Document:

Exhibit 10.2

 

PURCHASE AND SALE AGREEMENT
AND ESCROW INSTRUCTIONS

 

Between

 

AR I BORROWER, LLC

a Delaware limited
liability company

 

(“Seller”)

 

and

 

BLUEROCK REAL ESTATE,
L.L.C.

a Delaware limited
liability company

(as the “Purchaser”)

 

Covering

 

Real property located
at 10320 Grobie Way, Charlotte, North Carolina 28216, 

known as Ashton Reserve
at Northlake Phase I

 

     

     

    

 

PURCHASE AND SALE AGREEMENT

AND ESCROW INSTRUCTIONS

 

This PURCHASE AND SALE
AGREEMENT AND ESCROW INSTRUCTIONS (this “Agreement”) is entered into as of May 12, 2015 (“Agreement
Date”), by and between AR I BORROWER, LLC, a Delaware limited liability company (“Seller”) and
BLUEROCK REAL ESTATE, L.L.C., a Delaware limited liability company (“Purchaser”), and is joined in as to certain
matters by AR OWNER, LLC, a Delaware limited liability company (“AR Owner”).

 

RECITALS

 

A.           Seller
is the fee owner of that certain real property located at 10320 Grobie Way, Charlotte, Mecklenburg County, North Carolina 28216,
known as Ashton Reserve at Northlake Phase I, as more particularly described in Exhibit A attached hereto (the “Phase
I Land”) and made a part hereof, and the improvements (the “Phase I Improvements”) thereon. The Phase
I Land and the Phase I Improvements are sometimes hereafter referred to collectively as the “Phase I Real Property.”

 

B.           Seller
is also the owner of the personal property more particularly described in Exhibit B attached hereto and made a part
hereof (any therein being hereinafter collectively referred to as the “Phase I Personal Property”).

 

C.           Seller
is also the landlord or lessor in, to and under the agreements listed on the rent roll attached hereto as Exhibit C and
made a part hereof (the “Phase I Rent Roll”), or any such agreements hereafter executed by Seller in accordance
with the terms of this Agreement, pursuant to which any portion of the Phase I Land or Phase I Improvements is used or occupied
by anyone other than Seller (the property described in this clause (C) being herein referred to collectively as the “Phase
I Leases”).

 

D.           Seller
is also the holder of, or the Phase I Property benefits from, various intangible rights related to the Phase I Real Property and
Phase I Personal Property, including books, records, tenant files, plans, specifications, diagrams, building permits, certificates
of occupancy, warranties, guaranties and bonds and licenses and permits relating to the ownership and operation of the Phase I
Real Property and Phase I Personal Property (collectively, the “Phase I Plans, Licenses and Permits”).

 

D.           Seller
is also the obligee under certain service, supply, maintenance, and like agreements affecting the Phase I Property, which agreements
are listed and described on Exhibit D attached hereto (collectively, the “Phase I Contracts”)
and made a part hereof. The Phase I Real Property, the Phase I Personal Property, the Phase I Leases, the Phase I Plans, Licenses
and Permits and the Phase I Contracts are sometimes hereafter referred to collectively as the “Phase I Property.”

 

E.           Seller
is a party to a loan with SunLife Assurance Company of Canada, a Canadian corporation (“Existing Lender”),
evidenced by a Promissory Note dated November 22, 2013 (the “Note”) given by Seller to the order of Existing
Lender, which is secured by that certain Deed of Trust, Security Agreement and Fixture Filing dated of even date therewith (the
“Trust Deed”), used to finance Seller’s acquisition of the Phase I Property (the “Existing Loan”).

 

     

     

    

 

F.           AR
Owner, the sole member of Seller, is the purchaser under that certain Purchase and Sale Agreement dated October 31, 2013, as amended
(the “Phase II Purchase Contract”) with Northlake Investors 288, LLC, an Alabama limited liability company,
as seller (the “Phase II Seller”) pursuant to which AR Owner has contracted to acquire that certain real property
and improvements constructed thereon located immediately adjacent to the Phase I Property and known as Ashton Reserve at Northlake
Phase II (the “Phase II Property”).

 

G.           Purchaser
desires to purchase from Seller, and Seller desires to sell to Purchaser, all of the Phase I Property, in accordance with the terms
and conditions of this Agreement. In connection with such sale, AR Owner has also agreed to assign to Purchaser or Purchaser’s
designee AR Owner’s rights under the Phase II Purchase Contract, on and subject to the terms and conditions of this Agreement.

 

AGREEMENT

 

Now, therefore, for
good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

 

1.           PURCHASE
AND SALE OF PHASE I PROPERTY.

 

Subject to the terms
and conditions herein set forth, Seller agrees that it will sell to Purchaser, and Purchaser agrees that it will acquire from Seller,
on the Closing Date (as defined below), the Phase I Property. The purchase price for the Phase I Property shall be equal to Forty-Four
Million Seven Hundred Fifty Thousand and 00/100 Dollars ($44,750,000.00), minus the Existing Loan Balance, in cash (the “Purchase
Price”), payable in the manner set forth in Section 2 below.

 

2.           PURCHASE
PRICE; DEPOSIT; OPENING OF ESCROW

 

The Purchase Price
shall be paid as follows:

 

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2.1           Deposit.
No later than three (3) business days after the Agreement Date, Purchaser shall deposit with Calloway Title & Escrow, L.L.C.
(with the address set forth in Section 14.3); attention: S. Marcus Calloway (“Escrow Holder”)
in cash or other immediately available funds the sum of Two Hundred Fifty Thousand and 00/100 Dollars ($250,000.00) (the “Initial
Deposit”). Not later than the expiration of the Due Diligence Period (as hereinafter defined), if Purchaser provides
Seller with the Notice to Proceed described in Section 5.3, Purchaser shall deposit with Escrow Holder in cash or other
immediately available funds an additional deposit of Five Hundred Thousand and 00/100 Dollars ($500,000.00) (the “Second
Deposit”). Escrow Holder shall place the Initial Deposit (and the Second Deposit, if made) into a segregated interest
bearing account, and all interest thereon shall accrue for the benefit of the Purchaser. For purposes of this Agreement, “Deposit”
means the Initial Deposit and, if and when paid, the Second Deposit. Notwithstanding anything to the contrary in this Agreement,
the Initial Deposit shall be refundable to Purchaser for any reason prior to the expiration of the Due Diligence Period; provided,
however, that after the expiration of the Due Diligence Period, the Deposit shall only be refundable to Purchaser in the event
of (x) the failure of any of Purchaser’s Conditions Precedent to Closing set forth in Section 8, (y) a
default by Seller or AR Owner hereunder, or (z) in connection with any other express provision of this Agreement. All interest
earned on the Deposit shall not become part of the Deposit but rather shall be paid to Purchaser as it directs.

 

2.2           Purchase
Price. At Closing the Purchaser shall deposit with Escrow Holder the full amount of the Purchase Price, as such amount
may be increased or decreased by prorations, credits and other adjustments as herein provided, in cash, by wire transfer or in
other immediately available funds no later than the Closing Date, and, in consideration of the AR Owner’s delivery of the
Phase II Purchase Contract Assignment, including, without limitation, AR Owner's right, title and interest in and to the $750,000
earnest money deposit under the Phase II Contract, Purchaser shall pay to AR Holder by causing Escrow Holder to release to AR Owner
the Purchaser's interest in the Deposit. For avoidance of doubt, the Deposit shall not be credited in favor of Purchaser against
the Purchase Price at Closing but shall be paid to Seller by Escrow Holder at Closing (i.e. in addition to the Purchase Price)
as contemplated in the manner above.

 

2.3           Opening
of Escrow. Concurrently with the mutual execution of this Agreement (or as soon thereafter as reasonably possible) an escrow
(“Escrow”) shall be established with Escrow Holder. For purposes of this Agreement, the “Opening of
Escrow” shall mean for all purposes the Agreement Date. A fully executed copy of this Agreement shall serve as escrow
instructions to Escrow Holder, and Escrow Holder shall be and is hereby authorized and instructed to deliver pursuant to the terms
of this Agreement the documents and monies to be deposited into the Escrow.

 

3.          EXISTING
LENDER APPROVAL OF SALE.

 

3.1           Existing
Loan. For purposes of this Agreement, the principal balance owing Existing Lender pursuant to the Note as of the Closing
Date is hereafter referred to as the “Existing Loan Balance.”

  

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3.2           Existing
Loan Approval Contingency.

 

3.2.1       Consent
Requirements; Selling Parties Release. Under the terms of the Trust Deed and the other documents relating to the Existing Loan
(collectively, the “Existing Loan Documents”), Existing Lender’s consent to (i) the sale of the Phase
I Property to Purchaser, and (ii) the assumption of the Existing Loan by Purchaser (collectively, the “Consent Requirements”)
must be obtained prior to Closing or Seller will be in default under the Trust Deed. Additionally, in connection with the transaction
that will be permitted by the Consent Requirements, Seller requires that Existing Lender consent to the release of Seller (and
those acting and/or signing on behalf of Seller, including applicable guarantors) from all liabilities relating to the Existing
Loan arising out of acts or omissions first occurring from and after the Closing (the “Selling Parties Release”).
Obtaining Existing Lender’s approval of the Consent Requirements and the Selling Parties Release is hereinafter referred
to as the “Existing Loan Approval Contingency.”

 

3.2.2       Existing
Loan Document Modifications. Immediately upon the mutual execution of this Agreement, Purchaser and Seller shall together use
diligent and commercially reasonable efforts to secure Existing Lender’s approval with respect to the Consent Requirements
and the Selling Parties Release; provided, however, that Seller acknowledges and agrees that Purchaser may require, in connection
with any such Existing Lender approval, modifications of the Trust Deed and related Existing Loan Documents (the “Existing
Loan Document Modifications”) specifically to permit future intra-party transfers among the parent entities of Purchaser
to allow for, inter alia, compliance with certain REIT-related requirements. Seller shall have the right to review and approve
Purchaser’s proposed Existing Loan Document Modifications (“Purchaser’s Proposed Existing Loan Modifications”)
as follows:

 

(a) Purchaser
shall provide Seller with Purchaser’s Proposed Existing Loan Document Modifications within five (5) days after the Agreement
Date;

 

(b) Seller may,
acting in good faith, within five (5) days thereafter reject such Purchaser’s Proposed Existing Loan Modifications; provided,
however, that Seller shall accept Purchaser’s Proposed Existing Loan Modifications if Seller has no reasonable belief
that such terms will not be accepted by Existing Lender in all material respects; and

 

(c) if Seller,
in good faith, rejects Purchaser’s Proposed Existing Loan Modifications within such five (5) day period, then either Purchaser
or Seller may terminate this Agreement and the Escrow by written notice to the other within five (5) days after the preceding five
(5) day period, whereupon the Deposit shall be returned to Purchaser and the parties shall have no further obligations hereunder
other than the “Surviving Obligations” (as hereinafter defined) and each party shall bear its own costs in connection
with the transactions contemplated by this Agreement.

 

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3.2.3      Approved
Existing Loan Document Modifications—Purchaser Termination Right.

 

(a)          If
the Existing Loan Document Modifications, as approved by Existing Lender (the “Approved Existing Loan Modifications”),
are materially consistent with Purchaser’s Proposed Existing Loan Modifications as actually submitted by Purchaser to Existing
Lender (the “Pro Forma Existing Loan Document Modifications”) and do not contain any Material Adverse Modifications,
then Purchaser shall approve the Approved Existing Loan Modifications. Purchaser understands that as part of the Existing Loan
Approval Contingency, Existing Lender will require a creditworthy principal or affiliate of Purchaser to sign a guaranty of the
non-recourse carveouts set forth in the Note, including but not limited to paragraph 12 of the Note, and possibly of certain
environmental (hazardous materials) indemnity obligations, and Purchaser agrees to cause its principal or affiliate to sign such
documents provided such documents are commercially reasonable in nature and do not otherwise contain any Material Adverse Modifications.

 

(b)          If
the Approved Existing Loan Modifications contain any Material Adverse Modifications, or otherwise deviate from the Pro Forma Existing
Loan Document Modifications in such a way as to have a material adverse impact on the overall transaction contemplated by this
Agreement, the Purchaser or the proposed new guarantors or indemnitors for the Existing Loan, then Purchaser shall have the right
in its reasonable discretion to terminate this Agreement upon written notice to Seller thereof, whereupon the Deposit shall be
returned to Purchaser and the parties shall thereafter have no further obligations hereunder other than the Surviving Obligations.

 

(c)          For
purposes of this Agreement “Material Adverse Modifications” shall mean any of the following: (i) an increase
in the interest rate currently stated in the Note, (ii) a requirement to accelerate the pay down of the principal balance
of the Existing Loan other than as currently stated in the Existing Loan Documents or an adverse adjustment of the maturity date
or the amortization period thereunder, (iii) a requirement that the Purchaser pay or establish material escrows or expenditures
other than as currently stated in the Existing Loan Documents, and/or (iv) a requirement that the Purchaser’s non-recourse
guarantor agree to recourse provisions other than those currently stated in the Existing Loan Documents. As used in this Section 3.2.3,
“currently stated in the Existing Loan Documents” shall mean as such loan terms appear in the Existing Loan Documents,
and/or any modified terms as may be agreed by Seller, Purchaser and Existing Lender prior to the expiration of the Due Diligence
Period to be effective following the assumption of the Existing Loan.

 

3.2.4     Seller
Cooperation with Purchaser; Purchaser Negotiations with Existing Lender. Seller agrees to reasonably assist and cooperate with
Purchaser in connection with the Existing Loan Approval Contingency, including the execution and delivery of all assumption-related
documents to the extent required by Section 7.2 and to the extent such documents include the Selling Parties Release; provided,
however, nothing herein shall obligate Purchaser to pay or reimburse Seller for Seller’s legal fees that may be incurred
in the course of such cooperation. Purchaser shall have the right to negotiate directly with Existing Lender concerning the Existing
Loan Approval Contingency and the terms and conditions of any and all documents associated with or required in conjunction with
the Existing Loan Approval Contingency (collectively, the “Existing Loan Assumption Documents”),
provided that same incorporate the Selling Parties Release.

 

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3.2.5      Existing
Loan Approval Contingency Deadline. If the Existing Loan Approval Contingency is not satisfied within 75 days after the date
of this Agreement (the “Existing Loan Approval Contingency Deadline”), then either Purchaser or Seller shall
have the right to terminate this Agreement, in which event the Deposit shall be fully refunded to Purchaser and the parties shall
have no further obligations to each other, except with respect to the Surviving Obligations.

 

3.2.6.     [Intentionally
Deleted].

 

3.2.7      Surviving
Obligations. As used in this Agreement, the “Surviving Obligations” shall mean all indemnity and related
obligations under this Agreement and the provisions of Sections 3.2, 5.2, 6.3, 10.2, 10.4, 10.5, 10.8, 10.10, 11.1 through 11.5
(inclusive), 12.1, 12.3, 13.1 through 13.4 (inclusive), 14.11, 14.13, 14.18, 14.19, 14.20 and 14.21.

 

3.3         Due
Diligence for Selling Parties Release. Purchaser agrees to permit Seller to use Purchaser’s Phase I environmental
site assessment for purposes of obtaining the Selling Parties Release, and shall have, at Seller’s prior written request,
Purchaser's Phase I environmental site assessment certified to Seller. Purchaser shall cooperate as needed to facilitate same.

 

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4.          TITLE
MATTERS.

 

4.1           Title
Policy. Purchaser and AR Owner shall instruct Escrow Holder to expeditiously deliver to Purchaser and Seller (a) a copy
of Seller’s existing title policy (the “Existing Title Policy”) in regard to the Phase I Property;
(b) a dated down title report covering the Phase I Real Property (“Phase I Prelim”), (c) copies of all exceptions
to title reflected by said Existing Title Policy and Phase I Prelim (“Phase I Title Exceptions”), (d) Seller’s
existing survey of the Phase I Real Property (the “Phase I Survey”, and together with the Phase I Prelim
and the Phase I Title Exceptions, the “Phase I Title Documents”), (e) a copy of the current title commitment
covering the Phase II Property (“Phase II Commitment”), (f) copies of all exceptions to title reflected by said
Phase II Commitment (“Phase II Title Exceptions”), and (g) AR Owner’s existing survey of the Phase II
Property (the “Phase II Survey”, and together with the Phase II Commitment and the Phase II Title Exceptions,
the “Phase II Title Documents” and, together with the Phase I Title Documents, the “Title Documents”).
Purchaser acknowledges that (x) title to the Phase I Property is, and will, subject to the objection rights set forth below, remain
subject to all Phase I Title Exceptions reflected in the Existing Title Policy, including each item shown in the Phase I Survey,
and the Title Company’s standard exceptions and exclusions (which are, unless constituting a Disapproved Exception, collectively
referred to herein as “Phase I Permitted Exceptions”); provided, however, that delinquent real property
taxes (if any) and other monetary judgments, liens and encumbrances to title with respect to the Phase I Property (other than those
relating to the Existing Loan) shall be paid by Seller at the Closing, regardless of whether Purchaser objects to same as a Disapproved
Exception and (y) title to the Phase II Property is, and will, subject to the objection rights set forth below, remain subject
to all Phase II Title Exceptions reflected in the Phase II Title Commitment, including each item shown in the Phase II Survey,
and the Title Company’s standard exceptions and exclusions (which are, unless constituting a Disapproved Exception, collectively
referred to herein as “Phase II Permitted Exceptions”). Purchaser shall notify Seller and AR Owner no
later than 5:00 p.m. (Eastern time) on May 15, 2015 (the “Title Deadline”) in writing of any Title Exceptions
identified in the Title Documents which Purchaser disapproves (collectively, the “Disapproved Exceptions”).
Seller and/or AR Owner, as applicable shall notify Purchaser, within five (5) days following receipt of Purchaser’s notice
of any Disapproved Exceptions, whether (a) Seller will cure any such Disapproved Exceptions with respect to the Phase I Property
and (b) AR Owner is able to get the Phase II Seller to agree to cure any Disapproved Exceptions with respect to the Phase II
Property. In the event that Seller or AR Owner does not provide written notice of such party’s election to cure (or for which
no commitment from the Phase II Seller to cure has been obtained, as applicable) all the Disapproved Exceptions in such five
(5) day period, Purchaser may either elect to (a) accept the Phase I Property and the Phase II Property subject to the Disapproved
Exceptions that Seller and/or AR Owner has not elected to cure (or obtained the Phase II Seller’s agreement to cure) and
proceed to Closing without any reduction in the Purchase Price, (b) terminate this Agreement, in which event Purchaser shall be
entitled to the return of the Deposit or (c) if the Disapproved Exceptions relate to the Phase II Property and, under the Phase
II Purchase Contract, the Phase II Seller has the obligation to cure such Disapproved Exceptions, request that AR Owner exercise
its default rights under the Phase II Purchase Contract, including, if applicable, to terminate the Phase II Purchase Contract
(in which event the terms of Section 7.4 hereof shall apply). Seller, AR Owner and Purchaser hereby agree that, with
the exception of the Existing Loan Documents associated with the Existing Loan, the existence of any mortgages, deeds of trust,
liens or monetary encumbrances affecting the Phase I Property, the Phase II Property or any portion thereof, including, without
limitation, judgment liens and mechanic’s liens not to exceed $100,000.00 in the aggregate (provided, however, in the event
any judgment lien or mechanic's lien arises from the willful misconduct of Seller or AR Owner, then the aforementioned $100,000.00
limitation shall be inapplicable) (collectively, “Monetary Encumbrances”) shall be deemed to be Disapproved
Exceptions without the necessity of the Purchaser otherwise expressly objecting thereto, and Seller and/or AR Owner shall be required
to discharge or cause the Phase II Seller to agree to discharge all Monetary Encumbrances at or prior to the Closing Date; provided,
however, that nothing herein shall require AR Owner to have the Phase II Seller actually cure any such Disapproved Exceptions at
any time earlier than as required under the Phase II Purchase Contract. Finally, if any new Title Exceptions (including any matters
first appearing on any update of the Phase I Survey (which update will be ordered by Seller within seven (7) days after the Agreement
Date) or the Phase II Survey) first arise or are first identified to Purchaser following the Title Deadline (but in all events
prior to the Closing of the issuance and sale of the New AR Owner Interests), Purchaser shall nevertheless have the right to object
to such additional Disapproved Exceptions, in which event the procedure for Seller’s and/or AR Owner’s responses and
Purchaser’s elections set forth above shall again be applicable as to such Title Exceptions, including Purchaser’s
right to terminate this Agreement and receive the return of the Deposit.

 

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4.2          Title
Policy. At the Closing, the Title Company shall issue a new title insurance policy (“New Owner Policy”)
in the amount of $44,750,000, showing fee title to the Phase I Real Property as vested in Purchaser, subject to the Phase I
Permitted Exceptions. Title Company shall further issue a date down/modification endorsement (as required by Existing Lender) with
respect to the existing title policy issued to Existing Lender (“Existing Loan Policy”) with respect to the
Phase I Property; provided, however, if the Title Company is unable to issue such “date down” endorsement to the
Existing Loan Policy, then Purchaser may, alternatively, select an alternate title company to issue a new title insurance policy
to Existing Lender for the Existing Loan (the “New Loan Policy” and, together with the New Owner Policy, each
a “New Title Policy” and, collectively, the “New Title Policies”). All New Title Policies
may, at Purchaser’s election, be issued through Madison Title Insurance Agency with a nationally recognized title firm, and,
with regard to the Phase I Property only, on Chicago Title Insurance Company paper.

 

5.          DELIVERY
OF INFORMATION.

 

5.1           Due
Diligence Period. During the pendency of Escrow, Purchaser, upon twenty-four (24) hours’ prior written notice to
Seller, shall have the right during normal business hours: to make physical inspections of the Phase I Property and, subject to
the terms of the Phase II Purchase Contract, the Phase II Property; to review the books and records of Seller (and those relating
to the ownership and operation of the Phase I Property and the Phase II Property); and to interview the management and
leasing staff, which interviews will be coordinated by AR Developer, LLC, the managing member of AR Owner (and representatives
of AR Developer, LLC shall have the right to be present at such interviews).

 

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Seller and AR Owner
have made available, or shall, no later than three (3) business days after the Agreement Date, make available, to Purchaser the
documents listed on Schedule 5.1 attached hereto to the extent they are in such parties’ possession or control (for
purposes hereof, “control” shall mean in the possession of any asset or of any property management company engaged
by Seller or AR Owner) (collectively, “Due Diligence Documents”). During the pendency of Escrow, Purchaser shall
have the right to review the Due Diligence Documents, information disclosed by Seller and AR Owner, and any and all other documents
and information as Purchaser shall reasonably require to the extent in the possession or control of Seller or AR Owner in order
to satisfy itself with respect to the condition of title and the physical and economic condition of the Phase I Property and the
Phase II Property.

 

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5.2           Physical
Inspections. Purchaser understands and agrees that any on-site inspections of the Phase I Property and the Phase II
Property (“Physical Inspections”) shall occur at reasonable times agreed upon by Seller, AR Owner and Purchaser
(and the Phase II Seller for the Phase II Property) upon not less than twenty-four (24) hours’ prior written notice
to such parties and shall be conducted so as not to interfere unreasonably with the use of the Phase I Property by Seller
(and the Phase II Seller for the Phase II Property). If Purchaser desires to do any invasive Physical Inspections, including,
without limitation, a Phase II environmental study or testing which would otherwise damage or disturb any portion of the Phase
I Property or the Phase II Property, Purchaser shall do so only after notifying Seller and/or AR Owner, as applicable (and the
Phase II Seller for the Phase II Property) and obtaining Seller’s and/or AR Owner’s (and Phase II Seller’s
for the Phase II Property) prior written consent thereto, which consent may be subject to any terms and conditions imposed
by Seller and/or AR Owner, as applicable (or by the Phase II Seller as and where permitted by the Phase II Purchase Contract)
in its sole discretion, including, without limitation, Seller and/or AR Owner requiring Purchaser to provide such parties with
evidence of insurance in form and substance reasonably satisfactory to Seller and/or AR Owner and the prompt restoration of the
Phase I Property or the Phase II Property (as applicable) to its respective condition prior to any such inspections or
tests, at Purchaser’s sole cost and expense. Purchaser agrees, at the request of AR Owner or Seller, as applicable, to disclose
the results of all of its Physical Inspections to such parties, and, subject to the terms of Section 14.13 and to the
right of Purchaser to disclose all such materials to its representatives in connection with the due diligence it performs on the
Phase I Property and the Phase II Property, to keep all such information confidential and not disclose the same, or any part thereof,
without the prior written consent of AR Owner and/or Seller, as applicable. In conjunction with due diligence with respect to the
Phase II Property, AR Owner will use commercially reasonable efforts to provide assistance to obtain Phase II Seller’s
consent to the access by Purchaser to the Phase II Property (or absent such consent, to perform all applicable due diligence
on the Phase II Property at the request of Purchaser and in all instances consistent with the terms of the Phase II Purchase
Contract). Further, Purchaser will be entitled to rely upon and use and update, as applicable, any third-party reports previously
obtained by AR Owner for the Phase II Property, and AR Owner will use commercially reasonable efforts to obtain the consent
of all applicable service providers thereto. Following the expiration of the Due Diligence Period, AR Owner will enforce all available
rights of the purchaser under the Phase II Purchase Contract in the manner instructed by Purchaser, including communicating with,
or obtaining Purchaser’s right to communicate with, the Phase II Seller on any specific matters requested by Purchaser, other
than any right to terminate the Phase II Purchase Contract (which shall be governed by Section 7.4 below). Any inspections
in connection with the Phase II Property performed by AR Owner at the request of Purchaser shall be at Purchaser’s expense,
but Purchaser shall not be responsible for any costs incurred by AR Owner in excess of the costs that would have been incurred
by Purchaser in connection with any such inspections had Purchaser been able to perform such inspections directly. In connection
with the Physical Inspections, Purchaser shall maintain and cause its third-party agents to maintain (a) comprehensive general
liability insurance (“CGL”) with coverages of not less than $1,000,000.00 for injury or death to any one person
and $2,000,000.00 for injury or death to more than one person and $500,000.00 with respect to property damage, by water or otherwise,
and (b) worker’s compensation insurance for all of their respective employees in accordance with applicable statutory
requirements. Purchaser shall deliver proof of the insurance coverage required pursuant to this Agreement to Seller, as to the
Phase I Property, and AR Owner, as to the Phase II Property (in the form of a certificate of insurance) prior to Purchaser’s
or its agents’ entry onto the Phase I Property or the Phase II Property, as applicable (provided that if any agent’s
certificate of CGL insurance does not show worker’s compensation coverage, such agent shall not be required to provide a
separate certificate of insurance for such worker’s compensation coverage). The provisions of this paragraph shall survive
the termination of this Agreement, and if not so terminated shall survive the Closing.

