Document:

exh1012aug12009.htm

  

  

  

EXHIBIT 10.12

CHARMING SHOPPES, INC.

2003 Non-Employee Directors Compensation Plan

Amended and Restated Effective May 1, 2009

1.           Purpose and Scope of the Plan.

(a)           Purpose.  The purpose of this 2003 Non-Employee Directors Compensation Plan (the "Plan") of Charming Shoppes, Inc. (the "Company") is to advance the interests of the Company and its shareholders by providing
for fair and adequate equity compensation of non-employee directors and an opportunity for deferral of compensation in order to attract and retain high quality persons to serve as directors and to enable such persons to increase their proprietary interest in the Company.  In furtherance of this purpose, the Plan provides for grants of Options, Stock Appreciation Rights, Restricted Share Units, and/or Restricted Stock, and the opportunity for a director to elect deferred and alter­na­tive forms
of compen­sation in lieu of cash fees for service as a director, including Deferred Shares and deferred cash.

(b)           Effect of Amendment and Restatement of the Plan.  The Company hereby amends and restates the Plan, effective May 1, 2009 (the "Effective Date"). The Plan
was initially adopted on August 21, 1996 and was subsequently amended and restated on several occasions.  Non-employee director compensation paid or granted before May 7, 2008 was governed by the Plan and other policies of the Company then in effect, except that Section 4 hereof applies to any outstanding Deferred Shares, Section 6(a) applies to any outstanding Restricted Stock and Section 6(b) applies to RSUs granted in 2007 and thereafter.

(c)           Grandfathered Accounts.  The amendment and restatement of January 1, 2005 and subsequent amendments to the Plan shall not affect Grandfathered Accounts (as
defined below), which shall continue to be subject to, and governed by, the terms and conditions of the Plan as in effect on December 31, 2004.

(d)           Relation of Plan to Other Director Compensation. The amount, timing, and other terms of cash compensation that may be paid by the Company to non-employee directors
are not governed by this Plan, except for cash-settled equity awards hereunder and except to the extent that opportunities for deferral of cash compensation otherwise payable to a director, or receipt of such cash compensation in alternative forms, may be made available to a director under this Plan.  In addition, adoption of the Plan does not limit the authority of the Board of Directors in adopting other compensation programs in which directors may participate.

  

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2.           Definitions.  In addition to the terms defined in Section 1, the following terms shall be defined as set forth below:

(a)           "Account" means the account established and maintained by the Company for RSUs granted under Section 6 and Deferred Shares and deferred cash credited under Section 8.  A subaccount for RSUs and a subaccount for such Deferred Shares and deferred cash may be designated
within the Account.  The Account and RSUs, Deferred Shares and deferred cash credited to the Account will be maintained solely as bookkeeping entries by the Company to evidence unfunded obligations of the Company.

(b)           "Administrator" means the individual or committee specified in Section 3(b) to whom the Board has delegated authority to administer the Plan.

(c)           "Beneficiary" means the person(s) or trust(s) which have been designated by a Participant in his or her most recent written beneficiary designation filed with the Administrator to receive the benefits specified under the Plan upon such Participant's death.  If,
upon a Participant's death, there is no designated Beneficiary or surviving designated Beneficiary, then the term Beneficiary means the person(s) or trust(s) entitled by will or the laws of descent and distribution to receive such benefits.

(d)           "Board" means the Board of Directors of the Company.  The Board may delegate its functions to a committee of the Board as specified under Section 3(a), in which case references to the Board shall be deemed to include such committee.

 (e)           "Change in Control" and related terms are defined in Section 12.

 

(f)           "Code" means the Internal Revenue Code of 1986, as amended, including regulations thereunder and successor provisions and regulations thereto.

(g)           "Deferred Shares" means a Share Unit credited to a Participant's Account under Section 8 as a result of deferral of cash fees or other deferral permitted hereunder.

 

(h)           "Director Compensation" means annual retainer fees payable to a director in his or her capacity as such for service on the Board and service as chairman of any Board committee, and any other fees payable to a director in his or her capacity as such for attending meetings
and other service on the Board and Board committees; provided, however, that the Administrator may determine that specific fees will not be deemed Director Compensation (such determination to be made in advance of the applicable deadline for deferral of fees) and may determine that cash paid in settlement of Cash-Settled RSUs will be deemed to be Director Compensation.  Reimbursement of expenses does not constitute Director Compensation.

  

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(i)           "Disability" means a Participant's termination of service as a director of the Company due to a physical or mental incapacity of long duration which renders the Participant unable to perform the duties of a director of the Company.

(j)           "Exchange Act" means the Securities Exchange Act of 1934, as amended, including rules thereunder and successor provisions and rules thereto.

(k)           "Grandfathered Account" means that portion of a Participant's Account that was earned and vested as of December 31, 2004, and shall include earnings (including dividends paid in accordance with Section 13(b) and dividends and dividend equivalents paid in accordance with
Section 9(a)) credited to such amount under the terms of the Plan.  All Grandfathered Accounts shall be calculated in accordance with Section 409A of the Code.  The Company shall maintain a separate record of Grandfathered Accounts.

(l)           "Fair Market Value" means, with respect to Shares, the fair market value of such Shares determined by such methods or procedures as shall be established from time to time by the Board.  Unless otherwise determined by the Board, the Fair Market Value of a Share
as of any given date means the closing sale price of a Share reported on the Nasdaq Global Select Market (or, if Shares are then principally traded on a national securities exchange, in the reported "composite transactions" for such exchange) for such date, or, if no Shares were traded on that date, on the next preceding day on which there was such a trade.

(m)           “Mandatory Retirement” means the termination of a director's service in accordance with any mandatory retirement policy adopted by the Board of Directors and then in effect.

(n)           "Option" means the right, granted to a Participant under Section 7, to purchase a specified number of Shares at the specified exercise price for a specified period of time under the Plan.  All Options will be non-qualified stock options.

(o)           "Participant" means any person who has been granted an Option which remains outstanding, has RSUs, Deferred Shares or deferred cash credited to his or her Account, or has elected to defer receipt of Director Compensation in the form of Deferred Shares or deferred cash
under the Plan.

(p)           "Plan Year" means, with respect to a Participant, the period commencing at the time of election of the director at an annual meeting of shareholders (or the election of a class of directors if the Company then has a classified Board of Directors), or the director's initial
appointment to the Board if not at an annual meeting of shareholders, and continuing until the close of business of the day preceding the next annual meeting of shareholders.

(q)           "Restricted Stock" means Shares granted under Section 6, subject to a risk of forfeiture and restrictions on transfer for a specified period.

  

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(r)           "RSU" or "Restricted Share Unit" means a Share Unit credited to a Participant's Account as a grant under Section 6, which is subject to a risk of forfeiture for a specified period.

(s)           "Shares" means shares of common stock of the Company and such other securities as may be substituted or resubstituted for Shares pursuant to Section 13(b).

(t)           "Share Unit" means a right to receive, at a specified settlement date, delivery of one Share or the cash Fair Market Value of a Share at that date, subject to the terms and conditions of the Plan.  Share Units in the form of RSUs shall be subject to a risk of
forfeiture, but Share Units in the form of Deferred Shares will be at all times non-forfeitable.  Share Units and related awards settleable in cash shall be referred to as "Cash-Settled" and those settleable in Shares shall be referred to as "Share-Settled."  A given award will be deemed to be a Share-Settled award unless it has been specifically designated as a Cash-Settled award in this Plan or otherwise by the Committee in writing.

 (u)           "Stock Appreciation Right" or "SAR" means the right, granted to the Participant under Section 7, to receive, upon exercise thereof, the excess of (i) the Fair Market Value of one Share on the date of exercise over
(ii) the grant price of the SAR as determined by the Board at the time of grant.

(v)           "Valuation Date" shall mean the close of business on the last business day of each calendar quarter and, in the case of any final distribution of deferred cash from a Participant's Account, the day as of which such distribution is made; provided, however, that the Administrator
may specify a different Valuation Date in order to coordinate the Participant's deferred cash balance with any actual investment by which the deferred cash balance is to be measured.

3.           Administration.

(a)           Authority.  Both the Board and the Administrator (subject to the ability of the Board to restrict the Administrator) shall administer the Plan in accordance with its terms, and shall have all powers necessary
to accomplish such purpose, including the power and authority to construe and interpret the Plan, to define the terms used herein, to prescribe, amend and rescind rules and regulations, agreements, forms, and notices relating to the administration of the Plan, and to make all other determinations necessary or advisable for the administration of the Plan.  The Board may delegate any or all of its functions to a committee of the Board, provided that the Board shall approve the form and amount of compensation
to directors under any provision of the Plan.  The Administrator may perform any function of the Board under the Plan, except for establishing the form and amount of compensation under any provision, adopting material amendments to the Plan under Section 13(e), and any other function from time to time specifically reserved by the Board to itself.  Any actions of the Board or the Administrator with respect to the Plan shall be final, conclusive, and binding upon all persons interested in the
Plan, except that any action of the Administrator will not be binding on the Board.  The Board and Administrator may each appoint agents and delegate thereto powers and duties under the Plan, except as otherwise limited by the Plan.

  

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(b)           Administrator.  The Administrator shall be the Executive Vice President, General Counsel and Secretary of the Company, or, if that officer is unavailable, the Executive Vice President, Chief Financial
Officer, or, if that officer is unavailable, the Executive Vice President and Director of Human Resources; provided, however, that the Board may designate a different individual or committee to serve as Administrator.  In any case in which a director is a member of the Administrator, such director shall not act on or decide any matter relating solely to himself or herself or any of his or her rights or benefits under the Plan.  No bond or other security need be required of the Administrator
or any member thereof in any jurisdiction.

(c)           Limitation of Liability.  Each member of the Board and the Administrator shall be entitled to, in good faith, rely or act upon any report or other information furnished to him or her by any officer or
other employee of the Company or any subsidiary, the Company's independent certified public accountants, or any executive compensation consultant, legal counsel, or other professional retained by the Company to assist in the administration of the Plan.  No member of the Board or the Administrator, nor any person to whom ministerial duties under the Plan have been delegated, shall be personally liable for any action, determination, or interpretation taken or made in good faith with respect to the Plan,
and any such person shall, to the extent permitted by law, be fully indemnified and protected by the Company with respect to any such action, determination, or interpretation.

4.           Shares Available Under the Plan.  Subject to adjustment as provided in Section 13(b), the total
number of Shares reserved and available for delivery under the Plan for awards granted on or after June 26, 2003 shall be 600,000; provided however, that, in no event may more than 50% of such Shares be delivered in connection with "full-value Awards."   For this purpose, "full-value Awards" means awards other than Options or SARs for which a Participant does not pay or surrender rights to payment equal to at least the Fair Market Value of the award determined at the date of grant.  Shares
subject to and to be delivered in connection with awards granted before June 26, 2003 which remain outstanding at that date shall be drawn from the shares reserved and available under the Plan at the time of grant.   The Shares delivered under the Plan may consist, in whole or in part, of authorized and unissued Shares or treasury Shares.  For purposes of this Section 4, Shares subject to an award under the Plan (including an award granted before June 26, 2003) that is canceled, expired,
forfeited, settled in cash, or otherwise terminated without a delivery of Shares to the Participant, including the number of Shares withheld or surrendered in payment of any exercise or purchase price of an award and including the number of Shares subject to an award but not delivered upon exercise or settlement of the award, will become available for awards under the Plan. Shares delivered in settlement of Deferred Shares shall not be deemed to be Shares drawn from the Shares reserved and available under this
Section 4, to the fullest extent permitted under Nasdaq Marketplace Rule 4350(i)(1)(A)(ii) and excluding Deferred Shares resulting from deferrals of Share-Settled RSUs.  Likewise, Shares delivered in settlement of Cash-Settled RSUs as to which the Director has validly elected to receive settlement in the form of actual Shares shall not be deemed to be Shares drawn from the Shares reserved and available under this Section 4, to the fullest extent permitted under Nasdaq Marketplace Rule 4350(i)(1)(A)(ii).

  

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5.           Eligibility.  Each non-employee director of the Company may participate in the Plan, subject to the terms hereof.  No person other than those
specified in this Section 5 will be eligible to participate in the Plan.  The Administrator will notify each person of his or her eligibility to participate in an elective feature of the Plan not later than 15 days prior to any deadline for filing an election form.

6.           Grants of Restricted Stock or RSUs.  Restricted Stock and/or RSUs shall be granted to non-employee directors in accordance with policies established
from time to time by the Board specifying the directors or classes of directors to be granted such awards, the number of shares of Restricted Stock or RSUs to be granted, and the time or times at which such awards shall be granted.  An award granted under this Section 6 shall become vested and non-forfeitable at such dates as may be specified by the Board, and shall have such other terms as may be established by the Board.

(a)           One-Time Grant Upon First Election as a Non-Employee Director. The policy with respect to newly appointed or elected non-employee directors under this Section 6, effective
as of June 21, 2007 and continuing until modified or revoked by the Board, shall be as follows:

	
  
	
(i)
	
Award Type and Amount.  Effective June 21, 2007, one-time grants of Restricted Stock to each newly appointed or elected non-employee director were discontinued.

	
  
	
(ii)
	
Vesting and Forfeiture Terms.   With respect to Restricted Stock granted before June 21, 2007 under this Section 6(a), one-third of the number of Shares of Restricted Stock shall vest and become non-forfeitable at the close of business on June 1 of each of the three calendar years following the date of grant of such award, rounded to
the nearest number of whole Shares, subject to the following:

	
  
	
(A)
	
In the event of a Change in Control or termination of the Participant's service as a director due to death or Disability, the award, if not previously vested or forfeited, shall immediately vest and become non-forfeitable in full.

	
  
	
(B)
	
In the event of termination of the Participant's service as a director due to Mandatory Retirement by the Participant, the award, if not previously vested or forfeited, shall immediately vest and become non-forfeitable as to that number of Shares of Restricted Stock as would have vested and become non-forfeitable if the Participant had continued to serve as a director through the anticipated date of the next annual
meeting of shareholders.

	
  
	
Unless otherwise determined by the Board, an award of Restricted Stock that has not vested at or before the time of termination of the Participant's service as a director  (this would include all unvested Restricted Stock in the event of a director's removal from service) will cease to vest and will be forfeited upon such termination; provided, however, that, if a director's service would be terminated
as a result of the

  

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failure of such director to be reelected at an annual meeting of shareholders after agreeing to be nominated for reelection, such service will be deemed to terminate at the end of a 60-day period following such annual meeting if the director has not otherwise been appointed or elected to a seat on the Board and accepted such appointment
or election.

(b)            Annual Grant to a Non-Employee Director.  The policy with respect to annual grants of RSUs under this Section 6, effective as of June 21, 2007 and continuing
until modified or revoked by the Board, shall be as follows:

	
  
	
(i)
	
Award Type and Amount.  At the date of the 2007 Annual Meeting of Shareholders and each subsequent annual meeting of shareholders (subject to delayed grant as specified below) at which a director is elected or reelected as a member of the Board (or at which members of another class of directors are elected or reelected, if the Company then
has a classified Board), RSUs shall be automatically granted to each non-employee director eligible to participate in the Plan at the close of business on that date.  If an election of directors at an annual meeting is contested, the date of grant for all eligible directors shall be the date following the annual meeting that the independent Judge of Elections reports the results of the election to the Company, unless otherwise determined by the Board.  The number of such RSUs to be granted
shall equal $135,000 (or such lesser amount as may be specified by the Board or Compensation Committee) divided by the Fair Market Value of a Share on the date of grant.  If a non-employee director is initially elected or appointed at a date that does not coincide with the date of an annual meeting and does not fall within 30 days preceding an announced annual meeting, if he or she is eligible to participate in the Plan at that date, he or she will be automatically granted the number of RSUs equal to
(A) $135,000 (or such lesser amount as may be specified by the Board or Compensation Committee) multiplied by a fraction the numerator of which is the number of days from the date of grant to the anniversary of the most recent annual meeting and the denominator of which is 365, divided by (B) the Fair Market Value of a Share on the date of grant, with the resulting number of RSUs rounded to the nearest whole RSU; provided, however, that a director elected or appointed within 60 days after an annual meeting at
which the director was not reelected will receive the same number of RSUs as were granted at or following the annual meeting to each other non-employee director.  If at the time of grant of RSUs under this Section 6(b) on or after May 8, 2008 there remains insufficient Shares available for the number of Share-Settled RSUs anticipated to be granted during that fiscal year (taking into account previously granted and outstanding Share-Settled awards), (i) in fiscal 2009 the maximum number of Share-Settled
RSUs granted to each non-employee director will be 3,000, and any RSUs to be granted in excess of that number will be Cash-Settled RSUs, and (ii) after fiscal 2009 (or earlier at any time that fewer than 3,000 Shares remain available per director for new awards to be granted at a given date) all RSUs to be granted to a non-employee director will be Cash-Settled RSUs.

  

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(ii)
	
Vesting and Forfeiture Terms.   Such award shall become vested and non-forfeitable as to all RSUs at the close of business on June 1 of the year following the date of grant, subject to the following:

	
  
	
(A)
	
In the event of a Change in Control or termination of the Participant's service as a director due to death or Disability, the award, if not previously vested or forfeited, shall immediately vest and become non-forfeitable in full.

	
  
	
(B)
	
In the event of termination of the Participant's service as a director due to a voluntary termination of service or Mandatory Retirement by the Participant, the award, if ­­not previously vested or forfeited, shall immediately vest and become non-forfeitable as to that number of RSUs equal to the total number of RSUs multiplied by a fraction the numerator of which is the number of days from the date of grant
to the date of termination of service and the denominator of which is the number of days from the date of grant until June 1 of the year following the date of grant of such award (such fraction in no event will exceed one).  This provision will also apply in the case of a director who fails to be reelected as a director at an annual meeting of shareholders after agreeing to be nominated for reelection, provided, however, that, in such a case the director's service will be deemed to terminate only if,
at the end of a 60-day period following such annual meeting (but not later than December 31 if that date falls within the 60-day period), the director has not otherwise been appointed or elected to a seat on the Board and accepted such appointment or election.

Unless otherwise determined by the Board, an award of RSUs that has not vested at or before the time of termination of the Participant's service as a director (this would include all unvested RSUs in the event of a director's removal from service) as provided herein will cease to vest and will be forfeited upon such termination.

