(a)                If the Corporation fails to send to the holders of Series C
Preferred Shares a Redemption Notice or sends a Conversion Notice as provided in
Section 5(a), each Series C Preferred Share will automatically be converted into
the number of fully paid and non-assessable Common Shares obtained by dividing
the aggregate Liquidation Preference of such Series C Preferred Shares by the
Conversion Price.

 

(i)                Holders of Series C Preferred Shares at the close of business
on any Dividend Payment Record Date shall be entitled to receive the dividend
payable on such shares on the corresponding Dividend Payment Date
notwithstanding the conversion thereof (and of any accrued and unpaid dividends
to the date of conversion) following such Dividend Payment Record Date and prior
to such Dividend Payment Date. A holder of Series C Preferred Shares on a
Dividend Payment Record Date whose Series C Preferred Shares are converted into
Common Shares on such Dividend Payment Date will receive the dividend payable by
the Corporation on such Series C Preferred Shares on such date, and the
converting holder need not pay to the Corporation the amount of such dividend
upon conversion.

 

(b)               Each conversion shall be deemed to have been effected
immediately prior to the close of business on the Election Date, and the person
or persons in whose name or names any Common Shares shall be issuable upon such
conversion shall be deemed to have become the holder or holders of record of the
Common Shares represented thereby at such time on such date, and such conversion
shall be at the Conversion Price in effect at such time and on such date unless
the stock transfer books of the Corporation shall be closed on that date, in
which event such person or persons shall be deemed to have become such holder or
holders of record at the close of business on the next succeeding day on which
such stock transfer books are open, but such conversion shall be at the
Conversion Price in effect on the date on which such notice of conversion shall
have been received by the Corporation.

 

(c)                No fractional shares or scrip representing fractions of
Common Shares shall be issued upon conversion of the Series C Preferred Shares.
Instead of any fractional interest in a Common Share that would otherwise be
deliverable upon the conversion of a Series C Preferred Share, the Corporation
shall pay to the holder of such Series C Preferred Share an amount in cash based
upon the Current Market Price of Common Shares on the Trading Day immediately
preceding the date of conversion. If more than one Series C Preferred Share
shall be converted at one time by the same holder, the number of full Common
Shares issuable upon conversion thereof shall be computed on the basis of the
aggregate number of Series C Preferred Shares so surrendered.

  

(d)               The Fixed Conversion Price shall be adjusted from time to time
as follows:

 

(i)                 If, after the Issue Date, the Corporation (A) pays a
dividend or make a distribution on its shares of capital stock in Common Shares,
(B) subdivides its outstanding Common Shares into a greater number of shares,
(C) combines its outstanding Common Shares into a smaller number of shares or
(D) issues any shares of capital stock by reclassification of its Common Shares
(the events set forth in clauses (A), (B), (C) and (D) above being hereinafter
referred to as the “Common Share Events”), the Fixed Conversion Price shall be
adjusted so that the holder of any Series C Preferred Share thereafter
surrendered for conversion shall be entitled to receive the number of Common
Shares that such holder would have owned or have been entitled to receive after
the happening of any of any Common Share Event, had such Series C Preferred
Share been converted immediately prior to the record date in the case of a
dividend or distribution or the effective date in the case of a subdivision,
combination or reclassification. An adjustment made pursuant to this
subparagraph (i) shall become effective immediately upon the opening of business
on the day next following the record date (subject to paragraph (h) below) in
the case of a dividend or distribution and shall become effective immediately
upon the opening of business on the day next following the effective date in the
case of a subdivision, combination or reclassification.

 

 

 

 

(ii)               If, after the Issue Date, the Corporation issues rights,
options or warrants to all holders of Common Shares entitling them (for a period
expiring within 45 days after the record date mentioned below in this
subparagraph (ii)) to subscribe for or purchase Common Shares at a price per
share less than the Current Market Price per Common Share on the record date for
the determination of stockholders entitled to receive such rights, options or
warrants, then the Fixed Conversion Price shall be adjusted to equal the price
determined by multiplying (A) the Fixed Conversion Price by (B) a fraction, the
numerator of which shall be the sum of (I) the number of Common Shares
outstanding on the close of business on the date fixed for such determination
and (II) the number of Common Shares that the aggregate proceeds to the
Corporation from the exercise of such rights, options or warrants for Common
Shares would purchase at such Current Market Price, and the denominator of which
shall be the sum of (I) the number of Common Shares outstanding on the close of
business on the date fixed for such determination and (II) the number of
additional Common Shares offered for subscription or purchase pursuant to such
rights, options or warrants. Such adjustment shall become effective immediately
upon the opening of business on the day next following such record date (subject
to paragraph (h) below). In determining whether any rights, options or warrants
entitle the holders of Common Shares to subscribe for or purchase Common Shares
at less than such Current Market Price, there shall be taken into account any
consideration received by the Corporation upon issuance and upon exercise of
such rights, options or warrants, the value of such consideration, if other than
cash, to be determined by the Board of Directors, whose determination shall be
conclusive, absent manifest error.

 

(iii)             If the Corporation distributes to all holders of its Common
Shares any shares of capital stock of the Corporation (other than Common
Shares), evidence of its indebtedness or assets or cash dividends in excess of
$0.11 in any month or rights or warrants to subscribe for or purchase any of its
securities (excluding those rights and warrants referred to in and treated under
subparagraph (ii) above) (any of the foregoing being hereinafter in this
subparagraph (iii) called the “Securities”), then in each case the Fixed
Conversion Price shall be adjusted so that it shall equal the price determined
by multiplying (A) the Fixed Conversion Price by (B) a fraction, the numerator
of which shall be the Current Market Price per Common Share on the record date
mentioned below less the then fair market value (as determined by the Board of
Directors, whose determination shall be conclusive, absent manifest error) of
the portion of the shares of capital stock or assets or evidences of
indebtedness so distributed or of such rights or warrants applicable to one
Common Share, and the denominator of which shall be the Current Market Price per
Common Share on the record date mentioned below. Such adjustment shall become
effective immediately upon the opening of business on the day next following
(subject to paragraph (h) below) the record date for the determination of
stockholders

 

 

 

entitled to receive such distribution. For the purposes of this subparagraph
(iii), the distribution of a Security, which is distributed not only to the
holders of the Common Shares on the date fixed for the determination of
stockholders entitled to such distribution of such Security, but also is
required to be distributed with each Common Share delivered to a Person
converting a Series C Preferred Share after such determination date, shall not
require an adjustment of the Fixed Conversion Price pursuant to this
subparagraph (iii); provided that on the date, if any, on which a person
converting a Series C Preferred Share would no longer be entitled to receive
such Security with a Common Share (other than as a result of the termination of
all such Securities), a distribution of such Securities shall be deemed to have
occurred, and the Fixed Conversion Price shall be adjusted as provided in this
subparagraph (iii) (and such day shall be deemed to be “the date fixed for the
determination of the stockholders entitled to receive such distribution” and
“the record date” within the meaning of the two preceding sentences).