 

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With respect to such
Physical Inspections, it is agreed as follows:

 

5.2.1      Indemnification.
Purchaser shall protect, indemnify, defend and hold AR Owner, Seller, and the Phase I Property and the Phase II Property harmless
from and against any claim for liabilities, losses, costs, expenses (including reasonable attorneys’ fees), damages or injuries
arising out of or resulting from the Physical Inspections of the Phase I Property and the Phase II Property by Purchaser or its
agents, employees, representatives or consultants, (including, without limitation, any materialmen’s or mechanics’
liens) or the breach of Purchaser’s obligations under this Section 5, and notwithstanding anything to the contrary
in this Agreement, such obligation to indemnify, defend and hold harmless Seller, AR Owner, the Phase I Property, the Phase II
Owner and the Phase II Property shall survive Closing or any termination of this Agreement for the period of the applicable
statute of limitations. This indemnity shall not include, and shall specifically exclude, any loss, liability, damage, injury and
claims arising out of or resulting solely from (a) the gross negligence or willful misconduct of Seller, AR Owner, AR Developer,
LLC or their members, agents, representatives, contractors or employees, or (b) the mere discovery by Purchaser, or its agents,
representatives, contractors or employees, acting within the scope of investigations permitted under this Agreement, of the presence
of any toxic or hazardous substance in, on or under the Phase I Property or the Phase II Property, to the extent that Purchaser
or its agents do not materially exacerbate such condition.

 

5.2.2      Compliance
With Laws. Purchaser shall comply with all applicable governmental laws, ordinances and regulations in the conduct of any Physical
Inspections or activities on the Phase I Property or the Phase II Property.

 

5.2.3      Service
Contracts. Purchaser shall have the right, on or before the expiration of the Due Diligence Period (as defined below), to give
notice to Seller of any Phase I Contracts that Purchaser wishes to terminate, in which case Seller shall terminate such Phase I
Contracts, to the extent such Phase I Contracts are freely terminable by Seller, no later than Closing, failing which Purchaser
may cause Seller to terminate such Phase I Contracts only upon Purchaser paying any applicable termination fee. The term “Phase I
Assumed Contracts” shall mean collectively the Phase I Contracts, excluding those to be terminated pursuant to this
Section 5.2.3. Purchaser shall assume (or request the termination of) the service contracts applicable to the Phase
II Property as required under the Phase II Purchase Contract.

 

    	 	11	 

     

    

 

5.3           Notice
to Proceed. In the event that Purchaser elects to proceed to the Closing, Purchaser shall give written notice to Seller
of Purchaser’s intention to do so (the “Notice to Proceed”) by no later than 5:00 p.m. (Eastern time)
on May 13, 2015 (the “Due Diligence Period”). Following the issuance of the Notice to Proceed by Purchaser,
the Deposit shall, subject to the terms of this Agreement, become nonrefundable, and Purchaser shall be deemed to have elected
to proceed with the purchase of the Phase I Property and the assignment of AR Owner’s rights under the Phase II Purchase
Contract and waived its right to terminate this Agreement pursuant to this Section 5. In the event Purchaser does not
give a Notice to Proceed pursuant to the terms herein for any reason or no reason, then no party shall have any further rights
or obligations hereunder or in connection with the Phase I Property or the Phase II Property (except for the Surviving Obligations),
the Deposit shall be returned to Purchaser and each party shall bear its own costs incurred hereunder. For purposes of clarity,
Purchaser shall not be obligated to give a notice of termination prior to the expiration of the Due Diligence Period. Notwithstanding
the foregoing, even if Purchaser issues a Notice to Proceed, it will continue to reserve its rights to terminate this Agreement
under the Title Exception provisions of this Agreement, through May 15, 2015.

 

6.           DISCLAIMERS
AND WAIVERS.

 

6.1           No
Reliance on Documents. Purchaser hereby represents, warrants and agrees to and with Seller and AR Owner that, as of the
Closing, (a) Purchaser has independently conducted Purchaser’s own evaluation and inspection of the Phase I Property
and the Phase II Property, obtained and reviewed such information and conducted such inspections as Purchaser has deemed adequate
and appropriate, and (b) except as set forth in Section 10, Purchaser has not relied upon any investigation or
analysis conducted by, advice or communication from, nor any warranty or representation by, Seller, AR Owner or any agent or employee
of Seller or AR Owner, express or implied, concerning the condition, financial or otherwise, of the Phase I Property or the Phase
II Property, or any tax or economic benefits of an acquisition of the Phase I Property and the Phase II Property. Purchaser acknowledges
and agrees that all materials, data and information delivered or given by Seller and AR Owner to Purchaser in connection with the
transaction contemplated hereby, if any (excluding those relating to the Existing Loan), are provided to Purchaser as a convenience
only and that any reliance on or use of such materials, data or information by Purchaser shall be at the sole risk of Purchaser
(excluding those relating to the Existing Loan and those with respect to any third-party reports applicable to the Phase II Property
that are assumed by Purchaser in accordance with the terms of Section 5.2 above).

 

6.2           As-is
Sale; Disclaimers. IT IS UNDERSTOOD AND AGREED THAT NEITHER SELLER NOR AR OWNER IS MAKING AND HAS NOT AT ANY TIME MADE ANY
WARRANTIES OR REPRESENTATIONS OF ANY KIND OR CHARACTER, EXPRESS OR IMPLIED, ORAL OR WRITTEN, WITH RESPECT TO THE PHASE I PROPERTY
OR THE PHASE II PROPERTY EXCEPT TO THE EXTENT SET FORTH IN SECTION 10 (“SELLING PARTIES REPRESENTATIONS”), INCLUDING,
BUT NOT LIMITED TO, ANY WARRANTIES OR REPRESENTATIONS AS TO HABITABILITY, MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR
AS TO THE PHYSICAL, STRUCTURAL OR ENVIRONMENTAL CONDITION OF THE PHASE I PROPERTY OR THE PHASE II PROPERTY OR THEIR COMPLIANCE
WITH LAWS.

 

    	 	12	 

     

    

 

6.3         Survival
of Disclaimers. The provisions of this Section 6 shall survive Closing or any termination of this Agreement.

 

6.4         THE
PROVISIONS OF THIS SECTION 6 ARE MATERIAL AND INCLUDED AS A MATERIAL PORTION OF THE CONSIDERATION GIVEN TO SELLER BY
PURCHASER IN EXCHANGE FOR SELLER’S AND AR OWNER’S PERFORMANCE HEREUNDER. SELLER AND AR OWNER HAVE GIVEN PURCHASER MATERIAL
CONCESSIONS REGARDING THIS TRANSACTION IN EXCHANGE FOR PURCHASER AGREEING TO THE PROVISIONS OF THIS SECTION 6.

 

7.          CLOSING.

 

7.1         Closing
of Escrow. The purchase and sale of the Phase I Property and assignment of the Phase II Purchase Contract shall close (“Close
of Escrow” or the “Closing”) on the date (the “Closing Date”) which is the latter
to occur of: (i) thirty (30) days following the expiration of the Due Diligence Period or (ii) the earlier of (A) twenty
(20) days following the satisfaction of the Existing Loan Approval Contingency or (B) ten (10) business days after the Existing
Loan Approval Contingency Deadline (unless the Agreement is terminated under Section 3.2.5) (as applicable, the “Outside
Closing Date”); provided however, for the avoidance of doubt, in no event shall Purchaser be obligated to close on the
assignment of the Phase II Contract unless and until it has closed on the Phase I Property. Possession of the Phase I Property
shall be delivered at Closing, free and clear of all rights of third parties to possession other than the rights to possession
of tenants under the Phase I Leases and other matters of record approved by Purchaser in accordance with the terms of this
Agreement.

 

7.2         Deliveries
by Seller and AR Owner.

 

(a)          Deliveries
by Seller. At the Close of Escrow, Seller shall deliver the following:

 

(i)          to
Purchaser, through escrow, a duly executed special warranty deed in the form attached hereto
as Schedule 7.2(a)(i) and by this reference made a part hereof, conveying the Phase I Real Property
to Purchaser subject to the Phase I Permitted Exceptions (the “Deed”);

 

(ii)         to
Purchaser, through escrow, a bill of sale and assignment and assumption of leases and service contracts, in the form attached
hereto as Schedule 7.2(a)(ii) and by this reference made a part hereof, duly executed by Seller, pursuant to which (i) Seller
shall convey the Phase I Personal Property and the Phase I Plans, Licenses and Permits, and (ii) Seller shall assign to Purchaser,
and Purchaser shall assume from and after the Closing Date, Seller’s interest in and to the Phase I Leases and the Phase
I Assumed Contracts, as amended or supplemented pursuant to this Agreement (the “Bill of Sale and Assignment”);

 

    	 	13	 

     

    

 

(iii)        to
Purchaser, through escrow, a notice also to be joined in by Purchaser (the “Tenant Notice”) in
form and content reasonably satisfactory to Purchaser and Seller,
which Purchaser shall send a copy thereof to each tenant under each of
the Phase I Leases informing such tenant of the sale of the
Property and of the assignment to Purchaser of Seller’s interest
in, and obligations under, the Phase I Leases (including, if applicable
any security deposits) and directing that all rent and other
sums payable after the Closing under each such Phase I Lease shall
be paid as set forth in the notice;

 

(iv)        to
Purchaser, through escrow, a duly executed Certificate of Selling Parties signed by Seller, such form attached hereto as Schedule
7.2(a)(iv) and made a part hereof (the “Certificate of Selling Parties”), stating that the
representations and warranties of Seller contained in Section 10.2
and Section 10.4 of this Agreement are true and correct
in all material respects as of the Closing Date (with appropriate modifications
to reflect any changes therein or identifying any representation or warranty which is not, or no longer is true and correct and
explaining the state of facts giving rise to the change. For avoidance of doubt the inclusion of any such change shall not affect
Purchaser's rights under this Agreement pursuant to Section 10.10 to the extent a representation was breached when made as of the
Agreement Date nor shall the same affect the condition set forth in Section 8.3);

 

(v)         to
Purchaser and the Title Company, such evidence as Purchaser and the Title Company may reasonably require as to the authority of
the person or persons executing documents on behalf of Seller;

 

(vi)        to
Purchaser, through escrow, an affidavit duly executed by Seller stating that
Seller is not a “foreign person” as defined in the
Federal Foreign Investment in Real Property Tax Act of 1980
and the 1984 Tax Reform Act;

 

(vii)       to
the Title Company, a broker’s lien waiver, and a title insurance affidavit, if required by the Title Company, duly executed
by Seller or a representative of Seller, in the form attached hereto as Schedule 7.2(a)(vii); 

 

(viii)      to
Purchaser, at the place of Closing or at the Phase I Property, the Phase I Leases, together with such leasing and property files
and records in connection with the continued operation, leasing and maintenance of the Phase I Property, as well as all Phase I
Assumed Contracts, all to the extent not previously delivered;

 

(ix)         to
Existing Lender, Seller’s (and any existing guarantors, if needed) counterparts to the Existing Loan Assumption Documents;

 

(x)          to
Purchaser, possession and occupancy of the Phase I Property, subject to the rights of tenants under the Phase I Leases and
the Phase I Permitted Exceptions;

 

(xi)         to
Purchaser, through escrow, Seller’s counterpart to the Closing Statement, and such additional documents as shall be reasonably
requested by the Title Company or required to consummate the transaction contemplated by this Agreement; provided, however, that
in no event shall Seller be required to indemnify the Title Company, Purchaser, or any other party pursuant to any such documents,
or undertake any other material liability not expressly contemplated in this Agreement, unless Seller elects to do so in its sole
discretion.

 

    	 	14	 

     

    

 

(b)         Deliveries
by AR Owner. At the Close of Escrow, AR Owner shall deliver to Purchaser or Purchaser’s designee, through escrow,
(a) AR Owner’s counterpart of an Assignment and Assumption of Phase II Purchase Contract, in the form attached hereto
as Schedule 7.2(b) (the “Phase II Purchase Contract Assignment”), and (b) AR Owner’s
counterpart of the Certificate of Selling Parties, stating that the representations and warranties of AR Owner contained in Section 10.5
of this Agreement are true and correct in all material respects as of the Closing Date (with appropriate modifications to reflect
any changes therein or identifying any representation or warranty which is not, or no longer is true and correct and explaining
the state of facts giving rise to the change. For avoidance of doubt the inclusion of any such change shall not affect Purchaser's
rights under this Agreement pursuant to Section 10.10 to the extent a representation was breached when made as of the Agreement
Date nor shall the same affect the condition set forth in Section 8.3);

 

7.3          Purchaser’s
Deliveries. At the Close of Escrow, Purchaser shall deliver the following:

 

(a)          to
Seller, through escrow, the cash portion of the Purchase Price;

 

(b)          to
Seller, through escrow, Purchaser’s counterparts to the Bill of Sale and Assignment, the Tenant Notice, and the Closing Statement;

 

(c)          to
Seller, through escrow, a certificate of Purchaser, pursuant to which Purchaser shall (i) reaffirm the provisions of Section 6.2
hereof and confirm that such provisions remain and will continue in full force and effect as of and after the Closing, and (ii) state
that the representations and warranties of Purchaser contained in Section 11 of this Agreement are true and correct
in all material respects as of the Closing Date (with appropriate modifications to reflect any changes therein or identifying any
representation or warranty which is not, or no longer is, true and correct and explaining the state of facts giving rise to the
change);

 

(d)          to
the Title Company, such information as the Title Company may reasonably require as to
the authority of the person or persons executing documents on
behalf of Purchaser;

 

(e)          to
Existing Lender, Purchaser’s and any replacement guarantors’ or indemnitors’ counterparts to the Existing Loan
Assumption Documents;

 

(f)          to
AR Owner through escrow, Purchaser’s or Purchaser’s designee’s counterpart to the Phase II Purchase Contract
Assignment;

 

(g)          
to AR Owner through escrow, Purchaser’s interest in the Deposit; and

 

(h)          through
escrow, such additional documents as shall be reasonably requested by the Title Company or required to consummate the transaction
contemplated by this Agreement, provided, however, that in no event shall Purchaser be required to indemnify Seller, AR Owner,
Title Company or any other party or undertake any other material liability not expressly contemplated in this Agreement, unless
Purchaser elects to do so in its sole discretion.

 

    	 	15	 

     

    

 

7.4           Closing
of Phase II Escrow. The parties acknowledge that the Phase II Property is expected to close after the acquisition
by Purchaser of the Phase I Property. The terms of the acquisition of the Phase II Property by Purchaser or its designee will
be as provided under the existing Phase II Purchase Contract. Notwithstanding anything else to the contrary in this Agreement,
if under the Phase II Contract a closing on the Phase II Property is required prior to the Outside Closing Date, the Purchaser
shall have the option to terminate this Agreement by written notice to Seller and AR Owner, whereupon the Deposit shall be released
back to Purchaser and the parties hereto shall have no further rights or obligations.

 

In the event that at
any time there exists a right for AR Owner as purchaser thereunder to terminate the Phase II Purchase Contract (and seek damages,
recoveries or return of the $750,000.00 earnest money thereunder, whether occurring before or after the end of the Due Diligence
Period (but in all events prior to Closing, it being understood that following Closing any such determinations are the sole responsibility
of Purchaser)), Purchaser and AR Owner agree to meet and collaborate, in good faith, to determine whether the Phase II Purchase
Contract should, in the judgment of a reasonable purchaser, be terminated as a result of the event that creates such termination
right. If Purchaser and AR Owner are not able to agree, notwithstanding such good faith efforts, on whether the Phase II Purchase
Contract should be terminated, Purchaser shall have the following rights: (a) if such failure to agree occurs before the end
of the Due Diligence Period, Purchaser can either (i) waive the disagreement and permit AR Owner to terminate or not terminate
the Phase II Purchase Contract, as AR Owner in good faith elects, or (ii) exercise its right to terminate this Agreement and
receive the return of the Deposit, or (b) if such failure to agree occurs after the end of the Due Diligence Period (but in
all events prior to the Closing, it being understood that following Closing any such determinations are the sole responsibility
of Purchaser), Purchaser can either (i) waive the disagreement and permit AR Owner to terminate or not terminate the Phase
II Purchase Contract, as AR Owner in good faith elects, or (ii) terminate this Agreement. In the event that Purchaser elects
to terminate this Agreement pursuant to clause (b)(ii), Purchaser shall only be entitled to the return of the Deposit if AR Owner
(1) has failed to act in good faith in making the determination of what a reasonable purchaser would do, or (2) if it
is determined that a reasonable person would terminate the Phase II Purchase Contract and AR Owner fails to communicate that termination
to the Phase II Seller. If AR Owner has refused to terminate the Phase II Purchase Contract under these circumstances and Purchaser
has exercised its right under clause (b)(ii), Purchaser will not be entitled to the return of its Deposit if AR Owner in refusing
to do so has acted in good faith (measured by what a reasonable contract purchaser would do in the same circumstances), but Purchaser
shall not be obligated to Close hereunder and Seller and AR Owner shall have no other claims or rights against Purchaser. Notwithstanding
any other provisions of this Agreement, if the Phase II Purchase Contract is terminated in accordance with this paragraph, Purchaser
shall, unless it has otherwise elected to terminate this Agreement in its entirety as set forth in this paragraph, be permitted
to enforce the balance of this Agreement (i.e. with respect to the purchase of the Phase I Property) and, in such case, the Purchase
Price and any other non-applicable terms of this Agreement will be modified and amended to reflect the fact that the Phase II
Property is no longer involved in the transaction.

 

    	 	16	 

     

    

 

8.          CONDITIONS
TO THE OBLIGATION OF THE PURCHASER TO CLOSE.

 

Purchaser’s obligation
to purchase the Phase I Property and to close the transactions contemplated by this Agreement are subject to the satisfaction of
the following conditions being satisfied on or before the Closing Date (collectively, “Purchaser’s Conditions Precedent
to Closing”):

 

8.1           Deliveries.
AR Owner and Seller shall have delivered to Escrow Holder the documents and other items set forth in Section 7.2.

 

8.2           Reserved.

 

8.3           Representations,
Warranties and Covenants. The representations and warranties of AR Owner and Seller set forth in Section 10
shall be true as of the Closing Date in all material respects and all covenants of AR Owner and Seller contained in Sections 7.4
and 10 shall have been performed in full.

 

8.4           Consent
of Existing Lender. The Existing Loan Approval Contingency has been satisfied and the Approved Existing Loan Modifications
have been received and approved by Purchaser in accordance with Section 3.2.3 above (including the delivery by Existing
Lender to Seller and Purchaser at least five (5) business days prior to Closing of execution sets of all documents required by
Existing Lender to be signed in connection with Purchaser’s acquisition of the Phase I Property and assumption of the Existing
Loan).

 

8.5           Phase
II Purchase Contract. Except as otherwise provided in Section 7.4 above, the Phase II Purchase Contract shall
remain in full force and effect as of the Closing Date, and AR Owner shall not have assigned any of its rights thereunder (including
but not limited to in or to the $750,000 earnest money deposit thereunder), and AR Owner shall confirm, to the best of its knowledge,
that there are no known, imminent or threatened breaches or defaults thereunder.

 

8.6           Reserved.

 

8.7           Waiver.
Purchaser may waive in writing the satisfaction of any of the conditions set forth in this Section 8 or terminate this
Agreement. If Purchaser waives any such conditions, then said waived conditions shall be deemed to have been satisfied. If Purchaser
terminates this Agreement, then the Deposit shall be fully refunded to Purchaser, neither party shall have any further rights or
obligations hereunder except for the Surviving Obligations, and each party shall bear its own costs incurred hereunder. Notwithstanding
anything to the contrary in this Agreement, the occurrence of the Closing shall be deemed to be Purchaser’s waiver of any
unsatisfied condition (other than any rights Purchaser may have under this Agreement with regard to any breaches of the Selling
Parties Representations to the extent set forth, and subject to the limitations, in Sections 10.8 and 13.3).

 

    	 	17	 

     

    

 

9.          CONDITIONS
TO THE OBLIGATIONS OF SELLING PARTIES TO CLOSE.

 

Seller’s obligations
to sell the Phase I Property, AR Owner’s obligation to assign its rights under the Phase II Purchase Contract, and each such
party’s obligations to close the transactions contemplated by this Agreement are subject to the satisfaction of the following
conditions on or before the Close of Escrow (collectively, “Selling Parties’ Conditions Precedent to Closing”):

 

9.1           Purchaser’s
Deliveries. Purchaser shall have delivered to Escrow the items set forth in Section 7.3.

 

9.2           Consent
of Existing Lender. The Existing Loan Approval Contingency has been satisfied (including the delivery by Existing Lender
to Seller and Purchaser at least five (5) business days prior to Closing of execution sets of all documents required by Existing
Lender to be signed in connection with Purchaser’s acquisition of the Phase I Property and assumption of the Existing Loan).

 

9.3           Purchaser’s
Representations and Warranties. The representations and warranties of Purchaser set forth in Section 11 shall
be true in all material respects.

 

9.4           Waiver.
Seller may waive in writing the satisfaction of any of the conditions set forth in this Section 9 or terminate this
Agreement. If Seller waives any such conditions, then said waived conditions shall be deemed to have been satisfied. If Seller
terminates this Agreement, then the Deposit shall, to the extent such failure otherwise constitutes a default under this Agreement
by Purchaser, be retained by Seller, or, if such failure does not constitute a default by Purchaser, then the Deposit will be returned
to Purchaser, none of the parties shall have any further rights or obligations hereunder except for the Surviving Obligations and
each party shall bear its own costs incurred hereunder. Notwithstanding anything to the contrary in this Agreement, the occurrence
of the Closing shall be deemed to be Seller’s waiver of any unsatisfied condition (other than any rights Seller may have
under this Agreement with regard to any unknown breaches of Purchaser representations and warranties to the extent set forth, and
subject to the limitations, in Section 13.4).

 

10.         REPRESENTATIONS,
WARRANTIES AND COVENANTS OF SELLER AND AR OWNER

 

10.1         Reserved.

 

10.2        Representations
and Warranties as to Seller. As a material inducement to Purchaser to execute this Agreement and consummate the Closing,
Seller represents and warrants to Purchaser with respect to Seller, that:

 

(a)          Seller
is duly formed as a limited liability company, is validly existing and is in good standing under the laws of the State of Delaware
and is authorized to exercise all of its limited liability company powers, rights and privileges.

 

(b)          Seller
is qualified to do business in and is in good standing in the state where the Phase I Property is located.

 

    	 	18	 

     

    

  

(c)          Seller
has not had any employees and will not have any employees from the Agreement Date through the Closing Date.

 

(d)          Seller
has not conveyed, transferred, assigned, pledged or hypothecated any interests in the Phase I Property, in whole or in part, or
granted any rights, options or rights of first refusal or first offer to purchase any of such interests or any portion thereof
(except as may be shown as a matter of record and for the rights of the Purchaser under this Agreement and the Existing Loan),
nor is it a party to any material agreements other than those produced pursuant Schedule 3.1(e).

 

(e)          This
Agreement and all documents executed by Seller which are to be delivered to Purchaser at the Closing are, or as of the Closing
Date will be, duly authorized, executed, and delivered by Seller, and are, or as of the Closing Date will be, legal, valid, and
binding obligations of Seller, and do not, and as of the Closing Date will not, violate any provisions of any agreement to which
Seller is a party or to which it is subject or any law, judgment or order applicable to Seller. The execution, delivery and performance
by Seller of this Agreement or any such documents will not violate, conflict with or result in any breach or contravention of any
contractual obligation of Seller (excepting Seller’s obligations under the Existing Loan Documents unless the Existing Loan
Approval Contingency is satisfied).

