Preferred Apartment Communities, Inc.



and



Computershare Trust Company, N.A.,



Warrant Agent


 







 












 


Amended and Restated Warrant Agreement



Dated as of March 14, 2012


 


 


 


 


 


 


 



    	 



    	 	



    



 


 


TABLE OF CONTENTS


  


 





	 	 	Page
	 	 	 
	Section 1.	Certain Definitions	1
	 	 	 
	Section 2.	Appointment of Warrant Agent.	2
	 	 	 
	Section 3.	Issuance and Form of Global Warrant Certificate.	2
	 	 	 
	Section 4.	Warrant Register	3
	 	 	 
	Section 5.	Transfer and Exchange of Warrants.	3
	 	 	 
	Section 6.	Exercise of Warrants; Mechanics of Exercise.	4
	 	 	 
	Section 7.	Adjustment of Exercise Price	6
	 	 	 
	Section 8.	Certain Representations; Reservation and Availability of Shares of Common Stock or Cash.	7
	 	 	 
	Section 9.	Fractional Shares of Common Stock.	8
	 	 	 
	Section 10.	Warrant Holder Not Deemed a Stockholder	8
	 	 	 
	Section 11.	The Warrant Agent.	9
	 	 	 
	Section 12.	Purchase or Consolidation or Change of Name of Warrant Agent.	10
	 	 	 
	Section 13.	Duties of Warrant Agent.	11
	 	 	 
	Section 14.	Change of Warrant Agent.	12
	 	 	 
	Section 15.	Issuance of New Global Warrant Certificates.	13
	 	 	 
	Section 16.	Notices.	13
	 	 	 
	Section 17.	Supplements and Amendments	14
	 	 	 
	Section 18.	Successors	14
	 	 	 
	Section 19.	Benefits of this Agreement	14
	 	 	 
	Section 20.	Governing Law	14
	 	 	 
	Section 21.	Counterparts	14
	 	 	 
	Section 22.	Captions	14



 






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	Section 23.	Information	14
	 	 	 
	Section 24.	Force Majeure	14
	 	 	 
	Exhibit A -	Form of Global Warrant Certificate	 







 


 





 






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AMENDED AND RESTATED WARRANT AGREEMENT


 


AMENDED AND RESTATED WARRANT AGREEMENT
dated as of March 14, 2012 (this “Agreement”), between Preferred Apartment Communities, Inc., a Maryland corporation
(the “Company”), Computershare, Inc., a Delaware corporation (“Computershare”) and its fully
owned subsidiary Computershare Trust Company, N.A., national banking association (collectively with Computershare, the “Warrant
Agent”).


W I T N E S S
E T H


 


WHEREAS, the Company proposes to issue
up to 150,000 units (the “Units”) in connection with the Company’s public offering (the “Offering”),
with each unit comprised of (i) one share of Series A Redeemable Preferred Stock (the “Series A Preferred Stock”),
and (ii) one warrant (each, a “Warrant,” and collectively, the “Warrants”) to purchase 20
shares of common stock of the Company, par value $0.01 (the “Common Stock”). The Units will not be certificated.
The shares of Series A Preferred Stock and the Warrants are immediately separable and will be issued separately;


 


WHEREAS, the Company desires that the Warrant
Agent to act on behalf of the Company in connection with the issuance, transfer, exchange, exercise and replacement of the Warrants,
and this Agreement sets forth, among other things, the form and provisions of the Warrants and the terms and conditions on which
they may be issued, transferred, exchanged, exercised and replaced;


 


WHEREAS, the Company and the Warrant Agent
entered into that certain Warrant Agreement dated as of November 18, 2011 (the “Original Agreement”); and


 


WHEREAS, the Company and the Warrant Agent
have agreed to make certain amendments to, and desire to amend and restate, the Original Agreement;


 


NOW, THEREFORE, in consideration of the
premises and the mutual agreements herein set forth, the receipt and sufficiency of which hereby are acknowledged, the parties
hereto hereby agree that the Original Agreement hereby is amended and restated in its entirety to read as follows:


 


Section
1.       Certain Definitions.
For purposes of this Agreement, the following terms have the meanings indicated:


 


“Affiliate”
has the meaning ascribed to it in Rule 12b-2 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).


 


“AMEX”
means the NYSE Amex.


 


“Business Day”
means any day other than a Saturday, Sunday or a day on which the New York Stock Exchange is authorized or obligated by law or
executive order to close.


 






    	 



    	 	



    
 


 


“Close of Business”
on any given date means 5:00 p.m., New York City time, on such date; provided, however, that if such date is not
a Business Day, it means 5:00 p.m., New York City time, on the next succeeding Business Day.


 


“Exercise Price”,
for any particular Warrant, means the Initial Exercise Price, as adjusted from time to time pursuant to Section 7.


 


“Holder” means
a holder of beneficial interest in a Warrant.


 


“Initial Exercise Price”,
for any particular Warrant, means the greater of (i) $9.00 and (ii) 120% of the VWAP for the consecutive 20 Trading Days immediately
prior to the date of issuance of such Warrant.


 


“Person” means
an individual, corporation, association, partnership, limited liability company, joint venture, trust, unincorporated organization,
government or political subdivision thereof or governmental agency or other entity.


 


“Trading Day”
means, (i) if the Common Stock is listed or admitted to trading on the AMEX, a day on which the AMEX is open for the transaction
of business, (ii) if the Common Stock is not listed or admitted to trading on the AMEX but is listed or admitted to trading on
another national securities exchange or automated quotation system, a day on which the principal national securities exchange or
automated quotation system, as the case may be, on which the Common Stock is listed or admitted to trading is open for the transaction
of business, or (iii) if the Common Stock is not listed or admitted to trading on any national securities exchange or automated
quotation system, any day other than a Saturday, a Sunday or a day on which banking institutions in the State of New York are authorized
or obligated by law or executive order to close.


 


“VWAP” means,
for any Trading Day, the volume-weighted average price, calculated by dividing the aggregate value of Common Stock traded on the
AMEX during regular hours (price per share multiplied by number of shares traded) by the total volume (number of shares) of Common
Stock traded on the AMEX for such Trading Day, or if such volume-weighted average price is unavailable, the market value of one
share of Common Stock on such Trading Day as determined by the Board of Directors of the Company in a commercially reasonable manner,
using a volume-weighted average price method.


 


“Warrant Shares”
means shares of Common Stock issuable upon exercise of Warrants. Initially, the number of shares of Common Stock with respect to
which a Warrant may be exercised is 20.


 


Section
2.       Appointment of Warrant
Agent. 


 


The Company hereby appoints the Warrant
Agent to act as agent for the Company in accordance with the terms and conditions hereof, and the Warrant Agent hereby accepts
such appointment. The Company may from time to time appoint such Co-Warrant Agents as it may, in its sole discretion, deems necessary
or desirable.


