Document:

ex10-2.htm

Exhibit 10.2

 

FORM OF SERIES [B] [C] WARRANT

LUCAS ENERGY, INC.

Warrant To Purchase Common Stock

Warrant No.:                                                                                                                                          

Number of Shares of Common Stock:_____________

Date of Issuance:  December [___], 2010 ("Issuance Date")

Lucas Energy, Inc., a company organized under the laws of Nevada (the "Company"), hereby certifies that, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, [BUYER], the registered holder hereof or its permitted assigns (the "Holder"), is entitled, subject to the terms set forth below, to purchase from the Company, at the Exercise Price (as defined below) then in effect, at any time or times on or after [SERIES B: the date which is 185 days after the Issuance Date] [SERIES C ONLY: the tenth (10th) Trading Day immediately prior to the 216th day following the Issuance Date] (the "Initial Exercisability Date"), but not after 11:59 p.m., New York time, on the Expiration Date, (as defined below), ______________ (_____________)1 fully paid nonassessable shares of Common Stock, par value $0.001 per share (the "Warrant Shares").  Except as otherwise defined herein, capitalized terms in this Warrant to Purchase Common Stock (including any Warrants to Purchase Common Stock issued in exchange, transfer or replacement hereof, the "Warrant") shall have the meanings set forth in Section 17.  This Warrant is one of the Warrants to purchase Common Stock (the "SPA Warrants") issued pursuant to Section 1 of that certain Securities Purchase Agreement, dated as of December 26, 2010 (the "Subscription Date"), by and among the Company and the investors (the "Buyers") referred to therein (the "Securities Purchase Agreement").  Capitalized terms used herein and not otherwise defined shall have the definitions ascribed to such terms in the Securities Purchase Agreement.

 

1.  EXERCISE OF WARRANT.

 

(a) Mechanics of Exercise.  Subject to the terms and conditions hereof (including, without limitation, the limitations set forth in Section 1(f)), this Warrant may be exercised by the Holder at any time or times on or after the Initial Exercisability Date, in whole or in part, by (i) delivery of a written notice, in the form attached hereto as Exhibit A (the "Exercise Notice"), of the Holder's election to exercise this Warrant and (ii) (A) payment to the Company of an amount equal to the applicable Exercise Price multiplied by the number of Warrant Shares as to which this Warrant is being exercised (the "Aggregate Exercise Price") in cash or by wire transfer of immediately available funds or (B) by notifying the Company that this Warrant is being exercised pursuant to a Cashless Exercise (as defined in Section 1(d)) pursuant to the rights set forth thereunder.  The Holder shall not be required to deliver the original Warrant in order to effect an exercise hereunder.  Execution and delivery of the Exercise Notice with respect to less than all of the Warrant Shares shall have the same effect as cancellation of the original Warrant and issuance of a new Warrant evidencing the right to purchase the remaining number of Warrant Shares.  On or before the first (1st) Trading Day following the date on which the Company has received the Exercise Notice, the Company shall transmit by facsimile an acknowledgment of confirmation of receipt of the Exercise Notice to the Holder and the Company's transfer agent (the "Transfer Agent").  On or before the third (3rd) Trading Day following the date on which the Company has received the Exercise Notice (the "Share Delivery Date") so long as the Holder delivers the Aggregate Exercise Price (or notice of a Cashless Exercise) on or prior to the second (2nd) Trading Day following the date on which the Company has received the Exercise Notice, the Company shall (X) provided that the Transfer Agent is participating in The Depository Trust Company ("DTC") Fast Automated Securities Transfer Program, upon the request of the Holder, credit such aggregate number of Warrant Shares to which the Holder is entitled pursuant to such exercise to the Holder's or its designee's balance account with DTC through its Deposit / Withdrawal At Custodian system, or (Y) if the Transfer Agent is not participating in the DTC Fast Automated Securities Transfer Program, issue and dispatch by overnight courier to the address as specified in the Exercise Notice, a certificate, registered in the Company's share register in the name of the Holder or its designee, for the number of shares of Common Stock to which the Holder is entitled pursuant to such exercise.  The Company shall be responsible for all fees and expenses of the Transfer Agent and all fees and expenses with respect to the issuance of Warrant Shares via DTC, if any.  Upon delivery of the Exercise Notice, the Holder shall be deemed for all corporate purposes to have become the holder of record of the Warrant Shares with respect to which this Warrant has been exercised, irrespective of the date such Warrant Shares are credited to the Holder's DTC account or the date of delivery of the certificates evidencing such Warrant Shares, as the case may be.  If this Warrant is submitted in connection with any exercise pursuant to this Section 1(a) and the number of Warrant Shares represented by this Warrant submitted for exercise is greater than the number of Warrant Shares being acquired upon an exercise, then the Company shall as soon as practicable and in no event later than three (3) Trading Days after any exercise and at its own expense, issue a new Warrant (in accordance with Section 7(d)) representing the right to purchase the number of Warrant Shares issuable immediately prior to such exercise under this Warrant, less the number of Warrant Shares with respect to which this Warrant is exercised.  No fractional shares of Common Stock are to be issued upon the exercise of this Warrant, but rather the number of shares of Common Stock to be issued shall be rounded up to the nearest whole number.  The Company shall pay any and all taxes which may be payable with respect to the issuance and delivery of Warrant Shares upon exercise of this Warrant.

  

  

  

(b) Exercise Price.  For purposes of this Warrant, "Exercise Price" means $[SERIES B: 2.86] [SERIES C: 2.62], subject to adjustment as provided herein.

 

(c) Company's Failure to Timely Deliver Securities.  If the Company shall fail for any reason or for no reason to issue to the Holder within five (5) Trading Days of receipt of the Exercise Notice so long as the Holder delivers the Aggregate Exercise Price (or notice of a Cashless Exercise) on or prior to the second (2nd) Trading Day following the date on which the Company has received the Exercise Notice, a certificate for the number of shares of Common Stock to which the Holder is entitled and register such shares of Common Stock on the Company's share register or to credit the Holder's balance account with DTC for such number of shares of Common Stock to which the Holder is entitled upon the Holder's exercise of this Warrant, then, in addition to all other remedies available to the Holder, the Company shall pay in cash to the Holder on each day after such fifth (5thd) Trading Day that the issuance of such shares of Common Stock is not timely effected an amount equal to 1.5% of the product of (A) the sum of the number of shares of Common Stock not issued to the Holder on a timely basis and to which the Holder is entitled and (B) the Closing Sale Price of the Common Stock on the Trading Day immediately preceding the last possible date which the Company could have issued such shares of Common Stock to the Holder without violating Section 1(a).  In addition to the foregoing, if within three (3) Trading Days after the Company's receipt of the facsimile copy of an Exercise Notice the Company shall fail to issue and deliver a certificate to the Holder and register such shares of Common Stock on the Company's share register or credit the Holder's balance account with DTC for the number of shares of Common Stock to which the Holder is entitled upon the Holder's exercise hereunder or pursuant to the Company's obligation pursuant to clause (ii) below, and if on or after such Trading Day the Holder purchases (in an open market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by the Holder of shares of Common Stock issuable upon such exercise that the Holder anticipated receiving from the Company (a "Buy-In"), then the Company shall, within three (3) Trading Days after the Holder's request and in the Holder's discretion, either (i) pay cash to the Holder in an amount equal to the Holder's total purchase price (including brokerage commissions and other reasonable out-of-pocket expenses, if any) for the shares of Common Stock so purchased (the "Buy-In Price"), at which point the Company's obligation to deliver such certificate (and to issue such shares of Common Stock) or credit such Holder's balance account with DTC shall terminate, or (ii) promptly honor its obligation to deliver to the Holder a certificate or certificates representing such shares of Common Stock or credit such Holder's balance account with DTC and pay cash to the Holder in an amount equal to the excess (if any) of the Buy-In Price over the product of (A) such number of shares of Common Stock, times (B) the Closing Bid Price on the date of exercise.  Nothing herein shall limit a Holder’s right to pursue any other remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Company’s failure to timely deliver certificates representing shares of Common Stock upon exercise of this Warrant as required pursuant to the terms hereof.

 

(d) Cashless Exercise.  Notwithstanding anything contained herein to the contrary, if the Registration Statement (as defined in the Securities Purchase Agreement) covering the issuance of the Warrant Shares that are subject to the Exercise Notice (the "Unavailable Warrant Shares") is not available for the issuance of such Unavailable Warrant Shares, the Holder may exercise this Warrant in whole or in part and, in lieu of making the cash payment otherwise contemplated to be made to the Company upon such exercise in payment of the Aggregate Exercise Price, elect instead to receive upon such exercise the "Net Number" of shares of Common Stock determined according to the following formula in the event that the arithmetic average of the Weighted Average Prices of the Common Stock for the five (5) consecutive Trading Days ending on the date immediately preceding the date of the Exercise Notice is greater than the Exercise Price (a "Cashless Exercise"):

 

  

2

  

Net Number = (A x B) - (A x C)

  D

 

For purposes of the foregoing formula:

 

	
  

	
A= the total number of shares with respect to which this Warrant is then being exercised.

 

	
  

	
B= the arithmetic average of the Weighted Average Prices of the Common Stock for the five (5) consecutive Trading Days ending on the date immediately preceding the date of the Exercise Notice.

 

	
  

	
C= the Exercise Price then in effect for the applicable Warrant Shares at the time of such exercise.

 

	
  

	
D= the Weighted Average Price of the Common Stock on the Exercise Date.

 

(e) Disputes.  In the case of a dispute as to the determination of the Exercise Price or the arithmetic calculation of the Warrant Shares, the Company shall promptly issue to the Holder the number of Warrant Shares that are not disputed and resolve such dispute in accordance with Section 13.

 

(f) Limitations on Exercises.  The Company shall not effect the exercise of this Warrant, and the Holder shall not have the right to exercise this Warrant, to the extent that after giving effect to such exercise, such Person (together with such Person's affiliates) would beneficially own in excess of 9.99% (the "Maximum Percentage") of the shares of Common Stock outstanding immediately after giving effect to such exercise.  For purposes of the foregoing sentence, the aggregate number of shares of Common Stock beneficially owned by such Person and its affiliates shall include the number of shares of Common Stock issuable upon exercise of this Warrant with respect to which the determination of such sentence is being made, but shall exclude shares of Common Stock which would be issuable upon (i) exercise of the remaining, unexercised portion of this Warrant beneficially owned by such Person and its affiliates and (ii) exercise or conversion of the unexercised or unconverted portion of any other securities of the Company beneficially owned by such Person and its affiliates (including, without limitation, any convertible notes or convertible preferred stock or warrants) subject to a limitation on conversion or exercise analogous to the limitation contained herein.  Except as set forth in the preceding sentence, for purposes of this paragraph, beneficial ownership shall be calculated in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended (the "1934 Act").  For purposes of this Warrant, in determining the number of outstanding shares of Common Stock, the Holder may rely on the number of outstanding shares of Common Stock as reflected in (1) the Company's most recent Form 10-K, Form 10-Q, Current Report on Form 8-K or other public filing with the Securities and Exchange Commission, as the case may be, (2) a more recent public announcement by the Company or (3) any other notice by the Company or the Transfer Agent setting forth the number of shares of Common Stock outstanding.  For any reason at any time, upon the written or oral request of the Holder, the Company shall within one (1) Business Day confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding.  In any case, the number of outstanding shares Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including the SPA Warrants, by the Holder and its affiliates since the date as of which such number of outstanding shares of Common Stock was reported.  By written notice to the Company, the Holder may from time to time increase or decrease the Maximum Percentage to any other percentage not in excess of 9.99% specified in such notice; provided that (i) any such increase will not be effective until the sixty-first (61st) day after such notice is delivered to the Company, and (ii) any such increase or decrease will apply only to the Holder and not to any other holder of SPA Warrants.  The provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 1(f) 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.  To the extent that the limitation contained in this Section 1(f) applies, the submission of an Exercise Notice by the Holder shall be deemed to be the Holder’s representation that this Warrant is exercisable pursuant to the terms hereof and the Company shall be entitled to rely on such deemed representation for all purposes without making any further inquiry as to whether this Section 1(f) applies.

  

3

  

(g) Insufficient Authorized Shares.  If at any time while this Warrant remains outstanding the Company does not have a sufficient number of authorized and unreserved shares of Common Stock to satisfy its obligation to reserve for issuance upon exercise of this Warrant at least a number of shares of Common Stock equal to 100% of the number of shares of Common Stock (the "Required Reserve Amount") as shall from time to time be necessary to effect the exercise of all of this Warrant then outstanding (an "Authorized Share Failure"), then the Company shall immediately take all action necessary to increase the Company's authorized shares of Common Stock to an amount sufficient to allow the Company to reserve the Required Reserve Amount for this Warrant then outstanding.  Without limiting the generality of the foregoing sentence, as soon as practicable after the date of the occurrence of an Authorized Share Failure, but in no event later than ninety (90) days after the occurrence of such Authorized Share Failure, the Company shall hold a meeting of its stockholders for the approval of an increase in the number of authorized shares of Common Stock.  In connection with such meeting, the Company shall provide each stockholder with a proxy statement and shall use its best efforts to solicit its stockholders' approval of such increase in authorized shares of Common Stock and to cause its board of directors to recommend to the stockholders that they approve such proposal.

 

2.  ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES.  The Exercise Price and the number of Warrant Shares shall be adjusted from time to time as follows:

 

(a) Record Date.  If the Company takes a record of the holders of shares of Common Stock for the purpose of entitling them (A) to receive a dividend or other distribution payable in shares of Common Stock, Options or in Convertible Securities or (B) to subscribe for or purchase shares of Common Stock, Options or Convertible Securities, then such record date will be deemed to be the date of the issue or sale of the shares of Common Stock deemed to have been issued or sold upon the declaration of such dividend or the making of such other distribution or the date of the granting of such right of subscription or purchase, as the case may be.

 

(b) Voluntary Adjustment By Company.  The Company may at any time during the term of this Warrant reduce the then current Exercise Price to any amount and for any period of time deemed appropriate by the Board of Directors of the Company.

 

 

 

 

  

4

  

(c) Adjustment upon Subdivision or Combination of Shares of Common Stock.  If the Company at any time on or after the Subscription Date subdivides (by any stock split, stock dividend, recapitalization or otherwise) one or more classes of its outstanding shares of Common Stock into a greater number of shares, the Exercise Price in effect immediately prior to such subdivision will be proportionately reduced and the number of Warrant Shares will be proportionately increased.  If the Company at any time on or after the Subscription Date  combines (by combination, reverse stock split or otherwise) one or more classes of its outstanding shares of Common Stock into a smaller number of shares, the Exercise Price in effect immediately prior to such combination will be proportionately increased and the number of Warrant Shares will be proportionately decreased.  Any adjustment under this Section 2(c) shall become effective at the close of business on the date the subdivision or combination becomes effective.