 

(f)          No
proceedings under any bankruptcy or insolvency laws have been commenced by or against Seller; no general assignment for the benefit
of creditors has been made by Seller; and no trustee or receiver of Seller’s property has been appointed.

 

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

 

10.3        Reserved.

 

10.4       Representations
and Warranties Regarding the Phase I Property. As a material inducement to Purchaser to execute this Agreement and consummate
the Closing, Seller represents and warrants to Purchaser with respect to the Phase I Property, that:

 

(a)         The
Phase I Rent Roll is the rent roll relied upon by Seller in the ordinary course of business. Seller has complied in all material
respects with its obligations under each of the Phase I Leases. Except as set forth in the Phase I Rent Roll, the rents set forth
in the Phase I Leases are being collected on a current basis and no tenant has paid rent more than one (1) month in advance, and
Seller has not received any written notice of any uncured breaches or defaults by Seller as landlord under the leases from tenants
who are still tenants under current leases.

 

    	 	19	 

     

    

 

(b)         True,
correct and complete copies of all Phase I Contracts have been included in the Due Diligence Materials. Other than the Phase
I Contracts delivered to Purchaser as part of the Due Diligence Materials, there are no other property or asset management contracts
or other arrangements, contracts and agreements to which Seller is a party affecting the ownership, repair, maintenance, leasing
or operation of the Phase I Property. To Seller’s knowledge, the Seller is not in default under any Phase I Contract beyond
any applicable notice or cure period.

 

(c)         Except
for any litigation described in Schedule 10.2 (j) hereof, there are no pending or, to Seller’s knowledge, threatened
(a) eminent domain proceedings for the condemnation of any portion of the Phase I Real Property or (b) litigation against
Seller in respect of the Phase I Property which, if decided adversely, would have a material adverse effect on the Phase I Property.

 

(d)         Seller
has not received written notice from any governmental authority or agency that Seller is not in compliance with all material licenses
or permits necessary to operate the Phase I Property in material compliance with applicable laws and otherwise as presently operated.

 

(e)         Seller
has not received written notice from any governmental authority or agency with jurisdiction over the Phase I Property alleging
that the Phase I Property or its use is in material violation of any law, including any environmental law or regulation, that would
have a material adverse effect.

 

(f)          To
the best of Seller’s knowledge, except as may be disclosed in the environmental reports made available to Purchaser as a
part of the Due Diligence Materials, Seller has not introduced Hazardous Materials onto the Phase I Property which introduction
would constitute a violation of Environmental Laws. The term "Environmental Laws" shall mean, to the extent in
existence as of the Agreement Date, the Resource Conservation and Recovery Act and the Comprehensive Environmental Response, Compensation,
and Liability Act and other federal laws governing the environment as in effect on the date of this Agreement together with their
implementing regulations as of the date of this Agreement applicable to the Property, and all applicable state, regional, county,
municipal and other local laws, regulations and ordinances that are equivalent or similar to the federal laws recited above or
that purport to regulate hazardous or toxic substances and materials. The term "Hazardous Materials" includes
petroleum (including crude oil or any fraction thereof) and any substance, material, waste, pollutant or contaminant listed or
defined as hazardous or toxic under any Environmental Laws, in any case at levels or concentrations requiring monitoring, reporting,
remediation or removal in accordance with Environmental Laws, but shall exclude mold, radon and other naturally occurring substances.

 

(g)         Copies
of the Due Diligence Materials have been (or will be) delivered to Purchaser and are true, correct and complete copies.

 

    	 	20	 

     

    

 

(h)          The
copies of Existing Loan Documents delivered to Purchaser as part of the Due Diligence Materials are true, accurate and complete
copies of all of the material documents and instruments in effect with respect to the Existing Loan, including all amendments,
modifications and supplements thereto. To Seller’s knowledge, no material default or breach exists under any Existing Loan
Document beyond any applicable cure period, nor does there exist any material default or breach, or any material event or circumstance,
which with the giving of notice or passage of time, or both, would constitute a material default or breach by Seller or, to Seller’s
knowledge, any other party under any of the Existing Loan Documents.

 

(i)          Seller
is the owner of the Phase I Personal Property free and clear of all encumbrances other than the Phase I Permitted Exceptions, and
has not previously assigned its rights in and to the Phase I Personal Property except for security interests granted as security
for the Existing Loan. Except as set forth in the Due Diligence Materials, Seller does not lease any equipment or other personal
property in connection with the ownership or operation of the Phase I Property.

 

(j)          Seller
has not received written notice of any uncured violation of any declaration of covenants, conditions and restrictions, reciprocal
easement agreements or similar instrument governing or affecting the use, operation, maintenance, management or improvement of
all or any portion of the Phase I Property.

 

10.5       Representations
and Warranties regarding the Phase II Property and the Phase II Purchase Contract. As a material inducement to Purchaser
to execute this Agreement and consummate the Closing, AR Owner represents and warrants to Purchaser with respect to the Phase II
Property and the Phase II Purchase Contract, that:

 

(a)          The
Phase II Purchase Contract is in full force and effect, has not been modified or amended, and a true and complete copy thereof
has been or will be provided to Purchaser as part of the Due Diligence Materials. AR Owner has not previously assigned any of its
rights or obligations under the Phase II Purchase Contract. To AR Owner’s knowledge, neither AR Owner nor the Phase II Seller
is in default under the Phase II Purchase Contract.

 

(b)          To
AR Owner’s knowledge, none of the representations or warranties made by the Phase II Seller under the Phase II Purchase Contract
are untrue or inaccurate in any material respect. AR Owner has no knowledge of any condition or matter involving the Phase II Property
or the Phase II Purchase Contract that gives rise to a termination right by AR Owner thereunder. All reciprocal easements and similar
agreements between the Phase I Property and the Phase II Property contemplated by the Phase II Purchase Contract have
been completed and no party has issued (and, to AR Owner’s knowledge, no party has the right to issue) any default notices
thereunder.

 

    	 	21	 

     

    

 

(c)          This
Agreement and all documents executed by AR Owner which are to be delivered to Purchaser at the Closing are, or as of the Closing
Date will be, duly authorized, executed, and delivered by AR Owner, and are, or as of the Closing Date will be, legal, valid, and
binding obligations of AR Owner, and do not, and as of the Closing Date will not, violate any provisions of any agreement to which
Seller is a party or to which it is subject or any law, judgment or order applicable to AR Owner. The execution, delivery and performance
by AR Owner of this Agreement or any such documents will not violate, conflict with or result in any breach or contravention of
any contractual obligation of AR Owner.

 

(d)          No
proceedings under any bankruptcy or insolvency laws have been commenced by or against AR Owner; no general assignment for the benefit
of creditors has been made by AR Owner; and no trustee or receiver of AR Owner’s property has been appointed.

 

(e)          AR
Owner is not acting, directly or to its knowledge indirectly for, or on behalf of, any person, group, entity or nation named by
any Executive Order (including the September 24, 2001, Executive Order Blocking Property and Prohibiting Transactions With Persons
Who Commit, Threaten to Commit, or Support Terrorism) or the United States Treasury Department as a terrorist, “Specially
Designated National and Blocked Person,” or other banned or blocked person, entity, or nation pursuant to any Law that is
enforced or administered by the U.S. Office of Foreign Assets Control, and is not engaging in the transactions described herein,
directly or to its knowledge indirectly, on behalf of, or instigating or facilitating the transactions described herein, directly
or to its knowledge indirectly, on behalf of, any such person, group, entity or nation.

 

10.6        Operation
of Phase I Property. From and after the Agreement Date, and other than the Existing Loan, Seller shall not cause any new
mortgage, deed of trust, lien, easement, restriction, covenant or other matter of title to affect the Phase I Property or permit
the same to affect the Phase I Property, and shall continue to operate the Phase I Property in the ordinary course of business
consistent with the manner in which the Phase I Property has been operated by Seller; provided, however, in no event shall Seller
be obligated to make any repairs or replacements of a capital nature.

 

10.7        Contracts
and Leases. During the pendency of Escrow, Seller shall not (i) modify, amend or allow to lapse or expire any of the
Phase I Contracts or any leases representing greater than 3% of the rental revenue being generated from the Phase I Property as
of the Agreement Date, in each case without Purchaser’s prior consent, (ii) enter into any new leases for space within
the Phase I Property except on such terms (or better terms) as Seller leased units as of the Agreement Date, or (iii) enter
into any service, supply, maintenance or other contracts pertaining to the Phase I Property or the operation of the Phase I Property
which are not on prevailing market terms and cancelable without penalty after the Closing, upon thirty (30) days’ prior written
notice, without, in each instance, obtaining the prior written consent of Purchaser, which consent shall not be unreasonably withheld.

 

10.8        Survival.
 The representations and warranties made in this Agreement by Seller and AR Owner shall survive the Closing for the period
specified in Section 13.3.

 

    	 	22	 

     

    

 

10.9        Knowledge.
For purposes of this Agreement, references to the knowledge of Seller or AR Owner shall be deemed to mean the actual (i.e. not
constructive or imputed) knowledge of Robert Meyer (Robert Meyer being hereinafter referred to as the "Designated Representative"),
and shall not be construed, by imputation or otherwise, to refer to the knowledge of any property manager or broker, or to any
other officer, agent, manager, representative or employee of Seller or AR Owner or any affiliate of such entities, or to impose
upon such Designated Representative any duty to investigate the matter to which such actual knowledge, or the absence thereof,
pertains. In no event shall Purchaser have any personal claim against the above-named individuals as a result of the reference
thereto in this Section 10.9 and Purchaser waives and releases all such claims which Purchaser now has or may later
acquire against them in connection with the transactions contemplated in this Agreement.

 

10.10       Change
in Warranties and Representations. Notwithstanding anything to the contrary contained herein, Purchaser acknowledges that
Purchaser shall not be entitled to rely on any representation made by Seller or AR Owner in this Agreement (and, therefore, Seller
and AR Owner shall have no liability with respect to such representation) to the extent, prior to or at the Closing, Purchaser
shall have obtained actual knowledge that such representation or warranty was inaccurate or incomplete in any material respect;
provided, however, if Purchaser determines prior to Closing that there is a material adverse breach of, or change with respect
to, any of the representations and warranties made by Seller or AR Owner above, then Purchaser may, at its option, by sending to
Seller and AR Owner written notice of its election either to (i) terminate this Agreement within five (5) days of discovering
such breach, or (ii) waive such breach and proceed to Closing with no adjustment in the Purchase Price and, in such event,
Seller and AR Owner shall have no further liability as to such matter thereafter. In the event Purchaser terminates this Agreement
for the reasons set forth above, the Deposit shall be immediately refunded to Purchaser, Seller shall reimburse Purchaser for its
Due Diligence Costs (as hereinafter defined) and none of Purchaser, Seller or AR Owner shall thereafter have further liability
hereunder other than the Surviving Obligations. The provisions of this Section 10.10 shall survive the Closing. The
representations and warranties made in this Agreement by Seller and AR Owner shall survive the Closing for the period specified
in Section 13.3.

 

11.         REPRESENTATIONS
AND WARRANTIES OF PURCHASER

 

Purchaser hereby represents
and warrants to Seller and AR Owner as follows:

 

11.1        Due
Organization and Status.  Purchaser is a limited liability company duly organized, validly existing and in good
standing under the laws of the State of Delaware.

 

11.2        Authorization;
No Contravention. This Agreement and all documents executed by Purchaser which are to be delivered to Seller or AR Owner
at the Closing are, or as of the Closing Date will be, duly authorized, executed, and delivered by Purchaser, and are, or as of
the Closing Date will be, legal, valid, and binding obligations of Purchaser, and do not, and as of the Closing Date will not,
violate any provisions of any agreement to which Purchaser is a party or to which it is subject or any law, judgment or order applicable
to Purchaser. The execution, delivery and performance by Purchaser of this Agreement or any such documents will not violate, conflict
with or result in any breach or contravention of any contractual obligation of Purchaser.

 

    	 	23	 

     

    

 

11.3        Bankruptcy.
No proceedings under any bankruptcy or insolvency laws have been commenced by or against Purchaser; no general assignment for the
benefit of creditors has been made by Purchaser; and no trustee or receiver of Purchaser’s property has been appointed.

 

11.4        Reserved.

 

11.5        Anti-Terrorism.
Purchaser is not acting, directly or to its knowledge indirectly for, or on behalf of, any person, group, entity or nation named
by any Executive Order (including the September 24, 2001, Executive Order Blocking Property and Prohibiting Transactions With
Persons Who Commit, Threaten to Commit, or Support Terrorism) or the United States Treasury Department as a terrorist, “Specially
Designated National and Blocked Person,” or other banned or blocked person, entity, or nation pursuant to any Law that is
enforced or administered by the U.S. Office of Foreign Assets Control, and is not engaging in the transactions described herein,
directly or to its knowledge indirectly, on behalf of, or instigating or facilitating the transactions described herein, directly
or to its knowledge indirectly, on behalf of, any such person, group, entity or nation.

 

The representations
and warranties made in this Agreement by Purchaser shall survive the Closing for the period specified in Section 13.4.

 

12.         COSTS
AND PRORATIONS.

 

12.1        Closing
Prorations and Adjustments. A statement of prorations and other adjustments (the “Closing Statement”)
shall be prepared by Escrow Holder in conformity with the provisions of this Agreement and submitted to Purchaser and Seller for
review and approval not less than three (3) business days prior to the Closing Date.

 

(a)          The
following items are to be prorated or adjusted, as the case may require, as of the Closing Date:

 

    	 	24	 

     

    

 

(1)         The
rents under the Phase I Leases and any other sums owing by tenants thereunder with respect to the Phase I Property shall be
prorated for the month in which the Closing occurs on a per diem basis. On or before the Closing, Seller shall deliver to Purchaser
a schedule of all rents, charges and other amounts, if any, payable by tenants of the Phase I Property before the Closing under
the Phase I Leases which are unpaid on the Closing Date (such amounts are collectively referred to herein as the “Delinquent
Amounts”). Notwithstanding the foregoing or any direction from such tenants to the contrary, rental and other payments
received by Purchaser or Seller from such tenants shall first be applied toward the actual out-of-pocket costs of collection, then
toward the payment of current rent and other charges owed to Purchaser or Seller for periods after the Closing, and any excess
monies received shall be applied toward the payment of Delinquent Amounts. With respect to Delinquent Amounts owed by tenants of
the Phase I Property, Purchaser shall reasonably cooperate (including, without limitation, permitting Seller, through its counsel,
to file claims and institute suits if the parties have reasonably exhausted all other efforts for collection), at no expense to
Purchaser, in Seller’s collection of such Delinquent Amounts; provided, however, that Seller shall not be entitled to exercise
any right to terminate any leases or to evict any tenant of the Phase I Property, and all such collection efforts by Seller
must cease by the six (6) month anniversary of the Closing Date. Purchaser and Seller shall reasonably cooperate in reconciling
any operating expenses, taxes or other assessments reimbursable by the tenants of the Phase I Property under the Phase I Leases
for the periods of their respective ownership (or deemed ownership).

 

(2)         The
full amount of security deposits paid under the Phase I Leases, if any, and not theretofore applied, together with interest thereon
to the extent any interest is required by law or otherwise to be paid to tenants thereunder, shall be delivered or credited by
Seller to Purchaser on the Closing Date (and any letters of credit, if any, shall be delivered to, and assigned to, Purchaser at
the Closing at Seller’s expense);

 

(3)         All
other items of income and all items of expense related to the Phase I Property that are customarily prorated, including real
estate taxes, personal property taxes and assessments, funds on hand in operating accounts, operating expenses, and Phase I
Contracts payments (under Phase I Contracts not terminated by Purchaser pursuant to Section 5.2.3), shall be prorated
through Escrow with all items of income and expense allocated (i) to Seller for the period up to the Close of Escrow, and
(ii) to Purchaser for the period from and after the Close of Escrow. If Closing occurs before the current year's tax or assessment
bills are available, an estimated proration shall be made based on the most recent assessed value and the current tax or assessment
rates. Within thirty (30) days after receipt of the current year’s tax or assessment bill, Purchaser shall deliver a copy
to Seller and Purchaser shall refund to Seller any amount overpaid by Seller, or and Seller shall pay to Purchaser the amount of
any deficiency in the proration. If an estimated proration was made, the provisions of this subsection 12.1(a)(3) shall survive
the Closing for a period of thirty (30) days following issuance of the current year’s tax or assessment bill.

 

    	 	25	 

     

    

 

(4)         Interest
under the Existing Loan will be prorated between Seller and Purchaser such that Seller is responsible for all interest due and
payable, or accruing, prior to the Closing Date (including interest accruing through the day prior to the Closing Date as to interest
accruing for the month in which the Closing Date occurs) and Purchaser shall be responsible for all interest thereunder from and
after the Closing Date.

 

Any proration which must be estimated at
the Closing shall be reprorated and finally adjusted as soon as practicable after the Closing Date with any refunds payable to
Seller or Purchaser to be made as soon as practicable; otherwise all prorations shall be final. To the extent any prorations are
subject to reimbursement from the tenants of the Phase I Property under their respective leases, the parties shall adjust such
amounts upon receipt and such reimbursement shall be paid to Seller or Purchaser, as applicable, as soon as practicable. The terms
of this Section 12.1 shall expressly survive Closing.

 

(b)         At
Closing, Seller shall assign to Purchaser (if and to the extent assignable) and receive a credit for the then current balances,
if any, held in escrow for taxes, insurance, replacement reserves, operating deficits and/or working capital reserves in connection
with the Existing Loan (unless such reserves have been returned to Seller by Existing Lender, in which case no credit shall be
given at Closing).

 

(c)         Amounts
on deposit, if any, with utility companies or under any Phase I Contracts shall be returned to Seller, and Purchaser shall
make separate arrangements with such utility companies or service providers.

 

(d)         Seller
shall place, or cause to be placed, any units at the Phase I Property that are vacated at least five (5) business days prior to
Closing in “rent ready condition,” failing which Purchaser shall receive a credit at Closing equal to the sum of $750.00
per unit that is not in such rent ready condition. A representative of Seller and Purchaser shall walk the vacant units two (2)
days before the Close of Escrow to determine which vacant units are not rent ready, if any. For the purposes of this Section
12.1(d), “rent ready condition” shall mean: interior carpets have been cleaned or replaced where necessary, freshly
painted interior walls, working kitchen and other appliances (and water heaters and HVAC to the extent such items serve only the
individual vacant unit(s)), and no material damage to the doors, walls, ceilings, floors or windows inside such vacant units.

 

    	 	26	 

     

    

 

12.2       Expenses
of Closing. The expenses of Closing shall be paid in the following manner:

 

(a)          Seller
shall be responsible for the costs of: (i) to the extent Purchaser (or the Existing Lender) desires a New Owner Policy (or,
as to Lender, a new title policy for the Existing Loan), in connection with the acquisition of the Phase I Property, a base (i.e.,
without any endorsements) ALTA (or other form policy acceptable to Purchaser or Existing Lender) owner’s or mortgagee title
insurance policy, as the case may be, with extended coverage, for the Phase I Property or, if Existing Lender agrees that
the Existing Loan Policy for the Phase I Property will suffice, any endorsements to effectuate the down-dating of, and increase
in coverage of, such Existing Loan Policy; (ii) update to the Phase I Survey; (iii) any applicable transfer taxes
associated with or triggered by the sale of the Phase I Real Property; and (iv) 50% of Existing Lender’s consent fee
in connection with the satisfaction of the Consent Requirements and 50% of all other costs incurred by the Existing Lender (e.g.
lender legal fees) related to the satisfaction of the Consent Requirements which Existing Lender requires be paid or reimbursed
to it (which consent fee is projected to be approximately one percent (1%) of the current principal balance of the Existing Loan
at Closing). Purchaser shall be responsible for the payment of the other 50% of the Existing Lender consent fee, 50% of all other
direct costs incurred by the Existing Lender (e.g. lender legal fees) related to the satisfaction of the Consent Requirements
which Existing Lender requires be paid or reimbursed to it; 100% of the cost of any new third-party reports required by Existing
Lender or Purchaser in connection with the Phase I Property, and any additional endorsements to the Existing Title Policy
requested by Purchaser that are not described in clause (i) above.

 

(b)          Seller
and Purchaser shall split equally all escrow and recording fees incurred in connection with the Closing. Seller and Purchaser shall
pay the fees and expenses of their respective legal counsel incurred in connection with the transaction.

 

(c)          The
Closing Statement shall be prepared by Escrow Holder at the Closing and shall set forth the manner of computation of the Closing
adjustments and costs.

 

12.3        Broker’s,
Finder’s or Similar Fees. Each party hereto represents and warrants to the other that it has dealt with no brokers
or finders in connection with this transaction except for JLL Florida (“Broker”). If the sale of the Phase I
Property closes pursuant to the terms of this Agreement (without modification), Purchaser and Seller agree to split a thirty (30)
basis point commission payable to Broker (based on the $44.75 million purchase price for the Phase I Property), with the entirety
of such commission to be paid to Broker at the closing of the Phase II Property. All other sales commissions associated with
this transaction will be paid by Seller. Each party hereto agrees that if any person or entity, other than Broker, makes a claim
for brokerage commissions or finder’s fees related to the sale of the Phase I Property or the Phase II Property by Seller
to Purchaser, and such claim is made by, through or on account of any acts or alleged acts of said party or its representatives,
said party will protect, indemnify, defend and hold the other party free and harmless from and against any and all loss, liability,
cost, damage and expense (including reasonable attorneys’ fees) in connection therewith. The provisions of this Section 12.3
shall survive Closing or any termination of this Agreement.

 

    	 	27	 

     

    

 

13.         DEFAULTS.

 

13.1         Liquidated
Damages Upon Default by Purchaser. IF ESCROW FAILS TO CLOSE DUE TO PURCHASER’S DEFAULT UNDER THIS AGREEMENT, AND
SUCH FAILURE IS NOT CURED WITHIN TEN (10) CALENDAR DAYS AFTER RECEIPT OF WRITTEN NOTICE FROM SELLER REGARDING SUCH DEFAULT, SELLER
WILL BE DAMAGED AND WILL BE ENTITLED TO COMPENSATION FOR THOSE DAMAGES. SUCH DAMAGES WILL, HOWEVER, BE EXTREMELY DIFFICULT AND
IMPRACTICAL TO ASCERTAIN FOR THE FOLLOWING REASONS: (1) THE DAMAGES TO WHICH SELLER WOULD BE ENTITLED IN A COURT OF LAW WILL BE
BASED IN PART ON THE DIFFERENCE BETWEEN THE ACTUAL VALUE OF THE PHASE I PROPERTY AND PURCHASE RIGHTS UNDER THE PHASE II PURCHASE
CONTRACT AT THE TIME SET FOR THE CLOSE OF ESCROW AND THE PURCHASE PRICE FOR THE SUCH PROPERTY AS SET FORTH IN THIS AGREEMENT; (2)
PROOF OF THE AMOUNT OF SUCH DAMAGES WILL BE BASED ON OPINIONS OF VALUE OF THE PHASE I PROPERTY AND PHASE II PROPERTY, WHICH CAN
VARY IN SIGNIFICANT AMOUNTS; AND (3) IT IS IMPOSSIBLE TO PREDICT AS OF THE DATE ON WHICH THIS AGREEMENT IS MADE WHETHER THE VALUE
OF THE PHASE I PROPERTY AND PHASE II PROPERTY WILL INCREASE OR DECREASE AS OF THE DATE SET FOR THE CLOSE OF ESCROW. PURCHASER DESIRES
TO LIMIT THE AMOUNT OF DAMAGES FOR WHICH PURCHASER MIGHT BE LIABLE SHOULD PURCHASER BREACH THIS AGREEMENT. PURCHASER AND SELLER
WISH TO AVOID THE COSTS AND LENGTHY DELAYS WHICH WOULD RESULT IF SELLER FILED A LAWSUIT TO COLLECT ITS DAMAGES FOR A BREACH OF
THIS AGREEMENT.