 


Section
3.       Issuance and Form
of Global Warrant Certificate.


 






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(a)            
The Company shall execute and the Warrant Agent shall countersign and deliver one or more global certificates (each, a “Global
Warrant Certificate”), evidencing the Warrants, and each such Global Warrant Certificate (i) shall be registered in the
name of The Depository Trust Company (the “Depository”) or of the nominee of the Depository, and (ii) shall
be delivered by the Warrant Agent to the Depository or pursuant to the Depository’s instructions or held by the Warrant Agent
as custodian for the Depository. Each Global Warrant Certificate shall evidence such number of Warrants as is set forth therein.


 


(b)           
Each Global Warrant Certificate shall be substantially in the form set forth in Exhibit A attached hereto. The Global
Warrant Certificate may bear such appropriate insertions, omissions, substitutions and other variations as are required or permitted
by this Agreement, and may have such letters, numbers or other marks of identification and such legends or endorsements placed
thereon as may be required to comply with the rules and regulations of the Depository, any law or with any rules made pursuant
thereto or with any rules of any securities exchange or as may, consistently herewith, be determined by the officers of the Company
executing such Global Warrant Certificate, as evidenced by their execution of the Global Warrant Certificate, which shall be reasonably
acceptable to the Warrant Agent.


 


(c)            
The Company shall supply the Warrant Agent with an opinion of counsel indicating that the Warrants and any shares of Common
Stock issued upon exercise thereof were issued pursuant to an exemption from the registration requirements of the Securities Act
and that the Warrants and any shares of Common Stock issued upon exercise thereof will be, when issued, validly issued, fully paid
and non-assessable.


 


 


Section
4.       Warrant Register.
The Warrants will be issued in registered form only. The Warrant Agent will keep or cause to be kept, at one of its offices in
Canton, Massachusetts, or at the office of one of its agents, books for registration and transfer of the Global Warrant Certificates
issued hereunder. The Warrant Agent will create a special account for the issuance of Global Warrant Certificates.


 


Section
5.       Transfer and Exchange
of Warrants.


 


(a)            
The registration of the transfer and exchange of Warrants or beneficial interests therein shall be effected through the
Depository in accordance with this Agreement and the procedures and requirements of the Depository. Such requirements shall include,
inter alia, a signature guarantee from an eligible guarantor institution participating in a signature guarantee program
approved by the Securities Transfer Association. The Company may instruct the Warrant Agent from time to time that certain Warrants
are subject to restrictions on transfer, in which case the Warrant Agent shall not permit the transfer of such Warrants without
the consent of the Company. A Global Warrant Certificate may only be transferred as a whole, and not in part, and only by (i) the
Depository to a nominee of the Depository, (ii) a nominee of the Depository to the Depository or another nominee of the Depository,
or (iii) the Depository or any such nominee to a successor Depository or its nominee.


 


 



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(b)           
To permit registrations of transfers and exchanges, the Company shall execute and the Warrant Agent shall countersign, by
either manual or facsimile or other electronic submission, each Global Warrant Certificate. No service charge shall be made for
any registration of transfer or exchange. Any transfer tax, assessments, or similar governmental charge payable in connection with
any registration of transfer or exchange shall be paid by the Holder of such Warrants. All Warrants issued upon any transfer or
exchange pursuant to the terms of this Agreement shall be valid obligations of the Company, entitled to the same benefits under
this Agreement as the Warrants surrendered upon such transfer or exchange.


 


(c)            
If any Global Warrant Certificate shall be mutilated, lost, stolen or destroyed, the Company shall issue, and the Warrant
Agent shall countersign and deliver, in exchange and substitution for, and upon cancellation of the mutilated Global Warrant Certificate,
or in lieu of and substitution for the Global Warrant Certificate lost, stolen or destroyed, a new Global Warrant Certificate of
like tenor and representing an equivalent number of Warrants, but only upon receipt of evidence reasonably satisfactory to the
Warrant Agent of the loss, theft or destruction of such Global Warrant Certificate and an affidavit and the posting of an indemnity
or bond satisfactory to it. Applicants for such substitute Global Warrant Certificates shall also comply with such other reasonable
regulations and pay such other reasonable charges as the Warrant Agent may prescribe and as required by Section 8-405 of the Uniform
Commercial Code as in effect in the State of New York.


 


Section
6.       Exercise of Warrants;
Mechanics of Exercise. 


 


(a)            
Subject to the terms and conditions set forth herein and set forth in each Global Warrant Certificate, each Warrant shall
be exercisable for 20 shares of Common Stock at the Exercise Price (subject to any adjustment pursuant to Section 7) commencing
one year from the date of issuance thereof (the “Initial Exercise Date”). Such Warrant shall cease to be exercisable
and shall terminate and become void, and all rights thereunder and under this Agreement shall cease, at the Close of Business on
the third anniversary of the Initial Exercise Date (the “Expiration Date”).


 


(b)           
A Holder may exercise a Warrant in whole, but not in part, by delivering, not later than 5:00 p.m. New York time, on any
Business Day to the Warrant Agent at its office: (i) the exercise notice set forth in Exhibit A to the Global Warrant Certificate
(the “Exercise Notice”) and (ii) payment, for the account of the Company, of an amount equal to the product
of (A) the Exercise Price and (B) 20. Such payment shall be made in United States dollars by certified or official bank check payable
to the order of the Company or by wire transfer of funds to an account designated by the Company for such purpose. Any Holder shall
effect compliance with the requirements in clauses (i) and (ii) above through the relevant members of the Depository in accordance
with the procedures of the Depository. If the Exercise Notice or the Exercise Price is received by the Warrant Agent after the
Close of Business, the Warrant will be deemed to be received and exercised on the next Business Day. If the Warrant is received
or deemed to be received after the Expiration Date, the exercise thereof will be null and void and any funds delivered to the Warrant
Agent will be returned to the Holder as soon as practicable. In no event will interest accrue on funds deposited with the Warrant
Agent in respect of an exercise or attempted exercise of a Warrant. 


 






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(c)            
Notwithstanding any provision herein to the contrary, if on the date of any exercise of any Warrant a registration statement
covering the Warrant Shares is not effective and an exemption from registration is not available for the resale of such Warrant
Shares, the Holder may satisfy its obligation to pay the Exercise Price through a “cashless exercise,” in which event
the Warrant Agent shall issue to the Holder, subject to confirmation by the Company, the number of Warrant Shares as follows (the
“Cashless Exercise Ratio”):


 


X = Y [(A-B)/A]


 


where:


 


X = the number of shares of
Common Stock to be issued to the holder


 


Y = the number of shares of
Common Stock with respect to which the Warrant is being exercised


 


A = the Fair Market Value of
one share of Common Stock


 


B = the Exercise Price


 


For the purpose of computation of the
Cashless Exercise Ratio, the “Fair Market Value” per share of Common Stock at any date shall be deemed to be the closing
price of the Common Stock on the Trading Day immediately preceding the date as of which the Fair Market Value is being determined.