 

(d) Other Events.  If any event occurs of the type contemplated by the provisions of this Section 2 but not expressly provided for by such provisions (including, without limitation, the granting of stock appreciation rights, phantom stock rights or other rights with equity features), then the Company's Board of Directors will make an appropriate adjustment in the Exercise Price and the number of Warrant Shares so as to protect the rights of the Holder; provided that no such adjustment pursuant to this Section 2(e) will increase the Exercise Price or decrease the number of Warrant Shares as otherwise determined pursuant to this Section 2.

 

3.  RIGHTS UPON DISTRIBUTION OF ASSETS.  If the Company shall declare or make any dividend or other distribution of its assets (or rights to acquire its assets) to holders of shares of Common Stock, by way of return of capital or otherwise (including, without limitation, any distribution of cash, stock or other securities, property or options by way of a dividend, spin off, reclassification, corporate rearrangement, scheme of arrangement or other similar transaction) (a "Distribution"), at any time after the issuance of this Warrant, then, in each such case:

 

(a) any Exercise Price in effect immediately prior to the close of business on the record date fixed for the determination of holders of shares of Common Stock entitled to receive the Distribution shall be reduced, effective as of the close of business on such record date, to a price determined by multiplying such Exercise Price by a fraction of which (i) the numerator shall be the Closing Bid Price of the Common Stock on the Trading Day immediately preceding such record date minus the value of the Distribution (as determined in good faith by the Company's Board of Directors) applicable to one share of Common Stock, and (ii) the denominator shall be the Closing Bid Price of the Common Stock on the Trading Day immediately preceding such record date; and

 

 

 

 

  

5

  

(b) the number of Warrant Shares shall be increased to a number of shares equal to the number of shares of Common Stock obtainable immediately prior to the close of business on the record date fixed for the determination of holders of shares of Common Stock entitled to receive the Distribution multiplied by the reciprocal of the fraction set forth in the immediately preceding paragraph (a); provided that in the event that the Distribution is of shares of Common Stock (or common shares or common stock) ("Other Common Stock") of a company whose common stock is traded on a national securities exchange or a national automated quotation system, then the Holder may elect to receive a warrant to purchase Other Common Stock in lieu of an increase in the number of Warrant Shares, the terms of which shall be identical to those of this Warrant, except that such warrant shall be exercisable into the number of shares of Other Common Stock that would have been payable to the Holder pursuant to the Distribution had the Holder exercised this Warrant immediately prior to such record date and with an aggregate exercise price equal to the product of the amount by which the exercise price of this Warrant was decreased with respect to the Distribution pursuant to the terms of the immediately preceding paragraph (a) and the number of Warrant Shares calculated in accordance with the first part of this paragraph (b).

 

4.  PURCHASE RIGHTS; FUNDAMENTAL TRANSACTIONS.

 

(a) Purchase Rights.  In addition to any adjustments pursuant to Section 2 above, if at any time the Company grants, issues or sells any Options, Convertible Securities or rights to purchase stock, warrants, securities or other property pro rata to the record holders of any class of Common Stock (the "Purchase Rights"), then the Holder will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could have acquired if the Holder had held the number of shares of Common Stock acquirable upon complete exercise of this Warrant (without regard to any limitations on the exercise of this Warrant) immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights.

 

(b) Fundamental Transactions.  The Company shall not enter into or be party to a Fundamental Transaction unless (i) the Successor Entity assumes in writing all of the obligations of the Company under this Warrant and the other Transaction Documents in accordance with the provisions of this Section (4)(b) pursuant to written agreements in form and substance satisfactory to the Required Holders and reasonably approved by the Required Holders to the extent the terms set forth in this Warrant would be amended as a result of such Fundamental Transaction in a manner that is adverse to the Holder prior to such Fundamental Transaction, including agreements to deliver to each holder of the SPA Warrants in exchange for such SPA Warrants a security of the Successor Entity evidenced by a written instrument substantially similar in form and substance to this Warrant, including, without limitation, an adjusted exercise price equal to the value for the shares of Common Stock reflected by the terms of such Fundamental Transaction, and exercisable for a corresponding number of shares of capital stock equivalent to the shares of Common Stock acquirable and receivable upon exercise of this Warrant (without regard to any limitations on the exercise of this Warrant) prior to such Fundamental Transaction, and satisfactory to the Required Holders and (ii) the Successor Entity (including its Parent Entity) is a publicly traded corporation whose common stock is quoted on or listed for trading on an Eligible Market.  Upon the occurrence of any Fundamental Transaction, the Successor Entity shall succeed to, and be substituted for (so that from and after the date of such Fundamental Transaction, the provisions of this Warrant referring to the "Company" shall refer instead to the Successor Entity), and may exercise every right and power of the Company and shall assume all of the obligations of the Company under this Warrant with the same effect as if such Successor Entity had been named as the Company herein.  Upon consummation of the Fundamental Transaction, the Successor Entity shall deliver to the Holder confirmation that there shall be issued upon exercise of this Warrant at any time after the consummation of the Fundamental Transaction, in lieu of the shares of Common Stock (or other securities, cash, assets or other property) issuable upon the exercise of the Warrant prior to such Fundamental Transaction, such shares of the publicly traded common stock or common shares (or its equivalent) of the Successor Entity (including its Parent Entity) which the Holder would have been entitled to receive upon the happening of such Fundamental Transaction had this Warrant been converted immediately prior to such Fundamental Transaction, as adjusted in accordance with the provisions of this Warrant.  In addition to and not in substitution for any other rights hereunder, prior to the consummation of any Fundamental Transaction pursuant to which holders of shares of Common Stock are entitled to receive securities or other assets with respect to or in exchange for shares of Common Stock (a "Corporate Event"), the Company shall make appropriate provision to insure that the Holder will thereafter have the right to receive upon an exercise of this Warrant at any time after the consummation of the Corporate Event but prior to the Expiration Date, in lieu of shares of Common Stock (or other securities, cash, assets or other property) purchasable upon the exercise of this Warrant prior to such Corporate Event, such shares of stock, securities, cash, assets or any other property whatsoever (including warrants or other purchase or subscription rights) which the Holder would have been entitled to receive upon the happening of such Corporate Event had this Warrant been exercised immediately prior to such Corporate Event.  Provision made pursuant to the preceding sentence shall be in a form and substance reasonably satisfactory to the Required Holders.  The provisions of this Section shall apply similarly and equally to successive Fundamental Transactions and Corporate Events and shall be applied without regard to any limitations on the exercise of this Warrant.

 

  

6

  

(c) Notwithstanding the foregoing, in the event of a Fundamental Transaction other than one in which a Successor Entity that is (i) substantially the same entity as the Company, that conducts substantially the same business operations as the Company and that owns all or substantially all of the assets owned by the Company, in each case as of the time  immediately prior to the applicable Fundamental Transaction and (ii) a publicly traded corporation whose stock is quoted or listed for trading on an Eligible Market such that the Warrant shall be exercisable for the publicly traded Common Stock of such Successor Entity,  at the request of the Holder delivered before the ninetieth (90th) day after the consummation of such Fundamental Transaction, the Company (or the Successor Entity) shall purchase this Warrant from the Holder by paying to the Holder, within five (5) Business Days after such request (or, if later, on the effective date of the Fundamental Transaction), cash in an amount equal to the Black Scholes Value of the remaining unexercised portion of this Warrant on the date of such Fundamental Transaction.

 

5.  [SERIES B: [Intentionally Omitted]][SERIES C: FORCED EXERCISE.

 

(a) If (1) (i) the arithmetic average of the Weighted Average Prices of the Common Stock for the ten (10) consecutive Trading Days ending on the Trading Day immediately preceding the Initial Exercisability Date exceeds 125% of the Exercise Price on the Issuance Date or (ii) on the 216th day following the Issuance Date, the Market Price calculated as of such date exceeds the Exercise Price on the Issuance Date (each, a "Forced Exercise Event") and (2) there is not then an Equity Conditions Failure, the Company shall have the right to require the Holder to exercise all or any portion of the unexercised portion of this Warrant, in each case as designated in a Forced Exercise Notice (as defined below), into fully paid, validly issued and nonassessable shares of Common Stock in accordance with Section 1(a) hereof at the Exercise Price as of the Forced Exercise Date (as defined below) (each, a "Forced Exercise").  The Company may exercise its right to require a Forced Exercise under this Section 5 by delivering, by not later than two (2) Trading Days following the occurrence of the applicable Forced Exercise Event, a written notice thereof by facsimile and overnight courier to all, but not less than all, of the holders of the SPA Warrants and the Transfer Agent (the "Forced Exercise Notice" and the date all of the holders received such notice by facsimile is referred to as the "Forced Exercise Notice Date").  The Forced Exercise Notice shall be irrevocable and shall be considered received by each Holder for all purposes (and the Company shall not be required to confirm receipt or transmission) if properly transmitted to the facsimile number and e-mail address for the Holder which the Company then has on record as provided by the Holder.  The Forced Exercise Notice shall (i) state (A) the Trading Day selected for the Forced Exercise, which shall be not less than twelve (12) Business Hours nor more than two (2) Trading Days following the receipt of the Forced Exercise Notice by the Holder (the "Forced Exercise Date") and (B) the aggregate number of Warrant Shares subject to Forced Exercise from the Holder (the "Forced Exercise Share Number") and from all of the holders of the SPA Warrants pursuant to this Section 5 (the "Holders' Aggregate Forced Exercise Share Number") (and analogous provisions under the other SPA Warrants); and (ii) certify that there has been no Equity Conditions Failure; provided, however, that the Company may not require a Forced Exercise under this Section 5 in excess of the Holder Pro Rata Amount of the Forced Exercise Volume Limitation.  Notwithstanding the foregoing, the Company may not deliver more than one (1) Forced Exercise Notice hereunder.  If the Equity Conditions were satisfied as of the Forced Exercise Notice Date but the Equity Conditions are no longer satisfied at any time prior to the Forced Exercise Date, the Company shall provide the Holder a subsequent notice to that effect indicating that, unless the Holder waives the Equity Conditions, the Forced Exercise Notice shall be void ab initio and of no further force or effect.  The Company shall deliver to the Holder a notice no later than 10:00 a.m., New York time, on the Forced Exercise Date which notice shall certify whether or not the Equity Conditions have been satisfied.  Notwithstanding the foregoing, nothing in this subsection shall prevent the Holder from exercising this Warrant, in whole or part, on or prior to the Forced Exercise Date.  The Company covenants and agrees that it will honor all Exercise Notices tendered from the time of delivery of the Forced Exercise Notice through the Forced Exercise Date.  Upon an Equity Conditions Failure, the Holder may revoke any Exercise Notice delivered after the Forced Exercise Notice is received by the Holder and the Company, within one (1) Business Day of such revocation, shall return the Aggregate Exercise Price applicable to any such Exercise Notice(s) to the Holder by wire transfer of immediately available funds and any SPA Warrants so exercised shall be deemed reinstated and returned to the Holders, if applicable.

 

  

7

  

(b) Pro Rata Forced Exercise Requirement.  If the Company elects a Forced Exercise of this Warrant pursuant to Section 5(a), then it must simultaneously take the same action in the same proportion with respect to all of the SPA Warrants.  If the Company elects a Forced Exercise of this Warrant pursuant to Section 5(a) (or similar provisions under the other SPA Warrants) with respect to less than all of the Warrant Shares then outstanding under this Warrant, then the Company shall require a forced exercise of a number of Warrant Shares from each of the holders of the SPA Warrants equal to each Holders' Pro Rata Amount of the total number of warrant shares subject to such Forced Exercise pursuant to all of the SPA Warrants (such fraction with respect to each holder is referred to as its "Forced Exercise Allocation Percentage," and such amount with respect to each holder is referred to as its "Pro Rata Forced Exercise Amount"); provided, however, that in the event that any holder's Pro Rata Forced Exercise Amount exceeds the outstanding number of warrant shares of such holder's Warrant, then such excess Pro Rata Forced Exercise Amount shall be allocated amongst the remaining holders of SPA Warrants in accordance with the foregoing formula.  In the event that the initial holder of any SPA Warrants shall sell or otherwise transfer any of such holder's SPA Warrants, the transferee shall be allocated a pro rata portion of such holder's Forced Exercise Allocation Percentage and the Pro Rata Forced Exercise Amount.

 

(c) Holder Exercise Period.  During the Holder Exercise Period, the Holder may not sell on any Trading Day during such period a number of shares of Common Stock that is in excess of 10% of the aggregate dollar trading volume (as reported on Bloomberg) of the Common Stock on the Principal Market on such Trading Day; provided that the restriction set forth in this Section 5(c) shall not apply from and after the time this Warrant is either (x) exercised in full or (y) exercised in full or in part pursuant to a Forced Exercise contemplated in Section 5 hereto.

 

(d) Limitations. During the sixty (60) day period ending on the 216th day following the Issuance Date, the Company shall not, and shall cause any Person or Persons associated or affiliated with the Company not to, engage in any purchases of Common Stock or securities convertible into or exchangeable or exercisable for Common Stock other than purchases of such securities from the Company not on an Eligible Market.]

 

6.  NONCIRCUMVENTION.  The Company hereby covenants and agrees that the Company will not, by amendment of its Certificate of Incorporation or Bylaws, or through any reorganization, transfer of assets, consolidation, merger, scheme of arrangement, dissolution, issue or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, and will at all times in good faith carry out all the provisions of this Warrant and take all action as may be required to protect the rights of the Holder.  Without limiting the generality of the foregoing, the Company (i) shall not increase the par value of any shares of Common Stock receivable upon the exercise of this Warrant above the Exercise Price then in effect, (ii) shall take all such actions as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable shares of Common Stock upon the exercise of this Warrant, and (iii) shall, so long as any of the SPA Warrants are outstanding, take all action necessary to reserve and keep available out of its authorized and unissued shares of Common Stock, solely for the purpose of effecting the exercise of the SPA Warrants, 100% of the number of shares of Common Stock as shall from time to time be necessary to effect the exercise of the SPA Warrants then outstanding (without regard to any limitations on exercise).