(c)           Dividends and Dividend Equivalents.  Unless otherwise determined by the Board, cash dividends on Restricted Stock which are not large, special and non-recurring and which are paid prior to the lapse of
the risk of forfeiture on such Restricted Stock shall be paid to the Participant when paid to the Company's shareholders.  Other dividends will be payable or not payable and subject to adjustment to the Restricted Stock in accordance with Section 13(b).  Dividend Equivalents will be credited on RSUs in accordance with Section 9(a), with the resulting additional RSUs subject to the same terms, including risk of forfeiture, as the RSUs on which the dividend equivalent was paid; provided, however,
that such dividend equivalents may instead be paid in cash, subject to such terms as the Administrator may determine, if reinvestment of dividends is determined by the Administrator to be administratively burdensome.

 

  

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(d)           Other Restricted Stock Terms.  Restricted Stock shall be nontransferable by the Participant at any time that the award remains subject to a risk of forfeiture.  Restricted Stock granted under
the Plan may be evidenced in such manner as the Administrator shall determine.  Unless otherwise determined by the Administrator, if certificates representing Restricted Stock are registered in the name of the Participant, such certificates shall bear an appropriate legend referring to the terms, conditions, and restrictions applicable to such Restricted Stock, the Company shall retain physical possession of the certificate, and the Participant shall have delivered a stock power to the Company, endorsed
in blank, relating to the Restricted Stock.  Upon the lapse of restrictions on Restricted Stock, the Share certificate shall be released by the Company to the Participant with any legend relating to such restrictions removed.

(e)           Settlement of RSUs.

	
  
	
(i)
	
General Rule. Except as provided in (ii) – (v) below, RSUs shall be settled promptly at the time the RSUs become vested (and in any case within 90 days thereafter); provided, however, that settlement of RSUs shall be subject to delayed settlement if and to the extent specified in Section 10(d), (e) or (f) below.

	
  
	
(ii)
	
Deferral Election.  A director may elect to defer settlement of RSUs by timely filing an election with the Company as provided below:

	
A.  
	
Timing of Elections. A deferral election must generally be made by the end of the calendar year prior to the Plan Year in which the RSU is granted.  However, a newly eligible Participant (within the meaning of Treas. Reg. § 1.409A-2(a)(7)) may make a deferral election with
respect to an initial grant of RSUs under Section 6(b) within 30 days of election or appointment to the Board (which will apply only to the portion of the RSUs attributable to service by the director after the election has been filed), or at such other time as is permitted under Section 409A of the Code.

	
B.  
	
Effect and Irrevocability of Elections.  Elections relating to RSUs filed before the calendar year in which the Plan Year to which they relate begins, other than those subject to Section 9(c), shall become irrevocable immediately before the beginning of such calendar year unless
the Administrator specifies an earlier time.  Elections subject to Section 9(c) shall become irrevocable in accordance with Section 9(c).  Other elections shall become irrevocable upon filing or at such other time as may be specified by the Administrator.  The latest election filed with the Administrator shall be deemed to supersede all prior inconsistent elections that remain revocable at the time of filing of the latest election.

  

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(iii)
	
Matters To Be Elected.  The Administrator will provide a form or forms of election which will permit a director to make appropriate elections with respect to all relevant matters under this Section 6.  This election form may be included in the document evidencing the grant of RSUs.

	
  
	
(iv)
	
Permitted Elections as to Settlement.  Elections as to the time of settlement of deferred RSUs shall conform to the terms of Section 9(c).  A Director will be permitted to elect to receive shares in settlement of non-deferred Cash-Settled RSUs rather than cash.  Such an election must be made in advance of the applicable
vesting date of such Cash-Settled RSUs and at such time or times as may be specified by the Administrator.  Such an election will not be permitted to defer the time of settlement of the RSUs, and cannot be made for Cash-Setted RSUs that are subject to a valid deferral election.

 

	
  
	
(v)
	
Forfeiture Risk.  A validly deferred RSU will remain forfeitable as provided herein until the RSU has become vested.  Thereafter, although it will still be referred to as an RSU for purposes of the Plan, it will be non-forfeitable.

	
  
	
(vi)
	
Form of Settlement.  RSUs that are validly deferred will, upon such deferral, be treated as Deferred Shares and, to the fullest extent permitted under Nasdaq Marketplace Rule 4350(i)(1)(A)(ii), such Deferred Shares will be settled solely by delivery of actual Shares not drawn from the Shares reserved under Section 4, provided that Cash-Settled
RSUs, if designated as Director Compensation by the Administrator, may be deferred in accordance with Section 8.  In the case of Cash-Settled RSUs to be settled by delivery of actual Shares at the election of the Director, to the fullest extent permitted under Nasdaq Marketplace Rule 4350(i)(1)(A)(ii), such Cash-Settled RSUs shall be settled solely by delivery of actual Shares not drawn from the Shares reserved under Section 4.

7.           Grants of Options and SARs.   Options and/or SARs shall be granted to non-employee directors in accordance with policies established from time to time
by the Board specifying the directors or classes of directors to be granted such awards, the number of shares to be subject to Options or SARs, and the time or times at which such awards shall be granted, vested, exercisable, and expire, and such other terms as may be established by the Board.

(a)           Annual Grant of Option to a Non-Employee Director. The policy with respect to annual grants of Options under this Section 7, effective as of June 21, 2007 and continuing
until modified or revoked by the Board, shall be as follows:

	
  
	
(i)
	
Award Type and Amount.  Effective June 21, 2007, annual grants of Options to non-employee directors were discontinued.

  

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(ii)
	
Vesting and Forfeiture Terms.  With respect to each Option granted before June 21, 2007 under this Section 7(a), the Option shall vest and become exercisable in full at the close of business on the June 1 following the date of grant of such award, subject to the following:

	
  
	
(A)
	
If such Option has not previously vested or been forfeited, it shall vest and become exercisable in full upon a Change in Control, upon the Participant's death, or upon the termination of the Participant's service as a director due to Disability.

	
  
	
(B)
	
If such Option has not previously vested or been forfeited, it shall vest and become exercisable as to the "Pro Rata Shares" upon a termination of the Participant's service as a director due to a voluntary termination of service (i.e., excluding termination due to Disability or Mandatory Retirement).  For purposes of this Section 7(a)(ii), the "Pro Rata Shares" shall be the number of Shares determined by
multiplying (1) the number of Shares as to which the Option would have vested and become exercisable if the Participant had continued to serve as a director through the anticipated date of the next annual meeting of shareholders by (2) a fraction the numerator of which is the number of days from the date of the latest annual meeting of shareholders through the date of the Participant's termination and the denominator of which is 365 (rounded up to the next whole share).

	
  
	
(C)
	
Any portion of an Option that has not vested and become exercisable at the date of a director's Mandatory Retirement shall remain outstanding and become exercisable in accordance with the first sentence of this Section 7(a)(ii), provided that such Option shall become exercisable in full upon a Change in Control or the death of the director, and each such portion of the Option that becomes exercisable after such Mandatory
Retirement shall expire at the end of the one-year period following the date it becomes exercisable as provided in Section 7(a)(iii).

Except in the case of a Mandatory Retirement or as otherwise determined by the Board, any portion of a Participant's Option that has not vested and become exercisable at or before the time of termination of the Participant's service as a director  (this would include the entire unvested Option in the event of a director's removal
from service) as provided herein will cease to vest and will be forfeited upon such termination.

  

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(iii)
	
Option Term.  With respect to each Option granted before June 21, 2007 under this Section 7(a), the Option, to the extent not previously forfeited, shall expire at the earlier of (i) ten years after the date of grant (or such earlier date as may be specified by the Board prior to grant), or (ii) one year after the Participant ceases to serve
as a director of the Company for any reason except that, in the case of a termination due to Mandatory Retirement, any portion of the Option that becomes exercisable at a date following the Mandatory Retirement, as provided in Section 7(a)(ii)(C), shall expire one year after the date such portion vests and becomes exercisable.  (Note: Portions of any Option that were vested and exercisable at the date of Mandatory Retirement will expire one year after such Mandatory Retirement, but in no event later
than ten years after the date of grant).

(b)           Exercise Price and Grant Price.  The exercise price per Share purchasable under an Option will be equal to 100% of the Fair Market Value of a Share on the
date of grant of the Option.  The grant price per Share subject to an SAR will be equal to 100% of the Fair Market Value of a Share on the date of grant of the SAR.

(c)           Option and SAR Maximum Term. The maximum term of an Option or SAR granted hereunder shall be ten years
from the date of grant.

 

        (d)           Payment of Exercise Price.  The exercise price of an Option shall be paid to the Company either in cash or by the surrender of Shares or the withholding of Shares
from those deliverable upon exercise of the Option, or any combination thereof, or in such other lawful form or manner as may be established by the Administrator; provided, however, that, unless otherwise determined by the Administrator, Shares shall not be surrendered or withheld in payment of the exercise price if such surrender or withholding would result in additional accounting expense to the Company.

8.           Deferral of Fees In Deferred Shares and Deferred Cash.  Each director of the Company who is eligible under Section 5 may elect, in accor­dance
with Section 8(a), to defer receipt of Director Compensation in the form of Deferred Shares under Section 8(b) or deferred cash un­der Section 8(c).

  

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(a)           Elections.  A director shall elect to participate in the deferral feature under this Section 8 and the terms of such participation by timely filing an election with the Company as provided below:

	
  
	
(i)
	
Timing of Elections. A deferral election must generally be made by the end of the calendar year prior to the Plan Year in which the Director Compensation will be earned.  However, a newly eligible Participant (within the meaning of Treas. Reg. § 1.409A-2(a)(7)) may make a deferral election with respect to Director's initial Director Compensation
(earned after the date of such election) within 30 days of election or appointment to the Board, or at such other time as is permitted under Section 409A of the Code.

	
  
	
(ii)
	
Effect and Irrevocability of Elections.  Elections shall be deemed continuing and therefore applicable to Plan Years after the initial Plan Year covered by the election, until the election is modified or superseded by the Participant.  Elections other than those subject to Section 9(c) shall become irrevocable at the commencement
of the calendar year which includes the first day of the Plan Year to which an election relates.  Elections relating to the time and manner of settlement of an Account shall become irrevocable at the specified deadline for the filing of such elections under Section 9(c) unless the Administrator specifies a different time.  The latest election filed with the Administrator shall be deemed to supersede all prior inconsistent elections that remain revocable at the time of filing of the latest
election prior to the beginning of a Plan Year or at such other date as may be specified by the Administrator, provided that any date so specified shall ensure effective deferral of taxation and otherwise comply with applicable laws.

	
  
	
(iii)
	
Matters To Be Elected.  The Administrator will provide a form or forms of election which will permit a director to make appropriate elections with respect to all relevant matters under this Section 8 and Section 9.

	
  
	
(iv)
	
Time of Filing Elections.  An election must be received by the Administrator prior to the deadline specified by the Administrator.  Under no circumstances may a Participant defer compensation to which the Participant has attained, at the time of deferral, a legally enforceable right to current receipt of such compensation.

(b)           Deferral of Director Compensation in the Form of Deferred Shares.  If a Participant has elected to defer receipt of a specified amount of Director Compensation in the form of Deferred Shares, a number
of Deferred Shares shall be credited to the Participant's Account, as of the date such Director Compensation otherwise would have been payable to the Participant but for such election to defer, equal to (i) such amount otherwise payable divided by (ii) the Fair Market Value of a Share at that date.  Deferred Shares credited under this Section 8(b) shall be subject to the terms and conditions of Deferred Shares specified in Sections 9(a), 9(b), and 9(c).  The right and interest of each Participant
in Deferred Shares credited to the Participant's Account under this Section 8(b) at all times will be nonforfeitable.

  

13

  

(c)           Deferral of Director Compensation in the Form of Deferred Cash.  If a Participant has elected to defer receipt of a specified amount of Director Compensation  in the form of deferred cash, an
amount equal to such specified amount shall be credited to the Participant's Account as of the date such Director Compensation otherwise would have been payable to the Participant but for such election to defer.  Deferred cash credited to a Participant's Account may be invested in such investment vehicles as may be designated from time-to-time by the Board or a Board committee.  The terms of any such investment (including relating to timing, crediting of earnings and losses, and reallocation
among investment vehicles) shall be subject to such rules, regulations and determinations as may be adopted by the Administrator. The Company may link the earnings and losses under designated investment vehicles to the returns of actual investments in such vehicles, which investments may be made directly by the Company or through a rabbi trust or other intermediary; provided, however, that the Participant shall have no rights with respect to any specific assets that would cause the Participant to be other than
an unsecured creditor of the Company or to be otherwise in constructive receipt of any cash or property.  The right and interest of each Participant relating to deferred cash credited to his or her Account at all times will be nonforfeitable.

(d)           Cessation of Service as a Director.  If any Director Compensation otherwise subject to an election would be paid to a Participant after he or she has ceased to serve as a director, such payment shall not
be subject to deferral under this Section 8, but shall instead be paid in accordance with the Company's regular non-employee director compensation policies.

9.           Other Terms of Accounts.

(a)           Dividend Equivalents on Share Units.  Dividend equivalents will be credited on Share Units (i.e., RSUs and Deferred Shares) credited to a Participant's Account as follows:

	
  
	
(i)
	
Cash and Non-Share Dividends.  If the Company declares and pays a dividend on Shares in the form of cash or property other than Shares, then a number of additional Share Units shall be credited to a Participant's Account as of the designated crediting date for such dividend equal to (i) the number of Share Units credited to the Account as
of the record date for such dividend, multiplied by (ii) the amount of cash plus the Fair Market Value of any property other than Shares actually paid as a dividend on each Share at such payment date, divided by (iii) the Fair Market Value of a Share at such designated crediting date.

	
  
	
(ii)
	
Share Dividends and Splits.  If the Company declares and pays a dividend on Shares in the form of additional Shares, or there occurs a forward split of Shares, then a number of additional Share Units shall be credited to the Participant's Account as of the payment date for such dividend or forward Share split equal to (i) the number of Share
Units credited to the Account as of the record date for such dividend or split multiplied by (ii) the number of additional Shares actually paid as a dividend or issued in such split in respect of each Share.

  

14

  

	
  
	
(iii)
	
Designated Crediting Date.  The Administrator may designate the crediting date for dividend equivalents under Section 9(a)(i), which may be not earlier than the dividend payment date and not later than six months after the dividend payment date.  No interest will be credited on cash amounts between the dividend payment date and the
designated crediting date.

(b)           Reallocation of Accounts.  A Participant shall have no right to have amounts credited as cash in his or her Account reallocated or switched to Share Units in such Account or amounts credited as Share Units
in such Account reallocated or switched to deferred cash in such Account, unless otherwise determined by the Board.  The foregoing notwithstanding, in the event of a Change in Control, unless otherwise specifically elected by the Participant prior to the Change in Control, the Participant's Share Unit balance in his or her Account shall be automatically converted into deferred cash based on the Fair Market Value of Shares as of the close of business on the day of the Change in Control (or, if no Shares
remain outstanding at that time, as of the close of business on the day preceding the Change in Control).  If and to the extent authorized under Section 8(c), amounts of deferred cash may be reallocated among investment alternatives made available for cash deferrals under the Plan.

(c)           Elections as to Settlement.  Each Participant, at the time the Participant makes a deferral election under Section 6(e) or Section 8(a), shall file an election with the Administrator specifying the time
or times at which the Participant's Account will be settled, following the Participant's termination of service as a director of the Company, and whether distribution will be in a single lump sum or in a number of annual installments not exceeding ten; provided, however, that, if no valid election has been filed as to the time of settlement of a Participant's Account or any portion thereof, such Account or portion thereof shall be distributed in a single lump sum on the first business day of the year following
the year in which the Participant ceases to serve as a director.  If installments are elected, such installments must be annual installments commencing not later than the first year following the year in which the Participant ceases to serve as a director (on such annual installment date as may be specified by the Administrator) and extending over a period not to exceed ten years.

	
  
	
(i)
	
Matters Covered by Election.  Subject to the terms of the Plan, the Administrator shall determine whether all deferrals under the Plan must be subject to a single election as to the time or times of settlement, or whether settlement elections may relate to deferrals relating to a specified Plan Year.  If the Administrator permits
elections to relate to a specified Plan Year, such election shall apply to the amounts originally credited in respect of such Plan Year and to any additional amounts credited as dividend equivalents or interest in respect of such originally credited amounts and previously credited additional amounts.

  

15

  

	
  
	
(ii)
	
Modifying Elections.  A Participant may modify a prior election as to the time at which a Participant's Account (or portion thereof) will be settled and/or the form of settlement (i.e., lump sum or installments, or the number of installments) at any time by filing a new election with the Administrator, subject to, and in accordance with paragraphs
(A) and (B), below.  The foregoing notwithstanding, elections under this Section 9(c) shall not be permitted, if permitting such an election would result in constructive receipt by the Participant of compensation in respect of the Participant's Account prior to the actual settlement of such Account or would violate Section 409A of the Code.

	
  
	
(A)
	
Second Elections.  To the extent permitted under Section 409A of the Code and the regulations issued thereunder, a Participant may change the form of settlement (i.e., lump sum or installments, or the number of installments) and/or the settlement date selected under a deferral election,
provided (a) the new election must be must be filed with the Administrator at least 12 full months before settlement would occur under the election in place prior to the change, (b) the new election is not effective for a period of 12 months from the date made, and (c) the settlement date under the modified election defers settlement for at least 5 years from the date settlement would otherwise have occur.

	
  
	
(B)
	
Special 2006 – 2008 Elections.  Notwithstanding anything in Section 6, Section 8 or this Section 9 to the contrary, to the extent permitted under Section 409A of the Code and the regulations issued thereunder, a Participant may make a new election on or before December 31, 2008 as to the settlement date and/or form (i.e., lump sum or
installments, or the number of installments) of deferred RSUs, deferred cash and/or Deferred Shares credited to the Participant's Account.  However a Participant shall not be permitted in a given year to change an election in a manner that will defer settlement of amounts that the Participant otherwise would have received in that year or cause payments to be made in that year pursuant to the changed election.

(d)           Statements.  The Administrator will furnish statements to each Participant reflecting the amounts credited to a Partici­pant's Account, transactions therein, and other related information no less frequently
than once each calendar year.  Statements may be combined with other information, including information with respect to other compensation plans, being provided to the Participant.

(e)           Fractional Shares.  The amount of Share Units credited to an Account shall include fractional Shares calculated to at least three decimal places.