 


(d)           
No payment or adjustment shall be made on account of any distributions or dividends on the Warrant Shares. The Company shall
calculate and transmit to the Warrant Agent, and the Warrant Agent shall have no obligation under this section to calculate, the
Cashless Exercise Ratio.


 


(e)            
If less than all the Warrants evidenced by a Global Warrant Certificate surrendered are exercised, a new Global Warrant
Certificate shall be issued for the remaining number of Warrants evidenced by the Global Warrant Certificate so surrendered, and
the Warrant Agent is hereby authorized to countersign the new Global Warrant Certificate pursuant to the provisions of Section
3 and this Section 6.


 






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(f)            
The Warrant Agent shall not effect any exercise of any Warrant, and a Holder shall not have the right to exercise a Warrant
to the extent that after giving effect to such issuance, the Holder (together with the Holder’s Affiliates, and any other
persons acting as a group together with the Holder or any of the Holder’s Affiliates), would beneficially own in excess of
the Beneficial Ownership Limitation (as defined below). For purposes of the foregoing sentence, the number of shares of Common
Stock beneficially owned by the Holder and its Affiliates shall include the Warrant Shares issuable upon exercise of the Warrant,
but shall exclude the number of shares of Common Stock which would be issuable upon exercise or conversion of the unexercised or
nonconverted portion of any other Warrants or any other securities of the Company subject to a limitation on conversion or exercise
analogous to the limitation contained herein, in each case beneficially owned by the Holder or any of its Affiliates. Except as
set forth in the preceding sentence, for purposes of this Section 6(f), beneficial ownership shall be calculated in accordance
with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder, it being acknowledged by the
Holder that the Company is not representing to the Holder that such calculation is in compliance with Section 13(d) of the Exchange
Act and the Holder is solely responsible for any schedules required to be filed in accordance therewith. To the extent that the
limitation contained in this Section 6(f) applies, the determination of whether the Warrant is exercisable (in relation
to other securities owned by the Holder together with any Affiliates) and of which portion of the Warrant is exercisable shall
be in the sole discretion of the Holder, and the Company shall have no obligation to verify or confirm the accuracy of such determination
and shall have no liability for exercises of the Warrant that are in non-compliance with the Beneficial Ownership Limitation. In
addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of
the Exchange Act and the rules and regulations promulgated thereunder. The “Beneficial Ownership Limitation”
shall be 9.8% in value of the shares of the Company’s capital stock outstanding, or 9.8% (in value or number of shares, whichever
is more restrictive) of the shares of the Common Stock outstanding, in each case immediately after giving effect to the issuance
of the Warrant Shares. The provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict
conformity with the terms of this Section 6 to correct this paragraph (or any portion hereof) which may be defective or
inconsistent with the intended Beneficial Ownership Limitation herein contained or to make changes or supplements necessary or
desirable to properly give effect to such limitation. The limitations contained in this paragraph shall apply to a successor Holder
of the Warrant.


 


(g)           
As soon as reasonably practicable after the exercise of any Warrant, the Company shall issue, or otherwise deliver, in authorized
denominations to or upon the order of the holder of such by same-day or next-day credit to the Depository for the account of such
holder or for the account of a participant in the Depository the Warrant Shares to which such holder is entitled, in each case
registered in such name and delivered to such account as directed in the Exercise Notice by such Holder or by the direct participant
in the Depository through which such holder is acting.


 


(h)           
The Company acknowledges that the bank accounts maintained by Computershare in connection with the services provided under
this Agreement will be in its name and that Computershare may receive investment earnings in connection with the investment at
Computershare for the benefit of funds held in those accounts from time to time. Neither the Company nor the Warrantholders will
receive interest on any deposits or Exercise Price.


 


Section
7.       Adjustment of Exercise
Price. The Exercise Price and the Warrant Shares are subject to adjustment from time
to time as set forth in this Section 7.


 






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(a)            
In case the Company shall, while any Warrants remain outstanding and unexpired, (i) declare a dividend or make a distribution
on its outstanding Common Stock in Common Stock, (ii) subdivide or reclassify its outstanding Common Stock into a greater number
of shares, (iii) combine or reclassify its outstanding Common Stock into a smaller number of shares, or (iv) enter into any transaction
whereby the outstanding shares of Common Stock are at any time changed into or exchanged for a different number or kind of shares
or other securities of the Company or of another entity through reorganization, merger, consolidation, liquidation or recapitalization,
then an appropriate adjustment in the number of shares of Common Stock (or other securities for which such shares of Common Stock
have previously been exchanged or converted) purchasable under the Warrants shall be made and the Exercise Price in effect at the
time of the record date for such dividend or distribution or of the effective date of such subdivision, combination, reclassification,
reorganization, merger, consolidation, liquidation or recapitalization shall be proportionately adjusted so that the holder of
this warrant exercised after such date shall be entitled to receive the aggregate number and kind of shares or other securities
which, if the Warrant had been exercised by such holder immediately prior to such date, the holder would have been entitled to
receive upon such dividend, distribution, subdivision, combination, reclassification, reorganization, merger, consolidation, liquidation
or recapitalization. For example, if the Company declares a two-for-one stock subdivision (split) and the Exercise Price hereof
immediately prior to such event was $10.00 and the number of shares of Common Stock issuable upon exercise of the Warrant was 20,
the adjusted Exercise Price immediately after such event would be $5.00 and the adjusted number of shares of Common Stock issuable
upon exercise of the Warrant would be 40. Any such adjustment shall be made successively whenever any event listed above shall
occur.


 


(b)           
No adjustment in the Exercise Price shall be required unless such adjustment would require an increase or decrease of at
least one percent (1%) in the number of shares of Common Stock purchasable upon the exercise of each Warrant; provided,
however, that any adjustments which by reason of this Section 7(b) are not required to be made shall be carried forward
and taken into account in any subsequent adjustment(s). All calculations shall be made to the nearest one hundredth (1/100) of
a share.


 


(c)            
When a specified event requiring an adjustment occurs, the Company shall promptly prepare a certificate setting forth, as
applicable: (i) the Exercise Price of each Warrant, and (ii) the number of Warrant Shares covering each Warrant, each as adjusted,
and a brief statement of the facts accounting for such adjustment. The Company shall promptly file with the Warrant Agent and with
each transfer agent for the Common Stock a copy of such certificate and instruct the Warrant Agent to mail a brief summary thereof
to each Holder.


 


Section
8.       Certain Representations;
Reservation and Availability of Shares of Common Stock or Cash.