 

    	 	28	 

     

    

 

THEREFORE, IF ESCROW
FAILS TO CLOSE DUE TO PURCHASER’S DEFAULT, THE SUM REPRESENTED BY THE DEPOSIT SHALL BE DEEMED TO CONSTITUTE A REASONABLE
ESTIMATE OF SELLER’S DAMAGES, AND SELLER’S (AND AR OWNER’S) SOLE AND EXCLUSIVE REMEDY IN THE EVENT OF THE FAILURE
TO CLOSE ESCROW RESULTING FROM PURCHASER’S DEFAULT SHALL BE LIMITED TO RECOVERING SUCH AMOUNT AS LIQUIDATED DAMAGES, TOGETHER
WITH ANY REASONABLE ATTORNEYS’ FEES AND COSTS INCURRED BY SELLER TO ENFORCE THIS PROVISION. BY INITIALING THIS PROVISION
IN THE SPACES BELOW, SELLER AND PURCHASER EACH SPECIFICALLY AFFIRM THEIR RESPECTIVE AGREEMENTS CONTAINED IN THIS SECTION 13.1
AND AGREE THAT THE SUM REPRESENTED BY THE DEPOSIT IS A REASONABLE SUM CONSIDERING THE FACTS AND CIRCUMSTANCES AS THEY EXIST ON
THE DATE OF THIS AGREEMENT, INCLUDING THE RELATIONSHIP OF SUCH AMOUNT TO THE RANGE OF HARM TO SELLER THAT COULD BE ANTICIPATED,
AND THE ANTICIPATION THAT PROOF OF CAUSATION, FORESEEABILITY AND ACTUAL DAMAGES WOULD BE COSTLY AND/OR IMPRACTICAL. BY INITIALING
THIS PROVISION BELOW, THE PARTIES SPECIFICALLY CONFIRM THE ACCURACY OF SUCH FACTS, THE FACT THAT THEY POSSESS APPROXIMATELY EQUAL
BARGAINING STRENGTH AND SOPHISTICATION AND THE FACT THAT EACH OF THEM WAS REPRESENTED BY COUNSEL WHEN ENTERING INTO THIS AGREEMENT,
WHICH COUNSEL EXPLAINED THE CONSEQUENCES OF THIS SECTION TO THEM AT THE TIME THIS AGREEMENT WAS MADE. NOTHING SET FORTH IN THIS
SECTION SHALL ELIMINATE, ABROGATE OR OTHERWISE AFFECT SELLER’S OR AR OWNER’S RIGHTS UNDER ANY INDEMNITY GRANTED BY
PURCHASER TO SUCH ENTITIES. THE PAYMENT OF SUCH LIQUIDATED DAMAGES IS NOT INTENDED AS A FORFEITURE OR PENALTY BUT IS INTENDED TO
CONSTITUTE LIQUIDATED DAMAGES TO SELLER. THE PARTIES HAVE SET FORTH THEIR INITIALS BELOW TO INDICATE THEIR AGREEMENT WITH THE LIQUIDATED
DAMAGES PROVISIONS CONTAINED IN THIS SECTION.

 

	PURCHASER’S INITIALS	/s/ MK	 	SELLER’S INITIALS	/s/ RM

 

    	 	29	 

     

    

 

13.2         Default
by the Selling Parties. Subject to the limitations set forth in this Section 13.2, if the conveyance of the
Phase I Property and the assignment of the Phase II Purchase Contract is not consummated by reason of any default by Seller or
AR Owner and such default is not cured within ten (10) calendar days after receipt of written notice from Purchaser regarding such
default, then Purchaser shall be entitled, as its sole remedy and at its sole election, to receive either (x) (i) reimbursement
from Seller for the third-party costs and fees (including but not limited to legal fees) actually and reasonably incurred by Purchaser
in connection with this Agreement, its due diligence on the Phase I Property and the Phase II Property and the assumption
of the Existing Loan, not to exceed $100,000.00 in the aggregate (collectively, the “Due Diligence Costs”),
(ii) the return of the Deposit and (iii) if the uncured default resulted from an Intentional Act (as hereinafter defined) to Close
on the Phase I Property sale or the assignment of the Phase II Purchase Contract, liquidated damages equal to three percent (3%)
of the Purchase Price (“Purchaser’s Liquidated Damages”): which payments when made in full shall operate
to terminate this Agreement, or (y) to enforce specific performance of Seller’s obligations to convey the Phase I Property
to Purchaser and AR Owner’s obligation to assign its rights under the Phase II Purchase Contract to Purchaser or its designee;
provided, however, any claim for specific performance must be commenced within sixty (60) days from the date of Closing (or the
date on which Closing was to have occurred), failing which, Purchaser shall have no further right to bring suit for specific performance
under this Agreement. Any claim or right hereunder shall be asserted in writing within sixty (60) calendar days following the earlier
of the date upon which the Closing was to have occurred or the Outside Closing Date (as such latter date may be further extended
from time to time). In no event shall Seller or AR Owner be liable for consequential, speculative, remote or punitive damages,
or any other damages other than liquidated damages as stated above, and Purchaser hereby waives and releases any right to seek
or collect any such consequential, speculative, remote or punitive damages, or any its actual damages as set forth above. As used
herein, "Intentional Act" shall mean any default by Seller or AR Owner attributable to willful misconduct,
with an intent to deny or impair Purchaser from acquiring the property and interests described in this Agreement, including, without
limitation, conveying the property and interests to be conveyed to Purchaser under this Agreement to a third party, encumbering
or pledging such property and interests so that they cannot be transferred free and clear of liens, and/or failing to make the
deliveries required pursuant to Section 7.2; provided, however, for the avoidance of doubt, Seller's or AR Owner’s non-compliance
with the covenants set forth in this Agreement shall not, absent the showing of willful misconduct with an intent to deny or impair
described above, constitute an Intentional Act.

 

13.3        Indemnification
by Seller and AR Owner.

 

(a)          Seller
agrees to hold harmless, indemnify and defend Purchaser from and against (i) any and all obligations, claims, debts, liabilities
and damages resulting from any material inaccuracy in or material breach of any of those representations and warranties which are
set forth in Section 10.2 and Section 10.4 of the Agreement, and (ii) all costs and expenses, including
reasonable attorneys’ fees, incurred by Purchaser as a result of such claims. AR Owner further agrees to hold harmless,
indemnify and defend Purchaser from and against (x) any and all obligations, claims, debts, liabilities and damages resulting
from any material inaccuracy in or material breach of any of those representations and warranties which are set forth in Section 10.5
of the Agreement, and (y) all costs and expenses, including reasonable attorneys’ fees, incurred by Purchaser as a result
of such claims.

 

    	 	30	 

     

    

 

(b)          Seller’s
and AR Owner’s respective obligations pursuant to this Section 13.3 shall survive for a period of nine (9) months
after the Closing Date, after which time, respectively, all liabilities of such parties shall cease.

 

(c)          Valid
claims under this Section 13.3 shall collectively aggregate at least $25,000.00 before they are actionable, and in no event
shall Seller’s and AR Owner’s aggregate indemnity obligations hereunder exceed $500,000.00.

 

13.4         Purchaser’s
Indemnification. Purchaser shall hold harmless, indemnify and defend AR Owner and Seller, as applicable, from and against:
(i) any and all obligations, claims, debts, liabilities and damages resulting from any material inaccuracy in or material
breach of representation or warranty of Purchaser hereunder, (ii) any and all obligations and other matters relative to any
employees of Seller applicable to the period from and after the Closing where such employees are hired by Purchaser (but not otherwise),
and (iii) all costs and expenses, including reasonable attorneys’ fees, incurred by Seller or AR Owner as a result of
such claims. The provisions of this Section 13.4 shall survive the Closing, except any claim under this Section 13.4
must be submitted in writing by AR Owner or Seller to Purchaser within nine (9) months following the Closing, after which time
all liability of Purchaser under this Section 13.4 shall cease. Additionally, valid claims under this Section 13.3
shall collectively aggregate at least $25,000.00 before they are actionable and in no event shall Purchaser’s aggregate indemnity
obligations hereunder exceed $500,000.00.

 

14.         MISCELLANEOUS

 

14.1         Successors
and Assigns. Subject to the provisions of this Section 14.1, the terms and provisions of this Agreement are
to apply to and bind the permitted successors and assigns of the parties hereto. Purchaser may not assign its rights under this
Agreement without first obtaining Seller’s written approval, and any such attempted assignment without Seller’s prior
written approval shall be null and void. Notwithstanding the foregoing, Purchaser may assign all, but not less than all, of its
rights under this Agreement to any Affiliate (as hereinafter defined) of Purchaser or to any other entity which is an Affiliate
of Bluerock Residential Growth REIT, Inc. (“Bluerock REIT”). In the event Purchaser intends to assign its rights
hereunder, (a) Purchaser shall send Seller written notice of its request (or notice if consent is not required) at least one
(1) business day prior to the Closing Date, which notice shall include the legal name and structure of the proposed assignee, and
(b) Purchaser and the proposed assignee shall execute an assignment and assumption of this Agreement and deliver a copy thereof
to Seller. “Affiliate” means any person or entity that directly, or indirectly through one or more intermediaries,
controls, is controlled by or is under common control with Purchaser or Bluerock REIT. For the purposes of this definition, “control”
means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a person,
whether through the ownership of voting securities, by contract or otherwise, and the terms “controlling” and “controlled”
have the meanings correlative to the foregoing. Except as provided in this Section 14.1, no person other than the parties
hereto and their permitted successors and permitted assigns is intended to be a beneficiary of any of this Agreement.

 

    	 	31	 

     

    

 

14.2        Intentionally
Omitted.

 

14.3        Notices.
Any notice, consent or approval required or permitted to be given under this Agreement shall be in writing and shall be deemed
to have been given upon (i) hand delivery, (ii) one (1) business day after being deposited with Federal Express or another
reliable overnight courier service for next day deliver, (iii) upon facsimile or e-mail transmission (except that if the date
of such transmission is not a business day, then such notice shall be deemed to be given on the first business day following such
transmission), or (iv) two (2) business days after being deposited in the United States mail, registered or certified mail,
postage prepaid, return receipt required, and addressed as follows:

 

	If to Seller or AR Owner:	c/o Catalyst Development Partners, LLC
	 	880 Glenwood Avenue SE, Suite H
	 	Atlanta, Georgia 30316
	 	Attn:  Jorge Sardinas and Rob Meyer
	 	Email: JorgeS@catalystdp.com  and robm@catalystdp.com  
	 	 
	With a copy to:	Eric Wilensky, Esq.
	 	Nelson Mullins Riley & Scarborough LLP
	 	Atlantic Station
	 	201 17th  Street NW, Suite 1700
	 	Atlanta, GA 30363
	 	Facsimile: (404) 322-6050
	 	Email: eric.wilensky@nelsonmullins.com 
	 	 
	If to Purchaser:	Bluerock Real Estate, L.L.C.
	 	712 Fifth Avenue, 9th Floor
	 	New York, New York 10019
	 	Attn: Jordan Ruddy and Michael L. Konig, Esq.
	 	Facsimile: (646) 278-4220
	 	Email: Jruddy@bluerockre.com; Mkonig@bluerockre.com 
	 	 
	With a copy to:	Hirschler Fleischer
	 	2100 E. Cary Street
	 	Richmond, Virginia 23223
	 	Attn: S. Edward Flanagan, Esq.
	 	Facsimile: (804) 644-0957
	 	Email: eflanagan@hf-law.com 

 

    	 	32	 

     

    

 

	If to Escrow Holder:	Calloway Title & Escrow, LLC
	 	4170 Ashford-Dunwoody Road, Suite 285
	 	Atlanta, GA 30319
	 	Attn: S. Marcus Calloway
	 	Facsimile: (770) 395-9610 
	 	Email:  MarcusC@titlelaw.com 

 

14.4        Amendment
and Waiver.

 

(a)          No
failure or delay on the part of Seller, AR Owner or Purchaser in exercising any right, power or remedy hereunder shall operate
as a waiver thereof, nor shall any single or partial exercise of any such right, power or remedy preclude any other or further
exercise thereof or the exercise of any other right, power or remedy. The remedies provided for herein are cumulative and are not
exclusive of any remedies that may be available at law, in equity or otherwise.

 

(b)          Any
amendment, supplement or modification of or to any provision of this Agreement, any waiver of any provision of this Agreement,
and any consent to any departure from the terms of any provision of this Agreement, shall be effective (i) only if it is made or
given in writing and signed by Seller, Purchaser and (to the extent such amendment pertains to the Phase II Property or the Phase
II Purchase Contract) AR Owner, and (ii) only in the specific instance and for the specific purpose for which made or given.

 

14.5        Counterparts;
Facsimile Signatures. This Agreement may be executed in any number of counterparts and by the parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute
one and the same agreement. Executed copies of this Agreement transmitted by facsimile shall be fully binding and effective upon
receipt, but each party promptly shall deliver to the other an execution copy of this Agreement bearing an original signature.
Each person signing this Agreement or any documents required hereunder on behalf of another party warrants that he or she is duly
authorized to execute this Agreement and all documents required hereunder on behalf of such party.

 

14.6        Headings.
The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof.

 

14.7        Governing
Law. This Agreement shall be governed by and construed in accordance with the internal laws of the State of North Carolina
without regard to principles of conflict of laws of such state.

 

14.8        Severability.
If any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal
or unenforceable in any respect for any reason, the validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions hereof shall not be in any way impaired, unless the provisions held invalid, illegal or
unenforceable shall substantially impair the benefits of the remaining provisions hereof.

 

    	 	33	 

     

    

 

14.9         Entire
Agreement. This Agreement (including any Exhibits and Schedules) is intended by the parties as a final expression of their
agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect
of the subject matter contained herein and therein. There are no restrictions, promises, warranties or undertakings, other than
those set forth or referred to herein or therein. This Agreement supersedes all prior agreements and understandings between the
parties with respect to such subject matter. All Exhibits and Schedules which are attached hereto are incorporated in this Agreement
as though fully set forth herein.

 

14.10      Further
Assurances. Each of the parties shall execute such documents and perform such further acts (including obtaining any consents,
exemptions, authorizations, or other actions by, or giving any notice to, or making any filings with, any governmental authority
or any other person) as may be reasonably required or desirable to carry out or to perform the provisions of this Agreement.

 

14.11      Attorneys’
Fees. If either Seller or Purchaser shall obtain legal counsel and bring an action or proceeding against the other by reason
of an alleged breach of any covenant, provision or condition hereof, or otherwise arising out of this Agreement, the unsuccessful
party shall pay to the prevailing party reasonable attorneys’ fees and costs, which shall be payable whether or not any proceeding
is prosecuted to judgment or award. The term “prevailing party” shall include a party (i) who brings an action or proceeding
against the other by reason of the other’s breach or default and obtains substantially the relief sought by judgment or award
or (ii) who successfully defends an action or proceeding brought by the other party and against whom no material damages or specific
performance are awarded.

 

14.12      Other
Parties. Nothing in this Agreement shall be construed as giving any person, firm, corporation or other entity, other than
the parties hereto, their successors and permitted assigns, any right, remedy or claim under or with respect to this Agreement
or any provision hereof.

 

14.13      Confidentiality.
Purchaser understands that all information obtained by Purchaser in connection with the transactions contemplated by this Agreement
(including, but not limited to, the existence and terms of this Agreement, the Due Diligence Documents and other information relating
to Seller, AR Owner, the Phase I Property and the Phase II Property) is confidential (“Confidential Information”)
until Closing. Prior to Closing, Seller and Purchaser each agrees that except (i) as necessary in connection with the Existing
Loan Approval Contingency or obtaining the New Title Policies or (ii) to the extent required by The Securities Act of 1933,
The Securities and Exchange Act of 1934, and the rules and regulations promulgated thereunder, or other applicable law, neither
shall take any action nor conduct itself in any fashion that would disclose to third parties (excluding attorneys, accountants
and similar professionals assisting Purchaser with the transactions identified herein) unrelated to Purchaser, its acquisition
of the Phase I Property or the Phase II Property, or any aspect of the contemplated transaction.

 

    	 	34	 

     

    

 

14.14      Casualty.
In the event of the damage or destruction of all or any part of the Phase I Property prior to Closing, the aggregate cost to repair
or replace of which shall be $750,000.00 or more (as estimated by Seller’s insurance carrier), Purchaser may, at its option,
exercisable by written notice to Seller, either (i) terminate this Agreement, whereupon neither party will have any further
obligations hereunder other than the Surviving Obligations, and the Deposit shall be returned to Purchaser or (ii) continue
under this Agreement, whereupon at Closing Seller will assign to Purchaser its respective interests in and to any insurance policies
and proceeds thereof payable to either of them as a result of such damage or destruction, less such portion thereof payable as
shall first be reimbursed to Seller for the costs of any restoration work incurred by Seller prior to the Closing, and pay Purchaser
the amount of any deductible or self-insured retention under such policies. Seller shall notify Purchaser promptly in writing if
all or any portion of the Phase I Property is damaged or destroyed prior to the Closing Date. Seller shall not settle any insurance
claims without the consent of Purchaser, such consent not to be unreasonably withheld, conditioned or delayed. In the event that
prior to Closing the Phase II Property is the subject of a casualty that would permit the purchaser under the Phase II Purchase
Contract to terminate the Phase II Purchase Contract, Purchaser shall have the right to instruct AR Owner to terminate the Phase
II Purchase Contract, in which event the terms of Section 7.4 hereof shall apply.

 

14.15      Condemnation;
Zoning. In the event of (a) the taking of all or any material part of the Phase I Property, or conveyance in lieu
thereof, prior to the Closing (e.g., not including the taking of strips of widths less than ten (10) feet of the Phase I Real
Property running along adjacent roads and highways unless the same affects parking or access), by eminent domain or condemnation,
or notice to Seller prior to the Closing of the initiation of governmental proceedings to take such action or an offer to purchase
in lieu thereof, or (b) any change in zoning or other laws governing use of the Phase I Property, or notice thereof to Seller,
prior to the Closing, then in any such event, Seller shall promptly notify Purchaser thereof in writing, and Purchaser, at its
option, exercisable by written notice to Seller, may either (i) terminate this Agreement, whereupon neither party will have
any further obligation hereunder other than the Surviving Obligations and the Deposit shall be returned to Purchaser, or (ii) continue
under this Agreement, whereupon Seller shall have no interest in any award and proceeds thereof payable to Seller as a result of
such taking shall be assigned to Purchaser. Seller shall notify Purchaser promptly in writing if all or any portion of the Phase
I Property is taken by power of eminent domain or conveyed in lieu thereof, or if such taking or conveyance in lieu thereof is
threatened, prior to the Closing Date. In the event that prior to Closing the Phase II Property is the subject of a condemnation
or eminent domain proceeding that would permit the purchaser under the Phase II Purchase Contract to terminate the Phase II Purchase
Contract, Purchaser shall have the right to instruct AR Owner to terminate the Phase II Purchase Contract, in which event the terms
of Section 7.4 hereof shall apply.

 

14.16      Reserved.

 

    	 	35	 

     

    

 

14.17      Computation
of Time. Unless otherwise specified, in computing any period of time described in this Agreement, the day of the act or
event after which the designated period of time begins to run is not to be included and the last day of the period so computed
is to be included, unless such last day is a Saturday, Sunday or legal holiday under the laws of the State of North Carolina (all
days other than Saturdays, Sundays or North Carolina legal holidays being deemed “business days” for purposes hereof),
in which event the period shall run until the end of the next day which is neither a Saturday, Sunday nor legal holiday.

 

14.18      Exhibits
and Schedules. The following exhibits and schedules attached hereto shall be deemed to be an integral part of this Agreement:

 

	Exhibit A	Legal Description of Phase I Land
	Exhibit B	Inventory of Phase I Personal Property
	Exhibit C	Phase I Rent Roll
	Exhibit D	Phase I Contracts
	 	 
	Schedule 5.1	Due Diligence Documents
	Schedule 7.2(a)(i)	Deed
	Schedule 7.2(a)(ii)	Bill of Sale and Assignment
	Schedule 7.2(a)(iv)	Certificate of Selling Parties
	Schedule 7.2(a)(vii)	Seller’s Affidavit
	Schedule 7.2(b)	Assignment and Assumption of Phase II Purchase Contract

 

14.19     Limitation
of Selling Parties’ Liability. Except as expressly set forth in the Parent Joinder attached hereto, Purchaser shall
have no recourse against any of the past, present or future, direct or indirect, shareholders, partners, members, managers, principals,
directors, officers, agents, incorporators, affiliates or representatives of Seller or AR Owner or of any of the assets or property
of any of the foregoing for the payment or collection of any amount, judgment, judicial process, arbitral award, fee or cost or
for any other obligation or claim arising out of or based upon this Agreement and requiring the payment of money by AR Owner. This
Section 14.19 shall survive the Closing.

 

14.20      Limitation
of Purchaser’s Liability. Seller shall have no recourse against any of the past, present or future, direct or indirect,
shareholders, partners, members, managers, principals, directors, officers, agents, incorporators, affiliates or representatives
of Purchaser or of any of the assets or property of any of the foregoing for the payment or collection of any amount, judgment,
judicial process, arbitral award, fee or cost or for any other obligation or claim arising out of or based upon this Agreement
and requiring the payment of money by Purchaser. This Section 14.20 shall survive the Closing.

 

14.21      JURY
WAIVER. IN ANY LAWSUIT OR OTHER PROCEEDING INITIATED BY SELLER OR PURCHASER UNDER OR WITH RESPECT TO THIS AGREEMENT, SELLER
AND PURCHASER EACH WAIVE ANY RIGHT IT MAY HAVE TO TRIAL BY JURY. THIS SECTION 14.21 SHALL SURVIVE THE CLOSING.

 

[Remainder of page
intentionally left blank – signature page follows]

 

    	 	36	 

     

    

 

IN WITNESS WHEREOF,
the parties hereto have executed this Agreement on the date first set forth above.

 

	 	PURCHASER:
	 	 
	 	BLUEROCK REAL ESTATE, L.L.C.,
	 	a Delaware limited liability company
	 	 	 
	 	By: 	/s/ Michael L. Konig
	 	Name: 	Michael L. Konig
	 	Title: 	Senior Vice President and General Counsel

 

    	 	37	 

     

    

 

	 	SELLER:
	 	 
	 	AR I BORROWER, LLC, a Delaware limited liability 

company
	 	 
	 	By:	AR OWNER, LLC, a Delaware limited liability 

company, its Sole Member and Sole Manager
	 	 
	 	 	By:	AR DEVELOPER, LLC, a Georgia limited 

liability company, its Managing Member
	 	 
	 	 	 	By:	CATALYST DEVELOPMENT 

PARTNERS II, LLC, a Georgia 

limited liability company, its Sole 

Member and Sole Manager
	 	 
	 	 	 	 	By:	/s/ Robert Meyer
	 	 	 	 	 	Name: Robert Meyer
	 	 	 	 	 	Title: Manager/Officer

 

    	 	38	 

     

    

 

JOINDER OF AR OWNER

 

AR Owner hereby joins
in this Agreement as to those matters pertaining to AR Owner, the Phase II Property, the Phase II Purchase Contract, and the transactions
contemplated herein relating to the foregoing, and for no other purpose.

 

	 	AR OWNER:
	 	 
	 	AR OWNER, LLC, a Delaware
	 	limited liability company
	 	 
	 	By:	AR DEVELOPER, LLC, a Georgia limited  liability company, its Managing Member
	 	 
	 	 	By:	CATALYST DEVELOPMENT 

PARTNERS II, LLC, a Georgia limited 

liability company, its Sole Member and Sole 

Manager
	 	 	 	 	 
	 	 	 	By:	s/ Robert Meyer
	 	 	 	 	Name: Robert Meyer
	 	 	 	 	Title:  Manager/Officer

  

    	 	39	 

     

    

 

PARENT JOINDER

 

This joinder (this
“Parent Joinder”) is attached to and made a part of the foregoing Agreement and all terms capitalized but not
defined herein shall have the respective meanings given to them in the Agreement. The undersigned, HKCG Realty Associates, LP,
a Florida limited partnership, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged,
hereby duly executes with proper authority and joins in the execution of this Agreement, and agrees that it is jointly and severally
liable, as a principal and not as a surety, for the performance of the obligations of Seller and AR Owner pursuant to Section 13.3
of the Agreement which may arise following the Closing Date. Purchaser shall have the right to proceed directly against the undersigned
without first making written demand to Seller (and without any obligation to bring suit against Seller) for the satisfaction of
any such obligations.

 

The undersigned is
an indirect owner of Seller, will derive substantial benefits from the transactions described in the Agreement and acknowledges
that the execution of this Parent Joinder is a material inducement and condition to Purchaser’s execution of the Agreement.
The undersigned represents and warrants that it has the legal right, power, authority and capacity to execute this Parent Joinder,
that such execution does not violate the organizational documents of, or any other agreement or instrument by which the undersigned
is bound, and that this Parent Joinder is binding and enforceable against the undersigned.

 

The undersigned unconditionally
waives any guarantor or suretyship defenses that might otherwise be available to it with respect to its obligations under this
Parent Joinder. The terms of this Joinder shall survive Closing.

 

The provisions set
forth in Sections 14.3 though 14.13 of the Agreement are hereby incorporated by reference into this Parent Joinder as if fully
set forth herein, provided that the undersigned shall be “Seller”, as applicable, under such Sections.

 

	 	HKCG Realty Associates, LP, a Florida limited partnership
	 	 
	 	By:	H. Katz Capital Group, Inc., its general partner
	 	 	 
	 	By:	/s/ Brian Siegel
	 	 	 
	 	Name: 	Brian Siegel
	 	 	 
	 	Title:	Managing Director

 

    	 	40	 

     

    

 

PARENT JOINDER

 

This joinder (this
“Parent Joinder”) is attached to and made a part of the foregoing Agreement and all terms capitalized but not
defined herein shall have the respective meanings given to them in the Agreement. The undersigned, Catalyst Development Partners
II, LLC, a Georgia limited partnership, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged,
hereby duly executes with proper authority and joins in the execution of this Agreement, and agrees that it is jointly and severally
liable, as a principal and not as a surety, for the performance of the obligations of Seller and AR Owner pursuant to Section 13.3
of the Agreement which may arise following the Closing Date. Purchaser shall have the right to proceed directly against the undersigned
without first making written demand to Seller (and without any obligation to bring suit against Seller) for the satisfaction of
any such obligations.