  

16

  

10.           Settlement of Accounts.  The Company will settle a Participant's Account by making one or more distributions to the Participant (or his or her Beneficiary,
following Participant's death) at the time or times, in a lump sum or installments, as specified in the Participant's election(s) filed in accordance with Sections 6(e) and 9(c); provided, however, that an Account will be settled at times earlier than those specified in such election in accordance with Sections 10(b), or 10(c); and provided further, that RSUs as to which no valid election to defer has been filed will be settled at the date specified in connection with the award under Section 6.

(a)           Form of Distribution.  Distributions in settlement of a Participant's Account shall be made only in cash with respect to deferred cash, in Shares with respect to Share-Settled Share Units (including Deferred
Shares as specified herein) and in cash with respect to Cash-Settled Share Units.

(b)           Death or Disability.  If a Participant ceases to serve as a director due to death or Disability or dies prior to distribution of all amounts from his or her Account, the Company shall make a single lump-sum
distribution to the Participant or his or her Beneficiary.  Any such distribution shall be made as soon as practicable (and in any case within 90 days) following the Participant's cessation of service due to death or Disability.

(c)           Financial Emergency and Other Payments.  Other provisions of the Plan notwithstanding, if, upon the written application of a Participant, the Board determines that the Participant has suffered an unforeseeable
financial emergency, the Board may direct the payment to the Participant all or a portion of the balance of the Participant's Account and the time and manner of such payment.  For purposes of this Plan, an unforeseeable financial emergency is an unexpected need for cash arising from an illness, casualty loss, sudden financial reversal, or other such unforeseeable occurrence. Cash needs arising from foreseeable events such as the purchase of a house or education expenses for children shall not be considered
to be the result of an unforeseeable financial emergency.  It is intended that the Committee's determination as to whether a Participant has suffered an "unforeseeable financial emergency" and the amount of any distribution related to such emergency shall be made consistent with the requirements under Code Section 409A.

 (d)           Distribution Upon a Change in Control.  Other provisions of the Plan notwithstanding, settlement of RSUs and Accounts (other than Grandfathered Accounts)
in the event of a Change in Control will occur only if an event relating to the Change in Control constitutes a change in ownership or effective control of the Company or a change in the ownership of a substantial portion of the assets of the Company within the meaning of Treas. Reg. § 1.409A-3(i)(5).  In such event, the Company shall make a single lump-sum distribution to the Participant in settlement of his or her RSUs and in settlement of his or her Account as promptly as practicable and in
any case not later than 90 days following the event.  If a Change in Control occurs without triggering a distribution under the preceding sentence, the distribution will instead occur upon the occurrence of the next following event that, under Code Section 409A, would be a permissible event triggering distributions of deferred compensation.

  

17

  

(e)           Distributions in Certain Cases if Director Has Become an Employee.  Other provisions of the Plan notwithstanding, if a director is a “Key Employee” at the time of settlement of his or her RSUs
or Account, any such settlement subject to Section 409A (a)(2)(A)(i) that would be made within six months following a separation from service of the Director shall instead occur at the expiration of the six-month period under Section 409A(a)(2)(B)(i).  If distributions are delayed pursuant to this provision, the accumulated amounts withheld on account of Section 409A will be paid on the first business day after the end of the six-month period.  If the Participant dies during the six-month
period, the withheld amounts shall be paid to the Participant’s Beneficiary as soon as practicable (and in any case within 90 days) after the Participant’s death.  In the case of installments, this delay shall not affect the timing of any installment otherwise payable after the six-month delay period.  The term “Key Employee” shall mean an employee who, at any time during the 12-month period ending on the identification date, is a “specified employee” under
section 409A of the Code, as determined by the Committee or its delegate.  The determination of Key Employees, including the number and identity of persons considered specified employees and the identification date, shall be made by the Committee or its delegate in accordance with the provisions of sections 416(i) and 409A of the Internal Revenue Code and the regulations issued thereunder.  This paragraph 10(e) shall not apply to Grandfathered Accounts, which shall continue to be subject to,
and governed by, the terms of the Plan as in effect on December 31, 2004.

 

(f)           Separation from Service.   Other provisions of the Plan notwithstanding, settlement of RSUs and Accounts triggered by a Participant’s termination of service and intended to qualify under Section
409A(a)(2)(A)(i) shall be made only at the time that the Participant has had a “separation from service” within the meaning of Section 409A(a)(2)(A)(i) (or earlier at such time, after a termination of service as a director but subject to Section 13(h) below, that there occurs another event triggering a distribution under the Plan or the applicable Award agreement in compliance with Section 409A).

11.           Limitations on Deferrals and Related Participant Rights.  The rights of a Participant with respect
to deferrals under Sections 6, 8, 9, and 10, including any right to modify an election as to the time of settlement under Section 9(c), shall be limited or suspended at any time if and to the extent required by law or if the existence of such right would cause a Participant to be deemed to be in constructive receipt of amounts credited to his or her Account or otherwise cause the Participant's deferral of taxation with respect to compensation deferred hereunder to be ineffective.  The Plan is intended
to comply with the applicable requirements of Code Section 409A and its corresponding regulations and related guidance, and shall be maintained and administrated in accordance with Code Section 409A.  Notwithstanding anything in the Plan to the contrary, distributions from the Plan may only be made in a manner, and upon an event, permitted by Code Section 409A, and the Company shall have no authority to accelerate distributions relating to deferrals subject to Code Section 409A in excess of the authority
permitted under Section 409A.

  

18

  

12.           Definitions Relating to Change in Control.  For purposes of this Plan, the following definitions shall apply:

  (a)         "Beneficial Owner," "Beneficially Owns," and "Beneficial Ownership" shall have the meanings ascribed to such terms for purposes of Section 13(d) of the Exchange Act and the rules thereunder, except that, for purposes of this Section 12, "Beneficial Ownership" (and the related
terms) shall include Voting Securities that a Person has the right to acquire pursuant to any agreement, or upon exercise of conversion rights, warrants, options or otherwise, regardless of whether any such right is exercisable within 60 days of the date as of which Beneficial Ownership is to be determined.

 

   (b)         "Change in Control" means and shall be deemed to have occurred if, after June 21, 2007,

	
  
	
(i)
	
any Person, other than the Company or a Related Party, acquires directly or indirectly the Beneficial Ownership of any Voting Security of the Company and immediately after such acquisition such Person has, directly or indirectly, the Beneficial Ownership of Voting Securities representing 20 percent or more of the total voting power of all the then-outstanding Voting Securities; or

	
  
	
(ii)
	
those individuals who as of June 21, 2007 constitute the Board or who thereafter are elected to the Board and whose election, or nomination for election, to the Board was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors as of June 21, 2007 or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority
of the members of the Board; or

	
  
	
(iii)
	
there is consummated a merger, consolidation, recapitalization or reorganization of the Company, a reverse stock split of outstanding Voting Securities, or an acquisition of securities or assets by the Company (a "Transaction"), other than a Transaction which would result in the holders of Voting Securities having at least 80 percent of the total voting power represented by the Voting Securities outstanding immediately
prior thereto continuing to hold Voting Securities or voting securities of the surviving entity having at least 60 percent of the total voting power represented by the Voting Securities or the voting securities of such surviving entity outstanding immediately after such Transaction and in or as a result of which the voting rights of each Voting Security relative to the voting rights of all other Voting Securities are not altered; or

	
  
	
(iv)
	
there is implemented or consummated a plan of complete liquidation of the Company or a sale or disposition by the Company of all or substantially all of the Company's assets other than any such transaction which would result in Related Parties owning or acquiring more than 50 percent of the assets owned by the Company immediately prior to the transaction.

  

19

  

   (c)         "Person" shall have the meaning ascribed for purposes of Section 13(d) of the Exchange Act and the rules thereunder.

  

   (d)         "Related Party" means (i) a majority-owned subsidiary of the Company; or (ii) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or any majority-owned subsidiary of the Company; or (iii) a corporation owned directly or indirectly
by the shareholders of the Company in substantially the same proportion as their ownership of Voting Securities; or (iv) if, prior to any acquisition of a Voting Security which would result in any Person Beneficially Owning more than ten percent of any outstanding class of Voting Security and which would be required to be reported on a Schedule 13D or an amendment thereto, the Board approved the initial transaction giving rise to an increase in Beneficial Ownership in excess of ten percent and any subsequent
transaction giving rise to any further increase in Beneficial Ownership; provided, however, that such Person has not, prior to obtaining Board approval of any such transaction, publicly announced an intention to take actions which, if consummated or successful (at a time such Person has not been deemed a "Related Party"), would constitute a Change in Control.

   (e)         "Voting Securities" means any securities of the Company which carry the right to vote generally in the election of directors.

   13.         General Provisions.

   (a)         Limits on Transferability.  Restricted Stock prior to the lapse of restrictions, Options, RSUs, Deferred Shares, deferred cash, and all other rights under the Plan will not be transferable by a Participant
except by will or the laws of descent and distribution, or to a Beneficiary in the event of a Participant's death, and will not otherwise be subject to alienation, anticipation, encumbrance, garnishment, attachment, levy, execution or other legal or equitable process, nor subject to the debts, contracts, liabilities or engagements, or torts of any Participant or his or her Beneficiary.  Any attempt to alienate, sell, transfer, assign, pledge, garnish, attach or take any other action subject to legal
or equitable process or encumber or dispose of any interest in the Plan shall be void.  The foregoing notwithstanding, the Administrator may permit a Participant to transfer Options and related rights to one or more trusts, partnerships, or family members during the lifetime of the Participant solely for estate planning purposes, but only if and to the extent then consistent with the registration of any offer and sale of Shares related thereto on Form S-8, Form S-3, or such other registration form of
the Securities and Exchange Commission as may then be permitted to be filed with respect to the Plan.  The Company may rely upon the beneficiary designation last filed in accordance with this Section 13(a).

  

20

  

  (b)         Adjustments.  In the event that any large, special and non-recurring dividend or other distribution in the form of cash or other property, recapitalization, forward or reverse split, Share dividend,  reorganization,
merger, consolidation, spin-off, combination, repurchase, share exchange, liquidation, dissolution or other similar corporate transaction or event affects the Shares such that an adjustment is determined by the Board to be appropriate in order to prevent dilution or enlargement of a Participant's rights under the Plan, then the Board shall, in such manner as it may deem equitable, adjust any or all of (i) the number and kind of Shares reserved and available for delivery under the Plan and to be subject to Restricted
Stock, Options, SARs, RSUs and Deferred Shares thereafter granted or credited, (ii) the limits upon the number of Shares that may be subject to Restricted Stock, RSUs, Options and SARs automatically granted under Sections 6 and 7 and any specification of the number automatically granted, (iii) the number and kind of Shares outstanding as Restricted Stock, (iv) the number and kind of Shares deliverable upon exercise of outstanding Options and SARs, and the exercise price per Share thereof (provided that no fractional
Shares will be delivered upon exercise of any Option or SAR), and (v) the number and kind of Shares then credited as RSUs and Deferred Shares (taking into account any Share Units credited as dividend equivalents under Section 9(a)) and by reference to which RSUs and Deferred Shares are valued under the Plan.

(c)       Receipt and Release.  Payments (in any form) to any Participant or Beneficiary in accordance with the provisions of the Plan shall, to the extent thereof, be in full satisfaction of all claims for the compensation deferred and
relating to the Account to which the payments relate against the Company, the Board, or the Administrator, and the Administrator may require such Participant or Beneficiary, as a condition to such payments, to execute a receipt and release to such effect.  In the case of any payment under the Plan of less than all amounts then credited to an Account in the form of RSUs or Deferred Shares, the amounts paid shall be deemed to relate to the RSUs or Deferred Shares credited to the Account at the earliest
time.

(d)           Compliance.  The Company shall have no obligation to settle any Account of a Participant (in any form) until all legal and contractual obligations of the Company relating to establishment of the Plan and
such settlement shall have been complied with in full.  In addition, the Company shall impose such restrictions on Shares delivered to a Participant hereunder and any other interest constituting a security as it may deem advisable in order to comply with the Securities Act of 1933, as amended, the requirements of the Nasdaq National Market or any other stock exchange or automated quotation system upon which the Shares are then listed or quoted, any state securities laws applicable to such a transfer,
any provision of the Company's Articles of Incorporation or By-Laws, or any other law, regulation, or binding contract to which the Company is a party.

  

21

  

(e)      Changes to the Plan and Awards.  The Board may amend, suspend or discontinue the Plan, the authority to grant awards under the Plan, or any outstanding award (and any agreement relating thereto) without the consent of any other party,
including shareholders or Participants; provided, however, that any amendment shall be subject to shareholder approval if and to the extent then required under applicable rules of the Nasdaq National Market or any other stock exchange or automated quotation system upon which the Shares may then be listed or quoted; and provided further, that, without the consent of an affected Participant, no such action may materially impair the rights of such Participant under any award theretofore granted.  The foregoing
notwithstanding, the Board, in its sole discretion, may terminate the Plan (in whole or in part).  If the Board terminates the Plan, amounts credited the Participant's Account shall be paid in accordance with the terms of the Plan.  In the event of a Change in Control that constitutes a “change in control” event within the meaning of Code Section 409A, the Plan shall terminate as of the date of the Change in Control and the amounts credited to the Participant's Account shall be
distributed as soon as practicable thereafter consistent with Code Section 409A.

Without the prior approval of shareholders, the Committee will not amend or replace previously granted Options in a transaction that constitutes a "repricing."   For this purpose, a "repricing" means: (1) amending the terms of an Option after it is granted to lower its exercise price; (2) any other action that is treated
as a repricing under generally accepted accounting principles; and (3) canceling an Option at a time when its strike price is equal to or greater than the fair market value of the underlying Stock, in exchange for another Option, Restricted Stock, or other equity, unless the cancellation and exchange occurs in connection with a merger, acquisition, spin-off or other similar corporate transaction.  A cancellation and exchange described in clause (3) of the preceding sentence will be considered a repricing
regardless of whether the Option, Restricted Stock or other equity is delivered simultaneously with the cancellation, regardless of whether it is treated as a repricing under generally accepted accounting principles, and regardless of whether it is voluntary on the part of the Option holder.

(f)           Unfunded Status of Plan; Creation of Trusts.  The Plan is intended to constitute an "unfunded" Plan for deferred compensation and Participants shall rely solely on the unsecured promise of the Company
for payment hereunder (except insofar as Shares are issued in connection with Restricted Stock).  With respect to any payment not yet made to a Participant under the Plan, nothing contained in the Plan shall give a Participant any rights that are greater than those of a general unsecured creditor of the Company; provided, however, that the Board may authorize the creation of trusts or make other arrangements to meet the Company's obligations under the Plan, which trusts or other arrangements shall be
consistent with the "unfunded" status of the Plan unless the Board otherwise determines with the consent of each affected Participant.  The establishment and maintenance of, or allocations and credits to, the Account of any Participant shall not vest in any Participant any right, title or interest in and to any Plan assets or benefits except at the time or times and upon the terms and conditions and to the extent expressly set forth in the Plan and in accordance with the terms of any trust.

  

22

  

(g)           Other Participant Rights.  No Participant shall have any of the rights or privileges of a shareholder of the Company under the Plan, including as a result of the grant of an Option or SAR, or crediting
of RSUs, Deferred Shares or other amounts to an Account, or the creation of any Trust and deposit of Shares therein, except at such time as such Option or SAR may have been duly exercised or Shares may be actually delivered in settlement of an Account (in whole or in part); provided, however, that a Participant granted Restricted Stock shall have rights of a shareholder except to the extent that those rights are limited by the terms of the Plan and the agreement relating to the Restricted Stock.  No
provision of the Plan, document relating to the Plan, or transaction hereunder shall confer upon any Participant any right to continue to serve as a director of the Company or in any other capacity with the Company or a subsidiary or to be nominated for reelection as a director, or interfere in any way with the right of the Company to increase or decrease the amount of any compensation payable to such Participant.  Subject to the limitations set forth in Section 13(a), the Plan shall inure to the benefit
of, and be binding upon, the parties hereto and their successors and assigns.

(h)           Continued Service as an Employee.  If a Participant ceases to serve as a director and, immediately thereafter, is employed by the Company or any subsidiary, then such Participant will not be deemed to
have ceased to serve as a director at that time, and his or her continued employment by the Company or any subsidiary will be deemed to be continued service as a director; provided, however, that, for purposes of Section 5, such former director will not be deemed to be a non-employee director eligible for further grants of awards.

(i)           Governing Law.  The validity, construction, and effect of the Plan, any rules and regulations under the Plan, and any agreement under the Plan shall be determined in accordance with the Pennsylvania Business
Corporation Law, to the extent applicable, other laws (including those governing contracts) of the Commonwealth of Pennsylvania, without giving effect to principles of conflicts of laws, and applicable federal law.

(j)           Limitation.  A Participant and his or her Beneficiary shall assume all risk in connection with any decrease in value of Restricted Stock, Options, RSUs or Deferred Shares, and neither the Company, the
Board nor the Administrator shall be liable or responsible therefor.

(k)           Severability.  In the event that any provision of the Plan shall be declared illegal or invalid for any reason, said illegality or invalidity shall not affect the remaining provisions of the Plan but shall
be fully severable, and the Plan shall be construed and enforced as if said illegal or invalid provision had never been inserted herein.

(l)           Nonexclusivity of the Plan.  The adoption of the Plan by the Board shall not be construed as creating any limitation on the power of the Board to adopt such other compensatory arrange­ments for directors
as it may deem desirable.

  

23

  

(m)           Effective Date and Plan Termination.  The Plan, as amended and restated herein, shall be effective as of the Effective Date.  Unless earlier terminated by action of the Board, the Plan will remain
in effect until such time as no Shares remain available for delivery under the Plan and the Company has no further rights or obligations under the Plan with respect to outstanding awards or Accounts under the Plan.