  

The occurrence of a distribution or the occurrence of any other event as a
result of which holders of Series C Preferred Shares shall not be entitled to
receive rights, including exchange rights (the “Rights”), pursuant to any
stockholders protective rights agreement (the “Agreement”) that may be adopted
by the Corporation as if such holders had converted such shares into Common
Shares immediately prior to the occurrence of such distribution or event shall
not be deemed a distribution of Securities for the purposes of any Fixed
Conversion Price adjustment pursuant to this subparagraph (iii) or otherwise
give rise to any Fixed Conversion Price adjustment pursuant to this Section 7;
provided, however, that in lieu of any adjustment to the Fixed Conversion Price
as a result of any such a distribution or occurrence, the Corporation shall make
provision so that Rights, to the extent issuable at the time of conversion of
any Series C Preferred Shares into Common Shares, shall issue and attach to such
Common Shares then issued upon conversion in the amount and manner and to the
extent and as provided in the Agreement in respect of issuances at the time of
Common Shares other than upon conversion.

 

(iv)             If, at any time or from time to time after the Issue Date, the
Corporation issues or sells any Common Shares (other than in connection with any
underwritten public offering and issuances to unaffiliated third parties for an
acquisition on an arm’s-length basis) (“Additional Shares”) for a consideration
per share that is less than the Current Market Price on the Business Day
immediately preceding the earlier of the issuance or sale, or public
announcement of the issuance or sale, of such Additional Shares, then the Fixed
Conversion Price shall be reduced to an amount determined by multiplying the
Fixed Conversion Price by a fraction of which (x) the numerator is the sum of
(i) the product of (A) the number of Common Shares outstanding immediately prior
to such issuance or sale multiplied by (B) the greater of (1) the Fixed
Conversion Price and (2) the Closing Price on the date preceding the earlier of
the issuance or sale or public announcement of the issuance or sale of such
Additional Shares (the greater of (1) and (2) above hereinafter referred to as
the “Adjustment Price”) and (ii) the aggregate consideration receivable by the
Corporation for the total number of Common Shares so issued or sold, and (y) the
denominator equals the product of (i) the sum of (A) the total number of Common
Shares outstanding immediately prior to such issuance or sale and (B) the number
of additional Common Shares issued or sold, multiplied by (ii) the Adjustment
Price. An adjustment made pursuant to this subparagraph (iv) shall be made on
the next Business Day following the date on which any such issuance or sale is
made and shall be effective retroactively to the close of business on the date
of such issuance or sale.

 

 

 

(v)               No adjustment in the Fixed Conversion Price shall be required
unless such adjustment would require a cumulative increase or decrease of at
least 1 % in such price; provided, however, that any adjustments that by reason
of this subparagraph (v) are not required to be made shall be carried forward
and taken into account in any subsequent adjustment until made; and provided,
further, that any adjustment shall be required and made in accordance with the
provisions of this Section 7 (other than this subparagraph (v)) not later than
such time as may be required in order to preserve the tax-free nature of a
distribution to the holders of Common Shares. Notwithstanding any other
provisions of this Section 7, the Corporation shall not be required to make any
adjustment of the Fixed Conversion Price for the issuance of any Common Shares
pursuant to any plan providing for the reinvestment of dividends or interest
payable on securities of the Corporation and the investment of additional
optional amounts in Common Shares under such plan. All calculations under this
Section 7 shall be made to the nearest cent (with $.005 being rounded upward) or
to the nearest one-tenth of a share (with .05 of a share being rounded upward),
as the case may be. Anything in this paragraph (d) to the contrary
notwithstanding, the Corporation shall be entitled, to the extent permitted by
law, to make such reductions in the Fixed Conversion Price, in addition to those
required by this paragraph (d), as it in its discretion shall determine to be
advisable in order that any stock dividends, subdivision of shares,
reclassification or combination of shares, distribution of rights, options or
warrants to purchase stock or securities, or a distribution of other assets
(other than cash dividends) hereafter made by the Corporation to its
stockholders shall not be taxable.

 

(e)                If the Corporation becomes party to any transaction
(including without limitation a merger, consolidation, statutory share exchange,
self tender offer for all or substantially all Common Shares outstanding, sale
of all or substantially all of the Corporation’s assets or recapitalization of
the Common Shares but excluding any Common Share Events (each of the foregoing
being referred to herein as a “Transaction”), in each case as a result of which
Common Shares shall be converted into the right to receive stock, securities or
other property (including cash or any combination thereof), each Series C
Preferred Share that is not redeemed or converted into the right to receive
stock, securities or other property in connection with such Transaction shall
thereafter be convertible into the kind and amount of shares of stock,
securities and other property (including cash or any combination thereof)
receivable upon the consummation of such Transaction by a holder of that number
of Common Shares into which one Series C Preferred Share was convertible
immediately prior to such Transaction, assuming such holder of Common Shares (i)
is not a Person with which the Corporation consolidated or into which the
Corporation merged or which merged into the Corporation or to which such sale or
transfer was made, as the case may be (a “Constituent Person”), or an affiliate
of a Constituent Person and (ii) failed to exercise his or her rights of the
election, if any, as to the kind or amount of stock, securities and other
property (including cash) receivable upon such Transaction (provided that if the
kind or amount of stock, securities and other property (including cash)
receivable upon such Transaction is not the same for each Common Share held
immediately prior to such Transaction by other than a Constituent Person or an
affiliate thereof and in respect of which such rights of election shall not have
been exercised (“Non-Electing Share”), then for the purpose of this paragraph
(e) the kind and amount of stock, securities and other property (including cash)
receivable upon such Transaction by each Non-Electing Share shall be deemed to
be the kind and amount so receivable per share by a plurality of the
Non-Electing Shares). The Corporation shall not be a party to any Transaction
unless the terms of such Transaction are consistent with the provisions of this
paragraph (e), and it shall not consent or agree to the occurrence of any
Transaction until the Corporation has entered into an agreement with the
successor or purchasing entity, as the case may be, for the benefit of the
holders of the Series C Preferred Shares that will contain provisions enabling
the holders of the Series C Preferred Shares that remain outstanding after such
Transaction to convert their Series C Preferred Shares into the consideration
received by holders of Common Shares at the Conversion Price in effect
immediately prior to such Transaction. The provisions of this paragraph (e)
shall similarly apply to successive Transactions.