 


(a)            
This Agreement has been duly authorized, executed and delivered by the Company and, assuming due authorization, execution
and delivery hereof by the Warrant Agent, constitutes a valid and legally binding obligation of the Company enforceable against
the Company in accordance with its terms, and the Warrants have been duly authorized, executed and issued by the Company and, assuming
due authentication thereof by the Warrant Agent pursuant hereto, constitute valid and legally binding obligations of the Company
enforceable against the Company in accordance with their terms and entitled to the benefits hereof; in each case except as enforceability
may be limited by bankruptcy, insolvency, reorganization, moratorium and other similar laws relating to or affecting creditors’
rights generally or by general equitable principles (regardless of whether such enforceability is considered in a proceeding in
equity or at law).


 






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(b)           
As of the date hereof, the authorized capital stock of the Company consists of (i) 400,066,666 shares of Common Stock, of
which (A) 5,173,399 shares of Common Stock are issued and outstanding, (B) 3,000,000 shares of Common Stock are reserved for issuance
upon exercise of the Warrants, (C) 30,000,000 shares are reserved for issuance upon redemption of the Series A Preferred Stock,
(D) 150,000 shares of Common Stock are issuable upon exercise of previously issued and outstanding warrants, and (E) 538,128 shares
of Common Stock are reserved for issuance upon exercise of an equity incentive plan, and (ii)150,000 shares of preferred stock,
$0.01 par value per share, of up to 150,000 shares of Series A Preferred Stock are issuable in connection with the Offering. As
of the date hereof, there are no other outstanding obligations, warrants, options or other rights to subscribe for or purchase
from the Company any class of capital stock of the Company.


 


(c)            
The Company covenants and agrees that it will cause to be reserved and kept available out of its authorized and unissued
shares of Common Stock or its authorized and issued shares of Common Stock held in its treasury, free from preemptive rights, the
number of shares of Common Stock that will be sufficient to permit the exercise in full of all outstanding Warrants.


 


(d)           
The Company further covenants and agrees that it will pay when due and payable any and all federal and state transfer taxes
and charges which may be payable in respect of the original issuance or delivery of the Global Warrant Certificate or the Warrant
Shares. The Company shall not, however, be required to pay any tax or governmental charge which may be payable in respect of any
transfer involved in the transfer or delivery of a Global Warrant Certificate or the issuance of Warrant Shares in a name other
than that of the Holder until any such tax or governmental charge shall have been paid (any such tax or governmental charge being
payable by the Holder at the time of surrender) or until it has been established to the Company’s reasonable satisfaction
that no such tax or governmental charge is due.


 


Section
9.            
Fractional Shares of Common Stock.


 


(a)            
The Company shall not issue fractions of Warrant Shares. Whenever any fraction of Warrant Shares would otherwise be required
to be issued or distributed, (i) a cash adjustment shall be paid in respect of such fraction in an amount equal to such fraction
multiplied by the Exercise Price, or (ii) the actual issuance or distribution made shall reflect a rounding of such fraction to
the nearest whole share (up or down), with half shares or less being rounded down and fractions in excess of half of a share being
rounded up.


 


(b)           
The Holder of a Warrant by the acceptance of the Warrant expressly waives his right to receive any fractional Warrant Share.


 


Section
10.   Warrant Holder Not Deemed a Stockholder.
No Holder of a Warrant or record holder of a Global Warrant Certificate shall be entitled to vote, receive dividends or distributions
on, or be deemed for any purpose the holder of Common Stock or any other securities of the Company which may at any time be issuable
on the exercise of the Warrants represented thereby, nor shall anything contained herein or in any Global Warrant Certificate be
construed to confer upon the Holder of a Warrant or record holder of a Global Warrant Certificate, as such, any of the rights of
a stockholder of the Company or any right to vote for the election of directors or upon any matter submitted to stockholders at
any meeting thereof, or to give or withhold consent to any corporate action, or to receive notice of meetings or other actions
affecting stockholders, or to receive dividends or distributions or subscription rights, or otherwise, until such Warrant(s) evidenced
by such Global Warrant Certificate shall have been exercised in accordance with the provisions hereof.


 






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Section
11.   The Warrant Agent.


 


(a)            
The Company agrees to pay to the Warrant Agent reasonable compensation for all services rendered by it hereunder and, from
time to time, on demand of the Warrant Agent, its reasonable expenses and counsel fees and other disbursements incurred in the
administration and execution of this Agreement and the exercise and performance of its duties hereunder, as set forth in the Fee
Schedule provided to the Company and attached hereto as Schedule 1.


 


(b)           
The Company covenants and agrees to indemnify and to hold the Warrant Agent harmless against any costs, expenses (including
reasonable fees of its legal counsel), losses or damages, which may be paid, incurred or suffered by or to which it may become
subject, arising from or out of, directly or indirectly, any claims or liability resulting from its actions as Warrant Agent pursuant
hereto; provided, that such covenant and agreement does not extend to, and the Warrant Agent shall not be indemnified with respect
to, such costs, expenses, losses and damages incurred or suffered by the Warrant Agent as a result of, or arising out of, its gross
negligence, bad faith, or willful misconduct.


 


(c)            
Promptly after the receipt by the Warrant Agent of notice of any demand or claim or the commencement of any action, suit,
proceeding or investigation, the Warrant Agent shall, if a claim in respect thereof is to be made against the Company, notify the
Company thereof in writing. The Company shall be entitled to participate as its own expense in the defense of any such claim or
proceeding, and, if it so elects at any time after receipt of such notice, it may assume the defense of any suit brought to enforce
any such claim or of any other legal action or proceeding. For the purposes of this Section 11, the term “expense
or loss” means any amount paid or payable to satisfy any claim, demand, action, suit or proceeding settled with the express
written consent of the Warrant Agent, and all reasonable costs and expenses, including, but not limited to, reasonable counsel
fees and disbursements, paid or incurred in investigating or defending against any such claim, demand, action, suit, proceeding
or investigation.


 


(d)           
The Warrant Agent shall be responsible for and shall indemnify and hold the Company harmless from and against any and all
losses, damages, costs, charges, counsel fees, payments, expenses and liability arising out of or attributable to the Warrant Agent’s
refusal or failure to comply with the terms of this Agreement, or which arise out of Warrant Agent’s negligence or willful
misconduct or which arise out of the breach of any representation or warranty of the Warrant Agent hereunder, for which the Warrant
Agent is not entitled to indemnification under this Agreement; provided, however, that Warrant Agent’s aggregate liability
during any term of this Agreement with respect to, arising from, or arising in connection with this Agreement, or from all services
provided or omitted to be provided under this Agreement, whether in contract, or in tort, or otherwise, is limited to, and shall
not exceed, the amounts paid under this Agreement by the Company to Warrant Agent as fees and charges, but not including reimbursable
expenses.