Approved by the Board of Directors effective May 1, 2009

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

24Exhibit 10.33

 
  

 
  

PURCHASE AND SALE CONTRACT
 
 
 
 
 
 
 
BETWEEN
 
 
 
 
 
 
 
 
 
NATIONAL PROPERTY INVESTORS 8,
A CALIFORNIA LIMITED PARTNERSHIP,

 
 
a California limited partnership
 
 
 
 
 
AS SELLER
 
 
 
 
 
 
 
AND
 
 
 
 
 
 
 
MORRISVILLE APARTMENTS PARTNERS, LLC,
 
 
 
a North Carolina limited liability company
 
 
 
 
 
AS PURCHASER
 
 
 
 
 
 
 
 
 
HUNTINGTON ATHLETIC CLUB APARTMENTS
  

 

  
Table of Contents
  

	

Article I
	
DEFINED TERMS
	
 

	
Article II
	
PURCHASE AND SALE, PURCHASE PRICE & DEPOSIT
	
 

	
2.1
	
Purchase and Sale
	
1

	
2.2
	
Purchase Price and Deposit
	
1

	
2.3
	
Escrow Provisions Regarding Deposit
	
2

	
Article III
	
FEASIBILITY PERIOD
	
 

	
3.1
	
Feasibility Period
	
3

	
3.2
	
Expiration of Feasibility Period
	
3

	
3.3
	
Conduct of Investigation
	
3

	
3.4
	
Purchaser Indemnification
	
4

	
3.5
	
Property Materials
	
5

	
3.6
	
Property Contracts
	
6

	
Article IV
	
TITLE
	
 

	
4.1
	
Title Documents
	
6

	
4.2
	
Survey
	
6

	
4.3
	
Objection and Response Process
	
7

	
4.4
	
Permitted Exceptions
	
7

	
4.5
	
Assumed Encumbrances
	
7

	
4.6
	
Subsequently Disclosed Exceptions
	
10

	
4.7
	
Purchaser Financing
	
10

	
Article V
	
CLOSING
	
 

	
5.1
	
Closing Date
	
11

	
5.2
	
Seller Closing Deliveries
	
11

	
5.3
	
Purchaser Closing Deliveries
	
12

	
5.4
	
Closing Prorations and Adjustments
	
13

	
5.5
	
Post Closing Adjustments
	
16

	
Article VI
	
REPRESENTATIONS AND WARRANTIES OF SELLER AND PURCHASER
	
 

	
6.1
	
Seller’s Representations
	
16

	
6.2
	
AS-IS
	
17

	
6.3
	
Survival of Seller’s Representations
	
18

	

6.4
	
Definition of Seller’s Knowledge
	
18

	
6.5
	
Representations and Warranties of Purchaser
	
19

	
Article VII
	
OPERATION OF THE PROPERTY
	
 

	
7.1
	
Leases and Property Contracts
	
20

	
7.2
	
General Operation of Property
	
20

	
7.3
	
Liens
	
20

	
Article VIII
	
CONDITIONS PRECEDENT TO CLOSING
	
 

	
8.1
	
Purchaser’s Conditions to Closing
	
21

	
8.2
	
Seller’s Conditions to Closing
	
21

	
Article IX
	
BROKERAGE
	
 

	
9.1
	
Indemnity
	
22

	
9.2
	
Broker Commission
	
22

	
Article X
	
DEFAULTS AND REMEDIES
	
 

	
10.1
	
Purchaser Default
	
23

	
10.2
	
Seller Default
	
23

	
Article XI
	
RISK OF LOSS OR CASUALTY
	
 

	
11.1
	
Major Damage
	
24

	
11.2
	
Minor Damage
	
24

	
11.3
	
Closing
	
24

	
11.4
	
Repairs
	
25

	
Article XII
	
EMINENT DOMAIN
	
 

	
12.1
	
Eminent Domain
	
25

	
Article XIII
	
MISCELLANEOUS
	
 

	
13.1
	
Binding Effect of Contract
	
25

	
13.2
	
Exhibits and Schedules
	
25

	
13.3
	
Assignability
	
26

	
13.4
	
Captions
	
26

	
13.5
	
Number and Gender of Words
	
26

	
13.6
	
Notices
	
26

	
13.7
	
Governing Law and Venue
	
28

	
13.8
	
Entire Agreement
	
28

	
13.9
	
Amendments
	
28

	

13.10
	
Severability
	
29

	
13.11
	
Multiple Counterparts/Facsimile Signatures
	
29

	
13.12
	
Construction
	
29

	
13.13
	
Confidentiality
	
29

	
13.14
	
Time of the Essence
	
29

	
13.15
	
Waiver
	
29

	
13.16
	
Attorneys’ Fees
	
30

	
13.17
	
Time Zone/Time Periods
	
30

	
13.18
	
1031 Exchange
	
30

	
13.19
	
No Personal Liability of Officers, Trustees or Directors of

Seller’s Partners
	
30

	
13.20
	
No Exclusive Negotiations
	
30

	
13.21
	
ADA Disclosure
	
31

	
13.22
	
No Recording
	
31

	
13.23
	
Relationship of Parties
	
31

	
13.24
	
Dispute Resolution
	
31

	
13.25
	
AIMCO Marks
	
32

	
13.26
	
Non-Solicitation of Employees
	
32

	
13.27
	
Survival
	
32

	
13.28
	
Multiple Purchasers
	
32

	
Article XIV
	
LEAD–BASED PAINT DISCLOSURE
	
 

	
14.1
	
Disclosure
	
32

 

 

 
PURCHASE AND SALE CONTRACT
 
THIS PURCHASE AND SALE CONTRACT (this “Contract”) is entered into as of the 28
th day of August, 2009 (the “Effective Date”), by and between NATIONAL PROPERTY INVESTORS 8,
A CALIFORNIA LIMITED PARTNERSHIP, a California limited partnership, having an address at 4582 South Ulster Street Parkway, Suite 1100, Denver, Colorado 80237 (“
Seller”), and MORRISVILLE APARTMENTS PARTNERS, LLC., a North Carolina limited liability company, having a principal business address at P.O. Box 9886, Greensboro, North Carolina 27429 (“
Purchaser”).
 NOW, THEREFORE, in consideration of mutual covenants set forth herein, Seller and Purchaser hereby agree as follows:

RECITALS

A.        Seller owns the real estate located in Morrisville, North Carolina, as more particularly described in
Exhibit A attached hereto and made a part hereof, and the improvements thereon, commonly known as Huntington Athletic Club Apartments.

B.         Purchaser desires to purchase, and Seller desires to sell, such land, improvements and certain associated property, on the terms and conditions set forth below.

Article I
DEFINED TERMS
 Unless otherwise defined herein, any term with its initial letter capitalized in this Contract shall have the meaning set forth in
Error! Reference source not found. attached hereto and made a part hereof.
 
Article II
PURCHASE AND SALE, PURCHASE PRICE & DEPOSIT

2.1              
Purchase and Sale.  Seller agrees to sell and convey the Property to Purchaser and Purchaser agrees to purchase the Property from Seller, all in accordance with the terms and conditions set forth in this Contract.

2.2              
Purchase Price and Deposit.  The total purchase price (“Purchase Price”) for the Property shall be an amount equal to $10,500,000, payable by Purchaser, as follows:

2.2.1        Within 1 Business Day after the Effective Date, Purchaser shall deliver to Stewart Title Guaranty, c/o Wendy Howell, 1980 Post Oak Boulevard, Suite 610, Houston, Texas 77056, Telephone: (713) 625-8161, Facsimile: (713) 552-1703, Email: whowell@stewart.com (“
Escrow Agent” or “Title Insurer”) an initial deposit (the “
Initial Deposit”) of $100,000.00 by wire transfer of immediately available funds (“
Good Funds”).  
 
2.2.2        On or before the day that the Feasibility Period expires, Purchaser shall deliver to Escrow Agent an additional deposit (the “
Additional Deposit”) of $100,000.00 by wire transfer of Good Funds.  

2.2.3        At the Closing, subject to the occurrence of the Loan Assumption and Release, Purchaser shall receive a credit against the Purchase Price in the amount of the outstanding principal balance of the Note, together with all accrued but unpaid interest (if any) thereon, as of the Closing Date (the “
Loan Balance”).
 
2.2.4        The balance of the Purchase Price for the Property shall be paid to and received by Escrow Agent by wire transfer of Good Funds no later than 10:00 a.m. on the Closing Date.

2.3              Escrow Provisions Regarding Deposit.  

2.3.1        Escrow Agent shall hold the Deposit and make delivery of the Deposit to the party entitled thereto under the terms of this Contract.  Escrow Agent shall invest the Deposit in FDIC insured such short-term, high-grade securities, interest-bearing bank accounts, money market funds or accounts, or bank certificates of deposit or bank repurchase contracts as Escrow Agent, in its discretion, deems suitable, and all interest and income thereon shall become part of the Deposit and shall be remitted to the party entitled to the Deposit pursuant to this Contract.

2.3.2        Escrow Agent shall hold the Deposit until the earlier occurrence of (i) the Closing Date, at which time the Deposit shall be applied against the Purchase Price, or released to Seller pursuant to
Section 10.1, or (ii) the date on which Escrow Agent shall be authorized to disburse the Deposit as set forth in
Section 2.3.3.  The tax identification numbers of the parties shall be furnished to Escrow Agent upon request.

2.3.3        If prior to the Closing Date either party makes a written demand upon Escrow Agent for payment of the Deposit, Escrow Agent shall give written notice to the other party of such demand.  If Escrow Agent does not receive a written objection from the other party to the proposed payment within 5 Business Days after the giving of such notice, Escrow Agent is hereby authorized to make such payment.  If Escrow Agent does receive such written objection within such 5-Business Day period, Escrow Agent shall continue to hold such amount until otherwise directed by written instructions from the parties to this Contract or a final judgment or arbitrator’s decision.  However, Escrow Agent shall have the right at any time to deliver the Deposit and interest thereon, if any, with a court of competent jurisdiction in the state in which the Property is located.  Escrow Agent shall give written notice of such deposit to Seller and Purchaser.  Upon such deposit, Escrow Agent shall be relieved and discharged of all further obligations and responsibilities hereunder.  Any return of the Deposit to Purchaser provided for in this Contract shall be subject to Purchaser’s obligations set forth in
Section 3.5.2.    
 
2.3.4        The parties acknowledge that Escrow Agent is acting solely as a stakeholder at their request and for their convenience, and that Escrow Agent shall not be deemed to be the agent of either of the parties for any act or omission on its part unless taken or suffered in bad faith in willful disregard of this Contract or involving gross negligence.  Seller and Purchaser jointly and severally shall indemnify and hold Escrow Agent harmless from and against all costs, claims and expenses, including reasonable attorney’s fees, incurred in connection with the performance of Escrow Agent’s duties hereunder, except with respect to actions or omissions taken or suffered by Escrow Agent in bad faith, in willful disregard of this Contract or involving gross negligence on the part of the Escrow Agent.

2.3.5        The parties shall deliver to Escrow Agent an executed copy of this Contract.  Escrow Agent shall execute the signature page for Escrow Agent attached hereto which shall confirm Escrow Agent’s agreement to comply with the terms of Seller’s closing instruction letter delivered at Closing and the provisions of this
Section 2.3.
 
2.3.6        Escrow Agent, as the person responsible for closing the transaction within the meaning of Section 6045(e)(2)(A) of the Internal Revenue Code of 1986, as amended (the “
Code”), shall file all necessary information, reports, returns, and statements regarding the transaction required by the Code including, but not limited to, the tax reports required pursuant to Section 6045 of the Code.  Further, Escrow Agent agrees to indemnify and hold Purchaser, Seller, and their respective attorneys and brokers harmless from and against any Losses resulting from Escrow Agent’s failure to file the reports Escrow Agent is required to file pursuant to this section.

Article III
FEASIBILITY PERIOD

3.1              
Feasibility Period.  Subject to the terms of Sections 3.3 and 3.4 and the rights of Tenants under the Leases, from the Effective Date to and including the date which is 30 days after the Effective Date (the “
Feasibility Period”), Purchaser, and its agents, contractors, engineers, surveyors, attorneys, and employees (collectively, “
Consultants”) shall, at no cost or expense to Seller, have the right from time to time to enter onto the Property to conduct and make any and all customary studies, tests, examinations, inquiries, inspections and investigations of or concerning the Property, review the Materials and otherwise confirm any and all matters which Purchaser may reasonably desire to confirm with respect to the Property and Purchaser’s intended use thereof (collectively, the “
Inspections”).  
 
3.2              
Expiration of Feasibility Period.  If any of the matters in Section 3.1 or any other title or survey matters are unsatisfactory to Purchaser for any reason, or for no reason whatsoever, in Purchaser’s sole and absolute discretion, then Purchaser shall have the right to terminate this Contract by giving written notice to that effect to Seller and Escrow Agent no later than 5:00 p.m. on or before the date of expiration of the Feasibility Period.  If Purchaser provides such notice, this Contract shall terminate and be of no further force and effect subject to and except for the Survival Provisions, and Escrow Agent shall return the Initial Deposit to Purchaser.  If Purchaser fails to provide Seller with written notice of termination prior to the expiration of the Feasibility Period, Purchaser’s right to terminate under this
Section 3.2 shall be permanently waived and this Contract shall remain in full force and effect, the Deposit shall be non-refundable, and Purchaser’s obligation to purchase the Property shall be conditional only as provided in
Section 8.1.
 
3.3              
Conduct of Investigation.  Purchaser shall not permit any mechanics’ or materialmen’s liens or any other liens to attach to the Property by reason of the performance of any work or the purchase of any materials by Purchaser or any other party in connection with any Inspections conducted by or for Purchaser.  Purchaser shall give reasonable advanced notice to Seller prior to any entry onto the Property and shall permit Seller to have a representative present during all Inspections conducted at the Property.  Purchaser shall take all reasonable actions and implement all protections necessary to ensure that all actions taken in connection 
with the Inspections, and all equipment, materials and substances generated, used or brought onto the Property pose no material threat to the safety of persons, property or the environment.

3.4              
Purchaser Indemnification.  
 
3.4.1        Purchaser shall indemnify, hold harmless and, if requested by Seller (in Seller’s sole discretion), defend (with counsel approved by Seller) Seller, together with Seller’s affiliates, parent and subsidiary entities, successors, assigns, partners, managers, members, employees, officers, directors, trustees, shareholders, counsel, representatives, agents, Property Manager, Regional Property Manager, and AIMCO (collectively, including Seller, “
Seller’s Indemnified Parties”), from and against any and all damages, mechanics’ liens, materialmen’s liens, liabilities, penalties, interest, losses, demands, actions, causes of action, claims, costs and expenses (including reasonable attorneys’ fees, including the cost of in-house counsel and appeals) (collectively, “
Losses”) arising from or related to Purchaser’s or its Consultants’ entry onto the Property, and any Inspections or other acts by Purchaser or Purchaser’s Consultants with respect to the Property during the Feasibility Period or otherwise.  Purchaser shall, however, not be liable for any damages incurred by Seller resulting from the mere discovery by Purchaser of a pre-existing condition at or with regard to the Property; provided, however, that, if Purchaser proceeds with acquisition of the Property after the acquisition of the Feasibility Period, Purchaser shall accept the Property with such pre-existing condition and assume any liabilities associated therewith.

3.4.2        Notwithstanding anything in this Contract to the contrary, Purchaser shall not be permitted to perform any invasive tests on the Property without Seller’s prior written consent, which consent may be withheld in Seller’s sole discretion.  Further, Seller shall have the right, without limitation, to disapprove any and all entries, surveys, tests (including, without limitation, a Phase II environmental study of the Property), investigations and other matters that in Seller’s reasonable judgment could result in any injury to the Property or breach of any contract, or expose Seller to any Losses or violation of applicable law, or otherwise adversely affect the Property or Seller’s interest therein.  Purchaser shall use reasonable efforts to minimize disruption to Tenants in connection with Purchaser’s or its Consultants’ activities pursuant to this Section.  No consent by Seller to any such activity shall be deemed to constitute a waiver by Seller or assumption of liability or risk by Seller.  Purchaser hereby agrees to restore, at Purchaser’s sole cost and expense, the Property to the same condition existing immediately prior to Purchaser’s exercise of its rights pursuant to this
Article III.  Purchaser shall maintain and cause its third party consultants to maintain (a) casualty insurance and commercial general liability insurance with coverages of not less than $1,000,000.00 for injury or death to any one person and $3,000,000.00 for injury or death to more than one person and $1,000,000.00 with respect to property damage, and (b) worker’s compensation insurance for all of their respective employees in accordance with the law of the state in which the Property is located.  Purchaser shall deliver proof of the insurance coverage required pursuant to this
Section 3.4.2 to Seller (in the form of a certificate of insurance) prior to the earlier to occur of (i) Purchaser’s or Purchaser’s Consultants’ entry onto the Property, or (ii) the expiration of 5 days after the Effective Date.

3.5              
Property Materials.  
 
3.5.1        Within 5 Business Days after the Effective Date, and to the extent the same exist and are in Seller’s possession or reasonable control (subject to
Section 3.5.2), Seller agrees to make the documents set forth on Schedule 3.5 (together with any other documents or information provided by Seller or its agents to Purchaser with respect to the Property, the “
Materials”) available at the Property for review and copying by Purchaser at Purchaser’s sole cost and expense.  In the alternative, at Seller’s option and within the foregoing time period, Seller may deliver some or all of the Materials to Purchaser, or make the same available to Purchaser on a secure web site (Purchaser agrees that any item to be delivered by Seller under this Contract shall be deemed delivered to the extent available to Purchaser on such secured web site).  To the extent that Purchaser determines that any of the Materials have not been made available or delivered to Purchaser pursuant to this
Section 3.5.1, Purchaser shall notify Seller and Seller shall use commercially reasonable efforts to deliver the same to Purchaser within 5 Business Days after such notification is received by Seller; provided, however, that under no circumstances will the Feasibility Period be extended and Purchaser’s sole remedy will be to terminate this Contract pursuant to
Section 3.2.
 
3.5.2        In providing the Materials to Purchaser, other than Seller’s Representations, Seller makes no representation or warranty, express, written, oral, statutory, or implied, and all such representations and warranties are hereby expressly excluded and disclaimed.  All Materials are provided for informational purposes only and, together with all Third-Party Reports, shall be returned by Purchaser to Seller (or the destruction thereof shall be certified in writing by Purchaser to Seller) as a condition to return of the Deposit to Purchaser if this Contract is terminated for any reason.  Recognizing that the Materials delivered or made available by Seller pursuant to this Contract may not be complete or constitute all of such documents which are in Seller’s possession or control, but are those that are readily and reasonably available to Seller, Purchaser shall not in any way be entitled to rely upon the completeness or accuracy of the Materials and will instead in all instances rely exclusively on its own Inspections and Consultants with respect to all matters which it deems relevant to its decision to acquire, own and operate the Property.

3.5.3        In addition to the items set forth on
Schedule 3.5, no later than 3 Business Days after the Effective Date, Seller shall deliver to Purchaser (or otherwise make available to Purchaser as provided under
Section 3.5.1) the most recent rent roll for the Property, which rent roll is that which Seller uses in the ordinary course of operating the Property (the “
Rent Roll”).  Seller makes no representations or warranties regarding the Rent Roll other than the express representation set forth in
Section 6.1.5.  At Purchaser’s request, but in no event more often than once every two weeks, Seller shall update the Rent Roll. 