 

 

 

 

(f)                If:

 

(i)                the Corporation declares a dividend (or any other
distribution) on the Common Shares (other than in cash out of assets, based on a
fair valuation of assets, in excess of the sum of the liabilities of the
Corporation and the amount of stated capital attributable to Common Shares,
determined on the basis of the most recent annual consolidated cost basis and
current value basis and quarterly consolidated balance sheets of the Corporation
and its consolidated subsidiaries available at the time of the declaration of
the dividend or distribution); or

 

(ii)               the Corporation grants to the holders of the Common Shares of
rights or warrants to subscribe for or purchase any shares of any class or any
other rights or warrants (other than Rights to which the second paragraph of
subparagraph (d)(iii) of this Section 7 applies); or

 

(iii)             there shall occur any reclassification of the Common Shares
(other than an event to which subparagraph (d) (i) of this Section 7 applies) or
any consolidation or merger to which the Corporation is a party and for which
approval of any stockholders of the Corporation is required, or a statutory
share exchange involving the conversion or exchange of Common Shares into
securities or other property, or a self tender offer by the Corporation for all
or substantially all of its outstanding Common Shares, or the sale or transfer
of all or substantially all of the assets of the Corporation as an entirety and
for which approval of any stockholders of the Corporation is required; or

 

(iv)             there shall occur the voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, then the Corporation shall cause
to be prepared and delivered to the holders of the Series C Preferred Shares at
their addresses as shown on the stock records of the Corporation, as promptly as
possible, but at least 15 days prior to the applicable date hereinafter
specified, a notice stating (A) the date on which a record is to be taken for
the purpose of such dividend, distribution or rights or warrants, or, if a
record is not to be taken, the date as of which the holders of Common Shares of
record to be entitled to such dividend, distribution or rights or warrants are
to be determined or (B) the date on which such reclassification, consolidation,
merger, statutory share exchange, self tender offer, sale, transfer,
liquidation, dissolution or winding up is expected to become effective, and the
date as of which it is expected that holders of Common Shares of record shall be
entitled to exchange their Common Shares for securities or other property, if
any, deliverable upon such reclassification, consolidation, merger, statutory
share exchange, self tender offer, sale, transfer, liquidation, dissolution or
winding up. Failure to give or receive such notice or any defect therein shall
not affect the legality or validity of the proceedings described in this Section
7.

 

 

 

 

(g)               Whenever the Fixed Conversion Price is adjusted as herein
provided, the Corporation shall promptly prepare and deliver to the holders of
the Series C Preferred Shares a notice of such adjustment of the Fixed
Conversion Price setting forth the adjusted Fixed Conversion Price and the
effective date of such adjustment and an officer’s certificate setting forth the
Fixed Conversion Price after such adjustment and setting forth a brief statement
of the facts requiring such adjustment. The Corporation shall mail such notice
and such certificate to the holders of each Series C Preferred Share at such
holder’s last address as shown on the stock records of the Corporation. 

 

(h)               In any case in which paragraph (d) of this Section 7 provides
that an adjustment shall become effective on the day next following the record
date for an event, the Corporation may defer until the occurrence of such event
(A) issuing to the holder of any Series C Preferred Share converted after such
record date and before the occurrence of such event the additional Common Shares
issuable upon such conversion by reason of the adjustment required by such event
over and above the Common Shares issuable upon such conversion before giving
effect to such adjustment and (B) paying to such holder any amount of cash in
lieu of any fraction pursuant to paragraph (c) of this Section 7.

 

(i)                 There shall be no adjustment of the Fixed Conversion Price
in case of the issuance of any shares of capital stock of the Corporation in a
reorganization, acquisition or other similar transaction except as specifically
set forth in this Section 7. If any action or transaction would require
adjustment of the Fixed Conversion Price pursuant to more than one paragraph of
this Section 7, only one adjustment shall be made, and such adjustment shall be
the amount of adjustment that has the highest absolute value.

 

(j)                 If the Corporation takes any action affecting the Common
Shares, other than action described in this Section 7, that in the opinion of
the Board of Directors would materially adversely affect the conversion rights
of the holders of the Series C Preferred Shares, the Fixed Conversion Price for
the Series C Preferred Shares may be adjusted, to the extent permitted by law,
in such manner, if any, and at such time, as the Board of Directors, in its sole
discretion, may determine to be equitable in the circumstances.

 

(k)               The Corporation will at all times reserve and keep available,
free from preemptive rights, out of the aggregate of its authorized but unissued
Common Shares, for the purpose of effecting conversion of the Series C Preferred
Shares, the full number of Common Shares deliverable upon the conversion of all
outstanding Series C Preferred Shares not theretofore converted. For purposes of
this paragraph (k), the number of Common Shares that shall be deliverable upon
the conversion of all outstanding shares of Series C Preferred Shares shall be
computed as if at the time of computation all such outstanding shares were held
by a single holder.

 

 

 

 

Any Common Shares issued upon conversion of the Series C Preferred Shares shall
be validly issued, fully paid and non-assessable. Before taking any action that
would cause an adjustment reducing the Conversion Price below the then-par value
of the Common Shares deliverable upon conversion of the Series C Preferred
Shares, the Corporation shall take any corporate action that, in the opinion of
its counsel, may be necessary in order that the Corporation may validly and
legally issue fully paid and non-assessable Common Shares at such adjusted
Conversion Price.

 

The Corporation shall endeavor to list the Common Shares required to be
delivered upon conversion of the Series C Preferred Shares, prior to such
delivery, upon each national securities exchange, if any, upon which the
outstanding Common Shares are listed at the time of such delivery.

 

(l)                 The Corporation shall pay any and all documentary stamp or
similar issue or transfer taxes payable in respect of the issue or delivery of
Common Shares or other securities or property on conversion of the Series C
Preferred Shares pursuant hereto; provided, however, that the Corporation shall
not be required to pay any tax that may be payable in respect of any transfer
involved in the issue or delivery of any Common Shares or other securities or
property in a name other than that of the holder of the Series C Preferred
Shares to be converted, and no such issue or delivery shall be made unless and
until the person requesting such issue or delivery has paid to the Corporation
the amount of any such tax or established, to the reasonable satisfaction of the
Corporation, that such tax has been paid.

 

(m)               If the Fixed Conversion Price is adjusted from time to time in
accordance with this Section 7 as the result of an event that alters the number
of outstanding Common Shares (or an event in connection with which the Company
issues any rights, options or warrants or other securities that, upon exercise
or conversion (or otherwise), and such issuance would then alter the number of
outstanding Common Shares), then the number of Common Shares issuable hereunder
shall be adjusted by multiplying (A) the Common Shares issuable hereunder at
such time by (B) a fraction, the numerator of which shall be the Fixed
Conversion Price (prior to such adjustment) and the denominator of which shall
be the Fixed Conversion Price (following such adjustment).

 

SECTION 8.         PERMISSIBLE DISTRIBUTIONS. In determining whether a
distribution (other than upon liquidation, dissolution or winding up), whether
by dividend, or upon redemption or other acquisition of shares or otherwise, is
permitted under Maryland law, amounts that would be needed, if the Corporation
were to be dissolved at the time of the distribution, to satisfy the
preferential rights upon dissolution of holders of shares of any class or series
of capital stock whose preferential rights upon dissolution are superior or
prior to those receiving the distribution shall not be added to the
Corporation’s total liabilities.