 






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(e)            
Promptly after the receipt by the Company of notice of any demand or claim or the commencement of any action, suit, proceeding
or investigation, the Company shall, if a claim in respect thereof is to be made against the Warrant Agent, notify the Warrant
Agent thereof in writing. The Warrant Agent shall be entitled to participate at its own expense in the defense of any such claim
or proceeding, and, if it so elects at any time after receipt of such notice, it may assume the defense of any suit brought to
enforce any such claim or of any other legal action or proceeding. For the purposes of this Section 11, the term “expense
or loss” means any amount paid or payable to satisfy any claim, demand, action, suit or proceeding settled with the express
written consent of the Company, and all reasonable costs and expenses, including, but not limited to, reasonable counsel fees and
disbursements, paid or incurred in investigating or defending against any such claim, demand, action, suit, proceeding or investigation.


 


(f)            
Neither party to this Agreement shall be liable to the other party for any consequential, indirect, special or incidental
damages under any provisions of this Agreement or for any consequential, indirect, penal, special or incidental damages arising
out of any act or failure to act hereunder even if that party has been advised of or has foreseen the possibility of such damages.


 


Section
12.   Purchase or Consolidation or Change of
Name of Warrant Agent. 


 


(a)            
Any corporation into which the Warrant Agent or any successor Warrant Agent may be merged or with which it may be consolidated,
or any corporation resulting from any merger or consolidation to which the Warrant Agent or any successor Warrant Agent shall be
party, or any corporation succeeding to the corporate trust business of the Warrant Agent or any successor Warrant Agent, shall
be the successor to the Warrant Agent under this Agreement without the execution or filing of any paper or any further act on the
part of any of the parties hereto, provided that such corporation would be eligible for appointment as a successor Warrant Agent
under the provisions of Section 14. In case at the time such successor Warrant Agent shall succeed to the agency created
by this Agreement any of the Global Warrant Certificates shall have been countersigned but not delivered, any such successor Warrant
Agent may adopt the countersignature of the predecessor Warrant Agent and deliver such Global Warrant Certificates so countersigned;
and in case at that time any of the Global Warrant Certificates shall not have been countersigned, any successor Warrant Agent
may countersign such Global Warrant Certificates either in the name of the predecessor Warrant Agent or in the name of the successor
Warrant Agent; and in all such cases such Global Warrant Certificates shall have the full force provided in the Global Warrant
Certificates and in this Agreement.


 






    	10



    	 	



    
 


 


(b)           
If at any time the name of the Warrant Agent shall be changed and at such time any of the Global Warrant Certificates shall
have been countersigned but not delivered, the Warrant Agent may adopt the countersignature under its prior name and deliver Global
Warrant Certificates so countersigned; and in case at that time any of the Global Warrant Certificates shall not have been countersigned,
the Warrant Agent may countersign such Global Warrant Certificates either in its prior name or in its changed name; and in all
such cases such Global Warrant Certificates shall have the full force provided in the Global Warrant Certificates and in this Agreement.


 


Section
13.   Duties of Warrant Agent.  The
Warrant Agent undertakes the duties and obligations imposed by this Agreement upon the following terms and conditions, by all
of which the Company and the Holders of the Warrants, by their acceptance thereof, shall be bound:


 


(a)            
The Warrant Agent may consult with legal counsel (who may be legal counsel for the Company), and the opinion of such counsel
shall be full and complete authorization and protection to the Warrant Agent as to any action taken or omitted by it in good faith
and in accordance with such opinion.


 


(b)           
Whenever in the performance of its duties under this Agreement the Warrant Agent shall deem it necessary or desirable that
any fact or matter be proved or established by the Company prior to taking or suffering any action hereunder, such fact or matter
(unless other evidence in respect thereof be herein specifically prescribed) may be deemed to be conclusively proved and established
by a certificate signed by the Chairman, President or any Vice President of the Company and by the Treasurer or any Assistant Treasurer
or the Secretary of the Company and delivered to the Warrant Agent; and such certificate shall be full authentication to the Warrant
Agent for any action taken or suffered in good faith by it under the provisions of this Agreement in reliance upon such certificate.


 


(c)            
The Warrant Agent shall be liable hereunder only for its own gross negligence, bad faith or willful misconduct pursuant
to Section 11.


 


(d)           
The Warrant Agent shall not be liable for or by reason of any of the statements of fact or recitals contained in this Agreement
or in the Global Warrant Certificates (except its countersignature thereof) or be required to verify the same, but all such statements
and recitals are and shall be deemed to have been made by the Company only.


 


(e)            
The Warrant Agent shall not be under any responsibility in respect of the validity of this Agreement or the execution and
delivery hereof (except the due execution hereof by the Warrant Agent) or in respect of the validity or execution of any Global
Warrant Certificate (except its countersignature thereof); nor shall it be responsible for any breach by the Company of any covenant
or condition contained in this Agreement or in any Global Warrant Certificate; nor shall it be responsible for the adjustment of
the Exercise Price or the making of any change in the number of Warrant Shares required under the provisions of Section 7
or responsible for the manner, method or amount of any such change or the ascertaining of the existence of facts that would require
any such adjustment or change (except with respect to the exercise of Warrants evidenced by a Global Warrant Certificate after
actual notice of any adjustment of the Exercise Price); nor shall it by any act hereunder be deemed to make any representation
or warranty as to the authorization or reservation of any shares of Common Stock to be issued pursuant to this Agreement or any
Global Warrant Certificate or as to whether any shares of Common Stock will, when issued, be duly authorized, validly issued, fully
paid and nonassessable.


 






    	11



    	 	



    
 


 


(f)            
The Company agrees that it will perform, execute, acknowledge and deliver or cause to be performed, executed, acknowledged
and delivered all such further and other acts, instruments and assurances as may reasonably be required by the Warrant Agent for
the carrying out or performing by the Warrant Agent of the provisions of this Agreement.


 


(g)           
The Warrant Agent is hereby authorized to accept instructions with respect to the performance of its duties hereunder from
the Chairman or the President or any Vice President or the Secretary of the Company, and to apply to such officers for advice or
instructions in connection with its duties, and it shall not be liable and shall be indemnified and held harmless for any action
taken or suffered to be taken by it in good faith in accordance with instructions of any such officer, provided Warrant Agent carries
out such instructions without gross negligence, bad faith or willful misconduct.


 


(h)           
The Warrant Agent and any stockholder, director, officer or employee of the Warrant Agent may buy, sell or deal in any of
the Warrants or other securities of the Company or become pecuniarily interested in any transaction in which the Company may be
interested, or contract with or lend money to the Company or otherwise act as fully and freely as though it were not Warrant Agent
under this Agreement. Nothing herein shall preclude the Warrant Agent from acting in any other capacity for the Company or for
any other legal entity.