3.5.4        In addition to the items set forth on
Schedule 3.5, no later than 3 Business Days after the Effective Date, Seller shall deliver to Purchaser (or otherwise make available to Purchaser as provided under
Section 3.5.1) a list of all current Property Contracts (the “Property Contracts List”).  Seller makes no representations or warranties regarding the Property Contracts List other than the express representations set forth in
Section 6.1.6.  
 

3.6              
Property Contracts.  On or before the expiration of the Feasibility Period, Purchaser may deliver written notice to Seller (the “
Property Contracts Notice”) specifying any Property Contracts which Purchaser desires to terminate at the Closing (the “
Terminated Contracts”); provided that (a) the effective date of such termination on or after Closing shall be subject to the express terms of such Terminated Contracts, (b) if any such Property Contract cannot by its terms be terminated at Closing, it shall be assumed by Purchaser and not be a Terminated Contract, and (c) to the extent that any such Terminated Contract requires payment of a penalty, premium, or damages, including liquidated damages, for cancellation, Purchaser shall be responsible for the payment of any such cancellation fees, penalties, or damages, including liquidated damages up to $5,000.00 per Terminated Contract, and Seller shall pay any balance.  Purchaser shall have no liability or obligations with respect to any Property Contract (a) not on the Property Contracts list or (b) which, by its terms, is not assumable.  If Purchaser fails to deliver the Property Contracts Notice on or before the expiration of the Feasibility Period, there shall be no Terminated Contracts and Purchaser shall assume all Property Contracts at the Closing.  If Purchaser delivers the Property Contracts Notice to Seller on or before the expiration of the Feasibility Period, then simultaneously therewith, Purchaser shall deliver to Seller a vendor termination notice (in the form attached hereto as
Exhibit F) for each Terminated Contract informing the vendor(s) of the termination of such Terminated Contract as of the Closing Date (subject to any delay in the effectiveness of such termination pursuant to the express terms of each applicable Terminated Contract) (the “
Vendor Terminations”).  Seller shall sign the Vendor Terminations prepared by Purchaser, and deliver them to all applicable vendors.  To the extent that any Property Contract to be assigned to Purchaser requires vendor consent, then, prior to the Closing, Purchaser may attempt to obtain from each applicable vendor a consent (each a “
Required Assignment Consent”) to such assignment.  Purchaser shall indemnify, hold harmless and, if requested by Seller (in Seller’s sole discretion), defend (with counsel approved by Seller) Seller’s Indemnified Parties from and against any and all Losses arising from or related to Purchaser’s failure to obtain any Required Assignment Consent.

Article IV
TITLE
 
4.1              
Title Documents.  Within 5 days after the Effective Date, Seller shall cause to be delivered to Purchaser a standard form commitment or preliminary title report (“
Title Commitment”) to provide an American Land Title Association owner’s title insurance policy for the Property, using the 2006 policy jacket, in an amount equal to the Purchase Price (the “
Title Policy”), together with copies of all instruments identified as exceptions therein (together with the Title Commitment, referred to herein as the “
Title Documents”).  Seller shall be responsible only for payment of the basic premium for the Title Policy.  Purchaser shall be solely responsible for payment of all other costs relating to procurement of the Title Commitment, the Title Policy, and any requested endorsements.  

4.2              
Survey.  Subject to Section 3.5.2, within 3 Business Days after the Effective Date, Seller shall deliver to Purchaser or make available at the Property any existing survey of the Property (the “
Existing Survey”).  Purchaser may, at its sole cost and expense, order a new or updated survey of the Property either before or after the Effective Date (such new or updated survey together with the Existing Survey, is referred to herein as the “
Survey”).  
 
4.3              
Objection and Response Process.  On or before the date which is 20 days after the Effective Date (the “
Objection Deadline”), Purchaser shall give written notice (the “Objection Notice”) to the attorneys for Seller of any matter set forth in the Title Documents and the Survey to which Purchaser objects (the “
Objections”).  If Purchaser fails to tender an Objection Notice on or before the Objection Deadline, Purchaser shall be deemed to have approved and irrevocably waived any objections to any matters covered by the Title Documents and the Survey.  On or before 25 days after the Effective Date (the “
Response Deadline”), Seller may, in Seller’s sole discretion, give Purchaser notice (the “
Response Notice”) of those Objections which Seller is willing to cure, if any.  Seller shall be entitled to reasonable adjournments of the Closing Date to cure the Objections.  If Seller fails to deliver a Response Notice by the Response Deadline, Seller shall be deemed to have elected not to cure or otherwise resolve any matter set forth in the Objection Notice.  If Purchaser is dissatisfied with the Response Notice or the lack of Response Notice, Purchaser may, as its exclusive remedy, exercise its right to terminate this Contract prior to the expiration of the Feasibility Period in accordance with the provisions of
Section 3.2.  If Purchaser fails to timely exercise such right, Purchaser shall be deemed to accept the Title Documents and Survey with resolution, if any, of the Objections set forth in the Response Notice (or if no Response Notice is tendered, without any resolution of the Objections) and without any reduction or abatement of the Purchase Price.    

4.4              
Permitted Exceptions.  The Deed delivered pursuant to this Contract shall be subject to the following, all of which shall be deemed “
Permitted Exceptions”:
 
4.4.1        All matters shown in the Title Documents and the Survey, other than (a) those Objections, if any, which Seller has agreed to cure pursuant to the Response Notice under
Section 4.3, (b) mechanics’ liens and taxes due and payable with respect to the period preceding Closing, (c) the standard exception regarding the rights of parties in possession, which shall be limited to those parties in possession pursuant to the Leases, and (d) the standard exception pertaining to taxes, which shall be limited to taxes and assessments payable in the year in which the Closing occurs and subsequent taxes and assessments; 

4.4.2        All Leases;

4.4.3        The Assumed Encumbrances;

4.4.4        Applicable zoning and governmental regulations and ordinances;

4.4.5        Any defects in or objections to title to the Property, or title exceptions or encumbrances, arising by, through or under Purchaser; and

4.4.6        The terms and conditions of this Contract.

4.5              
Assumed Encumbrances.
 
4.5.1        Purchaser recognizes and agrees that, in connection with a loan (the “
Loan”) made to Seller by Federal Home Loan Mortgage Corporation (the “Lender”), the Property presently is encumbered by (i) a deed of trust dated December 30, 2008 and recorded January 7, 2009 and (ii) a deed of trust dated December 30, 2008 and recorded January 7, 2009 (collectively, the “
Assumed Deed of Trust”) and certain other security and related documents in connection with the Loan (collectively, the “
Assumed Encumbrances”).  The Loan is evidenced by that certain (i) promissory note dated December 30, 2008 in the stated principal amount of $5,548,680.93 and (ii) promissory note dated December 30, 2008 in the stated principal amount of $2,000,000 (collectively, the “
Note,” and together with the Assumed Deed of Trust, the Assumed Encumbrances and any other documents executed by Seller in connection with the Loan, the “
Assumed Loan Documents”), executed by Seller and payable to the order of the Lender.  Within 5 days after the Effective Date, Seller agrees that it will make available to Purchaser (in the same manner in which Seller is permitted to make the Materials available to Purchaser under
Section 3.5.1) copies of the Assumed Loan Documents which are in Seller’s possession or reasonable control (subject to
Section 3.5.2).  
 
4.5.2    Purchaser agrees that, at the Closing, (a) Purchaser shall assume Seller’s obligations under the Note and all of the other Assumed Loan Documents and accept title to the Property subject to the Deed of Trust and the Assumed Encumbrances,
and (b) the Lender shall release Seller, as well as any guarantors and other obligated parties under the Assumed Loan Documents, from all obligations under the Assumed Loan Documents (and any related guarantees or letters of credit), including, without limitation, any obligation to make payments of principal and interest under the Note upon terms that such releases are commonly provided by Lender in connection with assumptions of debt Lender holds or as otherwise provided for in the Assumed Loan Documents (collectively, the foregoing (a) and (b) referred to herein as the “
Loan Assumption and Release”).  Purchaser acknowledges and agrees that (x) certain of the provisions of the Assumed Loan Documents may have been negotiated for the exclusive benefit of Seller, AIMCO or their respective affiliates (the “
Specific AIMCO Provisions”), and (y) unless Lender otherwise agrees in Lender’s sole and arbitrary discretion, Purchaser will not be permitted to assume the benefit of the Specific AIMCO Provisions and the same shall be of no further force or effect from and after the Closing Date. 

160563201.0.0 
Purchaser further acknowledges that the Assumed Loan Documents require the satisfaction by Purchaser of certain requirements as set forth therein to allow for the Loan Assumption and Release.  Purchaser, at its sole cost and expense will use its commercially reasonable efforts to satisfy the requirements set forth in the Assumed Loan Documents to allow for the Loan Assumption and Release, including, without limitation, submitting a complete application to Lender for assumption of the Loan together with all documents and information required in connection therewith (the “
Loan Assumption Application”).  Purchaser agrees to provide Seller with a copy of the Loan Assumption Application (exclusive of any financial information relating to any individual), concurrently with its submission to Lender.  Purchaser acknowledges and agrees that Purchaser is solely responsible for the preparation and submittal of the Loan Assumption Application, including the collection of all materials, documents, certificates, financials, signatures, and other items required to be submitted to Lender in connection with the Loan Assumption Application.  

4.5.3    Purchaser shall comply with Lender’s assumption guidelines in connection with the Loan Assumption and Release.  Purchaser shall be responsible at its sole cost and expense for promptly correcting and re-submitting any deficiencies noted by Lender in connection with the Loan Assumption Application.  Purchaser also shall provide Seller with a copy of any correspondence from Lender with respect to the Loan Assumption Application promptly after receipt of such correspondence from Lender.  Purchaser acknowledges that 
Lender’s assumption guidelines may not be consistent with the provisions of the Assumed Loan Documents concerning the Loan Assumption and Release.  Purchaser shall coordinate with the Lender to comply with the appropriate provisions of both the Assumed Loan Documents and Lender assumption guidelines in order to allow for the Loan Assumption and Release.

4.5.4    Purchaser shall pay all fees and expenses (including, without limitation, all servicing fees and charges, transfer fees, assumption fees, title fees, endorsement fees, fees described in the Assumed Loan Documents, and any other fees imposed by Lender that are reasonable and customary to release Seller of all liability under the Loan) imposed or charged by the Lender or its counsel (such fees and expenses collectively being referred to as the “
Lender Fees”), in connection with the Loan Assumption Application and the Loan Assumption and Release. 

4.5.5    Additionally, Purchaser shall be responsible for (a) replacing (and increasing to the extent required by Lender) all reserves, impounds and other accounts required to be maintained in connection with the Loan, and (b) funding any additional reserves, impounds or accounts required by Lender to be maintained by Purchaser in connection with the Loan after the Loan Assumption and Release (the foregoing amounts in (a) and (b) collectively referred to herein as the “
Required Loan Fund Amounts”).  Any existing reserves, impounds and other accounts required to be replaced by Purchaser pursuant to the foregoing sentence shall be released in Good Funds to Seller at the Closing.  

4.5.6    Purchaser agrees promptly to deliver to the Lender all documents and information required by the Assumed Loan Documents, and such other information or documentation as the Lender reasonably may request, including, without limitation, financial statements, income tax returns and other financial information for Purchaser and any required guarantor.  Seller agrees that it will cooperate with Purchaser and Lender, at no cost or expense to Seller, in connection with Purchaser’s application to Lender for approval of the Loan Assumption and Release.  

4.5.7    Purchaser shall order a Phase I Environmental study (prepared by an environmental engineer reasonably acceptable to Seller and Lender), and covenants that such Phase I Environmental study shall be delivered to Seller and Lender no later than 10 days prior to the Closing Date in connection with and as a precondition to the Loan Assumption and Release.

 4.5.8     Provided that (a) Purchaser is in material compliance with its obligations under this Contract (including this
Section 4.5) and the requirements of the Assumed Deed of Trust in connection with obtaining the Loan Assumption and Release, (b) Purchaser uses its best efforts to obtain the Loan Assumption and Release, and (c) Purchaser does not obtain the consent of the Lender to the Loan Assumption and Release on terms and conditions that are commercially reasonable and do not impose new material adverse conditions on Purchaser within 30 days after expiration of the Feasibility Period (the “
Loan Approval Period”), then Purchaser shall have the right to give Escrow Agent notice terminating this Contract based solely on the fact that the Loan Assumption and Release has not been approved by the Lender (the “Loan Approval Termination”) on or before the expiration of the Loan Approval Period, in which event this Contract shall be of no further force and effect, subject to and except for 
Purchaser’s liability pursuant to Section 3.4 and any other provision of this Contract which survives such termination, and Escrow Agent shall forthwith return the Deposit to Purchaser.  Purchaser shall have the right to extend the Loan Approval Period twice, in each case for a period of 15 days, by delivering on or before 2 Business Days prior to the end of the existing Loan Approval Period (i) to Seller, written notice of such extension, and (ii) to Escrow Agent $20,000 which shall immediately become part of the Deposit for all purposes of this Contract.  If Purchaser fails to provide Seller with written notice of termination prior to the expiration of the Loan Approval Period in strict accordance with the notice provisions of this Contract, Purchaser’s right to terminate under this
Section 4.5.8 shall be permanently waived, this Contract shall remain in full force and effect, the Deposit shall be non-refundable, and Purchaser’s obligation to obtain the Lender’s approval of the Loan Assumption and Release and to purchase the Property shall be non-contingent and unconditional except only for satisfaction of the conditions expressly stated in
Section 8.1.  Purchaser recognizes and agrees that if the Loan Approval Period expires and Purchaser does not terminate this Contract, the Loan Assumption and Release shall not be a condition to Purchaser’s obligation to close, and, if the Loan Assumption and Release is not obtained and the Closing has not occurred on or before the Closing Date, Purchaser shall be in default under this Contract, entitling the Seller to terminate this Contract, in which event the Deposit shall be immediately released to Seller by the Escrow Agent and this Contract shall be of no further force and effect, subject to and except for Purchaser’s liability pursuant to
Section 3.4 and any other provision of this Contract which survives such termination.
 
4.6              
Subsequently Disclosed Exceptions.  If at any time after the expiration of the Feasibility Period, any update to the Title Commitment discloses any additional item that materially adversely affects title to the Property which was not disclosed on any version of or update to the Title Commitment delivered to Purchaser during the Feasibility Period (the “
New Exception”), Purchaser shall have a period of 5 days from the date of its receipt of such update (the “
New Exception Review Period”) to review and notify Seller in writing of Purchaser’s approval or disapproval of the New Exception.  If Purchaser disapproves of the New Exception, Seller may, in Seller’s sole discretion, notify Purchaser as to whether it is willing to cure the New Exception.  If Seller elects to cure the New Exception, Seller shall be entitled to reasonable adjournments of the Closing Date to cure the New Exception.  If Seller fails to deliver a notice to Purchaser within 3 days after the expiration of the New Exception Review Period, Seller shall be deemed to have elected not to cure the New Exception.  If Purchaser is dissatisfied with Seller’s response, or lack thereof, Purchaser may, as its exclusive remedy elect either:  (i) to terminate this Contract, in which event the Deposit shall be promptly returned to Purchaser or (ii) to waive the New Exception and proceed with the transactions contemplated by this Contract, in which event Purchaser shall be deemed to have approved the New Exception.  If Purchaser fails to notify Seller of its election to terminate this Contract in accordance with the foregoing sentence within 6 days after the expiration of the New Exception Review Period, Purchaser shall be deemed to have elected to approve and irrevocably waive any objections to the New Exception.  

4.7              
Purchaser Financing.  Purchaser assumes full responsibility to obtain the funds required for settlement, and Purchaser’s acquisition of such funds shall not be a contingency to the Closing. 

Article V
CLOSING

5.1              
Closing Date.  The Closing shall occur 15 days following the expiration of the Loan Approval Period at the time set forth in
Section 2.2.4 (the “Closing Date”) through an escrow with Escrow Agent, whereby Seller, Purchaser and their attorneys need not be physically present at the Closing and may deliver documents by overnight air courier or other means.  Notwithstanding the foregoing to the contrary, Seller shall have the option, by delivering written notice to Purchaser, to extend the Closing Date to the last Business Day of the month in which the Closing Date otherwise would occur pursuant to the preceding sentence, in connection with the Loan Assumption and Release.
 Further, the Closing Date may be extended without penalty at the option of Seller to a date not later than forty-five 45 days following the Closing Date specified in the first sentence of this paragraph above (or, if applicable, as otherwise extended by Seller or Purchaser pursuant to this paragraph).  Provided that Purchaser is not in default under the terms of this Contract, Purchaser shall be permitted to extend the Closing Date specified in the first sentence of this Section or the then scheduled Closing Date, as the case may be, solely in order to accomplish the Loan Assumption and Release for two (2) periods of up to an additional 15 days each period by delivering no later than 5 Business Days prior to the then scheduled Closing Date (i) to Escrow Agent, an additional deposit in the amount of $20,000.00 for each extension period, which such amount or amounts, as the case may be, shall constitute part of the “Deposit” for all purposes of this Contract, and shall become immediately non-refundable (except as expressly provided in this Contract); and (ii) to Seller, written notice of such election and Purchaser’s executed certification that such extension is necessary to accomplish the Loan Assumption and Release. 

5.2              
Seller Closing Deliveries.  No later than 1 Business Day prior to the Closing Date, Seller shall deliver to Escrow Agent, each of the following items:

5.2.1        Limited Warranty Deed (the “
Deed”) in the form attached as Exhibit B to Purchaser, subject to the Permitted Exceptions.

5.2.2        A Bill of Sale in the form attached as
Exhibit C.
 
5.2.3        A General Assignment in the form attached as
Exhibit D (the “General Assignment”).
 
5.2.4        An Assignment of Leases and Security Deposits in the form attached as
Exhibit E (the “Leases Assignment”).
 
5.2.5        Seller’s closing statement.

5.2.6        A title affidavit or an indemnity form reasonably acceptable to Seller, which is sufficient to enable Title Insurer to delete the standard pre-printed exceptions to the title insurance policy to be issued pursuant to the Title Commitment.  

5.2.7        A certification of Seller’s non-foreign status pursuant to Section 1445 of the Internal Revenue Code of 1986, as amended.

5.2.8        Resolutions, certificates of good standing, and such other organizational documents as Title Insurer shall reasonably require evidencing Seller’s authority to consummate this transaction.