 

The undersigned is
an indirect owner of Seller, will derive substantial benefits from the transactions described in the Agreement and acknowledges
that the execution of this Parent Joinder is a material inducement and condition to Purchaser’s execution of the Agreement.
The undersigned represents and warrants that it has the legal right, power, authority and capacity to execute this Parent Joinder,
that such execution does not violate the organizational documents of, or any other agreement or instrument by which the undersigned
is bound, and that this Parent Joinder is binding and enforceable against the undersigned.

 

The undersigned unconditionally
waives any guarantor or suretyship defenses that might otherwise be available to it with respect to its obligations under this
Parent Joinder. The terms of this Joinder shall survive Closing.

 

The provisions set
forth in Sections 14.3 though 14.13 of the Agreement are hereby incorporated by reference into this Parent Joinder as if fully
set forth herein, provided that the undersigned shall be “Seller”, as applicable, under such Sections.

 

	 	Catalyst Development Partners II, LLC, a Georgia 

limited liability company
	 	 	 
	 	By: 	/s/ Robert G. Meyer
	 	 	 
	 	Name: 	Robert G. Meyer
	 	 	 
	 	Title:	Manager/Officer

 

    	 	41	 

     

    

 

EXHIBIT A

 

Legal
Description of Phase I Real Property

 

Lying and being situate in Mecklenburg
County, North Carolina, and being more particularly described as follows:

 

Being all of Parcels 1, 2 and the areas
shown as the sixty-six (66) foot public right-of-way (“Prosser Way”) and the fifty (50) foot public right of way (“Skinner
Lane”), as shown on a plat recorded in Map Book 53, page 886, and Parcel 3A as shown on a plat recorded in Map Book 55, page
355, Mecklenburg County Register of Deeds, reference to which is hereby made for a more particular description.

 

TOGETHER WITH the rights and easements
conferred by that Sewer Easement Agreement recorded in Book 18053, at page 845, Mecklenburg County Register of Deeds, as amended
by First Amendment to Sewer Agreement recorded in Book 20732, at page 68, and Second Amendment to Sewer Easement Agreement recorded
in Book 22541, at page 189.

 

TOGETHER WITH easements contained in that
Declaration of Easements, Covenants and Restrictions recorded in Book 28849 at page 615, Mecklenburg County Register of Deeds.

 

    	 	42	 

     

    

 

EXHIBIT B

 

Phase
I PERSONAL Property

 

Ashton Reserve - Maintenance Shop Inventory

 

3 golf carts with chargers

2 back pack blowers

1 hand truck

2 snow shovels

5 gallon shop vac

2 hand held spreaders

pressure washer

portable a/c unit

portable air tank

cordless drill

cordless skill saw

cordless saw

saw

battery charger

carpet fan blower

hvac recovery machine

key machine

a/c vacuum pump

a/c torch set

30 lb a/c recovery tank

key machine

8 ft ladder

6 ft ladder

24 ft ladder

set of a/c gauges

caulk gun

miter saw

small refrigerator

bench grinder

 

    	 	43	 

     

    

 

POOL

 

Grill with Cover

54 Pool Chairs

28 white drink tables

4 trash cans

1 table with 6 chairs

4 high tables with 4 chairs each

2 end tables

6 Planters

4 lounge chairs with pillows

1 couch

1 chair with ottoman

 

Ashton Reserve - Office Inventory

 

	Clubhouse/Media Room	Bathrooms
	2 couches	4 mirrors
	4 lounge chairs	2 pieces of artwork
	Lamp Stand	1 Rug
	2 Flat Screen Tv	3 trash cans
	2 Coffee Table	 
	4 End tables	 
	Dresser Manager office	Manager office
	Bench Seat	1 computer
	6 mirrors	Printer
	4 pieces of wall art	2 prospect chairs
	2 area rugs	2 computer chairs
	5 barstools	1 desk
	Water Machine	1 calculator
	9 pieces of artwork	1 artwork
	Microwave	phone
	Stove	 
	Dishwasher	 
	Ice Maker	 
	Keurig	Assistant Manager office
	Wireless printer	computer
	conference table w/ 6	 
	chairs	desk
	8 seats	phone
	1 loveseat	calculator
	5 lamps	1 piece of artwork
	Entertainment Center	Hanging File organizer

 

    	 	44	 

     

    

 

	Leasing office	 
	2 desks Back	Back  Office/File Room
	2 desk chairs	Computer
	4 leasing chairs	Desk
	2 computers	Computer Chair
	2 phones	Copier
	Entry stand with	 
	vases	Refridgerator
	1 area rug	Key Trac
	1 wall art	Dyscon Vaccuum Cleaner
		paper Shredder
		Helium Tank
		Phone
		4 radios with chargers
		Laminator 

 

    	 	45	 

     

    

 

EXHIBIT C

 

Phase
I RENT ROLL

 

[ATTACHED]

 

    	 	46	 

     

    

  

EXHIBIT D

 

Phase
I CONTRACTS

 

1. That certain Advertiser Agreement by and between Catalyst
and Network Communications, Inc. d/b/a Apartment Finder dated May 19, 2014;

 

2. That certain Ad Insertion Agreement by and between For Rent
Media Solutions and Greystar dated February 8, 2012;

 

3. That certain Advertising Agreement by and between Greystar
Real Estate Partners, LLC and Apartment Guide dated January 31, 2015;

 

4. That certain Advertising Agreement by and between Apartment
Guide and Ashton Reserve at Northlake dated March 26, 2013;

 

5. That certain Pest Control Service Agreement by and between
Ashton Reserve at Northlake and Cramer Pest Control dated June 4, 2014;

 

6. That certain Preventative Maintenance Agreement by and between
Jasko Fitness Solutions, Inc. and Ashton Reserve at Northlake;

 

7. That certain Full Maintenance Agreement by and between New
River Landscaping and Ashton Reserve at Northlake dated February 18, 2014;

 

8. That certain Order Form to Master Services Agreement by and
between NWP Services Corporation and Northlake Investors 288, LLC for Ashton Reserve Northlake dated February 25, 2015;

 

9. That certain PPC Advertising Agreement by and among Standing
Dog Interactive, Greystar and Ashton Reserve dated January 13, 2015;

 

10. That certain Commercial Propane Gas Sales Agreement by and
between Suburban Propane and Ashton Reserve dated November 13, 2013;

 

11. That certain Change Order to Proposal or Contract by and
between Suburban Propane and Ashton I Borrower LLC dated Decmber 5, 2013;

 

12. That certain Guaranteed Maintenance Agreement by and between
Systel Business Equipment Co., Inc. and Ashton Reserve at Northlake dated March 12, 2012;

 

13. That certain Guaranteed Maintenance Agreement by and between
Systel Business Equipment Co., Inc. and Ashton Reserve at Northlake dated September 23, 2013;

 

    	 	47	 

     

    

 

14. That certain Life Safety Agreement by and between Wayne
Automatic Fire Sprinklers, Inc. and Ashton Reserve at Northlake dated October 22, 2012;

 

15. That certain Life Safety Agreement by and between Wayne
Automatic Fire Sprinklers, Inc. and Ashton Reserve at Northlake dated November 22, 2011;

 

16. That certain Service Contract by and between WebListers
LLC and Ashton Reserve at Northlake dated October 3, 2013; and

 

17. That certain Service and Marketing Agreement by and between
Time Warner Enterprises, LLC and Northlake Investors 288, LLC dated November 14, 2013.

 

    	 	48	 

     

    

 

SCHEDULE 5.1

 

Due
Diligence Documents

 

_____1. Business License or Permit

 

_____2. Survey or Site Plan

 

_____3. Building Plans and Specifications

 

_____4. Vendor List (with addresses and phone numbers)

 

_____5. Address, telephone number & account numbers for
utility companies

 

_____6. Utility Log covering the last twelve month period, including
copies of actual bills

 

_____7. Service Agreements/Contracts including account numbers,
if available

 

_____8. List of related entities performing services at the
properties indicating the type of service and amounts paid

 

_____9. Fire Inspection Reports

 

_____10. Critical Shut
Off Locations (water, gas & electric)

 

_____11. Tax Bills

 

_____12. Present year Notice of Proposed Property Taxes and
whether the proposed assessment is being appealed and any and all information regarding

 

_____13. Disclosure of all pending insurance claims

 

_____14. Personal Property Inventory

 

_____15. Current Insurance Certificates and premium breakdown
of the coverage provided.

 

_____16. Insurance Loss Runs for the past five years

 

_____17. Current Market Survey

 

_____18. 12 Month Traffic History with marketing sources

 

_____19. Gross Rent Potential
Schedule by unit type

 

    	 	49	 

     

    

 

_____20. Leasing Summary by month for last twelve months

 

_____21. Resident demographics information

 

_____22. Occupancy Report

 

_____23. Certificate of Occupancy

 

_____24. Income Statements for the three previous years in
twelve-month format, including capital expenditures (if available)

 

_____25. YTD Income Statement with actuals in twelve-month format,
including capital expenditures

 

_____26. Copy of the Balance Sheets (as of the end of the calendar
year for the last 2 years and current year-to-date)

 

_____27. Current year Operating Budget and next year including
capital items (if applicable or available)

 

_____28. Copy of the Cash Receipts Journals (last three months)
and Bank Statements (last 12 months)

 

_____29. Copy of the Delinquency Report and/or Aged Receivable
Report with prepaid rents (as of the last calendar year and end of the last calendar month)

 

_____30. Copy of the Aged Accounts Payable Schedule (as of the
end of the last calendar year and the end of the last calendar month)

 

_____31. Copy of General Ledger and current Trial Balance

 

_____32. Check Run for last 30 days

 

_____33. Copy of any CPA and/or internal audits, reports or
statements

 

_____34. Current Rent Roll - in Excel, if possible

 

_____35. Current Concessions Report

 

_____36. Current Detail Unit Status Report (status of Vacant/On-Notice
units)

 

_____37. Current Lease Expiration Summary

 

_____38. Copy of Current
Leases and Addenda

 

_____39. Current Security Deposit Report, if not listed on current
rent roll

 

    	 	50	 

     

    

 

_____40. Listing of all down units (i.e., not rent ready)

 

_____41. Listing of non-revenue units (model, employee, office,
courtesy officer, etc.)

 

_____42. Listing of amount of employee concessions

 

_____43. List of any charges and fees (application, NSF, month
to month, date rent is due, redecoration, late, water, sewer and trash)

 

_____44. Service Request Log

 

_____45. Pest Control Log

 

_____46. Compensation package information and time on property
for existing staff

 

_____47. Incident Reports

 

_____48. Termite Bond Letter (if available)

 

_____49. Construction plans (site plan)

 

_____50. Resident Ledgers

 

_____51. List of unit types/description and the number of each
type unit

 

_____52. Unit List with amenities for each unit

 

_____53. Property Security Code List with descriptions

 

_____54. Mailing List for each individual apartment. Are building
numbers included in the address?

 

_____55. Copies of Notices or Violations regarding Zoning, Building
Department, Fire Safety, Health Department, Municipality, other Governmental Body.

 

    	 	51	 

     

    

 

SCHEDULE 7.2(a)(i)

 

DEED

 

	Prepared by:	Nelson Mullins (CMR)
	 	4140 Parklake Avenue, Suite 200
	 	Raleigh, NC 27612
	 	 
	Return after recording to:   	Eric Wilensky, Esq.
	 	Nelson Mullins Riley & Scarborough LLP
	 	201 17th Street NW, Suite 1700
	 	Atlanta, GA 30363

 

Tax Parcel No.:

 

STATE OF NORTH CAROLINA

Excise Tax:
$____________

COUNTY OF MECKLENBURG

 

NORTH CAROLINA SPECIAL WARRANTY DEED

 

THIS DEED is
made as of the _____ day of ___________________, 2015, by and between AR I BORROWER, LLC, Grantor, and _________________________,
a ___________________________, Grantee, having a mailing address of _________________________________________; the designation
Grantor and Grantee as used herein shall include said parties, their heirs, successors, and assigns, and shall include singular,
plural, masculine, feminine or neuter as required by context;

 

WITNESSETH,
that the Grantor, for a valuable consideration paid by the Grantee, the receipt of which is hereby acknowledged, has and by these
presents does grant, transfer and convey unto the Grantee in fee simple all those certain lots or parcels of land situated in Mecklenburg
County, North Carolina, and more particularly described as follows:

 

See Exhibit A attached hereto
and incorporated herein by reference.

 

     

     

    

 

The property hereinabove
described was acquired by Grantor by instrument recorded in Book 28849 at Page 632 of the Mecklenburg County Public Registry.

 

A map showing the parcels
described above is recorded in Map Book 55, Page 355, of the Mecklenburg County Public Registry.

 

The above described
property  ̈ does x does not include the
primary residence of the Grantor.

 

TO HAVE AND TO HOLD
the aforesaid lots or parcels of land and all privileges and appurtenances thereto belonging to the Grantee in fee simple forever;

 

AND THE GRANTOR
covenants with Grantee that Grantor is seized of the above-described property in fee simple, has the right to convey the same in
fee simple, and has done nothing to impair such title as Grantor received, and Grantor will warrant and defend the title against
the lawful claims of all persons claiming by, under or through Grantor, except for the exceptions hereinafter stated.

 

See Exhibit B attached hereto
and incorporated herein by reference.

 

[REMAINDER OF PAGE INTENTIONALLY LEFT
BLANK]

 

     

     

    

 

IN WITNESS WHEREOF,
Grantor has caused this instrument to be signed the day and year first above written.

 

	 	AR I BORROWER, LLC, a Delaware limited 

liability company
	 	 	 
	 	By:	AR OWNER, LLC, a Delaware limited 

liability company, its Sole Member and Sole 

Manager
	 	 	 
	 	 	By:	AR DEVELOPER, LLC, a Georgia 

limited liability company, its 

Managing Member
	 	 	 	 
	 	 	 	By:	CATALYST DEVELOPMENT PARTNERS II, LLC, a Georgia limited liability company, its Sole Member and Sole Manager
	 	 	 	 	 	 
	 	 	 	 	By:	 
	 	 	 	 	 	Name:
	 	 	 	 	 	Title:

 

STATE OF ________________

 

COUNTY OF ________________

 

I certify that the
following person personally appeared before me this day, acknowledging to me that he voluntarily signed the foregoing document
for the purpose stated therein: ____________________________ as the _____________________ of Catalyst Development Partners II,
LLC, the sole member and sole manager of AR Developer, LLC, the managing member of AR Owner, LLC, the sole member and sole manager
of AR I BORROWER, LLC.

 

Date: ___________________, 2015.

 

	 	 
	 	Official Signature of Notary
	 	 
	 	 
	 	Notary’s printed or typed name
	 	 
	 	My commission expires: 	 

(Official Seal)

 

     

     

    

 

Exhibits to Special Warranty Deed

 

A – Legal Description
of Land

 

B – Permitted Exceptions

 

     

     

    

 

SCHEDULE 7.2(a)(ii)

 

BILL OF SALE AND ASSIGNMENT

 

Bill
of Sale and Assignment and Assumption

of
Leases and Service Contracts

 

This Bill of Sale and
Assignment and Assumption of Leases and Service Contracts (this “Agreement”) is made and entered into this ____
day of _____________________, 2015, by and between AR I BORROWER, LLC, a Delaware limited liability company (“Seller”),
and ___________________, a ___________ (“Purchaser”).

 

WITNESSETH:

 

WHEREAS, Seller and
Purchaser have previously entered into that certain Purchase and Sale Agreement and Escrow Instructions, dated _________________,
2015 [DESCRIBE AMENDMENTS, IF APPLICABLE] (the “Contract”), having AR Owner, LLC join as an additional party
for the limited purposes set forth therein;

 

WHEREAS, concurrently
with the execution and delivery of this Agreement and pursuant to the Contract, Seller is conveying to Purchaser, by Special Warranty
Deed, (i) those certain tracts or parcels of real property located in Mecklenburg County, North Carolina, and more particularly
described on Exhibit A attached hereto and made a part hereof (collectively, the “Land”), (ii) all
rights, easements and appurtenances pertaining to the Land (collectively, the “Related Rights”), and (iii) all
buildings, structures, fixtures and other improvements on and within the Land (the “Improvements”; and the Land,
the Related Rights and the Improvements being sometimes collectively referred to as the “Real Property”);

 

WHEREAS, Seller has
agreed to convey to Purchaser certain personal property and assign to Purchaser certain leases and service contracts as hereinafter
set forth;

 

NOW, THEREFORE, in
consideration of the receipt of Ten Dollars ($10.00), the assumptions by Purchaser hereinafter set forth and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, Seller and Purchaser agree as follows:

 

1.           Bill
of Sale.

 

(a)          Seller
hereby sells, assigns, transfers and conveys to Purchaser all of Seller’s right, title and interest in, to and under the
Phase I Personal Property and the Phase I Plans, Licenses and Permits. Seller warrants to Purchaser that Seller owns good and marketable
title to the Phase I Personal Property, that the Phase I Personal Property is free and clear of all liens, charges and encumbrances
other than the Phase I Permitted Exceptions (as defined in the Contract), and that Seller has full right, power and authority
to sell the Phase I Personal Property and to make this Bill of Sale. Seller further warrants to Purchaser that Seller has not assigned
or conveyed to any third party its right, title and interest, if any, in the Phase I Plans, Licenses and Permits.

 

     

     

    

 

(b)          “Phase
I Personal Property” shall have the meaning ascribed to such term in the Contract.

 

(c)          “Phase
I Plans, Licenses and Permits” shall have the meaning ascribed to such term in the Contract.

 

2.           Assignment
and Assumption of Phase I Leases.

 

(a)          Seller
hereby sells, assigns, transfers and conveys to Purchaser all of Seller’s right, title and interest as landlord in, to and
under all tenant leases identified on Exhibit B attached hereto (collectively, the “Assigned Leases”),
together with all refundable tenant security and other refundable deposits owing to tenants by the express terms of the Assigned
Leases, minus any documented amounts properly applied by Seller pursuant to the terms of such Assigned Leases, as of the date of
this Agreement, together with any interest owing thereon pursuant to the terms of the Assigned Leases or applicable law (collectively,
the “Phase I Deposits”). The assignment of the Phase I Deposits has been made by means of a credit or payment
on the closing statement executed by Seller and Purchaser pursuant to the Contract.

 

(b)          Purchaser
hereby assumes all of the covenants, agreements, conditions and other terms and provisions stated in the Assigned Leases which,
under the terms of the Assigned Leases, are to be performed, observed, and complied with by the landlord from and after the date
of this Agreement. Purchaser acknowledges that Purchaser shall become solely responsible and liable as landlord under the Assigned
Leases for obligations arising or accruing from and after the date hereof.

 

(c)          Purchaser
shall indemnify, hold harmless and defend Seller from and against any and all claims, demands, causes of action, liabilities, losses,
costs, damages and expenses (including reasonable attorneys’ fees and expenses and court costs incurred in defending any
such claim or in enforcing this indemnity) that may be incurred by Seller by reason of the failure of Purchaser to perform, observe
and comply with the landlord’s obligations under any of the Assigned Leases arising or accruing during the period from and
after the date hereof, including, without limitation, claims made by tenants with respect to the Phase I Deposits on or after the
date hereof (but only to the extent paid or assigned to Purchaser or for which Purchaser has received a credit or payment at Closing).
Seller shall indemnify, hold harmless and defend Purchaser from and against any and all claims, demands, causes of action, liabilities,
losses, costs, damages and expenses (including reasonable attorneys’ fees and expenses and court costs incurred in defending
any such claim or in enforcing this indemnity) that may be incurred by Purchaser by reason of the failure of Seller to have performed,
observed or complied with the landlord’s obligations under any of the Assigned Leases prior to the date hereof, including,
without limitation, claims made by tenants with respect to the Phase I Deposits arising before the date hereof (to the extent such
Phase I Deposits were not paid or assigned to Purchaser or for which Purchaser did not receive a credit or payment at Closing).

 

(d)          For
purposes of this Paragraph 2, the word “landlord” means the landlord, lessor or other equivalent party under any of
the Assigned Leases, and the word “tenant” means the tenant, lessee or other equivalent party under any of the Assigned
Leases.

 

     

     

    

 

3.           Assignment
and Assumption of Phase I Contracts.

 

(a)          Seller
hereby sells, assigns, transfers and conveys to Purchaser all of Seller’s right, title and interest in, to and under those
service, supply, equipment rental and similar agreements set forth on Exhibit C attached hereto and made part hereof
by this reference (collectively, the “Phase I Contracts”).

 

(b)          Purchaser
hereby assumes all of the covenants, agreements, conditions and other terms and provisions stated in the Phase I Contracts which,
under the terms of the Phase I Contracts, are to be performed, observed, and complied with by the property owner from and after
the date of this Agreement. Purchaser acknowledges that Purchaser shall become solely responsible and liable under the Phase I
Contracts for obligations arising or accruing from and after the date hereof, including with respect to any and all payments coming
due under the Phase I Contracts for which Purchaser has received a credit or payment on the closing statement executed by Purchaser
and Seller, if any (collectively, the “Credited Payments”).

 

(c)          Purchaser
shall indemnify, hold harmless and defend Seller from and against any and all claims, demands, causes of action, liabilities, losses,
costs, damages and expenses (including reasonable attorneys’ fees and expenses and court costs incurred in defending any
such claim or in enforcing this indemnity) that may be incurred by Seller by reason of the failure of Purchaser to perform, observe
and comply with its obligations under any of the Phase I Contracts arising or accruing during the period from and after the
date hereof, including without limitation, claims made by any other contract party with respect to the Credited Payments on or
after the date hereof (to the extent paid or assigned to Purchaser or for which Purchaser received a credit or payment at Closing).
Seller shall indemnify, hold harmless and defend Purchaser from and against any and all claims, demands, causes of action,
liabilities, losses, costs, damages and expenses (including reasonable attorneys’ fees and expenses and court costs incurred
in defending any such claim or in enforcing this indemnity) that may be incurred by Purchaser by reason of the failure of Seller
to have performed, observed or complied with its obligations under any of the Phase I Contracts prior to the date hereof, including
without limitation, claims made by any other contract party with respect to the Credited Payments arising before the date hereof
(to the extent such Credited Payments were not paid or assigned to Purchaser or for which Purchaser did not receive a credit or
payment at Closing).

 

4.          Qualifications.
This Agreement is subject to the Phase I Permitted Exceptions (as defined in the Contract). This Agreement is also subject
to those provisions of the Contract limiting Seller's liability to Purchaser.

 

5.          Counterparts.
This Agreement may be executed in two or more identical counterparts, and it shall not be necessary that any one of the counterparts
be executed by all of the parties hereto. Each fully or partially executed counterpart shall be deemed an original, but all of
such counterparts taken together shall constitute one and the same instrument.

 

6.          Successors
and Assigns. This Agreement shall inure to the benefit of, and be binding upon, the successors, executors, administrators,
legal representatives and assigns of the parties hereto.

 

     

     

    

 

7.          Governing
Law. This Agreement shall be construed under and enforced in accordance with the laws of the State of North Carolina.

 

     

     

    

 

EXECUTED effective
as of the date first above written.

 

	 	SELLER:
	 	 
	 	AR I BORROWER, LLC,
	 	a Delaware limited liability company
	 	 
	 	By:	AR OWNER, LLC,
	 	 	a Delaware limited liability company,
	 	 	its Sole Member and Sole Manager
	 	 	 	 
	 	 	By:	AR DEVELOPER, LLC,
	 	 	 	a Georgia limited liability company,
	 	 	 	its Managing Member
	 	 	 	 
	 	 	 	By:	CATALYST DEVELOPMENT
	 	 	 	 	PARTNERS II, LLC,
	 	 	 	 	a Georgia limited liability company,
	 	 	 	 	its Sole Member and Sole Manager
	 	 	 	 	 	 
	 	 	 	 	By:	 
	 	 	 	 	Name:	 
	 	 	 	 	Title:	 

 

	  	PURCHASER:	 
	 	 	 
	 	 ,	 
	 	a	 	 	 
	 	 	 	 
	 	By:	 	 
	 	Name:	 	 
	 	Title:	 	 

 

     

     

    

 

Exhibits to Bill of Sale and Assignment

 

A – Legal Description of Land

 

B – List of Assigned Leases

 

C – List of Phase I Contracts

 

     

     

    

 

SCHEDULE 7.2(a)(iv)

 

CERTIFICATE OF SELLING
PARTIES

 

Certificate of Selling Parties

 

THIS CERTIFICATION
is made as of ______________, 2015 by each of AR I BORROWER, LLC, a Delaware limited liability company (“Seller”)
and AR OWNER, LLC, a Delaware limited liability company (“AR Owner”), in favor of _______________________,
a __________ (“Purchaser”).