 


(i)             
The Warrant Agent may execute and exercise any of the rights or powers hereby vested in it or perform any duty hereunder
either itself or by or through its attorney or agents, and the Warrant Agent shall not be answerable or accountable for any act,
default, neglect or misconduct of any such attorney or agents or for any loss to the Company resulting from any such act, default,
neglect or misconduct, provided reasonable care was exercised in the selection and continued employment thereof.


 


Section
14.   Change of Warrant Agent.
The Warrant Agent may resign and be discharged from its duties under this Agreement upon 30 days’ notice in writing mailed
to the Company and to each transfer agent of the Common Stock by registered or certified mail, and to the Holders by first-class
mail. The Company may remove the Warrant Agent or any successor Warrant Agent upon 30 days’ notice in writing, mailed to
the Warrant Agent or successor Warrant Agent, as the case may be, and to each transfer agent of the Common Stock by registered
or certified mail, and to the Depository by first-class mail. If the Warrant Agent shall resign or be removed or shall otherwise
become incapable of acting, the Company shall appoint a successor to the Warrant Agent. If the Company shall fail to make such
appointment within a period of 30 days after such removal or after it has been notified in writing of such resignation or incapacity
by the resigning or incapacitated Warrant Agent or by the Depository, then the Depository may apply to any court of competent
jurisdiction for the appointment of a new Warrant Agent. Any successor Warrant Agent appointed hereunder shall execute, acknowledge
and deliver to the Warrant Agent and to the Company an instrument accepting such appointment hereunder and thereupon such new
warrant agent without any further act or deed shall become vested with all the rights, powers, duties and responsibilities of
the Warrant Agent hereunder with like effect as if it had been named as warrant agent; but if for any reason it becomes necessary
or expedient to have the former warrant agent execute and deliver any further assurance, conveyance, act or deed, the same shall
be done at the expense of the Company and shall be legally and validly executed and delivered by the former warrant agent. Not
later than the effective date of any such appointment, the Company shall file notice thereof with the former Warrant Agent and
each transfer agent for the Common Stock, and shall forthwith mail notice thereof to the registered holders at their addresses
as they appear on the registry books. Failure to file or mail such notice, or any defect therein, shall not affect the legality
or validity of the appointment of the successor Warrant Agent.


 


Section
15.   Issuance of New Global Warrant Certificates.   Notwithstanding
any of the provisions of this Agreement or of the Warrants to the contrary, the Company may, at its option, issue new Global Warrant
Certificate(s) evidencing the Warrants in such form as may be approved by its Board of Directors to reflect any adjustment or
change in the Exercise Price per share and the number or kind or class of shares of stock or other securities or property purchasable
under Global Warrant Certificate(s) made in accordance with the provisions of this Agreement.


 


Section
16.   Notices.  All notices, demands,
approvals, consents and other communications provided for or permitted hereunder (each a “Notice”) shall be
in writing and shall be sent by (a) registered or certified first-class mail (return receipt requested), (b) courier service,
(c) personal delivery, or (d) telecopier (provided that, in the case of this clause (d), such Notice also is sent concurrently
by another means specified above) as follows:


 


(a)          If to the Company, to:


 


Preferred Apartment Communities, Inc.

3625 Cumberland Boulevard, Suite 400

Atlanta, Georgia 30339

Attention: Jeffrey Sprain, Esq.

Fax: (770) 818-4105


 


(b)         If to the Warrant Agent, to:


 


Computershare Trust Company, N.A.

250 Royall Street

Canton, Massachusetts 02021

Attention: Client Administration

Fax: (781) 575-2549


 


Any notice required to be delivered by
the Company to the registered holder of any Global Warrant Certificate may be given by the Warrant Agent on behalf of the Company.


 


Each Notice shall be deemed to have been
duly given and effective upon actual receipt (or refusal of receipt). Any party may by Notice to the other parties given in accordance
with this Section 16 designate another address or person for receipt of Notices hereunder. If the address of a party has
changed, then such party promptly shall by Notice to the other parties given in accordance with this Section 16 designate
a new address for receipt of Notices hereunder. For the avoidance of doubt, if a Notice given in accordance with this Section
16 to a party is returned to the sender as being refused or undeliverable (or having a similar status), then such Notice to
such party shall be deemed to have been duly given and effective on the date that such Notice was originally sent.






    	13



    	 	



    
 


 


Section
17.   Supplements and Amendments.
The Company and the Warrant Agent may from time to time supplement or amend this Agreement without the approval of any Holders
in order to cure any ambiguity, to correct or supplement any provision contained herein which may be defective or inconsistent
with any other provisions herein, or to make any other provisions with regard to matters or questions arising hereunder which the
Company and the Warrant Agent may deem necessary or desirable and which shall not adversely affect the interests of the Holders.


 


Section
18.   Successors.
All covenants and provisions of this Agreement by or for the benefit of the Company or the Warrant Agent shall bind and inure to
the benefit of their respective successors and assigns hereunder.


 


Section
19.   Benefits of this Agreement.
Nothing in this Agreement shall be construed to give any Person other than the Company and the Warrant Agent any legal or equitable
right, remedy or claim under this Agreement; but this Agreement shall be for the sole and exclusive benefit of the Company, the
Warrant Agent and the Holders.


 


Section
20.   Governing Law.
This Agreement and each Global Warrant Certificate issued hereunder shall be governed by, and construed in accordance with, the
laws of the State of New York without giving effect to the conflicts of law principles thereof.


 


Section
21.   Counterparts.
This Agreement may be executed (including by facsimile or other electronic transmission) with counterpart signature pages or in
any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts
shall together constitute but one and the same instrument.


 


Section
22.   Captions.
The captions of the sections of this Agreement have been inserted for convenience only and shall not control or affect the meaning
or construction of any of the provisions hereof.


 


Section
23.   Information.
The Company agrees to promptly provide the Holders the information it is required to provide to the holders of the Common Stock.


 


Section
24.   Force Majeure.
Notwithstanding anything to the contrary contained herein, Warrant Agent shall not be liable for any delays or failures in performance
resulting from acts beyond its reasonable control including, without limitation, acts of God, terrorist acts, shortage of supply,
breakdowns or malfunctions, interruptions or malfunction of computer facilities, or loss of data due to power failures or mechanical
difficulties with information storage or retrieval systems, labor difficulties, war, or civil unrest.


 


 



    	14



    	 	



    



 


 


IN WITNESS WHEREOF, the
parties hereto have caused this Agreement to be duly executed as of the day and year first above written.


 





	 	PREFERRED APARTMENT
	 	COMMUNITIES, INC.
	 	 
	 	 
	 	By:	/s/ John A. Williams
	 	 	Name: John A. Williams
	 	 	Title:   President and Chief Executive Officer
	 	 	 
	 	 	 
	 	COMPUTERSHARE TRUST COMPANY, N.A.
	 	 