5.2.9        An updated Rent Roll effective as of a date no more than 3 Business Days prior to the Closing Date; provided, however, that the content of such updated Rent Roll shall in no event expand or modify the conditions to Purchaser’s obligation to close as specified under
Section 8.1.  
 
5.2.10    An updated Property Contracts List effective as of a date no more than 3 Business Days prior to the Closing Date; provided, however, that the content of such updated Property Contracts List shall in no event expand or modify the conditions to Purchaser’s obligation to close as specified under
Section 8.1.  
 
5.2.11    Notification letters to all Tenants prepared and executed by Seller in the form attached hereto as
Exhibit G, which shall be delivered to all Tenants by Seller immediately after Closing.

5.2.12    Documents reasonably required by Lender to cause the Loan Assumption and Release.

5.2.13    Any cancellation fees or penalties due to any vendor under any Terminated Contract as a result of the termination thereof to the extent required under
Section 3.6.
 
5.3
              
Purchaser Closing Deliveries.  No later than 1 Business Day prior to the Closing Date (except for the balance of the Purchase Price which is to be delivered at the time specified in
Section 2.2.3), Purchaser shall deliver to the Escrow Agent (for disbursement to Seller upon the Closing) the following items:

5.3.1        The full Purchase Price (with credit for the Deposit and, if applicable, the Loan Balance), plus or minus the adjustments or prorations required by this Contract.

5.3.2        A title affidavit or an indemnity form (pertaining to Purchaser’s activity on the Property prior to Closing), reasonably acceptable to Purchaser, which is sufficient to enable Title Insurer to delete the standard pre-printed exceptions to the title insurance policy to be issued pursuant to the Title Commitment.

5.3.3        Any declaration or other statement which may be required to be submitted to the local assessor.

5.3.4        Purchaser’s closing statement.

5.3.5        A countersigned counterpart of the General Assignment.

5.3.6        A countersigned counterpart of the Leases Assignment.

5.3.7        Any cancellation fees or penalties due to any vendor under any Terminated Contract as a result of the termination thereof to the extent required under
Section 3.6.
 
5.3.8        Resolutions, certificates of good standing, and such other organizational documents as Title Insurer shall reasonably require evidencing Purchaser’s authority to consummate this transaction.

5.3.9        All documents, instruments, guaranties, Lender Fees, Required Loan Fund Amounts, and other items or funds required by the Lender to cause the Loan Assumption and Release.

 
5.4              
Closing Prorations and Adjustments.  
 
5.4.1        
General.  All normal and customarily proratable items, including, without limitation, collected rents, operating expenses, personal property taxes, other operating expenses and fees, shall be prorated as of the Closing Date, Seller being charged or credited, as appropriate, for all of same attributable to the period up to the Closing Date (and credited for any amounts paid by Seller attributable to the period on or after the Closing Date, if assumed by Purchaser) and Purchaser being responsible for, and credited or charged, as the case may be, for all of the same attributable to the period on and after the Closing Date.  Seller shall prepare a proration schedule (the “
Proration Schedule”) of the adjustments described in this Section 5.3.9 prior to Closing.  

5.4.2        
Operating Expenses.  All of the operating, maintenance, taxes (other than real estate taxes), and other expenses incurred in operating the Property that Seller customarily pays, and any other costs incurred in the ordinary course of business for the management and operation of the Property, shall be prorated on an accrual basis.  Seller shall pay all such expenses that accrue prior to the Closing Date and Purchaser shall pay all such expenses that accrue from and after the Closing Date.

5.4.3        
Utilities.  The final readings and final billings for utilities will be made if possible as of the Closing Date, in which case Seller shall pay all such bills as of the Closing Date and no proration shall be made at the Closing with respect to utility bills.  Otherwise, a proration shall be made based upon the parties’ reasonable good faith estimate.  Seller shall be entitled to the return of any deposit(s) posted by it with any utility company, and Seller shall notify each utility company serving the Property to terminate Seller’s account, effective as of noon on the Closing Date.

5.4.4        
Real Estate Taxes.  Any real estate ad valorem or similar taxes for the Property, or any installment of assessments payable in installments which installment is payable in the calendar year of Closing, shall be prorated to the date of Closing, based upon actual days involved.  The proration of real property taxes or installments of assessments shall be based upon the assessed valuation and tax rate figures (assuming payment at the earliest time to allow for the maximum possible discount) for the year in which the Closing occurs to the extent the same are available; provided, however, that in the event that actual figures (whether for the assessed value of the Property or for the tax rate) for the year of Closing are not available at the Closing Date, 
the proration shall be made using figures from the preceding year (assuming payment at the earliest time to allow for the maximum possible discount).  The proration of real property taxes or installments of assessments shall be final and not subject to re-adjustment after Closing. 

5.4.5        
Property Contracts.  Purchaser shall assume at Closing the obligations under the Property Contracts assumed by Purchaser; however, operating expenses shall be prorated under
Section 5.4.2.
 
5.4.6        
Leases.  
 
5.4.6.1              All collected rent (whether fixed monthly rentals, additional rentals, escalation rentals, retroactive rentals, operating cost pass-throughs or other sums and charges payable by Tenants under the Leases), income and expenses from any portion of the Property shall be prorated as of the Closing Date.  Purchaser shall receive all collected rent and income attributable to dates from and after the Closing Date.  Seller shall receive all collected rent and income attributable to dates prior to the Closing Date.  Notwithstanding the foregoing, no prorations shall be made in relation to either (a) non-delinquent rents which have not been collected as of the Closing Date, or (b) delinquent rents existing, if any, as of the Closing Date (the foregoing (a) and (b) referred to herein as the “
Uncollected Rents”).  In adjusting for Uncollected Rents, no adjustments shall be made in Seller’s favor for rents which have accrued and are unpaid as of the Closing, but Purchaser shall pay Seller such accrued Uncollected Rents as and when collected by Purchaser to the extent they relate to the period prior to Closing.  Purchaser agrees to bill Tenants of the Property for all Uncollected Rents and to take reasonable actions to collect Uncollected Rents.  Notwithstanding the foregoing, Purchaser’s obligation to collect Uncollected Rents shall be limited to Uncollected Rents of not more than 90 days past due, and Purchaser’s collection of rents shall be applied, first, towards current rent due and owing under the Leases, and second, to Uncollected Rents.  After the Closing, Seller shall continue to have the right, but not the obligation, in its own name, to demand payment of and to collect Uncollected Rents owed to Seller by any Tenant, which right shall include, without limitation, the right to continue or commence legal actions or proceedings against any Tenant and the delivery of the Leases Assignment shall not constitute a waiver by Seller of such right; provided however, that the foregoing right of Seller shall be limited to actions seeking monetary damages and, in no event, shall Seller seek to evict any Tenants in any action to collect Uncollected Rents.  Purchaser agrees to cooperate with Seller in connection with all efforts by Seller to collect such Uncollected Rents and to take all steps, whether before or after the Closing Date, as may be necessary to carry out the intention of the foregoing, including, without limitation, the delivery to Seller, within 7 days after a written request, of any relevant books and records (including, without limitation, rent statements, receipted bills and copies of tenant checks used in payment of such rent), the execution of any and all consents or other documents, and the undertaking of any act reasonably necessary for the collection of such Uncollected Rents by Seller; provided, however, that Purchaser’s obligation to cooperate with Seller pursuant to this sentence shall not obligate Purchaser to terminate any Tenant lease with an existing Tenant, evict any existing Tenant from the Property.

5.4.6.2              At Closing, Purchaser shall receive a credit against the Purchase Price in an amount equal to the received and unapplied balance of all cash (or cash equivalent) Tenant Deposits, including, but not limited to, security, damage, pet or other 
refundable deposits paid by any of the Tenants to secure their respective obligations under the Leases, together, in all cases, with any interest payable to the Tenants thereunder as may be required by their respective Tenant Lease or state law (the “
Tenant Security Deposit Balance”).  Any cash (or cash equivalents) held by Seller which constitutes the Tenant Security Deposit Balance shall be retained by Seller in exchange for the foregoing credit against the Purchase Price and shall not be transferred by Seller pursuant to this Contract (or any of the documents delivered at Closing), but the obligation with respect to the Tenant Security Deposit Balance nonetheless shall be assumed by Purchaser.  The Tenant Security Deposit Balance shall not include any non-refundable deposits or fees paid by Tenants to Seller, either pursuant to the Leases or otherwise.

5.4.7        
Existing Loan.  Seller shall be responsible for all principal required to be paid under the terms of the Note prior to Closing, together with all interest accrued under the Note prior to Closing, all of which may be a credit against the Purchase Price as provided in
Section 2.2.3.  Purchaser shall be responsible for all Lender Fees and all other fees, penalties, interest and other amounts due and owing under the Assumed Loan Documents as a result of the Loan Assumption and Release.  As set forth in
Section 160563201.0.0, any existing reserves, impounds and other accounts maintained in connection with the Loan and required to be replaced by Purchaser, shall be released in Good Funds to Seller at Closing.  

5.4.8        
Insurance.  No proration shall be made in relation to insurance premiums and insurance policies will not be assigned to Purchaser.  Seller shall have the risk of loss of the Property until 11:59 p.m. the day prior to the Closing Date, after which time the risk of loss shall pass to Purchaser and Purchaser shall be responsible for obtaining its own insurance thereafter.

5.4.9        
Employees.  All of Seller’s and Seller’s manager’s on-site employees shall have their employment at the Property terminated as of the Closing Date.  

5.4.10    
Closing Costs.  Purchaser shall pay any premiums or fees required to be paid by Purchaser with respect to the Title Policy pursuant to
Section 4.1, and one-half of the customary closing costs of the Escrow Agent.  Seller shall pay any transfer, mortgage assumption, sales, use, gross receipts or similar taxes, the cost of recording any instruments required to discharge any liens or encumbrances against the Property, the base premium for the Title Policy to the extent required by
Section 4.1, and one-half of the customary closing costs of the Escrow Agent.  
 
5.4.11    
Intentionally Omitted.  
 
5.4.12    
Possession.  Possession of the Property, subject to the Leases, Property Contracts, other than Terminated Contracts, and Permitted Exceptions, shall be delivered to Purchaser at the Closing upon release from escrow of all items to be delivered by Purchaser pursuant to
Section 5.3.  To the extent reasonably available to Seller, originals or copies of the Leases and Property Contracts, lease files, warranties, guaranties, operating manuals, keys to the property, and Seller’s books and records (other than proprietary information) (collectively, “
Seller’s Property-Related Files and Records”) regarding the Property shall be made available to Purchaser at the Property after the Closing.  Purchaser agrees, for a period of not less than three (3) years after the Closing (the “
Records Hold Period”), to (a) provide and allow Seller reasonable access to Seller’s Property-Related Files and Records for purposes of inspection and copying thereof, and (b) reasonably maintain and preserve Seller’s Property-Related Files and Records.  If at any time after the Records Hold Period, Purchaser desires to dispose of Seller’s Property-Related Files and Records, Purchaser must first provide Seller prior written notice (the “
Records Disposal Notice”).  Seller shall have a period of 30 days after receipt of the Records Disposal Notice to enter the Property (or such other location where such records are then stored) and remove or copy those of Seller’s Property-Related Files and Records that Seller desires to retain.  

5.5              
Post Closing Adjustments.  Purchaser or Seller may request that Purchaser and Seller undertake to re-adjust any item on the Proration Schedule (or any item omitted therefrom), with the exception of real property taxes which shall be final and not subject to readjustment, in accordance with the provisions of
Section 5.3.9 of this Contract; provided, however, that neither party shall have any obligation to re-adjust any items (a) after the expiration of 60 days after Closing, or (b) subject to such 60-day period, unless such items exceed $5,000.00 in magnitude (either individually or in the aggregate).  

Article VI
REPRESENTATIONS AND WARRANTIES OF SELLER AND PURCHASER

6.1              
Seller’s Representations.  Except, in all cases, for any fact, information or condition disclosed in the Title Documents, the Permitted Exceptions, the Property Contracts, or the Materials, or which is otherwise known by Purchaser prior to the Closing, Seller represents and warrants to Purchaser the following (collectively, the “
Seller’s Representations”) as of the Effective Date and as of the Closing Date; provided that Purchaser’s remedies if any such Seller’s Representations are untrue as of the Closing Date are limited to those set forth in
Section 8.1:
 
6.1.1        Seller is validly existing and in good standing under the laws of the state of its formation set forth in the initial paragraph of this Contract; and, subject to
Section 8.2.4 and any approvals required from Lender for the Loan Assumption and Release, has or at the Closing shall have the entity power and authority to sell and convey the Property and to execute the documents to be executed by Seller and prior to the Closing will have taken as applicable, all corporate, partnership, limited liability company or equivalent entity actions required for the execution and delivery of this Contract, and the consummation of the transactions contemplated by this Contract.  The compliance with or fulfillment of the terms and conditions hereof will not conflict with, or result in a breach of, the terms, conditions or provisions of, or constitute a default under, any contract to which Seller is a party or by which Seller is otherwise bound, which conflict, breach or default would have a material adverse affect on Seller’s ability to consummate the transaction contemplated by this Contract or on the Property.  Subject to
Section 8.2.4, this Contract is a valid and binding agreement against Seller in accordance with its terms;

6.1.2        Seller is not a “foreign person,” as that term is used and defined in the Internal Revenue Code, Section 1445, as amended;

6.1.3        Except for (a) any actions by Seller to evict Tenants under the Leases, or (b) any matter covered by Seller’s current insurance policy(ies), to Seller’s knowledge, there are no material actions, proceedings, litigation or governmental investigations or condemnation actions either pending or threatened concerning the Property which will adversely impact Seller’s ability to convey the Property;

6.1.4        To Seller’s knowledge, Seller has not received any written notice of any material default by Seller under any of the Property Contracts that will not be terminated on the Closing Date;

6.1.5        To Seller’s knowledge, the Rent Roll (as updated pursuant to
Section 5.2.9) is accurate in all material respects; and
 
6.1.6        To Seller’s knowledge, the Property Contracts List (as updated pursuant to
Section 5.2.10) is accurate in all material respects and includes all Property Contracts.  To Seller’s knowledge, each Property Contract is free from material default. 

 
6.1.7        To Seller’s knowledge:  (A) no hazardous or toxic materials or other substances regulated by applicable federal or state environmental laws are stored by Seller on, in or under the Property in quantities which violate applicable laws governing such materials or substances, and (B) the Property is not used by Seller for the storage, treatment, generation or manufacture of any hazardous or toxic materials or other substances in a manner which would constitute a violation of applicable federal or state environmental laws.

6.2              
AS-IS.  Except for Seller’s Representations, the Property is expressly purchased and sold “AS IS,” “WHERE IS,” and “WITH ALL FAULTS.”  The Purchase Price and the terms and conditions set forth herein are the result of arm’s-length bargaining between entities familiar with transactions of this kind, and said price, terms and conditions reflect the fact that Purchaser shall have the benefit of, but is not relying upon, any information provided by Seller or Broker or statements, representations or warranties, express or implied, made by or enforceable directly against Seller or Broker, including, without limitation, any relating to the value of the Property, the physical or environmental condition of the Property, any state, federal, county or local law, ordinance, order or permit; or the suitability, compliance or lack of compliance of the Property with any regulation, or any other attribute or matter of or relating to the Property (other than any covenants of title contained in the Deed conveying the Property and Seller’s Representations).  Purchaser agrees that Seller shall not be responsible or liable to Purchaser for any defects, errors or omissions, or on account of any conditions affecting the Property.  Purchaser, its successors and assigns, and anyone claiming by, through or under Purchaser, hereby fully releases Seller’s Indemnified Parties from, and irrevocably waives its right to maintain, any and all claims and causes of action that it or they may now have or hereafter acquire against Seller’s Indemnified Parties with respect to any and all Losses arising from or related to any defects, errors, omissions or other conditions affecting the Property.  Purchaser represents and warrants that, as of the date hereof and as of the Closing Date, it has and shall have reviewed and conducted such independent analyses, studies (including, without limitation, environmental studies and analyses concerning the presence of lead, asbestos, water intrusion and/or fungal growth and any resulting damage, PCBs and radon in and about the Property), reports, investigations and inspections as it deems appropriate in connection with the Property.  
If Seller  provides or has provided any documents, summaries, opinions or work product of consultants, surveyors, architects, engineers, title companies, governmental authorities or any other person or entity with respect to the Property, including, without limitation, the offering prepared by Broker, Purchaser and Seller agree that Seller has done so or shall do so only for the convenience of both parties, Purchaser shall not rely thereon and the reliance by Purchaser upon any such documents, summaries, opinions or work product shall not create or give rise to any liability of or against Seller’s Indemnified Parties.  Purchaser acknowledges and agrees that no representation has been made and no responsibility is assumed by Seller with respect to current and future applicable zoning or building code requirements or the compliance of the Property with any other laws, rules, ordinances or regulations, the financial earning capacity or expense history of the Property, the continuation of contracts, continued occupancy levels of the Property, or any part thereof, or the continued occupancy by tenants of any Leases or, without limiting any of the foregoing, occupancy at Closing.  Prior to Closing, Seller shall have the right, but not the obligation, to enforce its rights against any and all Property occupants, guests or tenants.  Purchaser agrees that the departure or removal, prior to Closing, of any of such guests, occupants or tenants shall not be the basis for, nor shall it give rise to, any claim on the part of Purchaser, nor shall it affect the obligations of Purchaser under this Contract in any manner whatsoever; and Purchaser shall close title and accept delivery of the Deed with or without such tenants in possession and without any allowance or reduction in the Purchase Price under this Contract.  Purchaser hereby releases Seller from any and all claims and liabilities relating to the foregoing matters.  

6.3              
Survival of Seller’s Representations.  Seller and Purchaser agree that Seller’s Representations shall survive Closing for a period of 9 months (the “
Survival Period”).  Seller shall have no liability after the Survival Period with respect to Seller’s Representations contained herein except to the extent that Purchaser has requested arbitration against Seller during the Survival Period for breach of any of Seller’s Representations.  Under no circumstances shall Seller be liable to Purchaser for more than $500,000 in any individual instance or in the aggregate for all breaches of Seller’s Representations, nor shall Purchaser be entitled to bring any claim for a breach of Seller’s Representations unless the claim for damages (either in the aggregate or as to any individual claim) by Purchaser exceeds $5,000.  In the event that Seller breaches any representation contained in
Section 6.1 and Purchaser had knowledge of such breach prior to the Closing Date, and elected to close regardless, Purchaser shall be deemed to have waived any right of recovery, and Seller shall not have any liability in connection therewith.