 

SECTION 9.           RANKING. Any class or series of shares of capital stock of
the Corporation shall be deemed to rank:

 

(a)                prior or senior to the Series C Preferred Shares, as to the
payment of dividends and as to distribution of assets upon liquidation,
dissolution or winding up, if the holders of such class or series shall be
entitled to the receipt of dividends or of amounts distributable upon
liquidation, dissolution or winding up, as the case may be, in preference or
priority to the holders of Series C Preferred Shares (“Senior Shares”);

 

 

 

 

(b)               on a parity with the Series A Preferred Shares, the Series B
Preferred Shares and the Series C Preferred Shares, as to the payment of
dividends and as to the distribution of assets upon liquidation, dissolution or
winding up, whether or not the dividend rates, dividend payment dates or
redemption or liquidation prices per share thereof be different from those of
the Series A Preferred Shares, the Series B Preferred Shares or the Series C
Preferred Shares, if the holders of such class or series and the Series A
Preferred Shares, the Series B Preferred Shares and the Series C Preferred
Shares shall be entitled to the receipt of dividends and of amounts
distributable upon liquidation, dissolution or winding up in proportion to their
respective amounts of accrued and unpaid dividends per share or liquidation
preferences, without preference or priority one over the other (“Parity
Shares”); and

 

(c)                junior to the Series C Preferred Shares, as to the payment of
dividends or as to the distribution of assets upon liquidation, dissolution or
winding up, if such stock or series shall be Common Shares or otherwise
expressly designated as ranking junior to the Series C Preferred Shares (“Junior
Shares”).

 

SECTION 10.         VOTING.

 

(a)                Except as otherwise set forth herein, the Series C Preferred
Shares shall not have any relative, participating, optional or other special
voting rights and powers, and the consent of the holders thereof shall not be
required for the taking of any corporate action.

 

(b)               So long as any Series C Preferred Shares are outstanding, in
addition to any other vote or consent of stockholders required by the Charter,
the affirmative vote of at least a majority of the votes entitled to be cast by
the holders of Series C Preferred Shares; and at the time outstanding, voting as
a single class, given in person or by proxy, either in writing without a meeting
or by vote at any meeting called for the purpose, shall be necessary for
effecting or validating any amendment, alteration or repeal of any of the
provisions of the Charter, including the terms of the Series C Preferred Shares,
that materially and adversely affects the voting powers, rights or preferences
of the Series C Preferred Shares; provided, however, that if there are more than
two unaffiliated holders of Series C Preferred Shares, such majority shall
consist of votes from at least two unaffiliated holders provided further,
however, that (A) the amendment of the provisions of the Charter so as to
authorize or create or to increase the number of the authorized shares of, any
Senior Shares, Parity Shares or Junior Shares shall not be deemed to materially
and adversely affect the voting powers, rights or preferences of the Series C
Preferred Shares and (B) any filing with the SDAT by the Corporation in
connection with a merger, consolidation or sale of all or substantially all of
the assets of the Corporation shall not be deemed to be an amendment, alteration
or repeal of any of the provisions of the Charter, including the terms of the
Series C Preferred Shares.

 

For purposes of the foregoing provisions of this Section 10, each Series C
Preferred Share shall have one (1) vote per share.

 

SECTION 11.        RECORD HOLDERS. The Corporation may deem and treat the record
holder of any Series C Preferred Shares as the true and lawful owner thereof for
all purposes, and the Corporation shall not be affected by any notice to the
contrary.

 

 

 

 

SECTION 12.        NO PREEMPTIVE RIGHTS. No holder of Series C Preferred Shares
shall be entitled to any preemptive rights to subscribe for or acquire any
unissued Shares (whether now or hereafter authorized) or securities of the
Corporation convertible into, or carrying a right to subscribe to or acquire,
Shares. 

 

SECTION 13.         RESTRICTIONS ON OWNERSHIP AND TRANSFER; EXCHANGE CAP.

 

(a)                The Series C Preferred Shares are subject to all the
limitations, terms and conditions of the Charter applicable to Shares generally,
including but not limited to the “Aggregate Share Ownership Limit” and the other
terms and conditions (including exceptions and exemptions) of Section 4.07 of
the Charter.

 

(b)               In no event will the aggregate number Common Shares issued
pursuant to the Securities Purchase Agreement and upon conversion of the Series
C Convertible Preferred Stock issued pursuant to the Convertible Preferred Stock
Purchase Agreement exceed 19.9% of the number Common Shares outstanding on the
Trading Day immediately preceding the date of the Preferred Stock Purchase
Agreement (as appropriately adjusted for share splits, share dividends,
combinations, recapitalizations and the like).

 

(c)                Notwithstanding any other provision contained herein or in
the Charter, the Corporation shall not be entitled to issue any Common Shares
upon conversion of the Series C Preferred Shares, and no holder of Series C
Preferred Shares shall have the right to receive upon conversion of the Series C
Preferred Shares any Common Shares, if the issuance of such Common Shares would
exceed the limit in Section 13(a) or (b) above (the “Exchange Cap”), and no
holder shall be issued in the aggregate, pursuant to the Securities Purchase
Agreement or upon conversion of the Series C Preferred Shares, Common Shares in
an amount greater than the product of the Exchange Cap multiplied by the
quotient of (1) (i) the Common Shares issued to such holder pursuant to the
Securities Purchase Agreement plus (ii) the Common Shares underlying the Series
C Preferred Shares issued to such holder pursuant to the Convertible Stock
Purchase Agreement on the Issue Date divided by (2) (i) the aggregate number of
Common Shares issued to pursuant to the Securities Purchase Agreement plus (ii)
the aggregate number of Common Shares underlying the Series C Preferred Shares
issued pursuant to the Convertible Stock Purchase Agreement on the Issue Date.

 

(d)               In the event that the Corporation is prohibited from issuing
Common Shares pursuant to Section 13(c) (the “Exchange Cap Shares”), the
Corporation shall pay, out of funds legally available therefor, cash in lieu of
such Common Shares in an amount equal to the greater of the product of such
number of Exchange Cap Shares and (i) 102% of the Liquidation Preference and
(ii) the Conversion Price valued at the one-day VWAP of the Common Shares on the
applicable date.

 

For the avoidance of doubt, in the event a particular holder of Serices C
Preferred Shares is subject to the limit in Section 13(a), the shares otherwise
issuable to such holder shall be available for issuance to the remaining holders
of Series C Preferred Shares on a pro rata basis. The foregoing provisions of
this Section 13 shall not be construed to limit the applicability to the Series
C Preferred Shares of any other term or provision of the Charter.