 

1.          Seller
hereby certifies to Purchaser that (a) the representations and warranties of Seller set forth in Section 10.2 and Section 10.4
of that certain Purchase and Sale Agreement and Escrow Instructions between Seller and _________________________ [if applicable:
as amended] (the “Agreement”) dated as of _______________, 2015, are true and correct in all material respects
as of the date hereof, and (b) the Phase I Rent Roll attached hereto as Exhibit A replaces the Phase I Rent Roll attached
to the Agreement as Exhibit C (and such replacement Phase I Rent Roll shall be the same rent roll relied upon by Seller
in the ordinary course of business and reflects any Phase I Leases where a tenant has paid rent more than one (1) month in advance,
or where a written notice of any uncured breaches or defaults has been issued by Seller as landlord under the leases from tenants
who are still tenants under current leases).

 

2.          AR
Owner hereby certifies to Purchaser that the representations and warranties of AR Owner set forth in Section 10.5 of the Agreement
are true and correct in all material respects as of the date hereof, and that, to AR Owner's knowledge, there are no known, imminent
or threatened breaches or defaults under the Phase II Contract.

 

The representations
and warranties set forth in Sections 10.2, 10.4 and 10.5 of the Agreement, as updated by this Certificate of Selling Parties, will
survive only for a period of nine (9) months from the date hereof.

 

This certificate is
delivered pursuant to 7.2(a)(iv), 7.2(b) and 8.5 of the Agreement, and Seller’s and AR Owner’s liability hereunder
is subject to Section 13.3 of the Agreement, including the liability cap set forth therein.

 

     

     

    

 

	 	SELLER:  
	 	 
	 	AR I BORROWER, LLC,
	 	a Delaware limited liability company
	 	 
	 	By:	AR OWNER, LLC,
	 	 	a Delaware limited liability company,
	 	 	its Sole Member and Sole Manager
	 	 
	 	 	By:	AR DEVELOPER, LLC,
	 	 	 	a Georgia limited liability company,
	 	 	 	its Managing Member
	 	 	 	 	 
	 	 	 	By:	CATALYST DEVELOPMENT
	 	 	 	 	PARTNERS II, LLC,
	 	 	 	 	a Georgia limited liability company,
	 	 	 	 	its Sole Member and Sole Manager
	 	 	 	 	 	 
	 	 	 	 	By:	 
	 	 	 	 	Name:	 
	 	 	 	 	Title:	 

 

	 	AR OWNER:
	 	 
	 	AR OWNER, LLC,
	 	a Delaware limited liability company
	 	 	 	 	 
	 	By:	AR DEVELOPER, LLC,
	 	 	a Georgia limited  liability company,
	 	 	its Managing Member
	 	 	 	 	 
	 	 	By:	CATALYST DEVELOPMENT
	 	 	 	PARTNERS II, LLC,
	 	 	 	a Georgia limited liability company,
	 	 	 	its Sole Member and Sole Manager
	 	 	 	 	 
	 	 	 	By:	 
	 	 	 	Name:	 
	 	 	 	Title:	 

 

     

     

    

 

Exhibits to Certificate of Selling
Parties

 

Exhibit A –   Updated Phase I Rent
Roll

 

Exhibit B –    Seller Exceptions

 

Exhibit C –    AR Owner Exceptions

 

     

     

    

 

SCHEDULE 7.2(a)(vii)

 

SELLER’S AFFIDAVIT

 

Seller’s Affidavit

 

[will
need title company to verify same satisfactory

To
remove all nc standard title exceptions]

 

STATE OF GEORGIA

COUNTY OF ______________________

 

Personally appeared
before me the undersigned deponent, who, first being duly sworn, deposes and says on oath the following:

 

1.          THAT
Catalyst Development Partners II, LLC, a Georgia limited liability company (“Affiant”), is the sole member and sole
manager of AR DEVELOPER, LLC, a Georgia limited liability company, the Managing Member of AR OWNER, LLC, a Delaware limited liability
company, the sole member and sole manager of AR I BORROWER, LLC, a Delaware limited liability company (“Owner”); and

 

2.          THAT
deponent is the ___________________ of Affiant and is familiar with the affairs of Owner and is authorized to execute this Affidavit
on behalf of Affiant, and on behalf of Owner; and

 

3.          THAT
this Affidavit pertains to those certain tracts or parcels of land owned by Owner more particularly described on Exhibit “A”
attached hereto and by reference made a part hereof (the “Property”); and

 

4.          THAT
Owner has not made improvements or repairs on the Property during the one hundred twenty (120) days immediately preceding this
date, and there are no outstanding bills incurred by Owner for labor or materials used in making improvements or repairs on the
Property, or for services of architects, surveyors, engineers, or registered foresters incurred in connection therewith; and

 

5.          THAT
there are no parties in possession claiming by, through or under Owner except for those parties exercising their rights as set
forth on Exhibit “B” attached hereto and by reference made a part hereof; and

 

6.          THAT
Owner has not engaged any broker’s services with regard to the sale or other conveyance of any interest in the Property,
except as set forth in the final approved closing statement for such sale; and

 

7.          THAT
deponent has personal knowledge of the matters herein stated and makes this Affidavit for the purpose of inducing _____________________
to issue its policy or policies of title insurance covering the Property; and

 

     

     

    

 

8.          THAT
there are not unpaid or unsatisfied special assessments for water, sewage or street improvements affecting title to the Property,
except as set forth in said Exhibit “B.”

 

	 	_______________________________
	 	______________, not in his personal capacity, but solely in his capacity as ________________ of CATALYST DEVELOPMENT PARTNERS II, LLC, the sole member and sole manager of AR DEVELOPER, LLC, a Georgia limited  liability company, the Managing Member of AR OWNER, LLC, a Delaware limited liability company, the sole member and sole manager of AR I BORROWER, LLC, a Delaware limited liability company

 

Sworn to and subscribed before me,

this _____ day of _________________, 2015.

 

	(SEAL)	 
	 	 
	 	 
	Notary Public	 
	 	 
	My Commission Expires:	 
	 	 
	 	 
	(NOTARIAL SEAL)	 

 

     

     

    

 

SCHEDULE 7.2(b)

 

ASSIGNMENT
AND ASSUMPTION OF PHASE II PURCHASE CONTRACT

 

ASSIGNMENT AND ASSUMPTION OF PURCHASE
AND SALE AGREEMENT

 

THIS ASSIGNMENT
AND ASSUMPTION OF PURCHASE AND SALE AGREEMENT (this “Assignment”) is entered into effective as of ________________
___, 2015, by and between AR OWNER, LLC, a Delaware limited liability company ("Assignor”), and
_________________________, a ______________________ (“Assignee”).

 

RECITALS:

 

1.          Assignor
is the purchaser under that certain Purchase and Sale Agreement dated October 31, 2013, as amended (the “Phase II Purchase
Contract”) with Northlake Investors 288, LLC, an Alabama limited liability company, as seller, pursuant to which Assignor
has contracted to acquire that certain real property and improvements constructed thereon located in Mecklenburg County, North
Carolina known as Ashton Reserve at Northlake Phase II, and more particularly described in the Phase II Purchase Contract
(the “Phase II Property”).

 

2.          The
parties desire to enter into this Assignment to evidence the transfer and assignment of all of Assignor’s right, title and
interest in the Phase II Purchase Contract to Assignee.

 

NOW THEREFORE, in consideration
of the foregoing, the mutual representations, warranties, covenants and agreements herein contained and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto hereby agree as follows:

 

1.          Assignment.
Assignor hereby assigns, transfers and conveys to Assignee all of its right, title and interest in, to and under (i) the Phase
II Purchase Contract; (ii) the $750,000 earnest money deposit by Assignor thereunder; and (iii) all reports, inspections, certifications
and other instruments and documents relating to the Phase II Property and received or generated by Assignor in connection with
the investigation and acquisition of the Phase II Property pursuant to the Agreement and all representations and warranties made
to Assignor in connection therewith (collectively, together with the Agreement and the earnest money, the “Transferred
Assets”).

 

2.          Acceptance.
Assignee hereby: (a) accepts the assignment of the Phase II Purchase Contract; (b) agrees to be bound by the terms and conditions
of the Phase II Purchase Contract; and (c) assumes all of Assignor’s obligations under the Phase II Purchase Contract arising
from and after the date hereof.

 

     

     

    

 

3.          Assignor’s
Indemnification. Assignor, on demand, shall indemnify and hold Assignee harmless for, from, and against any and all loss, cost,
damage, claim, liability or expense, including court costs and attorneys’ fees in a reasonable amount, arising out of (i) any
breach of the Phase II Purchase Contract by Assignor or its agents occurring prior to the date hereof, or (ii) arising from
any breach of this Assignment by Assignor, or (iii) arising from any claim by any third party challenging the assignment by
Assignor of the Phase II Purchase Contract or asserting a claim for brokerage commissions (or similar fees) relating to the
Phase II Purchase Contract. The foregoing indemnification shall include loss, cost, damage, claim, liability or expense from
any injury or damage of any kind whatsoever (including death) to persons or property.

 

4.          Assignee’s
Indemnification. Assignee, on demand, shall indemnify and hold Assignor harmless for, from, and against any and all loss, cost,
damage, claim, liability or expense, including court costs and attorneys’ fees in a reasonable amount, arising out of any
breach of the Phase II Purchase Contract by Assignee or its agents occurring on or after the date hereof or arising from any breach
of this Assignment by Assignee or otherwise arising out of the Phase II Purchase Contract (except to the extent such matters relate
to Assignor’s prior breach of the Phase II Purchase Contract regardless of whether such breach was known on the date hereof).
The foregoing indemnification shall include loss, cost, damage, claim, liability or expense from any injury or damage of any kind
whatsoever (including death) to persons or property.

 

5.          Further
Assurances. Assignor represents and warrants that it has made no prior assignment of its right, title and interest in and to
the Phase II Purchase Contract, that it has delivered a true, correct and complete copy of the Phase II Purchase Contract
(together with all amendments thereto) to Assignee, and that it has full right, power and authority to assign its rights in and
to the Phase II Purchase Contract and to enter into this Assignment. Each of the parties hereto agrees to execute such other,
further and different documents and perform such other, further and different acts as may be reasonably necessary or desirable
to carry out the intent and purpose of this Assignment.

 

6.          Successors
and Assigns. This Assignment shall be binding upon and shall inure to the benefit of the parties hereto and their respective
successors and assigns.

 

7.          Governing
Law. This Assignment shall be governed in all respects, including validity, interpretation and effect, by and shall be enforceable
in accordance with the internal laws of the State of North Carolina, without regard to conflicts of laws principles.

 

8.          Counterpart
Execution. This Assignment may be executed in multiple counterparts, each one of which will be deemed an original, but all
of which shall be considered together as one and the same instrument. Further, in making proof of this Assignment, it shall not
be necessary to produce or account for more than one such counterpart. Execution by a party of a signature page hereto shall constitute
due execution and shall create a valid, binding obligation of the party so signing, and it shall not be necessary or required that
the signatures of all parties appear on a single signature page hereto.

 

     

     

    

 

9.          Entire
Agreement. This Assignment, together with that certain Purchase and Sale Agreement and Escrow Instructions dated May __,
2015 (the “Phase I Contract”), contains the entire agreement between the parties regarding the subject
matter hereof. Any prior agreements, discussions or representations not expressly contained herein or in the Phase I Contract
shall be deemed to be replaced by the provisions hereof and no party has relied on any such prior agreements (other than the Phase I
Contract), discussions or representations as an inducement to the execution hereof.

 

[Signatures appear
on following page]

 

     

     

    

 

IN WITNESS WHEREOF, the parties hereto
have executed or caused this Assignment to be executed by their duly authorized representatives as of the date first above written.

 

	 	ASSIGNOR:
	 	 
	 	AR OWNER, LLC,
	 	a Delaware limited liability company
	 	 
	 	By:	AR DEVELOPER, LLC,
	 	 	a Georgia limited  liability company,
	 	 	its Managing Member
	 	 	 
	 	 	By:	CATALYST DEVELOPMENT
	 	 	 	PARTNERS II, LLC,
	 	 	 	a Georgia limited liability company,
	 	 	 	its Sole Member and Sole Manager
	 	 	 	 	 
	 	 	 	By:	 
	 	 	 	Name:	 
	 	 	 	Title:	 

 

	  	ASSIGNEE:	 
	 	 	 
	 	 ,	 
	 	a	 	 	 
	 	 	 	 
	 	By:	 	 
	 	Name:	 	 
	 	Title:a51160267ex4_1.htm

Exhibit 4.1

 

 

 

 

 

 

 

 

IMATION CORP.

 

and

 

WELLS FARGO BANK, N.A.

 

as Rights Agent

 

 

 

 

382 RIGHTS AGREEMENT

 

 

Dated as of August 7, 2015

 

 

 

 

 

 

 

  

  

  

 

TABLE OF CONTENTS

 

 

	 	 	Page
	 	 	 
	
Section 1.

	
Certain Definitions

	
1

	
Section 2.

	
Appointment of Rights Agent

	
6

	
Section 3.

	
Issuance of Rights Certificates

	
6

	
Section 4.

	
Form of Rights Certificates

	
8

	
Section 5.

	
Countersignature and Registration

	
9

	
Section 6.

	
Transfer, Split-Up, Combination and Exchange of Rights Certificates; Mutilated, Destroyed, Lost or Stolen Rights Certificates

	
9

	
Section 7.

	
Exercise of Rights; Purchase Price; Expiration Date of Rights

	
10

	
Section 8.

	
Cancellation and Destruction of Rights Certificates

	
11

	
Section 9.

	
Reservation and Availability of Capital Stock

	
11

	
Section 10.

	
Preferred Stock Record Date

	
13

	
Section 11.

	
Adjustment of Purchase Price, Number and Kind of Shares or Number of Rights

	
13

	
Section 12.

	
Certificate of Adjusted Purchase Price or Number of Shares

	
19

	
Section 13.

	
Consolidation, Merger or Sale or Transfer of Assets, Cash Flow or Earning Power

	
19

	
Section 14.

	
Fractional Rights and Fractional Shares

	
21

	
Section 15.

	
Rights of Action

	
22

	
Section 16.

	
Agreement of Rights Holders

	
22

	
Section 17.

	
Rights Certificate Holder Not Deemed a Stockholder

	
23

	
Section 18.

	
Concerning the Rights Agent

	
23

	
Section 19.

	
Merger or Consolidation or Change of Name of Rights Agent

	
23

	
Section 20.

	
Duties of Rights Agent

	
24

	
Section 21.

	
Change of Rights Agent

	
25

	
Section 22.

	
Issuance of New Rights Certificates

	
26

	
Section 23.

	
Redemption and Termination

	
26

	
Section 24.

	
Exchange

	
27

	
Section 25.

	
Notice of Certain Events

	
28

	
Section 26.

	
Notices

	
28

	
Section 27.

	
Supplements and Amendments

	
29

	
Section 28.

	
Successors

	
29

	
Section 29.

	
Determinations and Actions by the Board, etc.

	
29

	
Section 30.

	
Benefits of this Agreement

	
30

	
Section 31.

	
Severability

	
30

	
Section 32.

	
Governing Law

	
30

	
Section 33.

	
Counterparts

	
30

	
Section 34.

	
Descriptive Headings

	
30

 

 

 

EXHIBITS

 

	

Exhibit A

	

—

	

Form of Certificate of Designation, Preferences and Rights of Series A Participating Preferred Stock

	

Exhibit B

	

—

	

Form of Rights Certificate

	

Exhibit C

	

—

	

Form of Summary of Rights

 

  

ii

  

 

382 RIGHTS AGREEMENT

 

382 RIGHTS AGREEMENT, dated as of August 7, 2015 (this “Agreement”), between Imation Corp., a Delaware corporation (the “Company”), and Wells Fargo Bank, N.A., a national banking association (the “Rights Agent”).

 

W I T N E S S E T H:

 

WHEREAS, the Company and certain of its Subsidiaries (as hereinafter defined) have generated certain Tax Benefits (as hereinafter defined) for United States federal income tax purposes; the Company desires to avoid an “ownership change” within the meaning of Section 382 of the Code (as hereinafter defined), and thereby preserve the Company’s current ability to utilize such Tax Benefits; and in furtherance of such objective, the Company desires to enter into this Agreement;

 

WHEREAS, on August 6, 2015 (the “Rights Dividend Declaration Date”), the Board of Directors of the Company (the “Board”) authorized and declared a dividend distribution of one Right (as hereinafter defined) for each share of Common Stock (as hereinafter defined) of the Company outstanding at the close of business on September 10, 2015 (the “Record Date”), and has authorized the issuance of one Right (as such number may hereinafter be adjusted pursuant to the provisions of Section 11(p) hereof) for each share of Common Stock issued between the Record Date (whether originally issued or delivered from the Company’s treasury) and the Distribution Date (as hereinafter defined), each Right initially representing the right to purchase one one-hundredth of a share of Series A Participating Preferred Stock, par value $0.01 per share, of the Company (the “Preferred Stock”) having the rights, powers and preferences set forth in the form of Certificate of Designation, Preferences and Rights attached hereto as Exhibit A, upon the terms and subject to the conditions hereinafter set forth (the “Rights”); and

 

WHEREAS, the Board intends to submit the Plan to stockholders of the Company for ratification at the 2016 Annual Meeting of Stockholders (the “2016 Annual Meeting”) and may elect to extend the Plan for one or more successive three-year periods by re-submitting the Plan (together with any supplements or amendments) to the stockholders of the Company for ratification at one or more Annual Meetings of the Company’s Stockholders prior to the expiration date of the Plan.

 

NOW, THEREFORE, in consideration of the premises and the mutual agreements herein set forth, the parties hereby agree as follows:

 

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

 

(a)   “Acquiring Person” shall mean any Person who or which, together with all Affiliates and Associates of such Person, is or becomes the Beneficial Owner of 4.90% or more of the Outstanding Shares, regardless of whether or not such Person continues to be the Beneficial Owner of 4.90% or more of the Outstanding Shares; provided, however, that an “Acquiring Person” shall not include (i) an Exempt Person or (ii) Existing Holder.  Notwithstanding the foregoing:  (A) no Person shall become an “Acquiring Person” solely as a result of (w) a reduction in the number of Outstanding Shares due to the repurchase of shares of Common Stock by the Company for cash or any other consideration, (x) a dividend or distribution paid or made by the Company on the outstanding shares of Common Stock or pursuant to a split or subdivision of the outstanding shares of Common Stock, (y) the exercise of any options, warrants, rights or similar interests (or the issuance of shares of restricted stock) granted by the Company to its directors, officers and employees and/or (z) an Exempt Transaction; and (B) if the Board determines in good faith that a Person who would otherwise be an “Acquiring Person” has become such inadvertently, and such Person divests as promptly as practicable (as determined by the Board) or enters into a written agreement with the Company to divest a sufficient number of shares of Common Stock, in the manner determined by the Board in its sole discretion, so that such Person would no longer be an “Acquiring Person”, then such Person shall not be deemed to be or have become an “Acquiring Person” at any time for any purposes of this Agreement.

 

  

  

  

 

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

 

(c)   “Affiliate” and “Associate” shall have the respective meanings ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under the Exchange Act.

 

(d)   “Agreement” shall have the meaning set forth in the preamble to this Agreement, as it may from time to time be supplemented, amended, renewed, restated or extended pursuant to the applicable provisions hereof.

 

(e)   A Person shall be deemed the “Beneficial Owner” of, and shall be deemed to “Beneficially Own,” and have “Beneficial Ownership” of, any securities:

 

(i)   which such Person or any of such Person’s Affiliates or Associates, directly or indirectly, owns or has the right to acquire (whether such right is exercisable immediately or only after the passage of time or upon the satisfaction of one or more conditions (whether or not within the control of such Person), compliance with regulatory requirements or otherwise) pursuant to any agreement, arrangement or understanding (whether or not in writing) or upon the exercise of conversion rights, exchange rights, other rights, warrants or options, or otherwise; provided, however, that a Person shall not be deemed the “Beneficial Owner” of, or to “Beneficially Own,” under this subparagraph (A) securities tendered pursuant to a tender or exchange offer made by such Person or any of such Person’s Affiliates or Associates until such tendered securities are accepted for purchase or exchange, (B) securities issuable upon exercise of Rights at any time prior to the occurrence of a Triggering Event or (C) securities issuable upon exercise of Rights from and after the occurrence of a Triggering Event which Rights were acquired by such Person or any of such Person’s Affiliates or Associates prior to the Distribution Date or pursuant to Section 3(a) or Section 22 hereof (the “Original Rights”) or pursuant to Section 11(i) hereof in connection with an adjustment made with respect to any Original Rights;

 

(ii)   which such Person or any of such Person’s Affiliates or Associates, directly or indirectly, has the right to vote or dispose of or has “beneficial ownership” of (as determined pursuant to Rule 13d-3 of the General Rules and Regulations under the Exchange Act), including pursuant to any agreement, arrangement or understanding, whether or not in writing; provided, however, that a Person shall not be deemed the “Beneficial Owner” of, or to “Beneficially Own,” any security under this subparagraph (ii) as a result of an agreement, arrangement or understanding (whether or not in writing) to vote such security if such agreement, arrangement or understanding (A) arises solely from a revocable proxy given in response to a public proxy or consent solicitation made pursuant to, and in accordance with, the applicable provisions of the General Rules and Regulations under the Exchange Act and (B) is not reportable by such Person on Schedule 13D under the Exchange Act (or any comparable or successor report);

 

(iii)   which are Beneficially Owned, directly or indirectly, by any other Person (or any Affiliate or Associate thereof) with respect to which such Person (or any of such Person’s Affiliates or Associates) has any agreement, arrangement or understanding (whether or not in writing), for the purpose of acquiring, holding, voting (except pursuant to a revocable proxy as described in the proviso to subparagraph (ii) of this paragraph (e)) or disposing of any voting securities of the Company; or

 

  

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(iv)   which such Person actually owns (directly or indirectly) or would be deemed to actually or constructively own pursuant to Section 382 of the Code and the Treasury Regulations promulgated thereunder.

 

Notwithstanding the foregoing, nothing in this paragraph (e) shall cause a Person engaged in business as an underwriter of securities to be the “Beneficial Owner” of, or to “Beneficially Own,” any securities acquired through such Person’s participation in good faith in a firm commitment underwriting until the expiration of forty days after the date of such acquisition, and then only if such securities continue to be owned by such Person at such expiration of forty days.

 

(f)   “Business Day” shall mean any day other than a Saturday, Sunday or a day on which banking institutions in the State of New York are authorized or obligated by law or executive order to close.

 

(g)   “Close of Business” on any given date shall mean 5:00 P.M., New York City time, on such date; provided, however, that if such date is not a Business Day, it shall mean 5:00 P.M., New York City time, on the next succeeding Business Day.

 

(h)   “Common Stock” shall mean the Common Stock, par value $0.01 per share, of the Company or any other shares of capital stock of the Company into which such stock shall be reclassified or changed, except that “Common Stock” when used with reference to any Person other than the Company shall mean the capital stock of such Person with the greatest voting power, or the equity securities or other equity interest having power to control or direct the management, of such Person.

 

(i)   “Company” shall have the meaning set forth in the preamble to this Agreement until a successor corporation or entity shall have become such or until a Principal Party shall assume, and thereafter be liable for, all obligations and duties of the Company hereunder pursuant to the applicable provisions of this Agreement, and thereafter, “Company” shall mean such successor or Principal Party, respectively.

 

(j)   “Company Bylaws” shall mean the Amended and Restated Bylaws of the Company, as the same may be amended after the date hereof.

 

(k)   “Company Charter” shall mean the Restated Certificate of Incorporation of the Company, as the same may be amended after the date hereof.

 

(l)   “Code” shall mean the Internal Revenue Code of 1986, as amended.

 

(m)   “Distribution Date” shall mean the earlier of (i) the Close of Business on the 10th Business Day (or such later date as may be determined by the Board before the occurrence of the Distribution Date) after the Stock Acquisition Date or (ii) the close of business on the 10th Business Day (or such later date as may be determined by the Board before the occurrence of the Distribution Date) after the Tender Offer Commencement Date; provided, however, that if either of the Stock Acquisition Date or the Tender Offer Commencement Date occurs after the date of this Agreement and on or prior to the Record Date, then the Distribution Date shall be the Record Date.

 

(n)   “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.

 

  

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(o)   “Exempt Person” shall mean the Company or any Subsidiary of the Company and any employee benefit plan of the Company, or of any Subsidiary of the Company or any Person or entity organized, appointed or established by the Company for or pursuant to the terms of any such plan.

 

(p)   “Exempt Transaction” shall mean any transaction that the Board determines, in its sole discretion, is exempt from this Agreement, which determination shall be made in the sole and absolute discretion of the Board, upon request by any Person prior to the date upon which such Person would otherwise become an Acquiring Person, including, without limitation, if the Board determines that (i) neither the Beneficial Ownership of shares of Common Stock by such Person, directly or indirectly, as a result of such transaction nor any other aspect of such transaction would jeopardize or endanger the availability to the Company of the Tax Benefits or (ii) such transaction is otherwise in the best interests of the Company.