6.4               
Definition of Seller’s Knowledge.  Any representations and warranties made “to the knowledge of Seller” shall not be deemed to imply any duty of inquiry.  For purposes of this Contract, the term Seller’s “
knowledge” shall mean and refer only to actual knowledge of the Regional Property Manager and shall not be construed to refer to the knowledge of any other partner, officer, director, agent, employee or representative of Seller, or any affiliate of Seller, or to impose upon such Regional Property Manager any duty to investigate the matter to which such actual knowledge or the absence thereof pertains, or to impose upon such Regional Property Manager any individual personal liability.  As used herein, the term “
Regional Property Manager” shall refer to Dawn Bailey who is the regional property manager handling this Property.  

6.5              
Representations and Warranties of Purchaser.  For the purpose of inducing Seller to enter into this Contract and to consummate the sale and purchase of the Property in accordance herewith, Purchaser represents and warrants to Seller the following as of the Effective Date and as of the Closing Date:

6.5.1        Purchaser is a corporation duly organized, validly existing and in good standing under the laws of North Carolina.

6.5.2        Purchaser, acting through any of its or their duly empowered and authorized officers or members, has all necessary entity power and authority to own and use its properties and to transact the business in which it is engaged, and has full power and authority to enter into this Contract, to execute and deliver the documents and instruments required of Purchaser herein, and to perform its obligations hereunder; and no consent of any of Purchaser’s partners, directors, officers or members are required to so empower or authorize Purchaser.  The compliance with or fulfillment of the terms and conditions hereof will not conflict with, or result in a breach of, the terms, conditions or provisions of, or constitute a default under, any contract to which Purchaser is a party or by which Purchaser is otherwise bound, which conflict, breach or default would have a material adverse affect on Purchaser’s ability to consummate the transaction contemplated by this Contract.  This Contract is a valid, binding and enforceable agreement against Purchaser in accordance with its terms.

6.5.3        No pending or, to the knowledge of Purchaser, threatened litigation exists which if determined adversely would restrain the consummation of the transactions contemplated by this Contract or would declare illegal, invalid or non-binding any of Purchaser’s obligations or covenants to Seller.

6.5.4        Other than Seller’s Representations, Purchaser has not relied on any representation or warranty made by Seller or any representative of Seller (including, without limitation, Broker) in connection with this Contract and the acquisition of the Property.

6.5.5        The Broker and its affiliates do not, and will not at the Closing, have any direct or indirect legal, beneficial, economic or voting interest in Purchaser (or in an assignee of Purchaser, which pursuant to
Section 13.3, acquires the Property at the Closing), nor has Purchaser or any affiliate of Purchaser granted (as of the Effective Date or the Closing Date) the Broker or any of its affiliates any right or option to acquire any direct or indirect legal, beneficial, economic or voting interest in Purchaser.

6.5.6        Purchaser is not a Prohibited Person.

6.5.7        To Purchaser’s knowledge, none of its investors, affiliates or brokers or other agents (if any), acting or benefiting in any capacity in connection with this Contract is a Prohibited Person.

6.5.8        The funds or other assets Purchaser will transfer to Seller under this Contract are not the property of, or beneficially owned, directly or indirectly, by a Prohibited Person. 

6.5.9        The funds or other assets Purchaser will transfer to Seller under this Contract are not the proceeds of specified unlawful activity as defined by 18 U.S.C. § 1956(c)(7).

Article VII 
OPERATION OF THE PROPERTY

7.1               
Leases and Property Contracts.  During the period of time from the Effective Date to the Closing Date, in the ordinary course of business Seller may enter into new Property Contracts, new Leases, renew existing Leases or modify, terminate or accept the surrender or forfeiture of any of the Leases, modify any Property Contracts, or institute and prosecute any available remedies for default under any Lease or Property Contract without first obtaining the written consent of Purchaser; provided, however, Seller agrees that any such new Property Contracts or any new or renewed Leases shall not have a term in excess of 1 year  without the prior written consent of and, Purchaser, which consent shall not be unreasonably withheld, conditioned or delayed.  Provided that the Closing occurs on the last Business Day of the calendar month, Seller agrees that at the Closing (a) Seller will deliver to Purchaser the same number (or less) of Tenant Units which were vacant and not in Rent-Ready Condition on the date that the Feasibility Period expired, or (b) Purchaser shall receive a credit against the Purchase Price in an amount equal to the product of (i) the number of additional Tenant Units on the date of the Closing that are vacant and not in Rent-Ready Condition in excess of the number of Tenant Units that were vacant and not in Rent-Ready Condition on the date that the Feasibility Period expired, and (ii) $500.00.

7.2              
General Operation of Property.  Except as specifically set forth in this Article VII, Seller shall operate the Property after the Effective Date in the ordinary course of business, and except as necessary in Seller’s sole discretion to address (a) any life or safety issue at the Property or (b) any other matter which in Seller’s reasonable discretion materially adversely affects the use, operation or value of the Property, Seller will not make any material alterations to the Property or remove any material Fixtures and Tangible Personal Property without the prior written consent of Purchaser which consent shall not be unreasonably withheld, denied or delayed.

7.3              
Liens.  Other than utility easements and temporary construction easements granted by Seller in the ordinary course of business, Seller covenants that it will not voluntarily create or cause any lien or encumbrance to attach to the Property between the Effective Date and the Closing Date (other than Leases and Property Contracts as provided in
Section 7.1) unless Purchaser approves such lien or encumbrance, which approval shall not be unreasonably withheld, conditioned or delayed.  If Purchaser approves any such subsequent lien or encumbrance, the same shall be deemed a Permitted Encumbrance for all purposes hereunder.

Article VIII 
CONDITIONS PRECEDENT TO CLOSING

8.1
              
Purchaser’s Conditions to Closing.  Purchaser’s obligation to close under this Contract shall be subject to and conditioned upon the fulfillment of the following conditions precedent:

8.1.1        All of the documents required to be delivered by Seller to Purchaser at the Closing pursuant to the terms and conditions hereof shall have been delivered;

8.1.2        Each of Seller’s Representations shall be true in all material respects as of the Closing Date;

8.1.3        Seller shall have complied with, fulfilled and performed in all material respects each of the covenants, terms and conditions to be complied with, fulfilled or performed by Seller hereunder; and

8.1.4        Neither Seller nor Seller’s general partner shall be a debtor in any bankruptcy proceeding nor shall have been in the last 6 months a debtor in any bankruptcy proceeding. 

8.1.5        The Loan Assumption and Release shall have occurred (provided that the occurrence of the Loan Assumption and Release shall not be a condition to Purchaser’s obligation to close if the failure of the Loan Assumption and Release to occur shall have been a result of any action or inaction of the Purchaser).

Notwithstanding anything to the contrary, there are no other conditions to Purchaser’s obligation to Close except as expressly set forth in this
Section 8.1.  If any condition set forth in Sections 8.1.1, 8.1.3 or 8.1.4 is not met, Purchaser may (a) waive any of the foregoing conditions and proceed to Closing on the Closing Date with no offset or deduction from the Purchase Price, or (b) if such failure constitutes a default by Seller, exercise any of its remedies pursuant to
Section 10.2.  If the condition set forth in Section 8.1.2 is not met, Seller shall not be in default pursuant to
Section 10.2, and Purchaser may, as its sole and exclusive remedy, (i) notify Seller of Purchaser’s election to terminate this Contract and receive a return of the Deposit from the Escrow Agent, or (ii) waive such condition and proceed to Closing on the Closing Date with no offset or deduction from the Purchase Price.  

8.2              
Seller’s Conditions to Closing.  Without limiting any of the rights of Seller elsewhere provided for in this Contract, Seller’s obligation to close with respect to conveyance of the Property under this Contract shall be subject to and conditioned upon the fulfillment of the following conditions precedent:

8.2.1        All of the documents and funds required to be delivered by Purchaser to Seller at the Closing pursuant to the terms and conditions hereof shall have been delivered;

8.2.2        Each of the representations, warranties and covenants of Purchaser contained herein shall be true in all material respects as of the Closing Date;

8.2.3        Purchaser shall have complied with, fulfilled and performed in all material respects each of the covenants, terms and conditions to be complied with, fulfilled or performed by Purchaser hereunder;

8.2.4        Seller shall have received all consents, documentation and approvals necessary to consummate and facilitate the transactions contemplated hereby, including, without limitation, a tax free exchange pursuant to
Section 13.18 (and the amendment of Seller’s (or Seller’s affiliates’) partnership or other organizational documents in connection therewith), (a) from Seller’s partners, members, managers, shareholders or directors to the extent required by Seller’s (or Seller’s affiliates’) organizational documents, and (b) as required by law; and

8.2.5        There shall not be pending or, to the knowledge of either Purchaser or Seller, any litigation or threatened litigation which, if determined adversely, would restrain the consummation of any of the transactions contemplated by this Contract or declare illegal, invalid or nonbinding any of the covenants or obligations of the Purchaser;

8.2.6        The Loan Assumption and Release shall have occurred.

If any of the foregoing conditions to Seller’s obligation to close with respect to conveyance of the Property under this Contract are not met, Seller may (a) waive any of the foregoing conditions and proceed to Closing on the Closing Date, or (b) terminate this Contract, and, if such failure constitutes a default by Purchaser, exercise any of its remedies under
Section 10.1.  
 
Article IX
BROKERAGE
 
9.1              
Indemnity.  Seller represents and warrants to Purchaser that it has dealt only with Apartment Realty Advisors, 4725 Piedmont Row Drive, Suite 220, Charlotte, North Carolina 28210 (“
Broker”) in connection with this Contract.  Seller and Purchaser each represents and warrants to the other that, other than Broker, it has not dealt with or utilized the services of any other real estate broker, sales person or finder in connection with this Contract, and each party agrees to indemnify, hold harmless, and, if requested in the sole and absolute discretion of the indemnitee, defend (with counsel approved by the indemnitee) the other party from and against all Losses relating to brokerage commissions and finder’s fees arising from or attributable to the acts or omissions of the indemnifying party.  

9.2              
Broker Commission.  If the Closing occurs, Seller agrees to pay Broker a commission according to the terms of a separate contract.  Broker shall not be deemed a party or third party beneficiary of this Contract.  As a condition to Seller’s obligation to pay the commission, Broker shall execute the signature page for Broker attached hereto solely for purposes of confirming the matters set forth therein.

Article X
DEFAULTS AND REMEDIES

10.1          
Purchaser Default.  If Purchaser defaults in its obligations hereunder to (a) deliver the Initial Deposit or Additional Deposit (or any other deposit or payment required of 
Purchaser hereunder), (b) deliver to Seller the deliveries specified under Section 5.3 on the date required thereunder, or (c) deliver the Purchase Price at the time required by
Section 2.2.4 and close on the purchase of the Property on the Closing Date, then, immediately and without the right to receive notice or to cure pursuant to
Section 2.2.3, Purchaser shall forfeit the Deposit, and the Escrow Agent shall deliver the Deposit to Seller, and neither party shall be obligated to proceed with the purchase and sale of the Property.  If, Purchaser defaults in any of its other representations, warranties or obligations under this Contract, and such default continues for more than 10 days after written notice from Seller, then Purchaser shall forfeit the Deposit, and the Escrow Agent shall deliver the Deposit to Seller, and neither party shall be obligated to proceed with the purchase and sale of the Property.  The Deposit is liquidated damages and recourse to the Deposit is, except for Purchaser’s indemnity and confidentiality obligations hereunder, Seller’s sole and exclusive remedy for Purchaser’s failure to perform its obligation to purchase the Property or breach of a representation or warranty.  Seller expressly waives the remedies of specific performance and additional damages for such default by Purchaser.  SELLER AND PURCHASER ACKNOWLEDGE THAT SELLER’S DAMAGES WOULD BE DIFFICULT TO DETERMINE, AND THAT THE DEPOSIT IS A REASONABLE ESTIMATE OF SELLER’S DAMAGES RESULTING FROM A DEFAULT BY PURCHASER IN ITS OBLIGATION TO PURCHASE THE PROPERTY.  SELLER AND PURCHASER FURTHER AGREE THAT THIS
SECTION 10.1 IS INTENDED TO AND DOES LIQUIDATE THE AMOUNT OF DAMAGES DUE SELLER, AND SHALL BE SELLER’S EXCLUSIVE REMEDY AGAINST PURCHASER, BOTH AT LAW AND IN EQUITY, ARISING FROM OR RELATED TO A BREACH BY PURCHASER OF ITS OBLIGATION TO CONSUMMATE THE TRANSACTIONS CONTEMPLATED BY THIS CONTRACT, OTHER THAN WITH RESPECT TO PURCHASER’S INDEMNITY AND CONFIDENTIALITY OBLIGATIONS HEREUNDER.

10.2
          
Seller Default.  If Seller, prior to the Closing, defaults in its covenants or obligations under this Contract, including to sell the Property as required by this Contract and such default continues for more than 10 days after written notice from Purchaser, then, at Purchaser’s election and as Purchaser’s sole and exclusive remedy, either (a) this Contract shall terminate, and all payments and things of value, including the Deposit, provided by Purchaser hereunder shall be returned to Purchaser and Purchaser may recover, as its sole recoverable damages (but without limiting its right to receive a refund of the Deposit), its direct and actual out-of-pocket expenses and costs (documented by paid invoices to third parties) in connection with this transaction, which damages shall not exceed $50,000 in aggregate, or (b) subject to the conditions below, Purchaser may seek specific performance of Seller’s obligation to deliver the Deed pursuant to this Contract (but not damages).  Purchaser may seek specific performance of Seller’s obligation to deliver the Deed pursuant to this Contract only if, as a condition precedent to initiating such litigation for specific performance, Purchaser first shall (i) deliver all Purchaser Closing documents to Escrow Agent in accordance with the requirements of this Contract, including, without limitation,
Sections 2.2.3 and 5.3 (with the exception of Section 5.3.1); (ii) not otherwise be in default under this Contract; and (iii) file suit therefor with the court on or before the 90th day after the Closing Date; if Purchaser fails to file an action for specific performance within 90 days after the Closing Date, then Purchaser shall be deemed to have elected to terminate the Contract in accordance with subsection (a) above.  Purchaser agrees that it shall promptly deliver to Seller an assignment of all of Purchaser’s right, title and interest in and to (together with possession of) all plans, studies, surveys, reports, and other materials paid for with 
the out-of-pocket expenses reimbursed by Seller pursuant to the foregoing sentence.  SELLER AND PURCHASER FURTHER AGREE THAT THIS
SECTION 10.2 IS INTENDED TO AND DOES LIMIT THE AMOUNT OF DAMAGES DUE PURCHASER AND THE REMEDIES AVAILABLE TO PURCHASER, AND SHALL BE PURCHASER’S EXCLUSIVE REMEDY AGAINST SELLER, BOTH AT LAW AND IN EQUITY ARISING FROM OR RELATED TO A BREACH BY SELLER OF ITS COVENANTS OR ITS OBLIGATION TO CONSUMMATE THE TRANSACTIONS CONTEMPLATED BY THIS CONTRACT.  UNDER NO CIRCUMSTANCES MAY PURCHASER SEEK OR BE ENTITLED TO RECOVER ANY SPECIAL, CONSEQUENTIAL, PUNITIVE, SPECULATIVE OR INDIRECT DAMAGES, ALL OF WHICH PURCHASER SPECIFICALLY WAIVES, FROM SELLER FOR ANY BREACH BY SELLER, OF ITS COVENANTS OR ITS OBLIGATIONS UNDER THIS CONTRACT.  PURCHASER SPECIFICALLY WAIVES THE RIGHT TO FILE ANY LIS PENDENS OR ANY LIEN AGAINST THE PROPERTY UNLESS AND UNTIL IT HAS IRREVOCABLY ELECTED TO SEEK SPECIFIC PERFORMANCE OF THIS CONTRACT AND HAS FILED AND IS DILIGENTLY PURSUING AN ACTION SEEKING SUCH REMEDY.

Article XI
RISK OF LOSS OR CASUALTY

11.1          
Major Damage.  In the event that the Property is damaged or destroyed by fire or other casualty prior to Closing, and the cost for demolition, site cleaning, restoration, replacement, or other repairs (collectively, the “
Repairs”), is more than $750,000.00, then Seller shall have no obligation to make such Repairs, and shall notify Purchaser in writing of such damage or destruction (the “
Damage Notice”).  Within 10 days after Purchaser’s receipt of the Damage Notice, Purchaser may elect at its option to terminate this Contract by delivering written notice to Seller in which event the Deposit shall be refunded to Purchaser.  In the event Purchaser fails to terminate this Contract within the foregoing 10-day period, this transaction shall be closed in accordance with
Section 11.3 below.
 
11.2          
Minor Damage.  In the event that the Property is damaged or destroyed by fire or other casualty prior to the Closing, and the cost of Repairs is equal to or less than $750,000.00, this transaction shall be closed in accordance with
Section 11.3, notwithstanding such casualty.  In such event, Seller may at its election endeavor to make such Repairs to the extent of any recovery from insurance carried on the Property, if such Repairs can be reasonably effected before the Closing.  Regardless of Seller’s election to commence such Repairs, or Seller’s ability to complete such Repairs prior to Closing, this transaction shall be closed in accordance with
Section 11.3 below. 
 
11.3          
Closing.  In the event Purchaser fails to terminate this Contract following a casualty as set forth in
Section 11.1, or in the event of a casualty as set forth in Section 11.2, then this transaction shall be closed in accordance with the terms of the Contract, at Seller’s election, either (i) for the full Purchase Price, notwithstanding any such casualty, in which case Purchaser shall, at Closing, execute and deliver an assignment and assumption (in a form reasonably required by Seller) of Seller’s rights and obligations with respect to the insurance claim related to such casualty, and thereafter Purchaser shall receive all insurance proceeds pertaining to such claim, less any amounts which may already have been spent by Seller for Repairs (plus a credit 
against the Purchase Price at Closing in the amount of any deductible payable by Seller in connection therewith); or (ii) for the full Purchase Price less a credit to Purchaser in the amount necessary to complete such Repairs (less any amounts which may already have been spent by Seller for Repairs). 

11.4          
Repairs.  To the extent that Seller elects to commence any Repairs prior to Closing, then Seller shall be entitled to receive and apply available insurance proceeds to any portion of such Repairs completed or installed prior to Closing, with Purchaser being responsible for completion of such Repairs after Closing.  To the extent that any Repairs have been commenced prior to Closing, then the Property Contracts shall include, and Purchaser shall assume at Closing, all construction and other contracts entered into by Seller in connection with such Repairs.