 

 

 

 

SECTION 14.         TAX MATTERS

 

(a)                Not less than ten (10) days prior to (i) a redemption of the
Series C Preferred Shares pursuant to Section 5(a), (ii) a conversion of the
Series C Preferred Shares pursuant to Section 7(a), or (iii) a payment of cash
or the issuance of additional shares of stock pursuant to the Contingent Value
Rights Agreement, the Company shall give written notice to the holders of Series
C Preferred Shares. If (a) any holder of Series C Preferred Shares (or, in the
case of a holder which is a partnership or disregarded entity for U.S. federal
income tax purposes, any direct or indirect partner, member or owner of such
holder) (any such person, a “Tax-Indemnified Person”) is advised by such
Tax-Indemnified Person’s tax advisors to pay, or (b) the U.S. taxing authorities
seek to impose on any Tax-Indemnified Person, a tax pursuant to Section 897 of
the Code in respect of (i) a sale or other disposition (including a redemption
or conversion) of such Series C Preferred Shares, or (ii) a payment of cash or
the issuance of additional shares pursuant to the Contingent Value Rights
Agreement, the Company shall indemnify such Tax-Indemnified Person, on an
after-tax basis, for the amount of such tax, including any interest or penalties
thereon.

 

(b)               It is the intention of the parties that no payments or
transactions with respect to the Series C Preferred Shares, any common stock
into which the Series C Preferred Shares have been converted, or any stock which
has been issued in respect of the Contingent Value Rights Agreement, other than
cash dividends payable pursuant to Section 3(a), shall be treated for U.S.
Federal income tax purposes as a dividend. Accordingly

 

(i)                In the event the Company treats (i) a payment in redemption
of the Series C Preferred Shares pursuant to Section 5(a), (ii) a conversion of
the Series C Preferred Shares pursuant to Section 7(a), (iii) any payment or
issuance of additional stock pursuant to the Contingent Value Rights Agreement
or (iv) any other payment, issuance of stock, or other transaction with respect
to the Series C Preferred Shares, any common stock into which the Series C
Preferred Shares has been converted, or any stock which has been issued in
respect of the Contingent Value Rights Agreement, other than cash dividends
payable pursuant to Section 3(a), as a dividend for U.S. Federal income tax
purposes (including, without limitation, as a result of the application of
Sections 302 or 305 of the Code), then the Company shall pay to the holders of
Series C Preferred Shares an additional amount such that the net amount paid or
issued, after any required withholding with respect to such payment or issuance
and such additional amount, shall be equal to the amount that would have been
received by the direct or indirect holder of the Series C Preferred Stock had
withholding not been required.

 

(ii)               In the event that (A) the United States taxing authorities
successfully take the position that (i) a payment in redemption of the Series C
Preferred Shares pursuant to Section 5(a), (ii) a conversion of the Series C
Preferred Shares pursuant to Section 7(a), (iii) any payment or issuance of
additional stock pursuant to the Contingent Value Rights Agreement or (iv) any
other payment, issuance of stock, or other transaction with respect to the
Series C Preferred Shares, any common stock into which the Series C Preferred
Shares have been converted, or any stock which has been issued in respect of the
Contingent Value Rights Agreement, other than cash dividends payable pursuant to
Section 3(a), should be treated for U.S. Federal income tax purposes as a
dividend (including, without limitation, as a result of the application of
Sections 302 or 305 of the Code), (B) Section 14(c)(i) a does not apply, then
the Company shall indemnify the direct or indirect holders of Series C Preferred
Shares, on an after-tax basis, for the withholding tax actually imposed on such
holders in respect of such dividend.

 

 

 

 

SECOND: The Series C Preferred Shares have been classified and designated by the
Board of Directors under the authority contained in the Charter.

 

THIRD: These Articles Supplementary have been approved by the Board of Directors
in the manner and by the vote required by law.

 

FOURTH: The undersigned acknowledges these Articles Supplementary to be the
corporate act of the Corporation and, as to all matters or facts required to be
verified under oath, the undersigned acknowledges that, to the best of his
knowledge, information and belief, these matters and facts are true in all
material respects and that this statement is made under the penalties of
perjury.

  

 

 

  

IN WITNESS WHEREOF, American Realty Capital Properties, Inc. has caused these
presents to be signed in its name and on its behalf by its Chief Executive
Officer and attested to by its Secretary of this __________ day of June, 2013.

 

Attest:  

AMERICAN REALTY CAPITAL PROPERTIES, INC.

  

      Name:  Edward M. Weil, Jr.   By: Title:  President, Chief     Name:
Nicholas S. Schorsch Operating Officer, Secretary and Treasurer     Title: 
Chief Executive Officer

  

 

 

 

EXHIBIT B

 

Company Certificate

 

 

 

 

EXHIBIT C

 

Investor Certificate

 

-2-

 

 

EXHIBIT D-1

 

AMERICAN REALTY CAPITAL PROPERTIES, INC.

 

STOCK CERTIFICATE/REGISTRATION QUESTIONNAIRE

 

    Please provide us with the following information:               1.  

The exact name that the Common Stock are to be registered in (this is the name
that will appear on the records of the Company, or, if required, stock
certificate(s)).  You may use a nominee name if appropriate:

 

    2.  

The relationship between the Investor of the Common Stock and the Registered
Holder listed in response to item 1 above:

 

    3.  

The mailing address, telephone and telecopy number and email address of the
Registered Holder listed in response to item 1 above:

 

       

 

 

       

 

 

       

 

 

       

 

 

    4.   The Tax Identification Number of the Registered Holder listed in
response to item 1 above:    

 

-3-

 

 

EXHIBIT D-2

 

AMERICAN REALTY CAPITAL PROPERTIES, INC.

 

REGISTRATION STATEMENT/PROSPECTUS QUESTIONNAIRE

 

In connection with the Registration Statement/Prospectus, please provide us with
the following information regarding the Investor.

 

1.           Please state your organization’s name exactly as it should appear
in the Registration Statement/Prospectus:

 

_____________________________________________________________________

 

Except as set forth below, your organization does not hold any equity securities
of the Company on behalf of another person or entity.

 

State any exceptions here:

 

_____________________________________________________________________

 

If the Investor is not a natural person, please identify the natural person or
persons who will have voting and investment control over the Common Stock owned
by the Investor:

 

_____________________________________________________________________

 

2. Address of your organization:

 

______________________________________________________

 

______________________________________________________

 

Telephone: __________________________

 

Fax: ________________________________

 

Contact Person: _______________________

 

3. Have you or your organization had any position, office or other material
relationship within the past three years with the Company or its affiliates?
(Include any relationships involving you or any of your affiliates, officers,
directors, or principal equity holders (5% or more) that has held any position
or office or has had any other material relationship with the Company (or its
predecessors or affiliates) during the past three years.)