 

  

8

  

7.  WARRANT HOLDER NOT DEEMED A STOCKHOLDER.  Except as otherwise specifically provided herein, the Holder, solely in such Person's capacity as a holder of this Warrant, shall not be entitled to vote or receive dividends or be deemed the holder of share capital of the Company for any purpose, nor shall anything contained in this Warrant be construed to confer upon the Holder, solely in such Person's capacity as the Holder of this Warrant, any of the rights of a stockholder of the Company or any right to vote, give or withhold consent to any corporate action (whether any reorganization, issue of stock, reclassification of stock, consolidation, merger, conveyance or otherwise), receive notice of meetings, receive dividends or subscription rights, or otherwise, prior to the issuance to the Holder of the Warrant Shares which such Person is then entitled to receive upon the due exercise of this Warrant.  In addition, nothing contained in this Warrant shall be construed as imposing any liabilities on the Holder to purchase any securities (upon exercise of this Warrant or otherwise) or as a stockholder of the Company, whether such liabilities are asserted by the Company or by creditors of the Company, except as provided in Section 5(a) above.  Notwithstanding this Section 7, the Company shall provide the Holder with copies of the same notices and other information given to the stockholders of the Company generally, contemporaneously with the giving thereof to the stockholders.

 

8.  REISSUANCE OF WARRANTS.

 

(a) Transfer of Warrant.  If this Warrant is to be transferred, the Holder shall surrender this Warrant to the Company, whereupon the Company will forthwith issue and deliver upon the order of the Holder a new Warrant (in accordance with Section 8(d)), registered as the Holder may request, representing the right to purchase the number of Warrant Shares being transferred by the Holder and, if less than the total number of Warrant Shares then underlying this Warrant is being transferred, a new Warrant (in accordance with Section 8(d)) to the Holder representing the right to purchase the number of Warrant Shares not being transferred.

 

(b) Lost, Stolen or Mutilated Warrant.  Upon receipt by the Company of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant, and, in the case of loss, theft or destruction, of any indemnification undertaking by the Holder to the Company in customary form and, in the case of mutilation, upon surrender and cancellation of this Warrant, the Company shall execute and deliver to the Holder a new Warrant (in accordance with Section 8(d)) representing the right to purchase the Warrant Shares then underlying this Warrant.

 

(c) Exchangeable for Multiple SPA Warrants.  This Warrant is exchangeable, upon the surrender hereof by the Holder at the principal office of the Company, for a new Warrant or Warrants (in accordance with Section 8(d)) representing in the aggregate the right to purchase the number of Warrant Shares then underlying this Warrant, and each such new Warrant will represent the right to purchase such portion of such Warrant Shares as is designated by the Holder at the time of such surrender; provided, however, that no Warrants for fractional shares of Common Stock shall be given.

 

 

  

9

  

(d) Issuance of New SPA Warrants.  Whenever the Company is required to issue a new Warrant pursuant to the terms of this Warrant, such new Warrant (i) shall be of like tenor with this Warrant, (ii) shall represent, as indicated on the face of such new Warrant, the right to purchase the Warrant Shares then underlying this Warrant (or in the case of a new Warrant being issued pursuant to Section 8(a) or Section 8(c), the Warrant Shares designated by the Holder which, when added to the number of shares of Common Stock underlying the other new SPA Warrants issued in connection with such issuance, does not exceed the number of Warrant Shares then underlying this Warrant), (iii) shall have an issuance date, as indicated on the face of such new Warrant which is the same as the Issuance Date, and (iv) shall have the same rights, terms and conditions as this Warrant.

 

9.  NOTICES.  Whenever notice is required to be given under this Warrant, unless otherwise provided herein, such notice shall be given in accordance with Section 9(f) of the Securities  Purchase Agreement, except as otherwise provided herein connection with a Forced Exercise Notice.  The Company shall provide the Holder with prompt written notice of all actions taken pursuant to this Warrant, including in reasonable detail a description of such action and the reason therefor.  Without limiting the generality of the foregoing, the Company will give written notice to the Holder (i) immediately upon any adjustment of the Exercise Price, setting forth in reasonable detail, and certifying, the calculation of such adjustment and (ii) at least fifteen (15) days prior to the date on which the Company closes its books or takes a record (A) with respect to any dividend or distribution upon the shares of Common Stock, (B) with respect to any grants, issuances or sales of any Options, Convertible Securities or rights to purchase stock, warrants, securities or other property to holders of shares of Common Stock or (C) for determining rights to vote with respect to any Fundamental Transaction, dissolution or liquidation, provided in each case that such information shall be made known to the public prior to or in conjunction with such notice being provided to the Holder.

 

10.  AMENDMENT AND WAIVER.  Except as otherwise provided herein, the provisions of this Warrant may be amended and the Company may take any action herein prohibited, or omit to perform any act herein required to be performed by it, only if the Company has obtained the written consent of the Holder.

 

11.  GOVERNING LAW.  This Warrant shall be governed by and construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation and performance of this Warrant shall be governed by, the internal laws of the State of New York, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of New York or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of New York.

 

12.  CONSTRUCTION; HEADINGS.  This Warrant shall be deemed to be jointly drafted by the Company and all the Buyers and shall not be construed against any person as the drafter hereof.  The headings of this Warrant are for convenience of reference and shall not form part of, or affect the interpretation of, this Warrant.

 

13.  DISPUTE RESOLUTION.  In the case of a dispute as to the determination of the Exercise Price or the arithmetic calculation of the Warrant Shares, the Company shall submit the disputed determinations or arithmetic calculations via facsimile within two (2) Business Days of receipt of the Exercise Notice giving rise to such dispute, as the case may be, to the Holder.  If the Holder and the Company are unable to agree upon such determination or calculation of the Exercise Price or the Warrant Shares within three (3) Business Days of such disputed determination or arithmetic calculation being submitted to the Holder, then the Company shall, within two (2) Business Days submit via facsimile (a) the disputed determination of the Exercise Price to an independent, reputable investment bank selected by the Company and approved by the Holder or (b) the disputed arithmetic calculation of the Warrant Shares to the Company's independent, outside accountant.  The Company shall cause at its expense the investment bank or the accountant, as the case may be, to perform the determinations or calculations and notify the Company and the Holder of the results no later than ten Business Days from the time it receives the disputed determinations or calculations.  Such investment bank's or accountant's determination or calculation, as the case may be, shall be binding upon all parties absent demonstrable error.

 

  

10

  

14. REMEDIES, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF.  The remedies provided in this Warrant shall be cumulative and in addition to all other remedies available under this Warrant and the other Transaction Documents, at law or in equity (including a decree of specific performance and/or other injunctive relief), and nothing herein shall limit the right of the Holder to pursue actual damages for any failure by the Company to comply with the terms of this Warrant.  The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder and that the remedy at law for any such breach may be inadequate.  The Company therefore agrees that, in the event of any such breach or threatened breach, the holder of this Warrant shall be entitled, in addition to all other available remedies, to an injunction restraining any breach, without the necessity of showing economic loss and without any bond or other security being required.

 

15. TRANSFER.   This Warrant may be offered for sale, sold, transferred or assigned without the consent of the Company.

 

16. SEVERABILITY.  If any provision of this Warrant is prohibited by law or otherwise determined to be invalid or unenforceable by a court of competent jurisdiction, the provision that would otherwise be prohibited, invalid or unenforceable shall be deemed amended to apply to the broadest extent that it would be valid and enforceable, and the invalidity or unenforceability of such provision shall not affect the validity of the remaining provisions of this Warrant so long as this Warrant as so modified continues to express, without material change, the original intentions of the parties as to the subject matter hereof and the prohibited nature, invalidity or unenforceability of the provision(s) in question does not substantially impair the respective expectations or reciprocal obligations of the parties or the practical realization of the benefits that would otherwise be conferred upon the parties.  The parties will endeavor in good faith negotiations to replace the prohibited, invalid or unenforceable provision(s) with a valid provision(s), the effect of which comes as close as possible to that of the prohibited, invalid or unenforceable provision(s).

 

17. CERTAIN DEFINITIONS.  For purposes of this Warrant, the following terms shall have the following meanings:

 

(a) "Black Scholes Value" means the value of this Warrant based on the Black and Scholes Option Pricing Model obtained from the "OV" function on Bloomberg determined as of the day immediately following the public announcement of the applicable Fundamental Transaction for pricing purposes and reflecting (i) a risk-free interest rate corresponding to the U.S. Treasury rate for a period equal to the remaining term of this Warrant as of such date of request, (ii) an expected volatility equal to the greater of 100% and the 100 day volatility obtained from the HVT function on Bloomberg as of the day immediately following the public announcement of the applicable Fundamental Transaction, (iii) the underlying price per share used in such calculation shall be the sum of the price per share being offered in cash, if any, plus the value of any non -cash consideration, if any, being offered in the Fundamental Transaction and (iv) a 360 day annualization factor.

 

  

11

  

(b) "Bloomberg" means Bloomberg Financial Markets.

 

(c) "Business Day" means any day other than Saturday, Sunday or other day on which commercial banks in The City of New York are authorized or required by law to remain closed.

 

(d) [SERIES C ONLY: "Business Hour" means any hour on which the Common Stock is traded on the Principal Market, or, if the Principal Market is not the principal trading market for the Common Stock, then on the principal securities exchange or securities market on which the Common Stock is then traded.]

 

(e) "Closing Bid Price" and "Closing Sale Price" means, for any security as of any date, the last closing bid price and last closing trade price, respectively, for such security on the Principal Market, as reported by Bloomberg, or, if the Principal Market begins to operate on an extended hours basis and does not designate the closing bid price or the closing trade price, as the case may be, then the last bid price or the last trade price, respectively, of such security prior to 4:00:00 p.m., New York time, as reported by Bloomberg, or, if the Principal Market is not the principal securities exchange or trading market for such security, the last closing bid price or last trade price, respectively, of such security on the principal securities exchange or trading market where such security is listed or traded as reported by Bloomberg, or if the foregoing do not apply, the last closing bid price or last trade price, respectively, of such security in the over-the-counter market on the electronic bulletin board for such security as reported by Bloomberg, or, if no closing bid price or last trade price, respectively, is reported for such security by Bloomberg, the average of the bid prices, or the ask prices, respectively, of any market makers for such security as reported in the "pink sheets" by Pink Sheets LLC (formerly the National Quotation Bureau, Inc.).  If the Closing Bid Price or the Closing Sale Price cannot be calculated for a security on a particular date on any of the foregoing bases, the Closing Bid Price or the Closing Sale Price, as the case may be, of such security on such date shall be the fair market value as mutually determined by the Company and the Holder.  If the Company and the Holder are unable to agree upon the fair market value of such security, then such dispute shall be resolved pursuant to Section 13.  All such determinations to be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during the applicable calculation period.

 

(f) "Common Stock" means (i) the Company's shares of Common Stock, par value $0.001 per share, and (ii) any share capital into which such Common Stock shall have been changed or any share capital resulting from a reclassification of such Common Stock.

 

 

 

 

  

12

  

(g) "Convertible Securities" means any stock or securities (other than Options) directly or indirectly convertible into or exercisable or exchangeable for shares of Common Stock.

 

(h) "Eligible Market" means the Principal Market, The NASDAQ Global Market, The NASDAQ Global Select Market, The New York Stock Exchange, Inc., or The Nasdaq Capital Market.

 

(i) [SERIES C: "Equity Conditions" means:  (A) on each day during the period beginning thirty (30) Trading Days prior to the applicable date of determination and ending on and including the applicable date of determination (the "Equity Conditions Measuring Period"), all shares of Common Stock issued and issuable hereunder and pursuant to the other SPA Warrants shall be eligible for sale without restriction or limitation pursuant to an effective and then usable Registration Statement or without the need for registration under any applicable federal or state securities laws; (B) on each day during the Equity Conditions Measuring Period, the Common Stock is designated for quotation on the Principal Market or an Eligible Market and shall not have been suspended from trading from any applicable exchanges or markets nor shall proceedings for such delisting or suspension from all such exchanges or markets have been commenced, threatened or pending either (1) in writing by all relevant exchanges and markets or (2) by falling below the minimum listing maintenance requirements of all relevant exchanges and markets; (C) on each day during the Equity Conditions Measuring Period, the Company shall have delivered Common Stock upon exercise of the SPA Warrants to the holders on a timely basis as set forth in Section 1(a) hereof; (D) any applicable shares of Common Stock to be issued in connection with the event requiring determination may be issued in full without violating Section 1(f) hereof or the rules or regulations of the applicable Principal Market; provided, however, that the foregoing shall not preclude the Company from issuing such number of shares that does not cause any such violation; (E) during the Equity Conditions Measuring Period, the Company shall not have failed to timely make any payments within five (5) Business Days of when such payment is due pursuant to any Transaction Document (as defined in the Securities Purchase Agreement); (F) during the Equity Conditions Measuring Period, there shall not have occurred either (x) a Triggering Event or an event that with the passage of time or giving of notice would constitute a Triggering Event or (y) the public announcement of a pending, proposed or intended Fundamental Transaction which has not been abandoned, terminated or consummated, (G) the Company shall have no knowledge of any fact that would cause all shares of Common Stock issued and issuable upon exercise of the SPA Warrants not to be eligible for sale without restriction or limitation and without the need for registration under any applicable federal or state securities laws; and (H) on each day during the Equity Conditions Measuring Period, the Company otherwise shall be in material compliance with and shall not be in breach of any provision, covenant, representation or warranty of any Transaction Document.]

 

(j) [SERIES C: "Equity Conditions Failure" means that during the period beginning on the Initial Exercisability Date through the Forced Exercise Date, the Equity Conditions have not been satisfied (or waived in writing by the Holder).]

 

 

 

  

13

  

(k) "Expiration Date" means the date [SERIES B: sixty months after the Initial Exercisability Date] [SERIES C: the date that is the 216th day following the Issuance Date] or, if such date falls on a day other than a Business Day or on which trading does not take place on the Principal Market (a "Holiday"), the next day that is not a Holiday; provided, that the Expiration Date shall be extended to the Forced Exercise Date if there occurs a Forced Exercise].

 

(l) [SERIES C: "Forced Exercise Volume Limitation" means 50% of the aggregate dollar trading volume (as reported on Bloomberg) of the Common Stock on the Principal Market over the ten (10) consecutive Trading Day period immediately prior to the applicable Forced Exercise Notice Date.]