 

(q)   “Existing Holder” shall mean any Person that, as of the date hereof, is the Beneficial Owner of 4.90% or more of the Outstanding Shares unless and until such Existing Holder acquires Beneficial Ownership of additional shares of Common Stock in an amount in excess of 0.5% of the Outstanding Shares (other than as a result of a dividend or distribution paid or made by the Company on the outstanding shares of Common Stock or pursuant to a split or subdivision of the outstanding shares of Common Stock) unless, upon becoming the Beneficial Owner of such additional share(s), such Existing Holder is not then the Beneficial Owner of 4.90% or more of the then Outstanding Shares.

 

(r)   “Expiration Date” shall mean shall mean the earliest of (i) the Final Expiration Date, (ii) the time at which the Rights are redeemed as provided in Section 23 hereof, (iii) the time at which the Rights are exchanged as provided in Section 24 hereof, (iv) the date on which the Board determines in its sole discretion that this Agreement is no longer necessary for the preservation of material valuable Tax Benefits, (v) the beginning of a taxable year of the Company to which the Board determines in its sole discretion that no Tax Benefits may be carried forward, (vi) the date on which the Board determines in its sole discretion that this Agreement is no longer in the best interest of the Company and its stockholders and (vii) the first anniversary of the adoption of the Agreement if shareholder approval has not been received by or on such date.

 

(s)   “Final Expiration Date” shall mean the date upon which the Rights expire and shall be 5:00 P.M., New York City time on August 7, 2018, unless the Rights are previously redeemed, exchanged or terminated.

 

(t)   “Outstanding Shares” shall mean, with respect to any particular date, all of the shares of Common Stock outstanding on such date as determined pursuant to the last sentence of Rule 13d-3(d)(1)(i) of the General Rules and Regulations under the Exchange Act.

 

(u)   “Person” shall mean any individual, firm, corporation, partnership, limited liability company, trust, association, syndicate or other entity and includes an unincorporated group of persons who, by formal or informal agreement or arrangement (whether or not in writing), have embarked on a common purpose or act.

 

(v)   “Preferred Stock” shall have the meaning set forth in the recitals to this Agreement, and, to the extent that there are not a sufficient number of shares of Series A Participating Preferred Stock authorized to permit the full exercise of the Rights, any other series of preferred stock of the Company designated for such purpose containing terms substantially similar to the terms of the Series A Participating Preferred Stock.

 

  

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(w)   “Section 11(a)(ii) Event” shall mean any event described in Section 11(a)(ii) hereof.

 

(x)   “Section 13 Event” shall mean any event described in Section 13(a) hereof.

 

(y)   “Stock Acquisition Date” shall mean the first date of public announcement (which, for purposes of this definition, shall include a report filed or amended pursuant to Section 13(d) under the Exchange Act) by the Company or an Acquiring Person that an Acquiring Person has become such or that discloses information which reveals the existence of an Acquiring Person, or such earlier date as a majority of the Board becomes aware of the existence of an Acquiring Person.

 

(z)   “Subsidiary” shall mean, with reference to any Person, any corporation or other entity of which an amount of securities or other ownership interest having ordinary voting power sufficient to elect at least a majority of the directors or other Persons having similar functions of such corporation or other entity are at the time, directly or indirectly, Beneficially Owned, or otherwise controlled by such Person.

 

(aa)   “Tax Benefits” shall mean the net operating loss carryovers, capital loss carryovers, general business credit carryovers, alternative minimum tax credit carryovers and foreign tax credit carryovers, as well as any loss or deduction attributable to a “net unrealized built-in loss” within the meaning of Section 382 of the Code and the Treasury Regulations promulgated thereunder, of the Company or any of its Subsidiaries.

 

(bb)   “Tender Offer Commencement Date” shall mean the date that a tender or exchange offer or other transaction by any Person (other than an Exempt Person) is first published or sent or given within the meaning of Rule 14d-2(a) of the General Rules and Regulations under the Exchange Act, if, upon consummation thereof, such Person would become an Acquiring Person.

 

(cc)   “Treasury Regulations” shall mean final, temporary and proposed regulation of the Department of Treasury under the Code and any successor regulation, including any amendments thereto.

 

(dd)   “Triggering Event” shall mean any Section 11(a)(ii) Event or any Section 13 Event.

 

(ee)   The following terms shall have the meanings defined for such terms in the Sections set forth below:

 

	 	
Term

	
Section

	 	
Adjustment Shares

	
Section 11(a)(ii)

	 	
Board

	
Recitals

	 	
Common Stock Equivalents

	
Section 11(a)(iii)

	 	
Current Market Price

	
Section 11(d)(i)

	 	
Current Value

	
Section 11(a)(iii)

	 	
Equivalent Preferred Stock

	
Section 11(b)

	 	
Exchange Ratio

	
Section 24(a)

	 	
Original Rights

	
Section 1(e)(i)

	 	
Preferred Stock

	
Recitals

	 	
Principal Party

	
Section 13(b)

	 	
Purchase Price

	
Section 4(a)

	 	
Record Date

	
Recitals

	 	
Redemption Price

	
Section 23(a)

	 	
Rights

	
Recitals

	 	
Rights Agent

	
Preamble

	 	
Rights Certificate

	
Section 3(a)

	 	
Rights Dividend Declaration Date

	
Recitals

	 	
Section 11(a)(ii) Trigger Date

	
Section 11(a)(iii)

	 	
Spread

	
Section 11(a)(iii)

	 	
Substitution Period

	
Section 11(a)(iii)

	 	
Summary of Rights

	
Section 3(b)

	 	
Trading Day

	
Section 11(d)(i)

 

  

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Section 2.   Appointment of Rights Agent.  The Company hereby appoints the Rights Agent to act as rights agent for the Company and the holders of the Rights (who, in accordance with Section 3 hereof, shall prior to the Distribution Date also be the holders of the Common Stock) in accordance with the terms and conditions hereof, and the Rights Agent hereby accepts such appointment.  The Company may from time to time appoint such co-rights agents as it may deem necessary or desirable.

 

Section 3.   Issuance of Rights Certificates.

 

(a)   Until the Distribution Date, (i) the Rights will be evidenced (subject to the provisions of paragraphs (b) or (c) of this Section 3) by the balances indicated in the book-entry account system of the transfer agent for the Common Stock registered in the names of the holders of the Common Stock (which shares of Common Stock shall also be deemed to represent certificates for Rights) or, in the case of certificated shares, the certificates for the Common Stock registered in the names of the holders of the Common Stock (which certificates for Common Stock shall also be deemed to be certificates for Rights), and not by separate certificates, and (ii) the Rights will be transferable only in connection with the transfer of the underlying shares of Common Stock (including a transfer to the Company).  As soon as practicable after the Distribution Date, the Rights Agent will send by first-class, insured, postage-prepaid mail, to each record holder of the Common Stock as of the Close of Business on the Distribution Date, at the address of such holder shown on the records of the Company, one or more rights certificates, in substantially the form of Exhibit B hereto (the “Rights Certificates”), evidencing one Right for each share of Common Stock so held, subject to adjustment as provided herein.  In the event that an adjustment in the number of Rights per share of Common Stock has been made pursuant to Section 11(p) hereof, at the time of distribution of the Rights Certificates, the Company shall make the necessary and appropriate rounding adjustments (in accordance with Section 14(a) hereof) so that Rights Certificates representing only whole numbers of Rights are distributed and cash is paid in lieu of any fractional Rights.  As of and after the Distribution Date, the Rights will be evidenced solely by such Rights Certificates.  The Company shall promptly notify the Rights Agent in writing upon the occurrence of the Distribution Date.  Until such notice is received by the Rights Agent, the Rights Agent may presume conclusively for all purposes that the Distribution Date has not occurred.

 

(b)   On or as promptly as practicable after the Record Date, the Company shall send by first class, postage prepaid mail, to each record holder of shares of Common Stock as of the Record Date a copy of a Summary of Rights, in substantially the form attached hereto as Exhibit C (the “Summary of Rights”), at the address of such holder shown on the records of the Company as of such date.  The Company will make available the Summary of Rights to any holder of Rights who may so request from time to time prior to the Expiration Date.  With respect to the Common Stock outstanding as of the Record Date, or issued subsequent to the Record Date, unless and until the Distribution Date shall occur, the Rights will be evidenced by the balances indicated in the book-entry account system of the transfer agent for the Common Stock or, in the case of certificated shares, such certificates for the Common Stock, and the registered holders of the Common Stock shall also be the registered holders of the associated Rights.  Until the earlier of the Distribution Date or the Expiration Date, the transfer of any shares of Common Stock in respect of which Rights have been issued shall also constitute the transfer of the Rights associated with such shares of Common Stock.

 

  

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(c)   Rights shall be issued in respect of all shares of Common Stock which are issued (whether originally issued or from the Company’s treasury) after the Record Date but prior to the earlier of the Distribution Date or the Expiration Date and shall bear the following legends:

 

(i)   Confirmation and account statements sent to holders of shares of Common Stock in book-entry form (which shares of Common Stock shall also be deemed to represent certificates for Rights) shall bear the following legend:

 

“The shares of Common Stock, par value $0.01 per share, of Imation Corp. (the “Company”) entitle the holder hereof to certain Rights as set forth in the 382 Rights Agreement between the Company and the Rights Agent thereunder (the “Rights Agent”) dated as of August 7, 2015, as it may be amended, restated, renewed or extended from time to time (the “Rights Agreement”), the terms of which are hereby incorporated herein by reference and a copy of which is on file at the principal offices of the Rights Agent.  Under certain circumstances, as set forth in the Rights Agreement, such Rights will be evidenced by separate certificates and will no longer be evidenced by the shares to which this statement relates.  The Rights Agent will mail to the holder of shares to which this statement relates a copy of the Rights Agreement, as in effect on the date of mailing, without charge, promptly after receipt of a written request therefor.  Under certain circumstances set forth in the Rights Agreement, Rights Beneficially Owned (as such term is defined in the Rights Agreement) by any Person who is, was or becomes an Acquiring Person or any Affiliate or Associate thereof (as such terms are defined in the Rights Agreement), whether currently held by or on behalf of such Person or by any subsequent holder, may become null and void.”

 

With respect to shares of Common Stock in book-entry form for which there has been sent a confirmation or account statement containing the foregoing legend, until the earlier of (A) the Distribution Date or (B) the Expiration Date, the Rights associated with the Common Stock represented by such shares of Common Stock shall be evidenced by such shares of Common Stock alone and registered holders of Common Stock shall also be the registered holders of the associated Rights, and the transfer of any of such shares of Common Stock shall also constitute the transfer of the Rights associated with such shares of Common Stock.

 

(ii)   In the case of certificated shares, certificates representing shares of Common Stock (which certificates shall also be deemed to be certificates for Rights) shall bear the following legend if such certificates are issued after the Record Date but prior to the earlier of the Distribution Date or the Expiration Date:

 

“This certificate also evidences and entitles the holder hereof to certain Rights as set forth in the 382 Rights Agreement between Imation Corp. (the “Company”) and the Rights Agent thereunder (the “Rights Agent”) dated as of August 7, 2015, as it may be amended, restated, renewed or extended from time to time (the “Rights Agreement”), the terms of which are hereby incorporated herein by reference and a copy of which is on file at the principal offices of the Rights Agent.  Under certain circumstances, as set forth in the Rights Agreement, such Rights will be evidenced by separate certificates and will no longer be evidenced by this certificate.  The Rights Agent will mail to the holder of this certificate a copy of the Rights Agreement, as in effect on the date of mailing, without charge, promptly after receipt of a written request therefor.  Under certain circumstances set forth in the Rights Agreement, Rights Beneficially Owned (as such term is defined in the Rights Agreement) by any Person who is, was or becomes an Acquiring Person or any Affiliate or Associate thereof (as such terms are defined in the Rights Agreement), whether currently held by or on behalf of such Person or by any subsequent holder, may become null and void.”

 

  

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With respect to such certificates containing the foregoing legend, until the earlier of (A) the Distribution Date or (B) the Expiration Date, the Rights associated with the Common Stock represented by such certificates shall be evidenced by such certificates alone and registered holders of Common Stock shall also be the registered holders of the associated Rights, and the transfer of any of such certificates shall also constitute the transfer of the Rights associated with the Common Stock represented by such certificates.

 

Section 4.   Form of Rights Certificates.

 

(a)   The Rights Certificates (and the forms of election to purchase and of assignment to be printed on the reverse thereof) shall each be substantially in the form set forth in Exhibit B hereto and may have such marks of identification or designation and such legends, summaries or endorsements printed thereon as the Company may deem appropriate and as are not inconsistent with the provisions of this Agreement, or as may be required to comply with any applicable law or with any rule or regulation made pursuant thereto or with any rule or regulation of any stock exchange on which the Rights may from time to time be listed, or to conform to usage.  Subject to the provisions of Section 11 and Section 22 hereof, the Rights Certificates, whenever distributed, shall be dated as of the Record Date and on their face shall entitle the holders thereof to purchase such number of one one-hundredths of a share of Preferred Stock as shall be set forth therein at the price set forth therein (such exercise price per one one-hundredth of a share, the “Purchase Price”), but the amount and type of securities purchasable upon the exercise of each Right and the Purchase Price thereof shall be subject to adjustment as provided herein.

 

(b)   Any Rights Certificate issued pursuant to Section 3(a), Section 11(i) or Section 22 hereof that represents Rights Beneficially Owned by (i) an Acquiring Person or any Associate or Affiliate of an Acquiring Person, (ii) a transferee of an Acquiring Person (or of any such Associate or Affiliate) who becomes a transferee after the Acquiring Person becomes such or (iii) a transferee of an Acquiring Person (or of any such Associate or Affiliate) who becomes a transferee prior to or concurrently with the Acquiring Person becoming such and receives such Rights pursuant to either (A) a transfer (whether or not for consideration) from the Acquiring Person to holders of equity interests in such Acquiring Person or to any Person with whom such Acquiring Person has any continuing agreement, arrangement or understanding (whether or not in writing) regarding the transferred Rights or (B) a transfer which the Board, in its sole discretion, has determined is part of a plan, arrangement or understanding which has as a primary purpose or effect the avoidance of Section 7(e) hereof, and any Rights Certificate issued pursuant to Section 6 or Section 11 hereof upon transfer, exchange, replacement or adjustment of any other Rights Certificate referred to in this sentence, shall contain (to the extent feasible) the following legend:

 

The Rights represented by this Rights Certificate are or were Beneficially Owned by a Person who was or became an Acquiring Person or an Affiliate or Associate of an Acquiring Person (as such terms are defined in the Rights Agreement).  Accordingly, this Rights Certificate and the Rights represented hereby may become null and void in the circumstances specified in Section 7(e) of the Rights Agreement.

 

  

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Section 5.   Countersignature and Registration.

 

(a)   The Rights Certificates shall be executed on behalf of the Company by its Chairman of the Board, its Chief Executive Officer, its President or any Vice President (or more senior officer) of the Company, either manually or by facsimile signature, and shall have affixed thereto the Company’s seal or a facsimile thereof which shall be attested by the Secretary or an Assistant Secretary of the Company, either manually or by facsimile signature.  The Rights Certificates shall be countersigned by the Rights Agent, either manually or by facsimile signature and shall not be valid for any purpose unless so countersigned.  In case any officer of the Company who shall have signed any of the Rights Certificates shall cease to be such officer of the Company before countersignature by the Rights Agent and issuance and delivery by the Company, such Rights Certificates, nevertheless, may be countersigned by the Rights Agent and issued and delivered by the Company with the same force and effect as though the person who signed such Rights Certificates had not ceased to be such officer of the Company; and any Rights Certificates may be signed on behalf of the Company by any person who, at the actual date of the execution of such Rights Certificate, shall be a proper officer of the Company to sign such Rights Certificate, although at the date of the execution of this Rights Agreement any such person was not such an officer.

 

(b)   Following the Distribution Date, the Rights Agent will keep, or cause to be kept, at its principal office or offices designated as the appropriate place for surrender of Rights Certificates upon exercise or transfer, books for registration and transfer of the Rights Certificates issued hereunder.  Such books shall show the names and addresses of the respective holders of the Rights Certificates, the number of Rights evidenced on its face by each of the Rights Certificates and the date of each of the Rights Certificates.

 

Section 6.   Transfer, Split-Up, Combination and Exchange of Rights Certificates; Mutilated, Destroyed, Lost or Stolen Rights Certificates.

 

(a)   Subject to the provisions of Section 4(b), Section 7(e) and Section 14 hereof, at any time after the Close of Business on the Distribution Date, and at or prior to the Close of Business on the Expiration Date, any Rights Certificate or Certificates (other than Rights Certificates representing Rights that may have been exchanged pursuant to Section 24 hereof) may be transferred, split up, combined or exchanged for another Rights Certificate or Certificates, entitling the registered holder to purchase a like number of one one-hundredths of a share of Preferred Stock (or, following a Triggering Event, Common Stock, other securities, cash or other assets, as the case may be) as the Rights Certificate or Certificates surrendered then entitles such holder (or former holder in the case of a transfer) to purchase.  Any registered holder desiring to transfer, split up, combine or exchange any Rights Certificate or Certificates shall make such request in writing delivered to the Rights Agent, and shall surrender the Rights Certificate or Certificates to be transferred, split up, combined or exchanged at the principal office or offices of the Rights Agent designated for such purpose.  Neither the Rights Agent nor the Company shall be obligated to take any action whatsoever with respect to the transfer of any such surrendered Rights Certificate until the registered holder shall have completed and signed the certificate contained in the form of assignment on the reverse side of such Rights Certificate and shall have provided such additional evidence of the identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates thereof as the Company shall reasonably request.  Thereupon the Rights Agent shall, subject to Section 4(b), Section 7(e), Section 14 and Section 24 hereof, countersign and deliver to the Person entitled thereto a Rights Certificate or Rights Certificates, as the case may be, as so requested.  The Company may require payment from the holder of a Rights Certificate of a sum sufficient to cover any tax or governmental charge that may be imposed in connection with any transfer, split up, combination or exchange of Rights Certificates.

 

(b)   Upon receipt by the Company and the Rights Agent of evidence reasonably satisfactory to them of the loss, theft, destruction or mutilation of a Rights Certificate, and, in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to them, and reimbursement to the Company and the Rights Agent of all reasonable expenses incidental thereto, and upon surrender to the Rights Agent and cancellation of the Rights Certificate, if mutilated, the Company will execute and deliver a new Rights Certificate of like tenor to the Rights Agent for countersignature and delivery to the registered owner in lieu of the Rights Certificate so lost, stolen, destroyed or mutilated.

 

  

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Section 7.   Exercise of Rights; Purchase Price; Expiration Date of Rights.

 

(a)   Subject to Section 7(e) hereof, at any time on or after the Distribution Date (or, if the Distribution Date is the Record Date, 10 Business Days after the Distribution Date), but prior to the Expiration Date, the registered holder of any Rights Certificate may exercise the Rights evidenced thereby (except as otherwise provided herein, including the restrictions on exercisability set forth in Section 9(c), Section 11(a)(iii) and Section 23(a) hereof) in whole or in part upon surrender of the Rights Certificate, with the form of election to purchase and the certificate on the reverse side thereof duly executed, to the Rights Agent at the principal office or offices of the Rights Agent designated for such purpose, together with payment of the aggregate Purchase Price with respect to the total number of one one-hundredths of a share of Preferred Stock (or other securities, cash or other assets, as the case may be) as to which such surrendered Rights are then exercisable

 

(b)   The Purchase Price for each one one-hundredth of a share of Preferred Stock pursuant to the exercise of a Right initially shall be $15.00, shall be subject to adjustment from time to time as provided in Section 11 and Section 13(a) hereof and shall be payable in accordance with paragraph (c) below.

 

(c)   Upon receipt of a Rights Certificate representing exercisable Rights, with the form of election to purchase and the certificate duly executed, accompanied by payment, with respect to each Right so exercised, of the Purchase Price per one one-hundredth of a share of Preferred Stock (or other shares, securities, cash or other assets, as the case may be) to be purchased as set forth below and an amount equal to any applicable transfer tax, the Rights Agent shall, subject to Section 7(f) and Section 20(k) hereof, thereupon promptly (i) (A) requisition from any transfer agent of the shares of Preferred Stock (or make available, if the Rights Agent is the transfer agent for such shares) certificates for the total number of one one-hundredths of a share of Preferred Stock to be purchased and the Company hereby irrevocably authorizes its transfer agent to comply with all such requests or (B) if the Company shall have elected to deposit the total number of shares of Preferred Stock issuable upon exercise of the Rights hereunder with a depositary agent, requisition from the depositary agent depositary receipts representing such number of one one-hundredths of a share of Preferred Stock as are to be purchased (in which case certificates for the shares of Preferred Stock represented by such receipts shall be deposited by the transfer agent with the depositary agent) and the Company will direct the depositary agent to comply with such request, (ii) requisition from the Company the amount of cash, if any, to be paid in lieu of fractional shares in accordance with Section 14 hereof, (iii) after receipt of such certificates or depositary receipts, cause the same to be delivered to or, upon the order of the registered holder of such Rights Certificate, registered in such name or names as may be designated by such holder and (iv) after receipt thereof, deliver such cash, if any, to or upon the order of the registered holder of such Rights Certificate.  The payment of the Purchase Price (as such amount may be reduced pursuant to Section 11(a)(iii) hereof) shall be made in cash or by certified bank check or bank draft payable to the order of the Company.  In the event that the Company is obligated to issue other securities (including Common Stock) of the Company, pay cash and/or distribute other property pursuant to Section 11(a) hereof, the Company will make all arrangements necessary so that such other securities, cash and/or other property are available for distribution by the Rights Agent, if and when appropriate.  The Company reserves the right to require prior to the occurrence of a Triggering Event that, upon any exercise of Rights, a number of Rights be exercised so that only whole shares of Preferred Stock would be issued.

 

(d)   In case the registered holder of any Rights Certificate shall exercise less than all the Rights evidenced thereby, a new Rights Certificate evidencing the Rights remaining unexercised shall be issued by the Rights Agent and delivered to, or upon the order of, the registered holder of such Rights Certificate, registered in such name or names as may be designated by such holder, subject to the provisions of Section 14 hereof.

 

  

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(e)   Notwithstanding anything in this Agreement to the contrary, from and after the first occurrence of a Section 11(a)(ii) Event, any Rights Beneficially Owned by (i) an Acquiring Person (or an Associate or Affiliate of an Acquiring Person), (ii) a transferee of an Acquiring Person (or of any such Associate or Affiliate) who becomes a transferee after the Acquiring Person becomes such or (iii) a transferee of an Acquiring Person (or of any such Associate or Affiliate) who becomes a transferee prior to or concurrently with the Acquiring Person becoming such and receives such Rights pursuant to either (A) a transfer (whether or not for consideration) from the Acquiring Person to holders of equity interests in such Acquiring Person or to any Person with whom the Acquiring Person has any continuing agreement, arrangement or understanding (whether or not in writing) regarding the transferred Rights or (B) a transfer which the Board has determined is part of a plan, arrangement or understanding which has as a primary purpose or effect of the avoidance of this Section 7(e), shall become null and void without any further action and no holder of such Rights shall have any rights whatsoever with respect to such Rights, whether under any provision of this Agreement or otherwise.  The Company shall use all reasonable efforts to insure that the provisions of this Section 7(e) and Section 4(b) hereof are complied with, but shall have no liability to any holder of Rights Certificates or any other Person as a result of its failure to make any determinations with respect to an Acquiring Person or any of its Affiliates, Associates or transferees hereunder.

 

(f)   Notwithstanding anything in this Agreement to the contrary, neither the Rights Agent nor the Company shall be obligated to undertake any action with respect to a registered holder upon the occurrence of any purported exercise as set forth in this Section 7 unless such registered holder shall have (i) completed and signed the certificate contained in the form of election to purchase set forth on the reverse side of the Rights Certificate surrendered for such exercise and (ii) provided such additional evidence of the identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates of such Beneficial Owner as the Company shall reasonably request.

 

Section 8.   Cancellation and Destruction of Rights Certificates.  All Rights Certificates surrendered for the purpose of exercise, transfer, split-up, combination or exchange shall, if surrendered to the Company or any of its agents, be delivered to the Rights Agent for cancellation or in cancelled form, or, if surrendered to the Rights Agent, shall be cancelled by it, and no Rights Certificates shall be issued in lieu thereof except as expressly permitted by any of the provisions of this Agreement.  The Company shall deliver to the Rights Agent for cancellation and retirement, and the Rights Agent shall so cancel and retire, any other Rights Certificate purchased or acquired by the Company otherwise than upon the exercise thereof.  The Rights Agent shall deliver all cancelled Rights Certificates to the Company, or shall, at the written request of the Company, destroy such cancelled Rights Certificates, and in such case shall deliver a certificate of destruction thereof to the Company.

 

Section 9.   Reservation and Availability of Capital Stock.

 

(a)   The Company covenants and agrees that it will cause to be reserved and kept available out of its authorized and unissued shares of Preferred Stock (and, following the occurrence of a Triggering Event, out of its authorized and unissued shares of Common Stock and/or other securities or out of its authorized and issued shares held in its treasury), the number of shares of Preferred Stock (and, following the occurrence of a Triggering Event, Common Stock and/or other securities) that, as provided in this Agreement including Section 11(a)(iii) hereof, will be sufficient to permit the exercise in full of all outstanding Rights.