 

 

 

 

_______ Yes _______ No        

If yes, please indicate the nature of any such relationship below:

 

4. Are you the beneficial owner of any other securities of the Company? (Include
any equity securities that you beneficially own or have a right to acquire
within 60 days after the date hereof, and as to which you have sole voting
power, shared voting power, sole investment power or shared investment power.)

 

_______ Yes _______ No        

If yes, please describe the nature and amount of such ownership as of a recent
date.

 

5. Except as set forth below, you wish that all the shares of the Company’s
common stock beneficially owned by you or that you have the right to acquire
from the Company be offered for your account in the Registration
Statement/Prospectus.

 

State any exceptions here:

 

6. Have you made or are you aware of any arrangements relating to the
distribution of the shares of the Company pursuant to the Registration
Statement/Prospectus?

 

_______ Yes _______ No        

If yes, please describe the nature and amount of such arrangements.

 

7.FINRA Matters

 

          (a)          State below whether (i) you or any associate or affiliate
of yours are a member of the FINRA, a controlling shareholder of an FINRA
member, a person associated with a member, a direct or indirect affiliate of a
member, or an underwriter or related person with respect to the proposed
offering; (ii) you or any associate or affiliate of yours owns any stock or
other securities of any FINRA member not purchased in the open market; or (iii)
you or any associate or affiliate of yours has made any outstanding subordinated
loans to any FINRA member. If you are a general or limited partnership, a no
answer asserts that no such relationship exists for you as well as for each of
your general or limited partners.

 

-2-

 

 

_______ Yes: _______ No:        

If “yes,” please identify the FINRA member and describe your relationship,
including, in the case of a general or limited partner, the name of the partner:

 

If you answer “no” to Question 7(a), you need not respond to Question 7(b).

 

State below whether you or any associate or affiliate of yours has been an
underwriter, or a controlling person or member of any investment banking or
brokerage firm which has been or might be an underwriter for securities of the
Corporation or any affiliate thereof including, but not limited to, the common
stock now being registered.

 

_______ Yes: _______ No:        

If “yes,” please identify the FINRA member and describe your relationship,
including, in the case of a general or limited partner, the name of the partner.

 

-3-

 

 

ACKNOWLEDGEMENT

 

The undersigned hereby agrees to notify the Company promptly of any changes in
the foregoing information which should be made as a result of any developments,
including the passage of time. The undersigned also agrees to provide the
Company and the Company’s counsel any and all such further information regarding
the undersigned promptly upon request in connection with the preparation,
filing, amending, and supplementing of the Registration Statement (or any
prospectus contained therein). The undersigned hereby consents to the use of all
such information in the Registration Statement/Prospectus.

 

The undersigned understands and acknowledges that the Company will rely on the
information set forth herein for purposes of the preparation and filing of the
Registration Statement/Prospectus.

 

The undersigned understands that the undersigned may be subject to serious civil
and criminal liabilities if the Registration Statement, when it becomes
effective, or Prospectus either contains an untrue statement of a material fact
or omits to state a material fact required to be stated in the Registration
Statement/Prospectus or necessary to make the statements in the Registration
Statement/Prospectus not misleading. The undersigned represents and warrants
that all information it provides to the Company and its counsel is currently
accurate and complete and will be accurate and complete at the time the
Registration Statement becomes effective or the Prospectus is filed and at all
times subsequent thereto, and agrees during the Effectiveness Period and any
additional period in which the undersigned is making sales of Registrable
Securities under and pursuant to the Registration Statement/Prospectus, and
agrees during such periods to notify the Company immediately of any misstatement
of a material fact in the Registration Statement/Prospectus, and of the omission
of any material fact necessary to make the statements contained therein not
misleading.

 

Dated:  __________         Name       Signature       Name and Title of
Signatory

 

-4-

 

 

EXHIBIT D-3

 

AMERICAN REALTY CAPITAL PROPERTIES, INC.

 

CERTIFICATE FOR CORPORATE, PARTNERSHIP, LIMITED LIABILITY COMPANY,
TRUST, FOUNDATION AND JOINT INVESTORS

 

If the Investor is a corporation, partnership, limited liability company, trust,
pension plan, foundation, joint Investor (other than a married couple) or other
entity, an authorized officer, partner, or trustee must complete, date and sign
this Certificate.

 

CERTIFICATE

 

The undersigned certifies that the representations and responses below are true
and accurate:

 

(a)          The Investor has been duly formed and is validly existing and has
full power and authority to invest in the Company. The person signing on behalf
of the undersigned has the authority to execute and deliver the Convertible
Preferred Stock Purchase Agreement on behalf of the Investor and to take other
actions with respect thereto.

 

(b)          Indicate the form of entity of the undersigned:

 

____   Limited Partnership

 

____   General Partnership

 

____   Limited Liability Company

 

____   Corporation

 

____   Revocable Trust (identify each grantor and indicate under what
circumstances the trust is revocable by the grantor):
                                                                                                                                                                             

                                                                                                          

(Continue on a separate piece of paper, if necessary.)

 

____    Other type of Trust (indicate type of trust and, for trusts other than
pension trusts, name the grantors and
beneficiaries):                                                                                                                                                                           

                                                                                                          

(Continue on a separate piece of paper, if necessary.)

 

____   Other form of organization (indicate form of organization
(                                                            

                                                                                                                                                                         ).

 

(c)          Indicate the approximate date the undersigned entity was formed:
                                .

 

-5-

 

 

(d)    In order for the Company to offer and sell the Common Stock in
conformance with state and federal securities laws, the following information
must be obtained regarding your investor status. Please initial each category
applicable to you as an investor in the Company.

 

___1.            A bank as defined in Section 3(a)(2) of the Securities Act, or
any savings and loan association or other institution as defined in Section
3(a)(5)(A) of the Securities Act whether acting in its individual or fiduciary
capacity;

 

___2.           A broker or dealer registered pursuant to Section 15 of the
Securities Exchange Act of 1934;

 

___3.           An insurance company as defined in Section 2(a)(13) of the
Securities Act;

 

___4.           An investment company registered under the Investment Company
Act of 1940 or a business development company as defined in Section  2(a)(48) of
that Act;

 

___5.           A Small Business Investment Company licensed by the U.S. Small
Business Administration under Section 301(c) or (d) of the Small Business
Investment Act of 1958;

 

___6.           A plan established and maintained by a state, its political
subdivisions, or any agency or instrumentality of a state or its political
subdivisions, for the benefit of its employees, if such plan has total assets in
excess of $5,000,000;

 

___7.           An employee benefit plan within the meaning of the Employee
Retirement Income Security Act of 1974, if the investment decision is made by a
plan fiduciary, as defined in Section 3(21) of such Act, which is either a bank,
savings and loan association, insurance company, or registered investment
advisor, or if the employee benefit plan has total assets in excess of
$5,000,000 or, if a self-directed plan, with investment decisions made solely by
persons that are accredited investors;

 

___8.           A private business development company as defined in
Section 202(a)(22) of the Investment Advisers Act of 1940;

 

___9.           Any partnership or corporation or any organization described in
Section 501(c)(3) of the Internal Revenue Code or similar business trust, not
formed for the specific purpose of acquiring the Shares, with total assets in
excess of $5,000,000;

 

___10.           A trust, with total assets in excess of $5,000,000, not formed
for the specific purpose of acquiring the Shares, whose purchase is directed by
a sophisticated person as described in Rule  506(b)(2)(ii) of the Exchange Act;

 

___11.           An entity in which all of the equity owners qualify under any
of the above subparagraphs. If the undersigned belongs to this investor category
only, list the equity owners of the undersigned, and the investor category which
each such equity owner satisfies:

 

-6-

 

 

                                                                            

(Continue on a separate piece of paper, if necessary.)