 

(m) "Fundamental Transaction" means that (A) the Company shall, directly or indirectly, in one or more related transactions, (i) consolidate or merge with or into (whether or not the Company is the surviving corporation) another Person, or (ii) sell, assign, transfer, convey or otherwise dispose of all or substantially all of the properties or assets of the Company to another Person, or (iii) allow another Person to make a purchase, tender or exchange offer that is accepted by the holders of more than the 50% of the outstanding shares of Common Stock (not including any shares of Common Stock held by the Person or Persons making or party to, or associated or affiliated with the Persons making or party to, such purchase, tender or exchange offer), or (iv) consummate a stock purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with another Person whereby such other Person acquires more than the 50% of the outstanding shares of Common Stock (not including any shares of Common Stock held by the other Person or other Persons making or party to, or associated or affiliated with the other Persons making or party to, such stock purchase agreement or other business combination), or (v) reorganize, recapitalize or reclassify its Common Stock or (B) any "person" or "group" (as these terms are used for purposes of Sections 13(d) and 14(d) of the 1934 Act) is or shall become the "beneficial owner" (as defined in Rule 13d-3 under the 1934 Act), directly or indirectly, of 50% of the aggregate ordinary voting power represented by issued and outstanding shares of Common Stock.

 

(n) [SERIES C: "Holder Exercise Period" means the period of ten (10) consecutive Trading Days ending on, and including, the 216th day following the Issuance Date, or, if such date falls on a Holiday, the next day that is not a Holiday].

 

(o) [SERIES C: "Holder Pro Rata Amount" means a fraction (i) the numerator of which is the aggregate number of Series C Warrants (as defined in the Securities Purchase Agreement) issued to the Holder issued on the Issuance Date and (ii) the denominator of which is the aggregate number of Series C Warrants issued on the Issuance Date.]

 

(p) [SERIES C: "Market Price" means, on any applicable date of determination, the lower of (x) the arithmetic average of the Weighted Average Prices of the Common Stock for the consecutive ten (10) Trading Days immediately preceding the applicable date of determination and (y) the Closing Bid Price of the Common Stock on the applicable date of determination.]

 

  

14

  

(q) "Options" means any rights, warrants or options to subscribe for or purchase shares of Common Stock or Convertible Securities.

 

(r) "Parent Entity" of a Person means an entity that, directly or indirectly, controls the applicable Person and whose common shares or common stock or equivalent equity security is quoted or listed on an Eligible Market, or, if there is more than one such Person or Parent Entity, the Person or Parent Entity with the largest public market capitalization as of the date of consummation of the Fundamental Transaction.

 

(s) "Person" means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization, any other entity and a government or any department or agency thereof.

 

(t) "Principal Market" means NYSE Amex Equities.

 

(u) "Required Holders" means the holders of the SPA Warrants representing at least a majority of the shares of Common Stock underlying the SPA Warrants then outstanding.

 

(v) "SPA Warrants" means the [SERIES B: Series B][SERIES C: Series C] Warrants issued pursuant to the Securities Purchase Agreement.

 

(w) "Successor Entity" means the Person (or, if so elected by the Required Holders, the Parent Entity) formed by, resulting from or surviving any Fundamental Transaction or the Person (or, if so elected by the Required Holders, the Parent Entity) with which such Fundamental Transaction shall have been entered into.

 

(x) "Trading Day" means any day on which the Common Stock is traded on the Principal Market, or, if the Principal Market is not the principal trading market for the Common Stock, then on the principal securities exchange or securities market on which the Common Stock is then traded; provided that "Trading Day" shall not include any day on which the Common Stock is scheduled to trade on such exchange or market for less than 4.5 hours or any day that the Common Stock is suspended from trading during the final hour of trading on such exchange or market (or if such exchange or market does not designate in advance the closing time of trading on such exchange or market, then during the hour ending at 4:00:00 p.m., New York time).

 

(y) [SERIES C: Triggering Event.  A "Triggering Event" shall be deemed to have occurred at such time as any of the following events:

 

(1) while the Registration Statement is required to be maintained, the effectiveness of the Registration Statement lapses for any reason (including, without limitation, the issuance of a stop order) or is unavailable to the Holder for the issuance and sale of the shares upon this Warrant, and such lapse or unavailability continues for a period of ten (10) consecutive Trading Days or for more than an aggregate of thirty (30) days in any 365-day period;

 

  

15

  

(2) the suspension from trading or failure of the Common Stock to be listed on the Principal Market or another Eligible Market for a period of five (5) consecutive Trading Days or for more than an aggregate of ten (10) Trading Days in any 365-day period;

 

(3) the entry by a court having jurisdiction in the premises of (i) a decree or order for relief in respect of the Company or any Subsidiary of a voluntary case or proceeding under any applicable Federal or State bankruptcy, insolvency, reorganization or other similar law or (ii) a decree or order adjudging the Company or any Subsidiary as bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjustment or composition of or in respect of the Company or any Subsidiary under any applicable Federal or State law or (iii) appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Company or any Subsidiary or of any substantial part of its property, or ordering the winding up or liquidation of its affairs, and the continuance of any such decree or order for relief or any such other decree or order unstayed and in effect for a period of 60 consecutive days;

 

(4) the commencement by the Company or any Subsidiary of a voluntary case or proceeding under any applicable Federal or State bankruptcy, insolvency, reorganization or other similar law or of any other case or proceeding to be adjudicated a bankrupt or insolvent, or the consent by it to the entry of a decree or order for relief in respect of the Company or any Subsidiary in an involuntary case or proceeding under any applicable Federal or State bankruptcy, insolvency, reorganization or other similar law or to the commencement of any bankruptcy or insolvency case or proceeding against it, or the filing by it of a petition or answer or consent seeking reorganization or relief under any applicable Federal or State law, or the consent by it to the filing of such petition or to the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Company or any Subsidiary or of any substantial part of its property, or the making by it of an assignment for the benefit of creditors, or the admission by it in writing of its inability to pay its debts generally as they become due, or the taking of corporate action by the Company or any Subsidiary in furtherance of any such action; or

 

(5) the Company breaches any representation, warranty, covenant or other term or condition of any Transaction Document (as defined in the Securities Purchase Agreement), except, in the case of a breach of a covenant which is curable, only if such breach remains uncured for a period of at least five (5) Business Days.]

 

(z) "Weighted Average Price" means, for any security as of any date, the dollar volume-weighted average price for such security on the Principal Market during the period beginning at 9:30:01 a.m., New York time (or such other time as the Principal Market publicly announces is the official open of trading), and ending at 4:00:00 p.m., New York time (or such other time as the Principal Market publicly announces is the official close of trading), as reported by Bloomberg through its "Volume at Price" function or, if the foregoing does not apply, the dollar volume-weighted average price of such security in the over-the-counter market on the electronic bulletin board for such security during the period beginning at 9:30:01 a.m., New York time (or such other time as the Principal Market publicly announces is the official open of trading), and ending at 4:00:00 p.m., New York time (or such other time as the Principal Market publicly announces is the official close of trading), as reported by Bloomberg, or, if no dollar volume-weighted average price is reported for such security by Bloomberg for such hours, the average of the highest closing bid price and the lowest closing ask price of any of the market makers for such security as reported in the "pink sheets" by Pink Sheets LLC (formerly the National Quotation Bureau, Inc.).  If the Weighted Average Price cannot be calculated for a security on a particular date on any of the foregoing bases, the Weighted Average Price of such security on such date shall be the fair market value as mutually determined by the Company and the Holder.  If the Company and the Holder are unable to agree upon the fair market value of such security, then such dispute shall be resolved pursuant to Section 13 with the term "Weighted Average Price" being substituted for the term "Exercise Price." All such determinations shall be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during the applicable calculation period.

 

[Signature Page Follows]

 

  

16

  

  

IN WITNESS WHEREOF, the Company has caused this Warrant to Purchase Common Stock to be duly executed as of the Issuance Date set out above.

	  	
LUCAS ENERGY, INC.

	  	  
	  	  
	  	
By:

	  	
Name:

	  	
Title:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

17

  

 EXHIBIT A

EXERCISE NOTICE

TO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS

WARRANT TO PURCHASE COMMON STOCK

LUCAS ENERGY

The undersigned holder hereby exercises the right to purchase _________________ of the Common Stock ("Warrant Shares") of Lucas Energy, Inc., a company incorporated under the laws of Nevada (the "Company"), evidenced by the attached Warrant to Purchase Common Stock (the "Warrant").  Capitalized terms used herein and not otherwise defined shall have the respective meanings set forth in the Warrant.

1.  Form of Exercise Price.  The Holder intends that payment of the Exercise Price shall be made as:

	
  

	
____________

	
a "Cash Exercise" with respect to _________________ Warrant Shares; or

	
  

	
____________

	
a "Cashless Exercise" with respect to _______________ Warrant Shares.

2.  Payment of Exercise Price.  In the event that the holder has elected a Cash Exercise with respect to some or all of the Warrant Shares to be issued pursuant hereto, the holder shall pay the Aggregate Exercise Price in the sum of $___________________ to the Company in accordance with the terms of the Warrant.

3.  Delivery of Warrant Shares.  The Company shall deliver to the holder __________ Warrant Shares in accordance with the terms of the Warrant.

Date: _______________ __, ______

 

Name of Registered Holder

By:           

Name:

Title:

  

18

  

ACKNOWLEDGMENT

The Company hereby acknowledges this Exercise Notice and hereby directs ClearTrust LLC to issue the above indicated number of shares of Common Stock in accordance with the Transfer Agent Instructions dated December [__], 2010 from the Company and acknowledged and agreed to by ClearTrust LLC.

 

	  	
LUCAS ENERGY, INC.

	  	  
	  	  
	  	
By:

	  	
Name:

	  	
Title:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

19ex_10-1.htm

REAL ESTATE PURCHASE

AND SALE AGREEMENT

by and between

CORAC, LLC, a Delaware limited liability company

As Seller

and

NTS REALTY HOLDINGS LIMITED PARTNERSHIP, a Delaware limited partnership

As Purchaser

Dated as of December 3, 2010

for

Plantation Lakes Apartments, Sanford, Florida

 

 

 

 

 

 

 

 

 

 

  

  

  

REAL ESTATE PURCHASE AND SALE AGREEMENT

Summary Statement

This Summary Statement is attached to and made a part of that certain Real Estate Purchase and Sale Agreement by and between the Seller and Purchaser referenced below.

 

	
1.

	
DATE OF AGREEMENT:

	
December 3, 2010

 

	
2.

	
SELLER:

	
CORAC, LLC

 

	
3.

	
PURCHASER:

	
NTS REALTY HOLDINGS LIMITED

PARTNERSHIP

 

	
4.

	
PROPERTY ADDRESS:

	
1000 Plantation Lakes Circle

Sanford, Florida 32771

 

	
5.

	
PURCHASE PRICE:

	
$37,200,000.00

 

	
6.

	
EARNEST MONEY:

	
$800,000.00, to be deposited as follows:

 

	
  

	
a.

	
Initial Deposit

	
$400,000.00 (due on December 7, 2010)

 

	
  

	
b.

	
Approval Deposit

	
$400,000.00 (within one (1) Business Day of the

Approval Date)

 

	
  

	
c.

	
Extension Deposit

	
$250,000.00 (on or before December 20, 2010)

 

	
7.

	
APPROVAL DATE:

	
December 17, 2010

 

	
8.

	
CLOSING DATE:

	
On or before December 27, 2010 (unless extended

as provided herein)

 

	
9.

	
TITLE COMPANY:

	
Commonwealth Land Title Insurance Company (or

another title insurance company approved by

Purchaser and Seller)

 

	
10.

	
PURCHASER’S ADDRESS:

	
NTS Development Company

10172 Linn Station Road

Louisville, Kentucky 40223

Attn: Neil A. Mitchell, Senior Vice President

Telephone: 502-426-4800 x212

Fax: 502-426-4994

E-Mail: nmitchell@ntsdevco.com

 

	
  

	
With a Copy to: 

	
Rosann D. Tafel, Esquire

NTS Development Company

 

                                                               

  

  

 

  

 

 

	
  

	
 

	

10172 Linn Station Road

Louisville, Kentucky 40223

Telephone: 502-426-4800 x153

Fax: 502-426-4994

E-Mail: rtafel@ntsdevco.com

                                                               

  

ii

  

	
11.

	
SELLER’S ADDRESS:

	
CORAC, LLC

c/o CIGNA Investment Management

900 Cottage Grove Road

Wilde Building, A4-CRI

Hartford, CT  06103

Attn:  Terri Wertman

Telephone:  860-226-8819

Fax:  860-226-8850

E-mail: terri.wertman@cigna.com

 

With a copy to:

 

CIGNA Corporation

Investment Law Department

900 Cottage Grove Road

Wilde Building, A5LGL

Hartford, CT  06103

Attn:  Alan Innes, Esq.

Telephone:  860-226-8935

Fax: 860-226-8942

E-Mail: alan.innes@cigna.com

 

  

  

 

  

REAL ESTATE PURCHASE AND SALE AGREEMENT

THIS REAL ESTATE PURCHASE AND SALE AGREEMENT (“Agreement”) is made and entered into as of December 3, 2010 (the “Date of Agreement”) by and between (i) CORAC, LLC, a Delaware limited liability company (“Seller”) and (ii) NTS REALTY HOLDINGS LIMITED PARTNERSHIP, a Delaware limited partnership (“Purchaser”).

 

RECITALS

A.           Seller is the owner of certain real property legally described in Exhibit A attached hereto (the “Land”) and all buildings, fixtures and other improvements situated on the Land (collectively, the “Improvements”), which Land and Improvements are described generally on Line 4 of the preceding Summary Statement attached to and incorporated into this Agreement (the “Summary Statement”).

 

B.           Seller desires to sell to Purchaser, and Purchaser desires to purchase from Seller, the Land and the Improvements, together with all of the other property and interests described in Section 1 below, subject to the terms and conditions contained herein.