	 	 
	 	By: 	/s/ Thomas Borbely
	 		Name: Thomas Borbely
	 	 	Title: Manager, Corporate Actions
	 	 	 
	 	 	 
	 	COMPUTERSHARE INC.
	 	 
	 	 
	 	By: 	/s/ Thomas Borbely
	 	 	Name: Thomas Borbely
	 	 	Title: Manager, Corporate Actions







  






    	15



    	 	



    
 


 


 


Exhibit A


 


Form of Global Warrant
Certificate


 






    	 



    	 	



    
 


 


 


Schedule 1




 


Warrant
Agent Proposal


For
Preferred Apartment Communities 


 


Project
Management and Processing Fees*


	Project Management and Setup Fee	$  12,500
	Per Warrant Exercise Processed	$         50
	Annual Maintenance Fee (waived first year)	$   1,500


*The above fees apply if the Agreement is in accordance with
the Computershare’s standard forms. This proposal is based upon information provided to date and may be subject to change.


 


Services Covered


 


		§	Designating
                                                                                                                                              an
                                                                                                                                              operational
                                                                                                                                              team
                                                                                                                                              to
                                                                                                                                              establish
                                                                                                                                              Warrant
                                                                                                                                              Agent
                                                                                                                                              procedures
                                                                                                                                              and
                                                                                                                                              duties,
                                                                                                                                              including
                                                                                                                                              document
                                                                                                                                              review,
                                                                                                                                              execution
                                                                                                                                              of
                                                                                                                                              legal
                                                                                                                                              agreement,
                                                                                                                                              operations
                                                                                                                                              management,
                                                                                                                                              and
                                                                                                                                              on-going
                                                                                                                                              updates
                                                                                                                                              and
                                                                                                                                              reporting



 


		§	Establish
                                                                                                                                              Warrant
                                                                                                                                              under
                                                                                                                                              Preferred
                                                                                                                                              Apartment
                                                                                                                                              Communities
                                                                                                                                              on
                                                                                                                                              Computershare’s
                                                                                                                                              Transfer
                                                                                                                                              Agent
                                                                                                                                              record
                                                                                                                                              keeping
                                                                                                                                              system



 


		§	Coordinate
                                                                                                                                              Warrant
                                                                                                                                              exercise
                                                                                                                                              and
                                                                                                                                              transfer
                                                                                                                                              procedures
                                                                                                                                              with
                                                                                                                                              the
                                                                                                                                              Depositary
                                                                                                                                              Trust
                                                                                                                                              Company



 


		§	Process
                                                                                                                                              Warrant
                                                                                                                                              exercise
                                                                                                                                              and
                                                                                                                                              transfer
                                                                                                                                              requests
                                                                                                                                              by
                                                                                                                                              issuing
                                                                                                                                              certificates
                                                                                                                                              or,
                                                                                                                                              if
                                                                                                                                              applicable,
                                                                                                                                              through
                                                                                                                                              the
                                                                                                                                              Direct
                                                                                                                                              Registration
                                                                                                                                              System



 


		§	Tracking
                                                                                                                                              and
                                                                                                                                              reporting
                                                                                                                                              the
                                                                                                                                              number
                                                                                                                                              of
                                                                                                                                              warrants
                                                                                                                                              issued,
                                                                                                                                              transferred,
                                                                                                                                              outstanding
                                                                                                                                              and
                                                                                                                                              exercised,
                                                                                                                                              as
                                                                                                                                              required



 


		§	Processing
                                                                                                                                              warrants
                                                                                                                                              received
                                                                                                                                              and
                                                                                                                                              converted



 


		§	Deposit
                                                                                                                                              Warrant
                                                                                                                                              conversion
                                                                                                                                              checks
                                                                                                                                              and
                                                                                                                                              incoming
                                                                                                                                              wire
                                                                                                                                              transfers
                                                                                                                                              daily
                                                                                                                                              and
                                                                                                                                              forward
                                                                                                                                              all
                                                                                                                                              participant
                                                                                                                                              funds
                                                                                                                                              to
                                                                                                                                              Preferred
                                                                                                                                              Apartment
                                                                                                                                              Communities



 


		§	Providing
                                                                                                                                              receipt
                                                                                                                                              summation
                                                                                                                                              of
                                                                                                                                              checks
                                                                                                                                              and
                                                                                                                                              wire
                                                                                                                                              transfers
                                                                                                                                              received



 


		§	Requisition
                                                                                                                                              of
                                                                                                                                              cash
                                                                                                                                              principle
                                                                                                                                              and
                                                                                                                                              cash
                                                                                                                                              in
                                                                                                                                              lieu
                                                                                                                                              of
                                                                                                                                              fractional
                                                                                                                                              shares,
                                                                                                                                              as
                                                                                                                                              required



 


		§	Calculating
                                                                                                                                              cash
                                                                                                                                              in
                                                                                                                                              lieu
                                                                                                                                              of
                                                                                                                                              fractional
                                                                                                                                              shares



 


		§	Issuing
                                                                                                                                              common
                                                                                                                                              shares
                                                                                                                                              and
                                                                                                                                              cash
                                                                                                                                              in
                                                                                                                                              lieu
                                                                                                                                              of
                                                                                                                                              fractional
                                                                                                                                              share
                                                                                                                                              checks



 


		§	Enclosing
                                                                                                                                              and
                                                                                                                                              mailing
                                                                                                                                              shares
                                                                                                                                              or
                                                                                                                                              DRS
                                                                                                                                              statements,
                                                                                                                                              checks,
                                                                                                                                              Forms
                                                                                                                                              1099-B
                                                                                                                                              and
                                                                                                                                              letters
                                                                                                                                              or
                                                                                                                                              notices
                                                                                                                                              to
                                                                                                                                              shareholders



 


		§	Issuing
                                                                                                                                              tax
                                                                                                                                              forms
                                                                                                                                              and
                                                                                                                                              filing
                                                                                                                                              tax
                                                                                                                                              information
                                                                                                                                              with
                                                                                                                                              the
                                                                                                                                              IRS,
                                                                                                                                              as
                                                                                                                                              required



 


		§	Replacing
                                                                                                                                              lost
                                                                                                                                              or
                                                                                                                                              destroyed
                                                                                                                                              checks



 


		§	Responding
                                                                                                                                              to
                                                                                                                                              shareholder
                                                                                                                                              telephone
                                                                                                                                              and
                                                                                                                                              correspondence
                                                                                                                                              inquiries



 


		§	Replace
                                                                                                                                              lost,
                                                                                                                                              stolen
                                                                                                                                              or
                                                                                                                                              destroyed
                                                                                                                                              securities
                                                                                                                                              in
                                                                                                                                              accordance
                                                                                                                                              with
                                                                                                                                              UCC
                                                                                                                                              guidelines
                                                                                                                                              and
                                                                                                                                              Computershare
                                                                                                                                              policy
                                                                                                                                              (subject
                                                                                                                                              to
                                                                                                                                              shareholder-paid
                                                                                                                                              fee
                                                                                                                                              and
                                                                                                                                              bond
                                                                                                                                              premium)