 

Please set forth in the space provided below the (i) states, if any, in the U.S.
in which you maintained your principal office during the past two years and the
dates during which you maintained your office in each state, (ii) state(s), if
any, in which you are incorporated or otherwise organized and (iii) state(s), if
any, in which you pay income taxes.

 

                                                                            

 

                                                                            

 

                                                                            

 

Dated:__________________________, 2013           Print Name of Investor        
  Name:   Title:  

 

(Signature and title of authorized officer, partner or trustee)

 

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Exhibit E

 

FORM OF CONTINGENT VALUE RIGHTS AGREEMENT

 

 

This CONTINGENT VALUE RIGHTS AGREEMENT (this “Agreement”), dated as of June
[__], 2013, is by and among American Realty Capital Properties, Inc., a Maryland
corporation (the “Company”), and the holder set forth on the signature page
hereto (together with their successor and their permitted assigns, the
“Holder”).

 

WHEREAS, in connection with the issuance by the Company of 28,398,213 shares of
the Company’s Series C Convertible Preferred Stock (the “Series C Preferred
Stock”) on the date hereof pursuant to that certain Convertible Preferred Stock
Purchase Agreement, dated as of June 4, 2013 (the “Stock Purchase Agreement”),
by and among the Company and the investors party thereto (the “Investors”), the
Company is obligated to issue 28,398,213 contingent value rights subject to the
terms and conditions contained herein (each such right, a “Contingent Value
Right”), including [______] Contingent Value Rights to the Holder (which
initially is an Investor) pursuant to this Agreement. Capitalized terms used but
not defined in this Agreement shall have the respective meanings assigned
thereto in the Stock Purchase Agreement.

 

NOW, THEREFORE, in consideration of the mutual covenants and undertakings
contained herein and for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:

 

1)Definitions. In addition to the terms defined elsewhere in this Agreement, the
following terms have the meanings indicated:

 

“Articles” means the Articles Supplementary for the Series C Preferred Stock.

 

“Test Date” means the 121st trading day following the Election Date (as defined
in the Articles).

 

“VWAP” means the dollar volume-weighted average price for the Common Stock on
its Trading Market during the period beginning at 9:30:01 a.m., New York time
(or such other time as the Trading Market publicly announces is the official
open of trading), and ending at 4:00:00 p.m., New York time (or such other time
as the Trading Market publicly announces is the official close of trading), as
reported by Bloomberg, L.P. through its “Volume at Price” function or, if the
foregoing does not apply, the dollar volume-weighted average price of such
security in the over-the-counter market on the electronic bulletin board for
such security during the period beginning at 9:30:01 a.m., New York time (or
such other time as the Trading Market publicly announces is the official open of
trading), and ending at 4:00:00 p.m., New York City Time (or such other time as
the Trading Market publicly announces is the official close of trading), as
reported by Bloomberg, L.P., or, if no dollar volume-weighted average price is
reported for such security by Bloomberg, L.P. for such hours, the average of the
highest closing bid price and the lowest closing ask price of any of the market
makers for such security as reported in the “pink sheets” by Pink Sheets LLC
(formerly the National Quotation Bureau, Inc.). If the VWAP cannot be calculated
for the Common Stock on a particular date on any of the foregoing bases, the
VWAP of the Common Stock shall be the fair market value of the Common Stock on
such date as determined by the Company’s Board of Directors in good faith.

 

 

 

 

2)Contingent Value Rights. In the event the Company converts (regardless of
whether any such shares are actually converted pursuant to Section 13 of the
Articles Supplementary) the shares of Series C Preferred Stock into Common Stock
pursuant to the terms of the Stock Purchase Agreement and the Articles, then:

 

(a)    On the Test Date, the Company shall calculate the VWAP per Common Share
for the period covering the 90th through the 120th trading days after the
Election Date (as defined in the Articles) (the “CVR Period VWAP”).

 

(b)   Within five (5) Business Days following the Test Date, the Company shall
pay to the Holder, in immediately available funds to an account designated in
writing by such Holder, the amount, if any, with respect to each share of the
Common Stock into which shares of Series C Preferred Stock were converted
(regardless of whether any such shares are actually converted pursuant to
Section 13 of the Articles Supplementary) (“Common Shares”) held by such Holder
(and/or its assignees) on the Test Date equal to: (i) the number of Common
Shares held by such Investor at the close of business on the Test Date
multiplied by (ii) the amount (the “Settlement Amount”), which shall not be less
than zero nor greater than $2.00, equal to the difference between (A) the
Conversion Price (as defined in the Articles) (as may be adjusted from time to
time pursuant to Section 7 of the Articles) and (B) the CVR Period VWAP.

 

(c)    If the number of shares of Common Stock is adjusted upon the occurrence
of any event that would have resulted in the adjustment of the Fixed Conversion
Price (as defined in the Articles Supplementary), the number of Contingent Value
Rights shall be adjusted proportionately.

 

3)Termination. This Agreement shall terminate and no Holder shall have any
rights hereunder (to payment or otherwise) upon (i) the payment by the Company
of the Settlement Amount, if any, due to the Holder pursuant to Section 2 or (2)
the redemption of the Series C Preferred Stock in accordance with Section 5 of
the Articles Supplementary.     4)Assignment. This Agreement shall be binding
upon and inure to the benefit of the parties and their successors and permitted
assigns. The Company may not assign this Agreement or any rights or obligations
hereunder without the prior written consent of the Holder. Any Holder may assign
all or a portion of its rights under this Agreement to any Person, provided (i)
such transferee is a “qualified institutional buyer” (as defined in Rule 144A
under the Securities Act of 1933, as amended (the “Securities Act”), (ii) such
transferor agrees in writing with the transferee or assignee to assign such
rights, and a copy of such agreement is furnished to the Company after such
assignment, (iii) the Company is furnished with written notice of the name and
address of such transferee or assignee, (iv) such transferee agrees in writing
to be bound by the provisions hereof that apply to the “Holder”, (v) such
transfer shall have been made pursuant to the safe harbor for the resale of
restricted securities provided by Rule 144A under the Securities Act provided,
however, that for purposes of this clause (v): (1) this Agreement or any rights
or obligations hereunder shall be deemed not to be the same class of securities
as the Common Stock for purposes of Rule 144A(d)(3)(i) and (2) if the Company as
the “issue” does not meet the requirements of Rule 144A(d)(4), then this
Agreement or any rights or obligations hereunder may be assigned pursuant to any
other exemption from registration under the Securities Act and (vi) such
transfer shall have been made pursuant to and in accordance with the applicable
requirements of this Agreement and with all laws applicable thereto.