 

AGREEMENTS

 

NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Seller and Purchaser agree as follows:

 

1.            AGREEMENT FOR PURCHASE AND SALE.

 

Seller agrees to sell, and Purchaser agrees to purchase, subject to the terms and conditions contained herein, the Land and the Improvements, together with:

 

(a)           (i) all liberties, privileges, hereditaments, easements, interests, and appurtenances, if any, owned by Seller and in any way belonging or appertaining to the Land and the Improvements and (ii) all of Seller’s right, title and interest, if any, in and to all adjoining streets, alleys, roads, passages and public ways (collectively, the “Appurtenant Rights”); and

 

(b)           all equipment and fixtures owned by Seller attached to the Improvements and all personal property owned by Seller, if any (the “Personal Property”), in each case located at and used in connection with the ownership, operation and maintenance of the Land or the Improvements including, but not limited to: (i) any trademarks, trade names, domain names, websites, internet addresses, logos and other means of property identification associated with the Land or the Improvements; and (ii) all other intangible property associated with the Land or the Improvements including, without limitation, all telephone numbers associated with on-site management and leasing and all tenant files pertaining to the leasing operation of the Seller; and

 

  

  

  

(c)           all of the interests of the landlord in, to and under all leases, tenancies and rental or occupancy agreements granting possessory rights in, on or covering the Land or Improvements, to tenants as tenants only, together with all modifications, extensions, amendments and guarantees thereof, regarding all of the tenants and occupants set forth in Exhibit B attached hereto, together with such other leases of the Improvements as may be made prior to Closing in accordance with the terms of this Agreement (collectively, the “Leases”); and

 

(d)           to the extent assignable, all of Seller’s right, title and interest in and to contracts, agreements, guarantees, warranties and indemnities listed in Exhibit C attached hereto which shall survive Closing and by which Purchaser will be bound (collectively, the “Contracts”).

 

The Land, Improvements, Appurtenant Rights, Personal Property, Leases and Contracts are collectively referred to herein as the “Property.”

 

           2.                PURCHASE PRICE.

 

The purchase price for the Property (the “Purchase Price”) shall be the amount set forth in Line 5 of the Summary Statement.  Purchaser shall pay the Purchase Price, plus or minus prorations and adjustments provided for herein, to Escrow (as such term is defined in Section 5 of this Agreement) in cash on or before 2:00 p.m. (Eastern time) on the Closing Date (as hereinafter defined).

 

           3.                EARNEST MONEY.

 

(a)           On or before December 7, 2010, Purchaser shall deposit into the Escrow (as hereinafter defined) by wire transfer of federal funds the amount set forth in Line 6(a) of the Summary Statement as an initial earnest money deposit (the “Initial Deposit”).

 

(b)           Within one (1) Business Day following the Approval Date, Purchaser shall deposit into Escrow  by wire transfer of federal funds the amount set forth in Line 6(b) of the Summary Statement as an additional earnest money deposit (the “Approval Deposit”).  Purchaser’s failure timely to deposit the Approval Deposit shall constitute a default by Purchaser hereunder and Seller shall have the remedies provided in Section 16(a) of this Agreement.

 

(c)           The Initial Deposit, Approval Deposit and, if applicable, the Extension Deposit (as defined in Section 4 hereof) (to the extent each such deposit was made by Purchaser hereunder) shall be referred to as the “Earnest Money.”  The Earnest Money shall be invested in an interest-bearing account and, except as otherwise provided herein, all interest earned on the Earnest Money shall remain the property of and be paid to Purchaser.  If the transaction contemplated by this Agreement does not close, the Earnest Money shall be handled in accordance with the terms of this Agreement.

 

           4.                CLOSING.

 

Subject to terms and conditions of this Agreement, the closing of the transaction contemplated by this Agreement (the “Closing”) shall take place on the date set forth on Line 8 of the Summary Statement (the “Closing Date”) in escrow with the Title Company.  On the 

  

2

  

Closing Date, Seller and Purchaser shall perform their obligations under Sections 10(b) and 10(c) of this Agreement, respectively, the performance of which obligations shall be concurrent.

 

Purchaser shall have a one-time right to extend the Closing Date to January 14, 2011 (the “Extended Closing Date”), upon written notice to Seller given not later than December 20, 2010, and as a condition to granting such extension, Purchaser shall deposit into Escrow by wire transfer of federal funds the amount set forth in Line 6(c) of the Summary Statement as an extension deposit (the “Extension Deposit”).

 

           5.                ESCROW.

 

This transaction shall be closed through an escrow established with the Title Company in accordance with escrow instructions in the form attached hereto as Exhibit E (the “Escrow”).  Upon the creation of the Escrow, anything herein to the contrary notwithstanding, the transfer and conveyance of the Property, the payment of funds and the delivery of the Closing Documents (as defined below) and other documents required to close the transaction contemplated by this Agreement shall be made through the Escrow.

 

6.           TITLE, SURVEY.

 

(a)               On or before December 8, 2010, Purchaser shall obtain at its own cost and expense an ALTA form title commitment (with Florida modifications) (the “Title Commitment”) for an owner’s title insurance policy issued by the title company identified in Line 9 of the Summary Statement (the “Title Company”), to be in the amount of the Purchase Price, covering title to the Property.  On or before December 13, 2010, Seller shall provide Purchaser with a survey of the Land in form and content acceptable to Purchaser and the Title Company so as to permit the Title Company to remove the survey exception from the owner’s title insurance policy (the “Survey”).  Promptly after receipt of each of the Title Commitment and the Survey, Seller and Purchaser shall provide copies thereof to each other.

 

On or before December 17, 2010 (the “Title Objection Date”), Purchaser will notify Seller in writing (the “Exception Notice”) as to those title exceptions listed in the Title Commitment or matters reflected on the Survey to which Purchaser objects, provided, however, that Purchaser may not object to the following:

 

(i)           liens for taxes and special assessments, in each case not yet due and payable or due and payable but not yet delinquent, with respect to the Land and Improvements;

 

(ii)           the Leases;

 

(iii)           Any applicable zoning regulations and ordinances, provided the same do not prohibit or impair in any material respect use of the Land and Improvements as currently operated and constructed;

 

(iv)           Any rights of utility companies to lay, maintain, construct and/or repair pipes, lines, poles, conduits, cables, boxes and related equipment upon, under and above the Land, to the extent the same do not materially impair the use of the Property as currently operated;

 

 

  

3

 

  

Any m 

     (v)           Any minor variations between tax lot lines and lines of record title; and

 

     (vi)   Any minor encroachments.

 

The foregoing matters, together with any other encumbrances, title exceptions or conditions with respect to the Land and Improvements that are not timely objected to by Purchaser in the Exception Notice or the Gap Notice, as applicable, or that Purchaser is deemed to have waived in accordance with this Agreement shall be referred to as the “Permitted Exceptions.”

 

If Purchaser fails to provide Seller the Exception Notice on or before the Title Objection Date, the title exceptions listed in the Title Commitment and any update thereof and the matters reflected on the Survey and any update thereof shall be deemed to be Permitted Exceptions and Purchaser shall be deemed to have waived its right to object to such exceptions and matters.  Seller shall have the right, but not the obligation, until the sooner of (x) the Closing Date, or (y) the date which is ten (10) days after the date Seller receives the Exception Notice (the sooner of which is hereinafter referred to as the “Title Clearance Date”), which date may extend beyond the Approval Date, to have such title exceptions other than Permitted Exceptions (collectively, the “Unpermitted Exceptions”) removed from the Title Commitment.  If Seller fails on or before the Title Clearance Date to provide written notice to Purchaser and to reasonably demonstrate to Purchaser that the Unpermitted Exceptions have been removed, then Purchaser shall, as its sole remedy, have the option (the “Title Election”) to either (i) terminate this Agreement, in which case the parties hereto shall have no further obligations hereunder (except for obligations that are expressly stated herein to survive the termination of this Agreement), and receive a return of the Earnest Money, or (ii) proceed with Closing.  If Purchaser fails to notify Seller of its Title Election by the earlier of the Closing Date or five (5) days after the Title Clearance Date, Purchaser shall be deemed to have elected to proceed with the Closing, as set forth in subclause (ii) above.  Notwithstanding the foregoing, Seller, at Seller’s sole cost and expense, shall be obligated to release and discharge of record, on or before the Closing Date, any liens or encumbrances created by Seller.  Seller may use all or any portion of the Purchase Price to satisfy its obligations under this Section.

 

Purchaser may, at or prior to Closing, notify Seller in writing (a “Gap Notice”) of any objections to Seller’s title to the Land and Improvements (a) raised by the Title Company between the effective date of the Title Commitment and the Closing, and (b) not previously disclosed by the Title Company; provided that Purchaser must notify Seller of such objection to title within three (3) days after receiving written notice thereof from the Title Company of the existence of such exception.  If Purchaser sends a Gap Notice to Seller, Purchaser and Seller shall have the same rights and obligations with respect to such notice as apply to Title Objections above.

 

(b)           Intentionally Omitted.

 

           7.                DUE DILIGENCE PERIOD.

 

(a)           During the period (the “Inspection Period”) from the Date of Agreement through the Approval Date identified in Line 7 of the Summary Statement (the “Approval Date”), 

 

  

4

  

(A) Seller shall permit Purchaser to examine, at reasonable times, the books and records in Seller’s possession or control relating to the Property, (B) Purchaser shall have the right, at reasonabletimes, to (I) inspect the Land, Improvements, Appurtenant Rights and Personal Property, (II) review the Leases and the Contracts, and (III) conduct non-invasive environmental audit or audits of the Property (with copies of the reports relating to such audits delivered to Seller when completed), and (C) Purchaser shall be given reasonable access to the Property for the purpose of making such tests, inspections and investigations.  All of the foregoing inspections, reviews, interviews, tests, investigations and studies to be conducted under this Section 10(a) by Purchaser shall be subject to the following:

 

(i)           Such studies, tests, inspections, interviews, reviews and investigations shall take place during normal business hours upon reasonable notice to Seller or its designated agents and Seller’s consent (which may be withheld in its sole discretion) shall be required prior to the performance of any drilling, boring or other invasive testing or procedures.  Seller shall be entitled to be present during any investigation, interview, inspection, testing or other visit to the Land and Improvements;

 

(ii)           In the event the Closing does not occur, Purchaser shall promptly return to Seller any documents obtained from Seller or Seller’s agents (and return or destroy any copies thereof);

 

(iii)           Purchaser shall not suffer or permit any lien, claim or charge of any kind whatsoever to attach to the Property or any part thereof; and

 

(iv)           Such tests, investigations and studies shall be at Purchaser’s sole cost and expense and shall not unreasonably interfere with the operation of the Property and shall be subject to the rights of tenants.  In the event of any damage to the Property caused by Purchaser, its agents, engineers, employees, contractors or surveyors (including without limitation pavement, landscaping and surface damage), Purchaser shall restore or pay the cost incurred by Seller to restore the Property to the condition existing prior to the performance of such tests, investigations or studies; such obligation shall survive the termination of this Agreement.

 

Purchaser shall defend, indemnify and hold Seller harmless from any and all liability, cost and expense (including without limitation reasonable attorneys’ fees, court costs and costs of appeal) suffered or incurred by Seller for death or injury to persons or property caused by or arising out of Purchaser’s reviews, interviews, investigations, tests, studies and inspections of the Property; such obligation shall survive the Closing or the earlier termination of this Agreement.  Prior to commencing any such tests, studies and investigations, Purchaser shall furnish to Seller a certificate of insurance evidencing comprehensive general public liability and property damage insurance insuring the person, firm or entity performing such tests, studies and investigations listing Seller as loss payee and Seller and Purchaser as additional insureds thereunder in the amount of Three Million Dollars ($3,000,000.00) combined single limit for personal injury and property damage per occurrence and from an insurer reasonably satisfactory to Seller.  If, in the sole discretion and at the sole election of Purchaser, any of said tests, inspections or investigations are unsatisfactory to Purchaser, in any manner or for any reason in Purchaser’s sole discretion, Purchaser may terminate this Agreement as provided below.  If Purchaser notifies Seller and Escrow Agent, in writing, on or before 5:00 p.m. (Eastern time) on

  

5

  

the Approval Date of Purchaser’s election to terminate this Agreement, this Agreement shall terminate, the Initial Deposit and all interest earned thereon shall be delivered to Purchaser and the parties hereto shall have no further obligations hereunder (except for obligations that are expressly stated herein to survive termination of this Agreement).  If Purchaser so elects to terminate this Agreement, Purchaser shall promptly upon Seller’s request following such termination deliver to Seller copies of all documents, studies and reports obtained by Purchaser in connection with its due diligence (which obligation shall survive the termination of this Agreement),  If Purchaser fails to notify Seller, in writing, on or before 5:00 p.m. (Eastern time) on the Approval Date, of Purchaser’s election to terminate this Agreement, Purchaser’s right to terminate this Agreement under this Section 7(a) shall expire.  Notwithstanding the foregoing, Purchaser’s right to terminate this Agreement pursuant to the Title Election remains in effect subsequent to the Approval Date and may be exercised by Purchaser in accordance with Section 6 hereof.

 

(b)           The obligation of Purchaser to close the transaction contemplated by this Agreement is further subject to the condition that:  (i) the representations and warranties of Seller contained in this Agreement are true and correct, in all material respects, at the Date of Agreement and as of the Closing Date, and (ii) all of the obligations of Seller to be performed hereunder and per the Escrow on or before the Closing Date have been substantially completed in a timely manner.  Purchaser shall give written notice to Seller within five (5) Business Days after Purchaser’s receipt of any notice disclosing that any Seller representation and warranty is no longer true and correct; provided, however, that Purchaser’s failure to give such written notice shall in no instance constitute a default by Purchaser under this Agreement but shall instead only serve to bar Purchaser from raising such matter as a failure of a condition precedent to Purchaser’s obligation to close the transaction.  Seller shall give written notice to Purchaser within five (5) Business Days if Seller gains actual knowledge that any Seller representation and warranty is not true and correct in any material respect.  Purchaser’s election to proceed with the Closing shall result in Purchaser’s waiver of any remedy resulting from the incorrectness in such representation or warranty or from the incorrectness in any other representation or warranty of Seller of which Purchaser shall have actual knowledge at or prior to Closing.  The foregoing waiver shall survive the Closing.

 

(c)           All information, data and documents relating to the Property not otherwise available in the public domain (including without limitation those furnished pursuant to the terms and provisions of Section 10(a)) obtained by Purchaser from Seller or any other party or discovered by Purchaser during the term of this Agreement shall be maintained by Purchaser in strict confidence and shall not be revealed to any other party except Purchaser’s employees, contractors, investors, attorneys and financial advisors but then only if Purchaser has notified the party to whom such information is revealed to maintain such information in strict confidence and not reveal any such information to any other party.  Nothing contained within this Section 7(c) shall preclude Purchaser from providing this Property information to lenders in conjunction with loan financing for the purchase of the Property applied for by Purchaser, provided that Purchaser direct such lenders to the covenants in this Section 7(c) and request that they abide thereby, or pursuant to an order, law, rule or regulation of any administration, governmental agency or authority.  The provisions of this Section 7(c) shall survive the termination of this Agreement.