 


		§	Process
                                                                                                                                              and
                                                                                                                                              post
                                                                                                                                              address
                                                                                                                                              changes
                                                                                                                                              plus
                                                                                                                                              mail
                                                                                                                                              confirmations
                                                                                                                                              if
                                                                                                                                              required



 


		§	Obtain
                                                                                                                                              W-9
                                                                                                                                              and
                                                                                                                                              W8-BEN
                                                                                                                                              certifications







    	 



    	 	



    
 


 


		§	Comply
                                                                                                                                              with
                                                                                                                                              SEC
                                                                                                                                              mandated
                                                                                                                                              annual
                                                                                                                                              lost
                                                                                                                                              shareholder
                                                                                                                                              search



 


		§	Perform
                                                                                                                                              OFAC
                                                                                                                                              (Office
                                                                                                                                              of
                                                                                                                                              Foreign
                                                                                                                                              Asset
                                                                                                                                              Control)
                                                                                                                                              and
                                                                                                                                              Patriot
                                                                                                                                              Act
                                                                                                                                              reporting



 


		§	Produce
                                                                                                                                              daily
                                                                                                                                              transfer
                                                                                                                                              reports
                                                                                                                                              and
                                                                                                                                              post
                                                                                                                                              them
                                                                                                                                              for
                                                                                                                                              online
                                                                                                                                              viewing



 


Items Not Covered


 


		§	Services
                                                                                                                                              associated
                                                                                                                                              with
                                                                                                                                              new
                                                                                                                                              duties,
                                                                                                                                              legislation
                                                                                                                                              or
                                                                                                                                              regulatory
                                                                                                                                              fiat
                                                                                                                                              which
                                                                                                                                              become
                                                                                                                                              effective
                                                                                                                                              after
                                                                                                                                              the
                                                                                                                                              date
                                                                                                                                              of
                                                                                                                                              this
                                                                                                                                              proposal
                                                                                                                                              (these
                                                                                                                                              will
                                                                                                                                              be
                                                                                                                                              provided
                                                                                                                                              on
                                                                                                                                              an
                                                                                                                                              appraisal
                                                                                                                                              basis)



 


		§	All
                                                                                                                                              out-of-pocket
                                                                                                                                              expenses
                                                                                                                                              such
                                                                                                                                              as
                                                                                                                                              telephone
                                                                                                                                              line
                                                                                                                                              charges,
                                                                                                                                              overprinting,
                                                                                                                                              checks,
                                                                                                                                              cash
                                                                                                                                              management
                                                                                                                                              fees,
                                                                                                                                              postage,
                                                                                                                                              stationery,
                                                                                                                                              wire
                                                                                                                                              transfers,
                                                                                                                                              etc.
                                                                                                                                              (these
                                                                                                                                              will
                                                                                                                                              be
                                                                                                                                              billed
                                                                                                                                              as
                                                                                                                                              incurred)



 


		§	Overtime
                                                                                                                                              charges
                                                                                                                                              assessed
                                                                                                                                              in
                                                                                                                                              the
                                                                                                                                              event
                                                                                                                                              of
                                                                                                                                              late
                                                                                                                                              delivery
                                                                                                                                              of
                                                                                                                                              material
                                                                                                                                              for
                                                                                                                                              mailings
                                                                                                                                              unless
                                                                                                                                              the
                                                                                                                                              target
                                                                                                                                              mail
                                                                                                                                              date
                                                                                                                                              is
                                                                                                                                              rescheduled



 


		§	Overtime
                                                                                                                                              charges
                                                                                                                                              assessed
                                                                                                                                              in
                                                                                                                                              the
                                                                                                                                              event
                                                                                                                                              of
                                                                                                                                              a
                                                                                                                                              special
                                                                                                                                              request
                                                                                                                                              by
                                                                                                                                              client



 


		§	Special
                                                                                                                                              reporting
                                                                                                                                              requests
                                                                                                                                              (including
                                                                                                                                              but
                                                                                                                                              not
                                                                                                                                              limited
                                                                                                                                              to
                                                                                                                                              escheatment,
                                                                                                                                              reconciliation
                                                                                                                                              and
                                                                                                                                              audit
                                                                                                                                              reports)
                                                                                                                                              and
                                                                                                                                              requests
                                                                                                                                              to
                                                                                                                                              expedite
                                                                                                                                              processed
                                                                                                                                              items
                                                                                                                                              outside
                                                                                                                                              of
                                                                                                                                              our
                                                                                                                                              standard
                                                                                                                                              target
                                                                                                                                              of
                                                                                                                                              7-10
                                                                                                                                              day
                                                                                                                                              turn
                                                                                                                                              around
                                                                                                                                              time



 


		§	Requests
                                                                                                                                              to
                                                                                                                                              expedite
                                                                                                                                              conversion
                                                                                                                                              of
                                                                                                                                              shareholder
                                                                                                                                              records
                                                                                                                                              in
                                                                                                                                              less
                                                                                                                                              than
                                                                                                                                              3
                                                                                                                                              days
                                                                                                                                              (minimum
                                                                                                                                              $2,500)



 


		§	Subsequent
                                                                                                                                              changes
                                                                                                                                              or
                                                                                                                                              updates
                                                                                                                                              to
                                                                                                                                              the
                                                                                                                                              certified
                                                                                                                                              shareholder
                                                                                                                                              records



 


		§	Shareholder
                                                                                                                                              processing
                                                                                                                                              rush
                                                                                                                                              fee
                                                                                                                                              of
                                                                                                                                              $250
                                                                                                                                              per
                                                                                                                                              presentation



 


Assumptions


 


		§	Proposal
                                                                                                                                              based
                                                                                                                                              upon
                                                                                                                                              document
                                                                                                                                              review
                                                                                                                                              and
                                                                                                                                              information
                                                                                                                                              known
                                                                                                                                              at
                                                                                                                                              this
                                                                                                                                              time
                                                                                                                                              about
                                                                                                                                              the
                                                                                                                                              transaction



 


		§	Significant
                                                                                                                                              changes
                                                                                                                                              made
                                                                                                                                              in
                                                                                                                                              the
                                                                                                                                              terms
                                                                                                                                              or
                                                                                                                                              requirements
                                                                                                                                              of
                                                                                                                                              this
                                                                                                                                              transaction
                                                                                                                                              could
                                                                                                                                              require
                                                                                                                                              modifications
                                                                                                                                              to
                                                                                                                                              this
                                                                                                                                              Agreement



 


It
is agreed that an invoice for the Project Management and Processing Fees will be rendered and payable on the effective date of
the transaction. An invoice for any out-of pockets realized will be rendered and payable on a monthly basis.