 

 

 

 

 

5)No Rights as Shareholders. This Agreement shall not entitle the Holder (or its
successors or permitted assigns) to any voting rights or other rights as a
stockholder of the Company.     6)Incorporation of Certain Sections By
Reference. The following sections from the Stock Purchase Agreement shall be
deemed incorporated by reference into this Agreement, with appropriate changes
as the context requires: Sections 9.6, 9.7, 9.8, 9.10, 9.11, 9.13, 9.14, 9.16
and 9.19.

 

[Signature pages follow.]

 

 

 

IN WITNESS WHEREOF, each party hereto has duly executed this Agreement or has
caused this Agreement to be duly executed by an authorized officer as of the day
and year first above written.

 

  AMERICAN REALTY CAPITAL PROPERTIES, INC.         By:       Name:     Title:

 

 

 

 

  [NAME OF HOLDER]         By:       Name:     Title:

 

 

 

 

EXHIBIT F

 

PLAN OF DISTRIBUTION

 

The selling stockholders may, from time to time, sell any or all of the shares
of our common stock beneficially owned by them and offered hereby directly or
through one or more underwriters, broker-dealers or agents. The selling
stockholders will be responsible for any underwriting discounts or agent’s
commissions. The common stock may be sold in one or more transactions at fixed
prices, at prevailing market prices at the time of the sale, at varying prices
determined at the time of sale, or at negotiated prices. The selling
stockholders may use any one or more of the following methods when selling
shares:

 

·on NASDAQ or any other national securities exchange or quotation service on
which the securities may be listed or quoted at the time of sale;

 

·in the over-the-counter market;

 

·in transactions otherwise than on these exchanges or systems or in the
over-the-counter market;

 

·through the writing of options, whether such options are listed on an options
exchange or otherwise;

 

·through ordinary brokerage transactions and transactions in which the
broker-dealer solicits purchasers;

 

·through block trades in which the broker-dealer will attempt to sell the shares
as agent but may position and resell a portion of the block as principal to
facilitate the transaction;

 

·through purchases by a broker-dealer as principal and resale by the
broker-dealer for its account;

 

·in an exchange distribution in accordance with the rules of the applicable
exchange;

 

·in privately negotiated transactions;

 

·through the settlement of short sales;

 

·a combination of any such methods of sale; and

 

·any other method permitted pursuant to applicable law.

 

 

 

 

The selling stockholders also may sell shares under Rule 144 promulgated under
the Securities Act of 1933, as amended, or the Securities Act, rather than under
this prospectus supplement.

 

In addition, the selling stockholders may enter into hedging transactions with
broker-dealers which may engage in short sales of shares in the course of
hedging the positions they assume with the selling stockholders. The selling
stockholders also may sell shares short and deliver the shares to close out such
short position. The selling stockholders also may enter into option or other
transactions with broker-dealers that require the delivery by such
broker-dealers of the shares, which shares may be resold thereafter pursuant to
this prospectus supplement.

 

Broker-dealers engaged by the selling stockholders may arrange for other
broker-dealers to participate in sales. If the selling stockholders effect such
transactions through underwriters, broker-dealers or agents, such underwriters,
broker-dealers or agents may receive compensation in the form of discounts,
concessions or commissions from the selling stockholders or commissions from
purchasers of the shares of our common stock for whom they may act as agent or
to whom they may sell as principal, or both (which discounts, concessions or
commissions as to particular underwriters, broker-dealers or agents may be less
than or in excess of those customary in the types of transactions involved).

 

The selling stockholders and any broker-dealers or agents that are involved in
selling the shares may be deemed to be “underwriters” within the meaning of the
Securities Act in connection with such sales. In such event, any compensation
received by such broker-dealers or agents and any profit on the resale of the
shares purchased by them may be deemed to be underwriting commissions or
discounts under the Securities Act. While neither we nor any selling stockholder
can presently estimate the amount of such compensation, if applicable, in
compliance with the guidelines of the Financial Industry Regulatory Authority,
Inc., or FINRA, the aggregate maximum discount, commission, agency fees or other
items constituting underwriting compensation to be received by any FINRA member
or independent broker-dealer will not exceed 8% of any offering pursuant to this
prospectus supplement or pricing supplement, as the case may be. However, it is
anticipated that the maximum commission or discount to be received in any
particular offering of securities will be less than this amount.

 

We have agreed to indemnify the selling stockholders against certain
liabilities, including liabilities arising under the Securities Act. The selling
stockholders may agree to indemnify any agent, dealer or broker-dealer that
participates in transactions involving sales of shares of common stock against
certain liabilities, including liabilities arising under the Securities Act.

 

Because selling stockholders may be deemed to be “underwriters” within the
meaning of Section 2(a)(11) of the Securities Act, the selling stockholders will
be subject to the prospectus delivery requirements of the Securities Act, which
may include delivery through the facilities of NASDAQ pursuant to Rule 153 under
the Securities Act.

 

The selling stockholders will be subject to the Securities Exchange Act of 1934,
as amended, or the Exchange Act, including Regulation M promulgated thereunder,
which may limit the timing of purchases and sales of common stock by the selling
stockholders and their affiliates.

 

-2-

 

 

Upon being notified by a selling stockholder that any material arrangement has
been entered into with a broker-dealer or underwriter for the sale of shares of
common stock through a block trade, special offering, exchange distribution or
secondary distribution or a purchase by a broker or dealer, we will file a
supplement to this prospectus supplement, if required, pursuant to Rule 424(b)
under the Securities Act, disclosing (i) the name of each such selling
stockholder and of the participating broker-dealer(s) or underwriter(s), (ii)
the number of shares of common stock involved, (iii) the price at which such
shares were or will be sold, (iv) the commissions paid or to be paid or
discounts or concessions allowed to such broker-dealer(s) or underwriter(s),
where applicable, (v) that, as applicable, such broker-dealer(s) or
underwriter(s) did not conduct any investigation to verify the information set
out or incorporated by reference in this prospectus supplement or the
accompanying prospectus and (iv) other facts material to the transaction.

 

There can be no assurance that the selling stockholders will sell any or all of
the shares of common stock registered pursuant to the registration statement, of
which this prospectus supplement or the accompanying prospectus form a part.

 

-3-