 

(d)           Prior to the Approval Date, Purchaser shall notify Seller which Contracts the Seller is to terminate as of the Closing Date, provided that such Contract(s) is/are cancelable 

 

  

6

  

upon not less than thirty (30) days prior written notice.  Seller shall terminate the existing property management agreement (the “Property Management Agreement”) in effect at the Property on or prior to the Closing Date.

           8.                REPRESENTATIONS AND WARRANTIES.

 

(a)           References to “Seller’s actual knowledge” shall mean the actual knowledge of Terri Wertman, an Analyst for CIGNA Investments, Inc., and the person with primary responsibility for the management of the Property on behalf of Seller, without investigation or inquiry of any person or entity other than verbal inquiry of Seller’s property manager for the Property.  Seller shall have no duty to conduct any further inquiry in making any such representations and warranties, and no knowledge of any other person shall be imputed to Seller.  Purchaser acknowledges that Seller obtained its interest in the Property through foreclosure on or about February 16, 2010 (such period between February 16, 2010 and the Date of Agreement, or Closing Date, as applicable, being the “Seller’s Period of Ownership”), and Seller therefore has limited records and knowledge regarding the Property.  Seller represents and warrants to Purchaser, as of the Date of Agreement and again on the Closing Date, as follows:

 

(i)           Except as shown on (x) the rent roll attached hereto as Exhibit B (as to the representation made on the Date of Agreement), (y) the rent roll delivered on the Closing Date pursuant to Section 10(b) below (as to the representation made as of the Closing Date) (as applicable, the “Rent Roll”) or (z) the Title Commitment or the Contracts, to Seller’s actual knowledge, there are no persons in possession or occupancy of the Property, or any part thereof, nor are there any persons who have possessory rights with respect to the Property or any part thereof;

 

(ii)          No person, corporation or other entity has any right or option to acquire all or any portion of the Property, other than Purchaser.

 

(iii)         None of the Leases and none of the rents or other amounts payable thereunder have been assigned, pledged or encumbered by Seller.  With respect to each Lease, to Seller’s actual knowledge:  (A) other than the Leases and Contracts, there are no other promises, amendments, agreements or commitments giving any party any right to possession or occupancy of the Property; (B) except as shown on the Rent Roll, there are no uncured monetary defaults by the tenant under any Lease and no offset or abatement has been asserted in writing by any tenant under any Lease and Seller is not aware of any offset or abatement that could be asserted by any tenant under any Lease; and (C) except as shown on the Rent Roll, Seller is holding no security or other deposits with respect to the Leases and no rent has been prepaid for more than one month before its due date.

 

(iv)          During Seller’s Period of Ownership, Seller has received no written notice from any governmental authority of any violation of applicable laws, ordinances or regulations related to the Property or the occupancy thereof which have not been heretofore corrected;

 

(v)           Neither the execution or delivery of this Agreement, the consummation of the transaction contemplated hereby, nor the fulfillment of or compliance with the terms and 

 

  

7

  

conditions hereof conflict with or result in a material breach of any of the terms, conditions or provisions of any agreement or instrument to which Seller is a party or, to Seller’s actual knowledge, by which Seller is bound;

 

(vi)          Except as disclosed in Section 18 hereof, Seller has not entered into any brokerage or leasing commission agreements with respect to the Property, where a commission or fee has been earned but not fully paid;

 

(vii)         To Seller’s actual knowledge, there are no contracts or agreements affecting the operation of the Land or the Improvements which will survive Closing and be binding upon Purchaser except as disclosed in Exhibit C;

 

(viii)        Seller has received no written notice from any party of any breach, default or failure to perform by Seller under any Contracts or Leases that has not heretofore been cured; and, except as set forth in Exhibit D hereof, Seller has delivered no written notice to any other party to any such Contracts or Leases that such party is in default thereunder;

 

(ix)          To Seller’s actual knowledge, (i) there are no claims, causes of action, lawsuits or legal proceedings pending or threatened against Seller regarding the ownership, use or possession of the Property, including without limitation condemnation or similar proceedings, except as would be covered by insurance and disclosed on Exhibit J attached hereto and made a part hereof, (ii) there is no pending litigation or to Seller's knowledge, threatened litigation, which could materially adversely affect title to the Property or any part thereof, the continued operation of the Property as a multi-family housing/apartment complex, or the ability of Seller to perform any of its obligations hereunder and (iii) there are no outstanding orders, rulings, judgments or decrees issued by any court of competent jurisdiction, by which Seller or the Property are bound or subject;

 

(x)           To Seller’s actual knowledge, Seller has not received written notice from any governmental entity of any violation by Seller of any law, rule or regulation affecting the Property or its use including any environmental law or regulation, nor, except as disclosed to Purchaser in the Due Diligence Items, any written notice that the Property is in violation of any applicable building or zoning code or ordinance.

 

(xi)          Seller is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization.  Seller has all necessary power and authority to enter into this Agreement and to consummate all of the transactions contemplated herein, the individuals executing this Agreement on behalf of Seller are duly authorized to execute, deliver and perform this Agreement on behalf of Seller and to bind Seller, and this Agreement and all documents to be executed by Seller and delivered to Purchaser hereunder (A) are and will be the legal, valid and binding obligations of Seller, enforceable in accordance with their terms, and (B) do not or will not contravene any provision of Seller’s organizational documents or any existing laws and regulations applicable to Seller or the Property;

 

(xii)         Exhibit C includes, to Seller’s actual knowledge, a true, correct and complete list of all of the Contracts, and to Seller’s actual knowledge Seller has provided to Purchaser true and correct copies of all Contracts;

 

 

  

8

  

 

 

(xiii)       Seller has not (i) made a general assignment for the benefit of creditors; (ii) filed any voluntary petition in bankruptcy or suffered the filing of an involuntary petition by Seller’s creditors; (iii) suffered the appointment of a receiver to take possession of all or substantially all of Seller’s assets: or (v) admitted in writing its inability to pay its debts as they come due;

 

(xiv)        Seller is not a “foreign person” within the meaning of Section 1445 of the Internal Revenue Code; and

 

(xv)         Seller has obtained or will before the Closing Date obtain all necessary consents and approvals of governmental agencies, lenders or third parties required in connection with the Closing, if any.

 

(b)           Purchaser represents and warrants to Seller, now and again on the Closing Date, that:

 

(i)           (A) Purchaser has all necessary power and authority to enter into this Agreement and to consummate all the transactions contemplated herein, (B) the individuals executing this Agreement on behalf of Purchaser are duly authorized to execute, deliver and perform this Agreement on behalf of Purchaser and to bind Purchaser and (C) this Agreement and all documents to be executed by Purchaser and delivered to Seller hereunder (1) are and will be the legal, valid and binding obligations of Purchaser, enforceable in accordance with their terms, (2) do not or will not contravene any provision of Purchaser’s organizational documents or any existing laws and regulations applicable to Purchaser and (3) will not conflict with or result in a violation of any agreement, instrument, order, writ, judgment or decree to which Purchaser is a party or is subject; and

 

(ii)           Purchaser is not acquiring the Property with the assets of an employee benefit plan as defined in Section 3(3) of ERISA and the transaction which is the subject of this Agreement is not a prohibited transaction under Section 406 of ERISA.

 

(c)                        All of the representations and warranties of Seller and Purchaser contained in this Agreement or in any of the Closing Documents are material, none shall merge into the deed herein provided for and all shall survive the Closing Date for a period of nine (9) months (the “Survival Period”).  All rights of Purchaser hereunder or under any of the Closing Documents, with respect to any surviving representation, warranty, covenant or indemnity shall be deemed waived if Purchaser does not, by written notice to Seller, advise Seller of any alleged breach of representation, warranty or covenant, or any alleged indemnification obligation, prior to the expiration of the Survival Period, provided, however, that no claim for breach of a representation or warranty of Seller shall be actionable or payable if the breach in question results from or is based on a condition, state of facts or other matter which was known to Purchaser prior to Closing, and unless the valid claims for all such breaches collectively aggregate more than Twenty-Five Thousand Dollars ($25,000.00), in which event, the full amount of such claims shall be actionable, subject to the cap on Seller’s Maximum Liability as hereinafter set forth.  Subject to the limitations set forth in the immediately preceding sentence, all remedies shall be those set forth in Section 16 below, and notwithstanding anything herein to the contrary, Seller’s liability under any representation, warranty, covenant or indemnity made hereunder or in any of the Closing

 

  

9

  

Documents shall in no event exceed the aggregate Seller’s Maximum Liability (as hereinafter defined).  The provisions of this Section 8(c) shall survive the Closing.

 

           9.                SELLER’S COVENANTS.

 

From and after the Date of Agreement through the Closing Date:

 

(a)           Seller shall operate the Property in a manner consistent with current practice, and perform its material obligations under the Leases and Contracts.

 

(b)           Seller shall keep in existence all fire and extended coverage insurance policies, and all public liability insurance policies maintained on Seller's behalf that are in existence as of the Date of Agreement with respect to the Property.

 

(c)           Between the Date of Agreement and the Closing Date or earlier termination of this Agreement, Seller will not modify, extend, amend or terminate any existing Lease, nor enter into any new lease or occupancy agreement without the prior written consent of Purchaser except (i) if the same is done in the ordinary course of Seller’s ownership of the Property or (ii) if it is a lease termination by reason of a default by the tenant thereunder; provided, however, that after the Approval Date, Seller shall not enter into any new leases with corporate apartment tenants without Purchaser’s prior written approval in each instance, which approval may be withheld in Purchaser’s sole discretion.  All new tenant leases shall be on the form of lease currently used by Seller or such other form as may be approved by Purchaser in its reasonable discretion.

 

(d)           No security deposits shall be applied except in the ordinary course with respect to delinquent tenants.

 

(e)           Seller will not enter into any new Contract with respect to the Premises that would survive the Closing, unless such Contract is entered into in the ordinary course of business and is terminable on not more than thirty (30) days notice without payment of any penalty or is otherwise approved in writing by Purchaser, which approval, if sought prior to the Approval Date, shall not be unreasonably withheld, delayed or conditioned and if sought after the Approval Date, may be withheld in Purchaser’s sole discretion.

 

10.          DELIVERY OF DOCUMENTS.

 

(a)           Within five (5) days after the Date of Agreement, Seller shall provide to Purchaser, to the extent in the possession or control of Seller, the Due Diligence Items pertaining to the Property specified in Exhibit I.  Such Due Diligence Items are being delivered without representation or warranty other than as expressly provided in Section 8(a) hereof.

 

(b)           On the Closing Date, Seller shall deliver the following documents (the “Closing Documents”) to Purchaser or the Escrow, all duly executed (and acknowledged, as applicable) by Seller, the delivery of which shall be a condition precedent to Purchaser’s obligation to close the transaction contemplated by this Agreement (and one or more of which may be waived in writing by Purchaser, in its sole discretion, on or prior to the Closing Date):

 

  

10

 

  

(i)    a recordable special warranty deed, in the form of Exhibit F-1 attached hereto, subject only to the Permitted Exceptions (the “Deed”);

 

(ii)      a bill of sale, in the form of Exhibit F-2 attached hereto;

 

(iii)     two originals of an assignment and assumption, in the form of Exhibit F-3 attached hereto (the “Assignment and Assumption”);

 

(iv)          to the extent reasonably required by the Title Company, a title affidavit in customary form, limited to Seller’s actual knowledge;

 

(v)           counterparts of the Seller’s and Purchaser’s closing and proration statements;

 

(vi)          a certification of nonforeign status satisfying Section 1445 of the Internal Revenue Code of 1986, as amended;

 

(vii)         evidence of Seller’s existence and authority to perform its obligations under this Agreement, in form and substance reasonably satisfactory to Purchaser and the Title Company;

 

(viii)        to the extent in possession of Seller, originals of the Leases and Contracts, together with a letter from Seller advising the tenants under the Leases of the assignment of their respective Leases to Purchaser and the manner in which rent is to be paid subsequent to Closing in the form of Exhibit G hereto;

 

(ix)          a current Rent Roll certified by Seller, dated within two (2) Business Days prior to the Closing Date, to Seller’s actual knowledge, in the same manner and to the same extent as provided in Section 8(a)(i) above;

 

(x)           a certificate in the form of Exhibit H recertifying the representations and warranties set forth in Section 8(a) above as of the Closing Date;

 

(xi)          copies of Seller’s files, books, records, computer and/or data files and other information regarding the Property or held by Seller or its property manager in connection with the ownership, operation and management of the Property, specifically excluding, however, any confidential or proprietary information, any joint venture materials between the partners in Seller, and any materials relating to the marketing and sale of the Property.  This obligation may be satisfied by Seller causing such materials to be left in the on-site property management office at the Property; and

 

(xii)         evidence of the termination of Property Management Agreement.

(c)           On the Closing Date, Purchaser shall deliver the following to Seller, in form and substance reasonably acceptable to Seller, all duly executed by Purchaser, where appropriate, each of which shall be a condition precedent to Seller’s obligation to close the transaction contemplated by this Agreement:

 

  

11

  

(i)            two counterparts of the Acceptance of the Assignment and Assumption as attached on Exhibit F-3, two originals;

 

(ii)           counterparts of the Seller’s and Purchaser’s closing and proration statements;

 

(iii)          a certified copy of the resolutions or consent of Purchaser authorizing the transaction contemplated by this Agreement or other satisfactory evidence of authorization;

 

(iv)           to the extent required by the Title Company, a title affidavit in customary form;

 

(v)            the Purchase Price, plus or minus prorations and adjustments as provided herein, by wire transfer of immediately available federal funds to or as directed by Seller.