Article XII
EMINENT DOMAIN

12.1          
Eminent Domain.  In the event that, at the time of Closing, any material part of the Property is (or previously has been) acquired, or is about to be acquired, by any governmental agency by the powers of eminent domain or transfer in lieu thereof (or in the event that at such time there is any notice of any such acquisition or intent to acquire by any such governmental agency), Purchaser shall have the right, at Purchaser’s option, to terminate this Contract by giving written notice within 10 days after Purchaser’s receipt from Seller of notice of the occurrence of such event, and if Purchaser so terminates this Contract, Purchaser shall recover the Deposit hereunder.  If Purchaser fails to terminate this Contract within such 10-day period, this transaction shall be closed in accordance with the terms of this Contract for the full Purchase Price and Purchaser shall receive the full benefit of any condemnation award.  It is expressly agreed between the parties hereto that this section shall in no way apply to customary dedications for public purposes which may be necessary for the development of the Property.

Article XIII
MISCELLANEOUS

13.1          
Binding Effect of Contract.  This Contract shall not be binding on either party until executed by both Purchaser and Seller.  Neither the Escrow Agent’s nor the Broker’s execution of this Contract shall be a prerequisite to its effectiveness.  Subject to
Section 13.3, this Contract shall be binding upon and inure to the benefit of Seller and Purchaser, and their respective successors and permitted assigns.

13.2          
Exhibits and Schedules.  All Exhibits and Schedules, whether or not annexed hereto, are a part of this Contract for all purposes.

13.3
          
Assignability.  Except to the extent required to comply with the provisions of Section 13.18 related to a 1031 Exchange, this Contract is not assignable by Purchaser without first obtaining the prior written approval of Seller.  Notwithstanding the foregoing, Purchaser may assign this Contract, without first obtaining the prior written approval of Seller, to one or more entities so long as (a) Purchaser is an affiliate of the purchasing entity(ies), and (b) Purchaser is not released from its liability hereunder, and (c) Purchaser provides written 
notice to Seller of any proposed assignment no later than 5 days prior to the Closing Date.  As used herein, an affiliate is a person or entity controlled by, under common control with, or controlling another person or entity.  

13.4          
Captions.  The captions, headings, and arrangements used in this Contract are for convenience only and do not in any way affect, limit, amplify, or modify the terms and provisions hereof.

13.5          
Number and Gender of Words.  Whenever herein the singular number is used, the same shall include the plural where appropriate, and words of any gender shall include each other gender where appropriate.

13.6          
Notices.  All notices, demands, requests and other communications required or permitted hereunder shall be in writing, and shall be (a) personally delivered with a written receipt of delivery; (b) sent by a nationally-recognized overnight delivery service requiring a written acknowledgement of receipt or providing a certification of delivery or attempted delivery; (c) sent by certified or registered mail, return receipt requested; or (d) sent by confirmed facsimile transmission or electronic delivery with an original copy thereof transmitted to the recipient by one of the means described in subsections (a) through (c) no later than 3 Business Days thereafter.  All notices shall be deemed effective when actually delivered as documented in a delivery receipt; provided, however, that if the notice was sent by overnight courier or mail as aforesaid and is affirmatively refused or cannot be delivered during customary business hours by reason of the absence of a signatory to acknowledge receipt, or by reason of a change of address with respect to which the addressor did not have either knowledge or written notice delivered in accordance with this paragraph, then the first attempted delivery shall be deemed to constitute delivery.  Each party shall be entitled to change its address for notices from time to time by delivering to the other party notice thereof in the manner herein provided for the delivery of notices.  All notices shall be sent to the addressee at its address set forth following its name below:

To Purchaser:

 
 Morrisville Apartments Partners, LLC

P.O. Box 9886

Greensboro, NC 27429

Attention:  Joseph M. Brantley, III

Telephone:  (336) 373-0028 ext. 302

Facsimile:  (336) 373-0029

 

 
With a copy to:
  

Isaacson Isaacson Sheridan & Fountain, LLP

101 W. Friendly Avenue, Suite 400 

Greensboro, North Carolina  27402

Attention:  Marc L. Isaacson, Esq.

Telephone:  (336) 275-7626 ext. 2

Facsimile:  (336) 273-7293

 
 Address for overnight delivery:

 
 826 North Elm Street, Suite 200

Greensboro, NC 27401

 
 To Seller:

 
 National Property Investors 8

c/o AIMCO
 4582 South Ulster Street Parkway 

Suite 1100
 Denver, Colorado  80237

Attention:  Mark Reoch

Telephone:  (303) 691-4337

Facsimile:  (720) 200-6882

 
 And:

 
 c/o AIMCO

4582 South Ulster Street Parkway 

Suite 1100
 Denver, Colorado  80237

Attention:  Mr. Harry Alcock

Telephone:  (303) 691-4344

Facsimile:  (303) 300-3282

 
 with copy to:

 
 AIMCO

4582 South Ulster Street Parkway 

Suite 1100
 Denver, Colorado  80237

Attention:  John Spiegleman, Esq.

Telephone:  (303) 691-4303

Facsimile:  (720) 200-6882

 
 
and a copy to:
  

Apartment Realty Advisors

4725 Piedmont Row Drive, Suite 220

Charlotte, North Carolina 28210

Attention:  Blake Okland

Telephone:  (704) 926-4431

Facsimile:  (704) 926-4468

 
 and a copy to:

 
 Kutak Rock LLP

1801 California Street, Suite 3100

Denver, Colorado  80202

Attention:  William S. Martin, Esq.

Telephone:  (303) 297-2400

Facsimile:  (303) 292-7799

 
 Any notice required hereunder to be delivered to the Escrow Agent shall be delivered in accordance with above provisions as follows:

Stewart Title Guaranty

1980 Post Oak Boulevard, Suite 610

Houston, Texas 77056

Attention:  Wendy Howell

Telephone:  (713) 625-8161

Facsimile: (713) 552-1703

 
 Unless specifically required to be delivered to the Escrow Agent pursuant to the terms of this Contract, no notice hereunder must be delivered to the Escrow Agent in order to be effective so long as it is delivered to the other party in accordance with the above provisions.

13.7          
Governing Law and Venue.  The laws of the State of North Carolina shall govern the validity, construction, enforcement, and interpretation of this Contract, unless otherwise specified herein except for the conflict of laws provisions thereof.  Subject to
Section 13.24, all claims, disputes and other matters in question arising out of or relating to this Contract, or the breach thereof, shall be decided by proceedings instituted and litigated in a court of competent jurisdiction in the state in which the Property is situated, and the parties hereto expressly consent to the venue and jurisdiction of such court.

13.8          
Entire Agreement.  This Contract embodies the entire Contract between the parties hereto concerning the subject matter hereof and supersedes all prior conversations, proposals, negotiations, understandings and contracts, whether written or oral.

13.9          
Amendments.  This Contract shall not be amended, altered, changed, modified, supplemented or rescinded in any manner except by a written contract executed by all of the parties; provided, however, that, (a) the signature of the Escrow Agent shall not be required as to 
any amendment of this Contract other than an amendment of Section 2.3, and (b) the signature of the Broker shall not be required as to any amendment of this Contract

13.10      
Severability.  In the event that any part of this Contract shall be held to be invalid or unenforceable by a court of competent jurisdiction, such provision shall be reformed, and enforced to the maximum extent permitted by law.  If such provision cannot be reformed, it shall be severed from this Contract and the remaining portions of this Contract shall be valid and enforceable.

13.11      
Multiple Counterparts/Facsimile Signatures.  This Contract may be executed in a number of identical counterparts.  This Contract may be executed by facsimile signatures or electronic delivery of signatures which shall be binding on the parties hereto, with original signatures to be delivered as soon as reasonably practical thereafter.

13.12      
Construction.  No provision of this Contract shall be construed in favor of, or against, any particular party by reason of any presumption with respect to the drafting of this Contract; both parties, being represented by counsel, having fully participated in the negotiation of this instrument.

13.13      
Confidentiality.  Neither Purchaser nor Seller shall disclose the terms and conditions contained in this Contract and shall keep the same confidential, provided that either may disclose the terms and conditions of this Contract (a) as required by law, (b) to consummate the terms of this Contract, or any financing or partnership consent relating thereto, or (c) to Purchaser’s or Seller’s lenders, attorneys and accountants.  Any information obtained by Purchaser in the course of its inspection of the Property, and any Materials provided by Seller to Purchaser hereunder, shall be confidential and Purchaser shall be prohibited from making such information public to any other person or entity other than its Consultants, without Seller’s prior written authorization, which may be granted or denied in Seller’s sole discretion.  In addition, Purchaser shall use its reasonable efforts to prevent its Consultants from divulging any such confidential information to any unrelated third parties except as required by law or as reasonably necessary to third parties engaged by Purchaser for the limited purpose of analyzing and investigating such information for the purpose of consummating the transaction contemplated by this Contract.  Unless and until the Closing occurs, Purchaser shall not market the Property (or any portion thereof) to any prospective purchaser or lessee without the prior written consent of Seller, which consent may be withheld in Seller’s sole discretion.  Notwithstanding the provisions of
Section 13.8 Purchaser agrees that the covenants, restrictions and agreements of Purchaser contained in any confidentiality agreement executed by Purchaser prior to the Effective Date shall survive the execution of this Contract and shall not be superseded hereby.

13.14      
Time of the Essence.  It is expressly agreed by the parties hereto that time is of the essence with respect to this Contract and any aspect thereof.

13.15      
Waiver.  No delay or omission to exercise any right or power accruing upon any default, omission, or failure of performance hereunder shall impair any right or power or shall be construed to be a waiver thereof, but any such right and power may be exercised from time to time and as often as may be deemed expedient.  No waiver, amendment, release, or modification 
of this Contract shall be established by conduct, custom, or course of dealing and all waivers must be in writing and signed by the waiving party.

13.16      
Attorneys’ Fees.  In the event either party hereto commences litigation or arbitration against the other to enforce its rights hereunder, the prevailing party in such litigation shall be entitled to recover from the other party its reasonable attorneys’ fees and expenses incidental to such litigation and arbitration, including the cost of in-house counsel and any appeals.

13.17      
Time Zone/Time Periods.  Any reference in this Contract to a specific time shall refer to the time in the time zone where the Property is located.  (For example, a reference to 3:00 p.m. refers to 3:00 p.m. MST if the Property is located in Denver, Colorado.)  Should the last day of a time period fall on a weekend or legal holiday, the next Business Day thereafter shall be considered the end of the time period.

13.18      
1031 Exchange.  Seller and Purchaser acknowledge and agree that the purchase and sale of the Property may be part of a tax-free exchange for either Purchaser or Seller pursuant to Section 1031 of the Code, the regulations promulgated thereunder, revenue procedures, pronouncements and other guidance issued by the Internal Revenue Service.  Each party hereby agrees to cooperate with each other and take all reasonable steps on or before the Closing Date to facilitate such exchange if requested by the other party, provided that (a) no party making such accommodation shall be required to acquire any substitute property, (b) such exchange shall not affect the representations, warranties, liabilities and obligations of the parties to each other under this Contract, (c) no party making such accommodation shall incur any additional cost, expense or liability in connection with such exchange (other than expenses of reviewing and executing documents required in connection with such exchange), and (d) no dates in this Contract will be extended as a result thereof, except as specifically provided herein.  Notwithstanding anything in this
Section 13.18 to the contrary, Seller shall have the right to extend the Closing Date (as extended pursuant to the second or third sentences of
Section 5.1) for up to 30 days in order to facilitate a tax free exchange pursuant to this
Section 13.18, and to obtain all documentation in connection therewith.
 
13.19      
No Personal Liability of Officers, Trustees or Directors of Seller’s Partners.  Purchaser acknowledges that this Contract is entered into by Seller which is a California limited partnership, and Purchaser agrees that none of Seller’s Indemnified Parties shall have any personal liability under this Contract or any document executed in connection with the transactions contemplated by this Contract.

13.20      
No Exclusive Negotiations.  Seller shall have the right, at all times prior to the expiration of the Feasibility Period, to solicit backup offers and enter into discussions, negotiations, or any other communications concerning or related to the sale of the Property with any third-party; provided, however, that such communications are subject to the terms of this Contract, and that Seller shall not enter into any binding contract with a third-party for the sale of the Property unless such contract is contingent on the termination of this Contract without the Property having been conveyed to Purchaser.

13.21
      ADA Disclosure.  Purchaser acknowledges that the Property may be subject to the federal Americans With Disabilities Act (the “
ADA”) and the federal Fair Housing Act (the “FHA”).  The ADA requires, among other matters, that tenants and/or owners of “public accommodations” remove barriers in order to make the Property accessible to disabled persons and provide auxiliary aids and services for hearing, vision or speech impaired persons.  Seller makes no warranty, representation or guarantee of any type or kind with respect to the Property’s compliance with the ADA or the FHA (or any similar state or local law), and Seller expressly disclaims any such representations.

13.22      
No Recording.  Purchaser shall not cause or allow this Contract or any contract or other document related hereto, nor any memorandum or other evidence hereof, to be recorded or become a public record without Seller’s prior written consent, which consent may be withheld at Seller’s sole discretion.  If Purchaser records this Contract or any other memorandum or evidence thereof, Purchaser shall be in default of its obligations under this Contract.  Purchaser hereby appoints Seller as Purchaser’s attorney-in-fact to prepare and record any documents necessary to effect the nullification and release of the Contract or other memorandum or evidence thereof from the public records.  This appointment shall be coupled with an interest and irrevocable.

13.23      
Relationship of Parties.  Purchaser and Seller acknowledge and agree that the relationship established between the parties pursuant to this Contract is only that of a seller and a purchaser of property.  Neither Purchaser nor Seller is, nor shall either hold itself out to be, the agent, employee, joint venturer or partner of the other party.

13.24      
Dispute Resolution.  Any controversy, dispute, or claim of any nature arising out of, in connection with, or in relation to the interpretation, performance, enforcement or breach of this Contract (and any closing document executed in connection herewith), including any claim based on contract, tort or statute, shall be resolved at the written request of any party to this Contract by binding arbitration.  The arbitration shall be administered in accordance with the then current Commercial Arbitration Rules of the American Arbitration Association.  Any matter to be settled by arbitration shall be submitted to the American Arbitration Association in the state in which the Property is located.  The parties shall attempt to designate one arbitrator from the American Arbitration Association.  If they are unable to do so within 30 days after written demand therefor, then the American Arbitration Association shall designate an arbitrator.  The arbitration shall be final and binding, and enforceable in any court of competent jurisdiction.  The arbitrator shall award attorneys' fees (including those of in-house counsel) and costs to the prevailing party and charge the cost of arbitration to the party which is not the prevailing party.  Notwithstanding anything herein to the contrary, this
Section 13.24 shall not prevent Purchaser or Seller from seeking and obtaining equitable relief on a temporary or permanent basis, including, without limitation, a temporary restraining order, a preliminary or permanent injunction or similar equitable relief, from a court of competent jurisdiction located in the state in which the Property is located (to which all parties hereto consent to venue and jurisdiction) by instituting a legal action or other court proceeding in order to protect or enforce the rights of such party under this Contract or to prevent irreparable harm and injury.  The court's jurisdiction over any such equitable matter, however, shall be expressly limited only to the temporary, preliminary, or permanent equitable relief sought; all other claims initiated under this Contract 
between the parties hereto shall be determined through final and binding arbitration in accordance with this
Section 13.24.  
 
13.25      
AIMCO Marks.  Purchaser agrees that Seller, the Property Manager or AIMCO, or their respective affiliates, are the sole owners of all right, title and interest in and to the AIMCO Marks (or have the right to use such AIMCO Marks pursuant to license agreements with third parties) and that no right, title or interest in or to the AIMCO Marks is granted, transferred, assigned or conveyed as a result of this Contract.  Purchaser further agrees that Purchaser will not use the AIMCO Marks for any purpose.

13.26      
Non-Solicitation of Employees.  Prior to the expiration of the Feasibility Period, Purchaser acknowledges and agrees that, without the express written consent of Seller, neither Purchaser nor any of Purchaser’s employees, affiliates or agents shall solicit any of Seller’s employees or any employees located at the Property (or any of Seller’s affiliates’ employees located at any property owned by such affiliates) for potential employment.

13.27      
Survival.  Except for (a) all of the provisions of this Article XIII (other than Sections 13.18 and 13.20); (b)
Sections 2.3, 3.3, 3.4, 3.5, 4.5.4, 4.5.5, 5.3.9, 5.5, 6.1.6, 6.5, 9.1, 11.4 and 14.1; (c) any other provisions in this Contract, that by their express terms survive the termination or Closing; and (d) any payment obligation of Purchaser under this Contract (the foregoing (a), (b), (c) and (d) referred to herein as the “
Survival Provisions”), none of the terms and provisions of this Contract shall survive the termination of this Contract, and if the Contract is not so terminated, all of the terms and provisions of this Contract (other than the Survival Provisions, which shall survive the Closing) shall be merged into the Closing documents and shall not survive Closing. 

13.28      
Multiple Purchasers.  As used in this Contract, the term “Purchaser” means all entities acquiring any interest in the Property at the Closing, including, without limitation, any assignee(s) of the original Purchaser pursuant to
Section 13.3 of this Contract.  In the event that “Purchaser” has any obligations or makes any covenants, representations or warranties under this Contract, the same shall be made jointly and severally by all entities being a Purchaser hereunder.  

Article XIV
LEAD–BASED PAINT DISCLOSURE

14.1          
Disclosure.  Seller and Purchaser hereby acknowledge delivery of the Lead Based Paint Disclosure attached as
Exhibit H hereto.  
  

 
 [Remainder of Page Intentionally Left Blank]

 

  
NOW, THEREFORE, the parties hereto have executed this Contract as of the date first set forth above.

 
 
Seller:
 
 
 
NATIONAL PROPERTY INVESTORS 8,
 
A CALIFORNIA LIMITED PARTNERSHIP,
a California limited partnership
  

By:       NPII EQUITY INVESTMENTS, INC.,

            a Florida corporation
,
             its general partner

 
             By: 
/s/John Spiegleman
             Name:  John Spiegleman

            Title:  Senior Vice President

 

  
 
 
Purchaser:
 
 
 
MORRISVILLE APARTMENTS PARTNERS, LLC, a North Carolina limited liability company
 
 
 By: 
/s/Joseph M. Brantley, III
 Name:  Joseph M. Brantley, III

Title:  Managing Member

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