 

11.          FIRE OR CASUALTY.

 

In the event of damage to the Property by fire or other casualty prior to the Closing Date, Seller shall notify Purchaser of such fire or other casualty promptly after Seller becomes aware thereof.  Seller shall have no duty to repair such damage.  However, Seller may repair any such damage with Purchaser’s prior, written approval and may, without Purchaser’s approval, repair damage where such repair is necessary in Seller’s reasonable opinion to preserve and protect the health and safety of tenants of the Property or to preserve the Property from imminent risk of further damage or if required to do so by Seller’s insurance carrier (the costs thereof being referred to as “Preservation Expenses”).  If the fire or other casualty causes damage which would cost in excess of One Million Five Hundred Thousand and 00/100 Dollars ($1,500,000.00) to repair (as determined by an independent third party engineering firm engaged by Seller), then Purchaser may elect, by written notice to be delivered to Seller on or before the sooner of (i) the tenth (10th) day after Purchaser’s receipt of such notice or (ii) the Closing Date (provided that if such damage occurs within five (5) days prior to the Closing Date, the Closing Date shall be extended for ten (10) days to permit Purchaser time to evaluate and make such election), to either:  (a) close the transaction contemplated by this Agreement and receive: (i) a credit against the Purchase Price in an amount equal to all deductibles and self-insured amounts, if any, under the applicable insurance policies; and (ii) all insurance claims and proceeds payable to Seller as a result of such fire or other casualty less any Preservation Expenses and other reasonable repair expenses incurred by Seller, with the same being paid or assigned to Purchaser at Closing, or (b) terminate this Agreement, and receive a return of the Earnest Money, in which case the parties hereto shall have no further obligations hereunder (except for obligations that are expressly stated to survive the termination of this Agreement).  If the damage to the Property by fire or other casualty prior to the Closing Date would cost less than or equal to One Million Five Hundred Thousand and 00/100 Dollars ($1,500,000.00) to repair (as determined by an independent third party engineering firm engaged by Seller), Purchaser shall not have the right to terminate its obligations under this Agreement by reason thereof, and Seller shall assign and transfer to Purchaser on the Closing Date all of Seller’s right, title and interest in and to all insurance proceeds paid or payable to Seller on account of such fire or casualty less any Preservation Expenses and other reasonable repair expenses incurred by Seller and shall provide

 

  

12

  

 

a credit against the Purchase Price in an amount equal to all deductibles and self-insured amounts, if any, under the applicable insurance policies.

 

           12.             CONDEMNATION.

 

If, prior to the Closing Date, all or any part of the Property is taken by condemnation or a conveyance in lieu thereof, or if Seller receives notice of a condemnation proceeding with respect to the Property, then Seller shall notify Purchaser of such condemnation or conveyance in lieu thereof promptly after Seller becomes aware thereof.  If the taking or threatened taking involves a material portion of the Property (hereinafter defined), Purchaser may elect, by written notice to be delivered to Seller on or before the sooner of (i) the tenth (10th) day after Purchaser’s receipt of such notice, or (ii) the Closing Date (provided that if such taking or notice of a condemnation occurs within five (5) days prior to the Closing Date, the Closing Date shall be extended for five (5) days to permit Purchaser time to evaluate and make such election), to terminate this Agreement, in which event the Earnest Money shall be returned to Purchaser, and the parties hereto shall have no further obligations hereunder (except for obligations that are expressly stated herein to survive the termination of this Agreement).  If Purchaser elects to close this transaction notwithstanding such taking or condemnation, Purchaser shall be entitled to any award paid or payable to Seller as a result of such condemnation proceedings, with the same being assigned to Purchaser at Closing.  As used herein, a “material portion of the Property” means any part of the Property reasonably required for the operation of the Property in the manner operated on the date hereof as reasonably determined by Seller and Purchaser.  If any taking or threatened taking does not involve a material portion of the Property, Purchaser shall be required to proceed with the Closing, in which event Seller shall assign to Purchaser any award paid or payable to Seller (or the right to receive any such award) as a result of such condemnation proceedings.

 

           13.              ADJUSTMENTS AND PRORATIONS.

 

Adjustments and prorations with respect to the Property shall be computed and determined between the parties as of 12:01 a.m. on the Closing Date (as if Purchaser were vested with title to the Property during the entire Closing Date) as follows:

 

(a)           General real estate taxes, special assessments and personal property taxes (including, without limitation, any assessments relating to Permitted Exceptions), business improvement district assessments or similar charges, property owner’s association assessments, if any, water rates and charges, sewer taxes, vault charges and taxes shall be prorated for the year in which closing occurs based on actual days involved as of the Closing Date based on the then current taxes (if known, based on final tax bills for such period -- and if not known, based on the most recent ascertainable taxes) and the special assessments due and owing prior to Closing, and Seller or Purchaser shall receive a credit at Closing, as appropriate.  If final taxes or special assessments are not known as of the Closing, the parties agree to reprorate when such amounts become known.  The provisions of the Section 13(a) shall survive the Closing.

 

(b)           All rents and other sums receivable from tenants of the Property, which were earned and attributable to the period prior to the Closing Date, will be retained by Seller to the extent that such rents have been collected on or before the Closing Date.  Rents earned and

 

  

13

  

attributable to the period beginning on the Closing Date and thereafter will be paid to Purchaser by the tenants under the Leases, or credited to Purchaser at Closing (if such rents are received by Seller prior to the Closing Date).  All payments from tenants, on account of rent or otherwise, received after the Closing Date by Purchaser shall be applied first to rent or other sums then due under the Leases attributable to the period beginning on the Closing Date and continuing thereafter, and then promptly paid to Seller on account of rents which were earned and attributable to the period prior to the Closing Date but which were not paid when due, provided, Purchaser’s obligation shall extend only to such amounts collected within 180 days after the Closing Date.  Purchaser shall use commercially reasonable efforts to collect or attempt to collect delinquent rentals, but shall not be required to file suit against such tenants or terminate such leases.  In the event that, after the Closing, Seller recovers any payments of rent or other sums due from tenants under Leases, Seller shall promptly forward to Purchaser any portion of such payments to which Purchaser is entitled in accordance with this Section 13(b).

 

(c)           On the Closing Date, Seller shall deliver to Purchaser in cash, as a credit against the Purchase Price or as an adjustment to the prorations provided for elsewhere in this Section 13, as appropriate, an amount equal to the cash security deposits made by tenants occupying the Property which were actually paid to Seller as set forth on Exhibit B and which shall not have been applied by Seller or otherwise pursuant to the Leases, together with interest owing thereon pursuant to the applicable Lease, if any, and together with a listing of the tenants to which such deposits and interest are owing.

 

(d)           All amounts payable, owing or incurred in connection with the Property under the Contracts to be assumed by Purchaser under the Assignment and Assumption shall be prorated as of the Closing Date.

 

(e)           All utility deposits, if any, may be withdrawn by and refunded to Seller, and Purchaser shall make its own replacement deposits for utilities as may be required by the respective utilities involved.  In the event any payments have been received by Seller in connection with any cable or telephone contracts affecting the Property, such payment amounts, if any, shall be prorated among Seller and Purchaser to the extent any amount of such payments applies to the period of ownership of the Property occurring on or after the Closing Date.

 

(f)           At Closing, Purchaser first shall pay the entire Purchase Price to Seller and thereafter the Earnest Money shall be refunded to Purchaser.

 

(g)           All utility charges that are not separately metered to tenants shall be prorated to the Closing Date and Seller shall obtain a final billing therefor and pay any amounts owing therein for the period prior to the Closing Date and Purchaser shall pay any amounts owing for the period on and after the Closing Date.  To the extent that utility bills cannot be handled in the foregoing manner, they shall be prorated as of the Closing Date based on the most recent bills available and reprorated when such final bills become known.

 

(h)           With respect to any matters not addressed by the provisions set forth above in this Section 13, Seller and Purchaser shall prorate as of the Closing Date such other items as are customarily prorated in a purchase and sale of the type contemplated hereunder.  Seller and

 

  

14

 

  

Purchaser shall each reasonably cooperate with the other in connection with any and all prorations and post-Closing reconciliations provided for herein.

 

(i)           Except as otherwise provided in Section 13(b), each of the provisions of this Section 13 shall survive the Closing until the later of (i) one (1) year after the date of Closing or (ii) three (3) months after the issuance of the final tax bill for the year in which the Closing occurs.

 

Not less than two (2) Business Days prior to the Closing, Purchaser shall prepare and deliver to Seller, subject to all the terms and provisions of this Agreement, a closing statement setting forth, inter alia, the closing adjustments and material monetary terms of the transaction contemplated hereby as of the Closing Date, in form reasonably acceptable to Seller.  Seller shall cooperate to timely provide Purchaser with the information necessary to prepare and deliver such closing statement.

 

    14.             CLOSING COSTS.

 

Seller shall pay: (a) the cost to record any releases required to clear title to the Property to the extent required of Seller in accordance with Section 6 hereof, (b) Seller’s attorneys’ fees, (c) one-half of all escrow closing fees and costs, (d) documentary transfer tax (including those imposed by the state, city, county and/or other governmental unit) or other tax imposed on the transfer of the Property, (e) the costs of the Survey and any update thereto, and (f) the commission, if any, due Broker (hereinafter defined).  Purchaser shall pay: (i) recording fees for all transfer documents, (ii) the cost of  Purchaser’s Owner Policy of Title Insurance (the “Owners’ Policy”) in the amount of the Purchase Price, any endorsements to the Owner’s Policy and any mortgagee’s title insurance policy and any endorsements thereto, (iii) Purchaser’s attorneys’ fees, (iv) one-half of all escrow closing fees and costs and (v) the fees, costs and expenses of any reports or inspections or other due diligence commissioned by Purchaser in connection with the transaction contemplated by this Agreement.

 

    15.             POSSESSION.

 

Possession of the Property shall be delivered to Purchaser at Closing, free and clear of all liens and claims other than Permitted Exceptions and the rights of the tenants identified on the Rent Roll and of the parties to the Contracts set forth on Exhibit C.  Seller shall also deliver to Purchaser on the Closing Date all keys and access cards to, and combinations to locks and other security devices located at, the Property, to the extent applicable.  From and after the Approval Date, and continuing to and following the Closing, Seller shall cooperate with Purchaser and shall cause its property manager (to the extent required of it in the management agreement) to cooperate with Purchaser to accomplish a professional transition of management of the Property to Purchaser and its property manager(s).

 

    16.             DEFAULT.

 

(a)           If Purchaser defaults hereunder, Seller may terminate this Agreement by providing written notice to Purchaser of such default.  If Purchaser does not cure such default within five (5) Business Days of receipt of such notice, this Agreement shall terminate (a “Purchaser Default Termination”) and Seller shall retain the Earnest Money and any interest

 

  

15

  

 

thereon as liquidated damages in full settlement of all claims against Purchaser (with the exception of claims against Purchaser related to obligations which are expressly stated herein to survive the termination of this Agreement).  The parties agree that the amount of actual damages that Seller would suffer if the Closing fails to occur as a result of Purchaser’s default hereunder would be extremely difficult to determine and have agreed, after specific negotiation, that the amount of the Earnest Money is a reasonable estimate of Seller’s damages and is intended to constitute a fixed amount of liquidated damages in lieu of other remedies available to Seller and is not intended to constitute a penalty.  The provisions of this Section 16(a) shall survive the Closing.

 

 

PURCHASER AND SELLER ACKNOWLEDGE THAT THEY HAVE READ AND UNDERSTAND THE PROVISIONS OF THIS SECTION 16(a) AND BY THEIR INITIALS IMMEDIATELY BELOW AGREE TO BE BOUND BY ITS TERMS.

 

PURCHASER:   BFL     SELLER:   JGE   

           (Initials)                                 (Initials)

 

(b)          If Seller defaults hereunder prior to Closing, or if prior to Closing it is determined that the representations and warranties set forth in this Agreement shall not be true and correct in all material respects on the Date of Agreement and as of the Closing Date, then Purchaser’s sole remedy shall be either:

 

(i) to terminate this Agreement and promptly receive a return of the Earnest Money, and any interest thereon, in which event each of the parties hereto shall be relieved of any further obligation to the other arising by virtue of this Agreement (except for obligations that are expressly stated herein to survive the termination of this Agreement), or

 

(ii) bring an action against Seller to seek specific performance of Seller’s obligations hereunder within sixty (60) days following the earlier of (x) the scheduled Closing Date or (y) the date of Seller’s breach, provided that Purchaser is not otherwise in default under this Agreement.  Such action for specific performance will not be construed to require Seller to cure any title defect, cure any untrue representation, comply with any covenant hereunder, cure any physical condition existing at the Property, or cause any third party to take any action with respect to the Property or Seller.

 

Notwithstanding anything to the contrary contained in this Agreement, if Purchaser has actual knowledge that Seller has defaulted in any respect under this Agreement prior to the Closing Date and nonetheless proceeds to Closing, then same shall be deemed to be a waiver by Purchaser of any further right to make a claim arising out of such default.

 

If the Closing occurs, in no event shall Seller be liable for any special, punitive, speculative or consequential damages, nor shall Seller’s liability under any representation, warranty, certification, covenant, agreement, proration, reproration, obligation or indemnity made hereunder or under any of the Closing Documents or otherwise in connection with the

 

  

16

  

transactions contemplated herein exceed Five Hundred Thousand Dollars ($500,000) in the aggregate (the “Seller’s Maximum Liability”).

 

None of Seller’s general or limited partners, members in Seller’s general partner, managers, officers, agents or employees shall have any personal liability of any kind or nature or by reason of any matter or thing whatsoever under, in connection with, arising out of or in any way related to this Agreement, the Closing Documents or the transactions contemplated herein, and Purchaser waives for itself and for anyone who may claim by, through or under Purchaser any and all rights to sue or recover on account of any such alleged personal liability.

 

    17.             NOTICES.

 

Any notice, demand, request or other communication which any party hereto may be required or may desire to give under this Agreement shall be in writing and shall be deemed to have been properly given if (i) hand delivered (effective upon delivery) or (ii) sent by a nationally recognized overnight delivery service (effective one (1) Business Day after delivery to such courier for overnight service) in each case, prepaid and addressed in accordance with Line 10 or Line 11 (as applicable) of the Summary Statement or to such other or additional addresses as either party might designate by written notice to the other party.  Any notices given by the attorneys for the parties shall be deemed effective as if given by such party.

 

    18.             BROKERS/CONSULTANTS.

 

Each of Seller and Purchaser represents and warrants to the other that it has not dealt with any brokers, finders or agents with respect to the transaction contemplated hereby other than CBRE (the “Broker”).  Seller shall be responsible to pay any commission due Broker with respect to this Agreement pursuant to a separate written agreement between Seller and Broker.  Each party agrees to indemnify, defend and hold harmless the other party, its successors, assigns and agents, from and against the payment of any commission, compensation, loss, damages, costs, and expenses (including without limitation attorneys’ fees and costs) incurred in connection with, or arising out of, claims for any broker’s, agent’s or finder’s fees of any person claiming by or through such party.   The obligations of Seller and Purchaser under this Section 18 shall survive the Closing and the termination of this Agreement.

 

    19.            “AS IS” SALE

 

EXCEPT FOR THE EXPRESS REPRESENTATIONS AND WARRANTIES OF SELLER SET FORTH HEREIN AND IN THE CLOSING DOCUMENTS, PURCHASER ACKNOWLEDGES AND AGREES THAT IT WILL BE PURCHASING THE PROPERTY BASED SOLELY UPON ITS INSPECTIONS AND INVESTIGATIONS OF THE PROPERTY, AND THAT PURCHASER WILL BE PURCHASING THE PROPERTY “AS IS” AND “WITH ALL FAULTS”, BASED UPON THE CONDITION OF THE PROPERTY AS OF THE DATE OF AGREEMENT, ORDINARY WEAR AND TEAR AND LOSS BY FIRE OR OTHER CASUALTY OR CONDEMNATION EXCEPTED AND THAT SELLER MAKES NO WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED, OR ARISING BY OPERATION OF LAW, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTY OF CONDITION, HABITABILITY, MERCHANTABILITY OR FITNESS FOR A PARTICULAR

  

17

  

PURPOSE, IN RESPECT OF THE PROPERTY.  WITHOUT LIMITING THE FOREGOING, PURCHASER ACKNOWLEDGES THAT, EXCEPT AS MAY OTHERWISE BE SPECIFICALLY SET FORTH ELSEWHERE IN THIS AGREEMENT OR IN THE CLOSING DOCUMENTS, NEITHER SELLER NOR ITS CONSULTANTS, REPRESENTATIVES OR AGENTS HAS MADE ANY REPRESENTATIONS OR WARRANTIES OF ANY KIND UPON WHICH PURCHASER IS RELYING AS TO ANY MATTERS CONCERNING THE PROPERTY, INCLUDING BUT NOT LIMITED TO:  (I) THE CONDITION OF THE LAND OR ANY IMPROVEMENTS COMPRISING THE PROPERTY; (II) THE EXISTENCE OR NON-EXISTENCE OF ANY POLLUTANT, TOXIC WASTE AND/OR ANY HAZARDOUS MATERIALS OR SUBSTANCES; (III) ECONOMIC PROJECTIONS OR MARKET STUDIES CONCERNING THE PROPERTY, OR THE INCOME TO BE DERIVED FROM THE PROPERTY; (IV) ANY DEVELOPMENT RIGHTS, TAXES, BONDS, COVENANTS, CONDITIONS AND RESTRICTIONS AFFECTING THE PROPERTY; (V) THE NATURE AND EXTENT OF ANY RIGHT OF WAY, LEASE, LIEN, ENCUMBRANCE, LICENSE, RESERVATION OR OTHER TITLE MATTER; (VI) WATER OR WATER RIGHTS, TOPOGRAPHY, GEOLOGY, DRAINAGE, SOIL OR SUBSOIL OF THE PROPERTY; (VII) THE UTILITIES SERVING THE PROPERTY; (VIII) THE SUITABILITY OF THE PROPERTY FOR ANY AND ALL ACTIVITIES AND USES WHICH PURCHASER MAY ELECT TO CONDUCT THEREON; OR (IX) THE COMPLIANCE OF THE PROPERTY WITH ANY ZONING, ENVIRONMENTAL, BUILDING OR OTHER LAWS, RULES OR REGULATIONS AFFECTING THE PROPERTY.  SELLER MAKES NO REPRESENTATION OR WARRANTY THAT THE PROPERTY COMPLIES WITH THE AMERICANS WITH DISABILITIES ACT OR ANY FIRE CODE OR BUILDING CODE.  PURCHASER HEREBY RELEASES SELLER FROM ANY AND ALL LIABILITY IN CONNECTION WITH ANY CLAIMS THAT PURCHASER MAY HAVE AGAINST SELLER, AND PURCHASER HEREBY AGREES NOT TO ASSERT ANY CLAIMS FOR CONTRIBUTION, COST RECOVERY OR OTHERWISE, AGAINST SELLER RELATING DIRECTLY OR INDIRECTLY TO THE EXISTENCE OF ASBESTOS OR HAZARDOUS MATERIALS OR SUBSTANCES ON, OR ENVIRONMENTAL CONDITIONS OF, THE PROPERTY, WHETHER KNOWN OR UNKNOWN.  As used herein, the terms “Hazardous Substances” and “HAZARDOUS MATERIALS OR SUBSTANCES” mean (i) hazardous wastes, hazardous substances, hazardous constituents, toxic substances or related materials, whether solids, liquids or gases, including but not limited to substances defined as “hazardous wastes,” “hazardous substances,” “toxic substances,” “pollutants,” “contaminants,” “radioactive materials,” or other similar designations in, or otherwise subject to regulation under, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C. §9601 et seq.; the Toxic Substance Control Act, 15 U.S.C. §2601 et seq.; The Hazardous Materials Transportation Act, 49 U.S.C. §1802; the Resource Conservation and Recovery Act, 42 U.S.C. §9601. et seq.; the Clean Water Act, 33 U.S.C. §1251; the Safe Drinking Water Act, 42 U.S.C. §300f et seq.; the Clean Air Act, 42 U.S.C. §7401 et seq.; and in any permits, licenses, approvals, plans, rules, regulations or ordinances adopted, or other criteria and guidelines promulgated pursuant to the preceding laws or other similar federal, state or local laws, regulations, rules or ordinance now or hereafter in effect relating to environmental matters (collectively, “Environmental Laws”); and (ii) any other substances, constituents or wastes subject to any applicable federal, state or local law, regulation or ordinance, including any Environmental Law, now or hereafter in effect, including but not limited to (A) petroleum, 

 

 

  

18

  

 

 

(B) refined petroleum products, (C) waste oil, (D) waste aviation or motor vehicle fuel, (E) mold and (F) asbestos.  Purchaser acknowledges that, having been given the opportunity to inspect the Property, except for the representations, warranties and covenants of Purchaser set forth in this Agreement, Purchaser is relying solely on its own investigation of the Property and not on any information provided or to be provided by Seller.  Purchaser further acknowledges that the information provided and to be provided with respect to the Property was obtained from a variety of sources, and that Seller (x) has not made any independent investigation or verification of such information and (y) makes no representations as to the accuracy or completeness of such information, except as provided herein.  The provisions of this Section 19 shall survive the Closing Date.  PURCHASER’S FOREGOING RELEASE OF CLAIMS AGAINST SELLER RELATING DIRECTLY OR INDIRECTLY TO THE EXISTENCE OF HAZARDOUS MATERIALS OR SUBSTANCES AT, ON, UNDER OR NEAR THE PROPERTY, AND/OR TO THE ENVIRONMENTAL CONDITION OF THE PROPERTY, IS INTENDED TO INCLUDE ANY UNKNOWN OR UNSUSPECTED CLAIMS RELATING TO SUCH MATTERS.  PURCHASER HEREBY ACKNOWLEDGES THAT SUCH WAIVER AND RELEASE IS MADE WITH THE ADVICE OF COUNSEL AND WITH FULL KNOWLEDGE AND UNDERSTANDING OF THE CONSEQUENCES AND EFFECTS OF SUCH RELEASE.

Purchaser’s Initials      BFL                                                         

 

    20.             ASSIGNMENT.

 

Purchaser shall not have the right to assign this Agreement or any interest herein without the express written consent of Seller, and in the event Seller consents to such assignment, Purchaser shall remain liable for, and the assignee shall assume, all obligations of Purchaser hereunder.  Notwithstanding the foregoing, provided that Purchaser notifies Seller in writing in sufficient time to allow the Closing to occur without delay or unreasonable burden, Purchaser may assign this Agreement, without the necessity of obtaining consent from Seller to such assignment, to one or more entities wholly owned and controlled by or under common control with Purchaser and/or with the current principals of Purchaser, such multiple entities, if applicable, to take title to the Property as tenants-in-common, however, such assignment shall not release Purchaser hereunder.

 

    21.             MISCELLANEOUS.

 

(a)           Time is of the essence of each provision of this Agreement.

 

(b)           This Agreement and all provisions hereof shall extend to, be obligatory upon and inure to the benefit of the respective heirs, legatees, successors and permitted assigns of the parties hereto.

 

(c)           Except as provided herein, this Agreement contains the entire agreement between the parties relating to the transactions contemplated hereby.

 

(d)           This Agreement shall be governed by and construed in accordance with the laws of the State of Florida.

 

 

  

19

  

 

(e)           If any of the provisions of this Agreement or the application thereof to any persons or circumstances shall, to any extent, be deemed invalid or unenforceable, the remainder of this Agreement and the application of such provisions to persons or circumstances other than those as to whom or which it is held invalid or unenforceable shall not be affected thereby.

 

(f)           This Agreement and any document or instrument executed pursuant hereto may be executed in any number of counterparts, each of which shall be deemed an original, but all of which, together, shall constitute one and the same instrument.

 

(g)           From and after the Date of Agreement, Purchaser and Seller shall jointly prepare and issue any releases of information relating to the sale of the Property, and any inquiries regarding the transaction contemplated hereby shall be responded to only after consultation with the other party hereto.  The provisions of this Section 21(g) shall survive the Closing or earlier termination of this Agreement.

 

(h)           If either party institutes a legal action against the other relating to this Agreement or any default hereunder, the unsuccessful party to such action will reimburse the successful party for the reasonable expenses of prosecuting or defending such action, including without limitation attorneys’ fees and disbursements and court costs.  The obligations under this Section 21(h) shall survive the Closing or earlier termination of this Agreement.

 

(i)           This Agreement shall not be construed more strictly against one party than against the other merely by virtue of the fact that the Agreement may have been prepared primarily by counsel for one of the parties, it being recognized that both Purchaser and Seller have contributed substantially and materially to the preparation of this Agreement.

 

(j)           The term “Business Day” shall mean any day other than Saturday, Sunday, a legal holiday or other date on which banks located in Hartford, Connecticut or Sanford, Florida are not open for business.

 

(k)           If, under the terms of this Agreement and the calculation of the time periods provided for herein, the Approval Date, the Closing Date or any other date to be determined under this Agreement should fall on a day which is not a Business Day, then such date shall be extended to the next Business Day.

 

(l)           A facsimile, scanned or photocopy signature on this Agreement, any amendment hereto, or any notice delivered hereunder shall have the same legal effect as an original signature.

 

(m)           The parties shall keep the terms of this Agreement confidential and shall not disclose such terms to any other parties without the other party’s prior written consent, which consent shall be in each party’s sole discretion; provided, however, that each party may, without obtaining such prior written consent, make such disclosures as may be required by applicable laws or agreements by which such party is bound, and to each such party’s managers, members, officers, lenders, employees, investors, attorneys, accountants, appraisers, insurance advisors, consultants and similar third party professionals.  Notwithstanding anything contained in this Section 21(m), this obligation of confidentiality shall not apply to disclosures compelled by law (including to make any required Securities and Exchange Commission, New York Stock Exchange

 

 

  

20

  

 

or other securities market filings), any order of a court of competent jurisdiction, by a lawful, proper subpoena, or other legal, tax or financial requirements or guidelines applicable to Purchaser, in which event Purchaser shall immediately notify Seller of the circumstances purporting to require such disclosure.  During the Inspection Period, Seller and Purchaser shall agree on a form of press release reasonably acceptable to both parties reporting the acquisition of the Property to be issued after the Closing Date.

 

(n)           Each of Seller and Purchaser state that they are not acting, directly or indirectly for, or on behalf of, any person, group, entity or nation named by any Executive Order (including the September 24, 2001, Executive Order Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism) or the United States Treasury Department as a terrorist, “Specially Designated National and Blocked Person,” or other banned or blocked person, entity, or nation pursuant to any law that is enforced or administered by the Office of Foreign Assets Control, and is not engaging in this transaction, directly or indirectly, on behalf of, or instigating or facilitating this transaction, directly or indirectly, on behalf of, any such person, group, entity or nation.

 

(o)           Radon is a naturally occurring radioactive gas that, when it has accumulated in a building in sufficient quantities, may present health risks to persons who are exposed to it over time.  Levels of radon that exceed federal and state guidelines have been found in buildings in Florida. Additional information regarding radon and radon testing may be obtained from the County Public Health Unit.

 

(p)           Neither this Agreement nor any memorandum or short form thereof shall be recorded by either party hereto.  The provisions of this Section 21(p) shall survive the termination of this Agreement.

 

(q)           If Purchaser desires to effectuate the transaction contemplated by this Agreement as a tax-free exchange (the “Exchange”), then upon request made by Purchaser, Seller shall cooperate with Purchaser in effectuating such tax-deferred exchange, such cooperation to include, without limitation, executing and delivering all documents and instruments necessary for such purpose, but only on the conditions that (i) the Exchange shall not delay the Closing Date, (ii) the consummation or accomplishment of the Exchange shall not be a condition precedent or condition subsequent to Purchaser’s obligations under this Agreement, (iii) Seller shall have no obligation to take title to any property in connection with the Exchange, (iv) Seller shall not be required to incur any obligations or liabilities in connection with the Exchange and Purchaser shall pay Seller for all costs and expenses incurred by Seller in connection with such cooperation, (v) Purchaser shall not be released of its obligations under this Agreement as a result of the Exchange, and (vi) Purchaser shall provide notice to Seller of the Exchange at least five (5) Business Days prior to the Closing Date.  Seller shall have no obligation to execute any documents or to undertake any action by which Seller would or might incur any liability or obligation not otherwise provided for in the other provisions of this Agreement.

 

(r)           During the Inspection Period, Seller and Purchaser shall agree to a form of accounting letter reasonably acceptable to both parties.  During the Inspection Period, Seller shall endeavor to cause the current property manager at the Property, at Purchaser’s sole cost and expense, to agree to a form of accounting letter reasonably acceptable to such property manager

 

 

  

21

  

 

and Purchaser, which letter shall provide for access to revenue and expense supporting documents, deposits, bank statements, invoices and other similar documentation regarding the operation of the Property for the period beginning January 1, 2009 and ending March 31, 2010.

 

[Signature Page Follows]

 

 

 

 

  

22

  

IN WITNESS WHEREOF, this Agreement has been executed as of the date first above written.

 

	
PURCHASER:

 

NTS REALTY HOLDING LIMITED

PARTNERSHIP, a Delaware limited

partnership

 

By:  NTS Realty Capital, Inc., a Delaware

corporation, its managing general partner

 

 

By: /s/ Brian F. Lavin         

Name: Brian F. Lavin

Title: President and Chief Executive Officer

	
SELLER:

 

CORAC, LLC, a Delaware limited liability

company

 

By:  Connecticut General Life Insurance

        Company, its managing member

 

By:  CIGNA Investments, Inc., its authorized

        representative

        

 

    By: /s/ John G. Eisele         

        Name: John G. Eisele

        Title: Managing Director

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00182-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00182-of-00352.parquet"}]]