 

  

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(b)   So long as the shares of Preferred Stock (and, following the occurrence of a Triggering Event, Common Stock and/or other securities) issuable and deliverable upon the exercise of the Rights may be listed on any national securities exchange, the Company shall use its best efforts to cause, from and after such time as the Rights become exercisable, all shares reserved for such issuance to be listed on such exchange upon official notice of issuance upon such exercise.

 

(c)   The Company shall use its best efforts to (i) file, as soon as practicable following the earliest date after the first occurrence of a Section 11(a)(ii) Event on which the consideration to be delivered by the Company upon exercise of the Rights has been determined in accordance with Section 11(a)(iii) hereof, a registration statement under the Act, with respect to the securities purchasable upon exercise of the Rights on an appropriate form, (ii) cause such registration statement to become effective as soon as practicable after such filing and (iii) cause such registration statement to remain effective (with a prospectus at all times meeting the requirements of the Act) until the earlier of (A) the date as of which the Rights are no longer exercisable for such securities and (B) the date of the expiration of the Rights.  The Company will also take such action as may be appropriate under, or to ensure compliance with, the securities or “blue sky” laws of the various states in connection with the exercisability of the Rights.  The Company may temporarily suspend, for a period of time not to exceed 90 days after the date set forth in clause (i) of the first sentence of this Section 9(c), the exercisability of the Rights in order to prepare and file such registration statement and permit it to become effective.  Upon any such suspension, the Company shall issue a public announcement stating that the exercisability of the Rights has been temporarily suspended, as well as a public announcement at such time as the suspension has been rescinded.  In addition, if the Company shall determine that a registration statement is required following the Distribution Date, the Company may temporarily suspend the exercisability of the Rights until such time as a registration statement has been declared effective.  Notwithstanding any provision of this Agreement to the contrary, the Rights shall not be exercisable in any jurisdiction if the requisite qualification in such jurisdiction shall not have been obtained, the exercise thereof shall not be permitted under applicable law or a registration statement shall not have been declared effective.

 

(d)   The Company covenants and agrees that it will take all such action as may be necessary to ensure that all one one-hundredths of a share of Preferred Stock (and, following the occurrence of a Triggering Event, Common Stock and/or other securities) delivered upon exercise of Rights shall, at the time of delivery of the certificates for such shares (subject to payment of the Purchase Price), be duly and validly authorized and issued and fully paid and nonassessable.

 

(e)   The Company further covenants and agrees that it will pay when due and payable any and all federal and state transfer taxes and charges which may be payable in respect of the issuance or delivery of the Rights Certificates and of any certificates for a number of one one-hundredths of a share of Preferred Stock (or Common Stock and/or other securities, as the case may be) upon the exercise of Rights.  The Company shall not, however, be required to pay any transfer tax which may be payable in respect of any transfer or delivery of Rights Certificates to a Person other than, or the issuance or delivery of a number of one one-hundredths of a share of Preferred Stock (or Common Stock and/or other securities, as the case may be) in respect of a name other than that of the registered holder of the Rights Certificates evidencing Rights surrendered for exercise, nor shall the Company be required to issue or deliver any certificates (or make any entries in the book-entry account system of the transfer agent) for a number of one one-hundredths of a share of Preferred Stock (or Common Stock and/or other securities, as the case may be) in a name other than that of the registered holder upon the exercise of any Rights until such tax shall have been paid (any such tax being payable by the holder of such Rights Certificates at the time of surrender) or until it has been established to the Company’s satisfaction that no such tax is due.

 

  

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Section 10.   Preferred Stock Record Date.  Each person in whose name any certificate or entry in the book-entry account system of the transfer agent for a number of one one-hundredths of a share of Preferred Stock (or Common Stock and/or other securities, as the case may be) is issued upon the exercise of Rights shall for all purposes be deemed to have become the holder of record of such fractional shares of Preferred Stock (or Common Stock and/or other securities, as the case may be) represented thereby on, and such certificate or entry in the book-entry account system shall be dated, the date upon which the Rights Certificate evidencing such Rights was duly surrendered and payment of the Purchase Price (and all applicable transfer taxes) was made; provided, however, that if the date of such surrender and payment is a date upon which the Preferred Stock (or Common Stock and/or other securities, as the case may be) transfer books are closed, such Person shall be deemed to have become the record holder of such shares (fractional or otherwise) on, and such certificate or entry in the book-entry account system shall be dated, the next succeeding Business Day on which the Preferred Stock (or Common Stock and/or other securities, as the case may be) transfer books are open.  Prior to the exercise of the Rights evidenced thereby, the holder of a Rights Certificate shall not be entitled to any rights of a stockholder of the Company with respect to shares for which the Rights shall be exercisable, including the right to vote, to receive dividends or other distributions or to exercise any preemptive rights, and shall not be entitled to receive any notice of any proceedings of the Company, except as provided herein.

 

Section 11.   Adjustment of Purchase Price, Number and Kind of Shares or Number of Rights.  The Purchase Price, the number and kind of shares covered by each Right and the number of Rights outstanding are subject to adjustment from time to time as provided in this Section 11.

 

(a)   (i) In the event the Company shall at any time after the date of this Agreement (A) declare a dividend on the Preferred Stock payable in shares of Preferred Stock, (B) subdivide or split the outstanding shares of Preferred Stock, (C) combine or consolidate the outstanding shares of Preferred Stock into a smaller number of shares, through a reverse stock split or otherwise or (D) issue any shares of its capital stock in a reclassification of the Preferred Stock (including any such reclassification in connection with a consolidation or merger in which the Company is the continuing or surviving corporation), except as otherwise provided in this Section 11(a) and Section 7(e) hereof, the Purchase Price in effect at the time of the record date for such dividend or of the effective date of such subdivision, split, combination, consolidation or reclassification, and the number and kind of shares of Preferred Stock or capital stock, as the case may be, issuable on such date, shall be proportionately adjusted so that the holder of any Right exercised after such time shall be entitled to receive, upon payment of the Purchase Price then in effect, the aggregate number and kind of shares of Preferred Stock or capital stock, as the case may be, which, if such Right had been exercised immediately prior to such date and at a time when the Preferred Stock transfer books of the Company were open, such holder would have owned upon such exercise and been entitled to receive by virtue of such dividend, subdivision, split, combination, consolidation or reclassification; provided that in no event shall the consideration to be paid upon the exercise of one Right be less than the aggregate par value of the shares of capital stock of the Company issuable upon the exercise of one Right.  If an event occurs which would require an adjustment under both this Section 11(a)(i) and Section 11(a)(ii) hereof, the adjustment provided for in this Section 11(a)(i) shall be in addition to, and shall be made prior to, any adjustment required pursuant to Section 11(a)(ii) hereof.

 

(ii)   In the event any Person shall, at any time after the Rights Dividend Declaration Date, become an Acquiring Person, unless the event causing such Person to become an Acquiring Person is a transaction set forth in Section 13(a) hereof, then, promptly following the later of the occurrence of such event and the Record Date, proper provision shall be made so that each holder of a Right (except as provided below and in Section 7(e) hereof) shall thereafter have the right to receive, upon exercise thereof at the then current Purchase Price in accordance with the terms of this Agreement, in lieu of a number of one one-hundredths of a share of Preferred Stock, such number of shares of Common Stock of the Company as shall equal the result obtained by (x) multiplying the then current Purchase Price by the then number of one one-hundredths of a share of Preferred Stock for which a Right was exercisable immediately prior to the first occurrence of a Section 11(a)(ii) Event and (y) dividing that product (which, following such first occurrence, shall thereafter be referred to as the “Purchase Price” for each Right and for all purposes of this Agreement) by 50% of the Current Market Price per share of Common Stock on the date of such first occurrence (such number of shares, the “Adjustment Shares”).

 

  

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(iii)   In the event that the number of treasury shares and shares of Common Stock which are authorized by the Company Charter, but not outstanding or reserved for issuance for purposes other than upon exercise of the Rights, is not sufficient to permit the exercise in full of the Rights in accordance with the foregoing subparagraph (ii) of this Section 11(a), the Company shall (A) determine the value of the Adjustment Shares issuable upon the exercise of a Right (the “Current Value”) and (B) with respect to each Right (subject to Section 7(e) hereof), make adequate provision to substitute for the Adjustment Shares, upon the exercise of a Right and payment of the applicable Purchase Price, (1) cash, (2) a reduction in the Purchase Price, (3) Common Stock or other equity securities of the Company (including shares, or units of shares, of preferred stock, such as the Preferred Stock, which the Board has deemed to have essentially the same value or economic rights as shares of Common Stock (such shares of preferred stock being referred to as “Common Stock Equivalents”)), (4) debt securities of the Company, (5) other assets or (6) any combination of the foregoing, having an aggregate value equal to the Current Value (less the amount of any reduction in the Purchase Price), where such aggregate value has been determined by the Board based upon the advice of a nationally recognized investment banking firm selected by the Board; provided, however, that if the Company shall not have made adequate provision to deliver value pursuant to clause (B) above within 30 days following the later of (x) the first occurrence of a Section 11(a)(ii) Event and (y) the date on which the Company’s right of redemption pursuant to Section 23(a) expires (the later of (x) and (y) being referred to herein as the “Section 11(a)(ii) Trigger Date”), then the Company shall be obligated to deliver, upon the surrender for exercise of a Right and without requiring payment of the Purchase Price, shares of Common Stock (to the extent available) and then, if necessary, cash, which shares and/or cash have an aggregate value equal to the Spread.  For purposes of the preceding sentence, the term “Spread” shall mean the excess of (i) the Current Value over (ii) the Purchase Price.  If the Board determines in good faith that it is likely that sufficient additional shares of Common Stock could be authorized for issuance upon exercise in full of the Rights, the 30 day period set forth above may be extended to the extent necessary, but not more than 90 days after the Section 11(a)(ii) Trigger Date, in order that the Company may seek stockholder approval for the authorization of such additional shares (such 30 day period, as it may be extended, is herein called the “Substitution Period”).  To the extent that the Company determines that action should be taken pursuant to the first and/or third sentences of this Section 11(a)(iii), the Company (1) shall provide, subject to Section 7(e) hereof, that such action shall apply uniformly to all outstanding Rights and (2) may suspend the exercisability of the Rights until the expiration of the Substitution Period in order to seek such stockholder approval for such authorization of additional shares and/or to decide the appropriate form of distribution to be made pursuant to such first sentence and to determine the value thereof.  In the event of any such suspension, the Company shall issue a public announcement stating that the exercisability of the Rights has been temporarily suspended, as well as a public announcement at such time as the suspension is no longer in effect.  For purposes of this Section 11(a)(iii), the value of each Adjustment Share shall be the Current Market Price per share of the Common Stock on the Section 11(a)(ii) Trigger Date and the per share or per unit value of any Common Stock Equivalent shall be deemed to equal the Current Market Price per share of the Common Stock on such date.

 

  

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(b)   In case the Company shall fix a record date for the issuance of rights, options or warrants to all holders of Preferred Stock entitling them to subscribe for or purchase (for a period expiring within 45 days after such record date) Preferred Stock (or shares having the same rights, privileges and preferences as the shares of Preferred Stock (“Equivalent Preferred Stock”)) or securities convertible into Preferred Stock or Equivalent Preferred Stock at a price per share of Preferred Stock or per share of Equivalent Preferred Stock (or having a conversion price per share, if a security convertible into Preferred Stock or Equivalent Preferred Stock) less than the Current Market Price per share of Preferred Stock on such record date, the Purchase Price to be in effect after such record date shall be determined by multiplying the Purchase Price in effect immediately prior to such record date by a fraction, the numerator of which shall be the number of shares of Preferred Stock outstanding on such record date, plus the number of shares of Preferred Stock which the aggregate offering price of the total number of shares of Preferred Stock and/or Equivalent Preferred Stock so to be offered (and/or the aggregate initial conversion price of the convertible securities so to be offered) would purchase at such Current Market Price, and the denominator of which shall be the number of shares of Preferred Stock outstanding on such record date, plus the number of additional shares of Preferred Stock and/or Equivalent Preferred Stock to be offered for subscription or purchase (or into which the convertible securities so to be offered are initially convertible); provided that in no event shall the consideration to be paid upon the exercise of one Right be less than the aggregate par value of the shares of capital stock of the Company issuable upon the exercise of one Right.  In case such subscription price may be paid by delivery of consideration, part or all of which may be in a form other than cash, the value of such consideration shall be as determined in good faith by the Board, whose determination shall be described in a statement filed with the Rights Agent and shall be binding on the Rights Agent and the holders of the Rights.  Shares of Preferred Stock owned by or held for the account of the Company shall not be deemed outstanding for the purpose of any such computation.  Such adjustment shall be made successively whenever such a record date is fixed, and in the event that such rights, options or warrants are not so issued, the Purchase Price shall be adjusted to be the Purchase Price which would then be in effect if such record date had not been fixed.

 

(c)   In case the Company shall fix a record date for a distribution to all holders of Preferred Stock (including any such distribution made in connection with a consolidation or merger in which the Company is the continuing corporation) of cash (other than a regular quarterly cash dividend out of the earnings or retained earnings of the Company), assets (other than a dividend payable in Preferred Stock, but including any dividend payable in stock other than Preferred Stock) or evidences of indebtedness or of subscription rights or warrants (excluding those referred to in Section 11(b) hereof), the Purchase Price to be in effect after such record date shall be determined by multiplying the Purchase Price in effect immediately prior to such record date by a fraction, the numerator of which shall be the Current Market Price per share of Preferred Stock on such record date, less the fair market value (as determined in good faith by the Board, whose determination shall be described in a statement filed with the Rights Agent) of the portion of the cash, assets or evidences of indebtedness so to be distributed or of such subscription rights or warrants applicable to a share of Preferred Stock, and the denominator of which shall be such Current Market Price per share of Preferred Stock; provided that in no event shall the consideration to be paid upon the exercise of one Right be less than the aggregate par value of the shares of capital stock of the Company issuable upon the exercise of one Right.  Such adjustments shall be made successively whenever such a record date is fixed, and in the event that such distribution is not so made, the Purchase Price shall be adjusted to be the Purchase Price which would have been in effect if such record date had not been fixed.

 

  

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(d)   (i) For the purpose of any computation hereunder, other than computations made pursuant to Section 11(a)(iii) hereof, the “Current Market Price” per share of Common Stock on any date shall be deemed to be the average of the daily closing prices per share of such Common Stock for the 30 consecutive Trading Days immediately prior to such date, and for purposes of computations made pursuant to Section 11(a)(iii) hereof, the Current Market Price per share of Common Stock on any date shall be deemed to be the average of the daily closing prices per share of such Common Stock for the 10 consecutive Trading Days immediately following such date; provided, however, that in the event that the Current Market Price per share of the Common Stock is determined during a period following the announcement by the issuer of such Common Stock of (A) a dividend or distribution on such Common Stock payable in shares of such Common Stock or securities convertible into shares of such Common Stock (other than the Rights) or (B) any subdivision, combination, consolidation, reverse stock split or reclassification of such Common Stock, and the ex-dividend date for such dividend or distribution, or the record date for such subdivision, combination, consolidation, reverse stock split or reclassification shall not have occurred prior to the commencement of the requisite 30 Trading Day or 10 Trading Day period, as set forth above, then, and in each such case, the Current Market Price shall be properly adjusted to take into account ex-dividend trading.  The closing price for each day shall be the last sale price, regular way, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, in either case as reported by the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the New York Stock Exchange or, if the shares of Common Stock are not listed or admitted to trading on the New York Stock Exchange, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which the shares of Common Stock are listed or admitted to trading or, if the shares of Common Stock are not listed or admitted to trading on any national securities exchange, the last quoted price or, if on such date the shares of Common Stock are not so quoted or reported, the average of the high bid and low asked prices in the over-the-counter market as reported by any system then in use, or, if not so quoted, the average of the closing bid and asked prices as furnished by a professional market maker making a market in the Common Stock selected by the Board.  The term “Trading Day” shall mean a day on which the principal national securities exchange on which the shares of Common Stock are listed or admitted to trading is open for the transaction of business or, if the shares of Common Stock are not listed or admitted to trading on any national securities exchange, a Business Day.  If on any such date the Common Stock is not so listed, traded, quoted or reported and no such market maker is making a market in the shares of Common Stock, Current Market Price per share shall mean the fair value per share as determined in good faith by the Board, whose determination shall be described in a statement filed with the Rights Agent and shall be conclusive for all purposes.

 

(ii)   For the purpose of any computation hereunder, the Current Market Price per share of Preferred Stock shall be determined in the same manner as set forth above for the Common Stock in clause (i) of this Section 11(d) (other than the last sentence thereof).  If the Current Market Price per share of Preferred Stock cannot be determined in the manner provided above or if the Preferred Stock is not publicly held or listed or traded in a manner described in clause (i) of this Section 11(d), the Current Market Price per share of Preferred Stock shall be conclusively deemed to be an amount equal to 100 (as such number may be appropriately adjusted for such events as stock splits, stock dividends and recapitalizations with respect to the Common Stock occurring after the date of this Agreement) multiplied by the Current Market Price per share of the Common Stock.  If neither the Common Stock nor the Preferred Stock is publicly held or so listed or traded, Current Market Price per share of the Preferred Stock shall mean the fair value per share as determined in good faith by the Board, whose determination shall be described in a statement filed with the Rights Agent and shall be conclusive for all purposes.

 

(e)  Anything herein to the contrary notwithstanding, no adjustment in the Purchase Price shall be required unless such adjustment would require an increase or decrease of at least 1% in the Purchase Price; provided, however, that any adjustments which by reason of this Section 11(e) are not required to be made shall be carried forward and taken into account in any subsequent adjustment.  All calculations under this Section 11 shall be made to the nearest cent or to the nearest one-hundredth of a share of Common Stock or other share or one-millionth of a share of Preferred Stock, as the case may be.  Notwithstanding the first sentence of this Section 11(e), any adjustment required by this Section 11 shall be made no later than the earlier of (i) 3 years from the date of the transaction which mandates such adjustment or (ii) the Expiration Date.

 

  

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(f)   If as a result of an adjustment made pursuant to Section 11(a)(ii) or Section 13(a) hereof, the holder of any Right thereafter exercised shall become entitled to receive any shares of capital stock other than Preferred Stock, thereafter the number of such other shares so receivable upon exercise of any Right and the Purchase Price thereof shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the Preferred Stock contained in Sections 11(a), (b), (c), (e), (g), (h), (i), (j), (k) and (m), and the provisions of Section 7, Section 9, Section 10, Section 13 and Section 14 hereof with respect to the Preferred Stock shall apply on like terms to any such other shares.

 

(g)   All Rights originally issued by the Company subsequent to any adjustment made to the Purchase Price hereunder shall evidence the right to purchase, at the adjusted Purchase Price, the number of one one-hundredths of a share of Preferred Stock purchasable from time to time hereunder upon exercise of the Rights, all subject to further adjustment as provided herein.

 

(h)   Unless the Company shall have exercised its election as provided in Section 11(i), upon each adjustment of the Purchase Price as a result of the calculations made in Section 11(b) and (c), each Right outstanding immediately prior to the making of such adjustment shall thereafter evidence the right to purchase, at the adjusted Purchase Price, that number of one one-hundredths of a share of Preferred Stock (calculated to the nearest one-millionth) obtained by (i) multiplying (x) the number of one one-hundredths of a share covered by a Right immediately prior to this adjustment by (y) the Purchase Price in effect immediately prior to such adjustment of the Purchase Price and (ii) dividing the product so obtained by the Purchase Price in effect immediately after such adjustment of the Purchase Price.

 

(i)   The Company may elect on or after the date of any adjustment of the Purchase Price to adjust the number of Rights, in lieu of any adjustment in the number of one one-hundredths of a share of Preferred Stock purchasable upon the exercise of a Right.  Each of the Rights outstanding after the adjustment in the number of Rights shall be exercisable for the number of one one-hundredths of a share of Preferred Stock for which a Right was exercisable immediately prior to such adjustment.  Each Right held of record prior to such adjustment of the number of Rights shall become that number of Rights (calculated to the nearest one one-hundredth) obtained by dividing the Purchase Price in effect immediately prior to adjustment of the Purchase Price by the Purchase Price in effect immediately after adjustment of the Purchase Price.  The Company shall make a public announcement of its election to adjust the number of Rights, indicating the record date for the adjustment, and, if known at the time, the amount of the adjustment to be made.  This record date may be the date on which the Purchase Price is adjusted or any day thereafter, but, if the Rights Certificates have been issued, shall be at least 10 days later than the date of the public announcement.  If Rights Certificates have been issued, upon each adjustment of the number of Rights pursuant to this Section 11(i), the Company shall, as promptly as practicable, cause to be distributed to holders of record of Rights Certificates on such record date Rights Certificates evidencing, subject to Section 14 hereof, the additional Rights to which such holders shall be entitled as a result of such adjustment, or, at the option of the Company, shall cause to be distributed to such holders of record in substitution and replacement for the Rights Certificates held by such holders prior to the date of adjustment, and upon surrender thereof, if required by the Company, new Rights Certificates evidencing all the Rights to which such holders shall be entitled after such adjustment.  Rights Certificates so to be distributed shall be issued, executed and countersigned in the manner provided for herein (and may bear, at the option of the Company, the adjusted Purchase Price) and shall be registered in the names of the holders of record of Rights Certificates on the record date specified in the public announcement.

 

  

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(j)   Irrespective of any adjustment or change in the Purchase Price or the number of one one-hundredth of a share of Preferred Stock issuable upon the exercise of the Rights, the Rights Certificates theretofore and thereafter issued may continue to express the Purchase Price per one one-hundredth of a share and the number of one one-hundredths of a share which were expressed in the initial Rights Certificates issued hereunder.

 

(k)   Before taking any action that would cause an adjustment reducing the Purchase Price below the then par value, if any, of the number of one one-hundredths of a share of Preferred Stock issuable upon exercise of the Rights, the Company shall take any corporate action which may, in the opinion of its counsel, be necessary in order that the Company may validly and legally issue fully paid and nonassessable such number of one one-hundredths of a share of Preferred Stock at such adjusted Purchase Price.

 

(l)   In any case in which this Section 11 shall require that an adjustment in the Purchase Price be made effective as of a record date for a specified event, the Company may elect to defer until the occurrence of such event the issuance to the holder of any Right exercised after such record date the number of one one-hundredths of a share of Preferred Stock and other capital stock or securities of the Company, if any, issuable upon such exercise over and above the number of one one-hundredths of a share of Preferred Stock and other capital stock or securities of the Company, if any, issuable upon such exercise on the basis of the Purchase Price in effect prior to such adjustment; provided, however, that the Company shall deliver to such holder a due bill or other appropriate instrument evidencing such holder’s right to receive such additional shares (fractional or otherwise) or securities upon the occurrence of the event requiring such adjustment.

 

(m)   Anything in this Section 11 to the contrary notwithstanding, the Company shall be entitled to make such reductions in the Purchase Price, in addition to those adjustments expressly required by this Section 11, as and to the extent that the Board in its sole discretion shall determine to be advisable in order that any (i) consolidation or subdivision of the Preferred Stock, (ii) issuance wholly for cash of any shares of Preferred Stock at less than the Current Market Price, (iii) issuance wholly for cash of shares of Preferred Stock or securities which by their terms are convertible into or exchangeable for shares of Preferred Stock, (iv) stock dividends or (v) issuance of rights, options or warrants referred to in this Section 11, hereafter made by the Company to holders of its Preferred Stock shall not be taxable to such stockholders.

 

(n)   The Company covenants and agrees that it shall not, at any time after the Distribution Date, (i) consolidate with any other Person (other than a Subsidiary of the Company in a transaction which complies with Section 11(o) hereof), (ii) merge with or into any other Person (other than a Subsidiary of the Company in a transaction which complies with Section 11(o) hereof) or (iii) sell or transfer (or permit any Subsidiary to sell or transfer), in one transaction, or a series of related transactions, assets, cash flow or earning power aggregating more than 50% of the assets or earning power of the Company and its Subsidiaries (taken as a whole) to any other Person or Persons (other than the Company and/or any of its Subsidiaries in one or more transactions each of which complies with Section 11(o) hereof), if (x) at the time of or immediately after such consolidation, merger or sale there are any rights, warrants or other instruments or securities outstanding or agreements in effect which would substantially diminish or otherwise eliminate the benefits intended to be afforded by the Rights or (y) prior to, simultaneously with or immediately after such consolidation, merger or sale, the stockholders of the Person who constitutes, or would constitute, the “Principal Party” for purposes of Section 13(a) hereof shall have received a distribution of Rights previously owned by such Person or any of its Affiliates and Associates.

 

  

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(o)   The Company covenants and agrees that, after the Distribution Date, it will not, except as permitted by Section 23 or Section 27 hereof, take (or permit any Subsidiary to take) any action if at the time such action is taken it is reasonably foreseeable that such action will diminish substantially or otherwise eliminate the benefits intended to be afforded by the Rights.

 

(p)   Anything in this Agreement to the contrary notwithstanding, in the event that the Company shall at any time after the Rights Dividend Declaration Date and prior to the Distribution Date (i) declare a dividend on the outstanding shares of Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding shares of Common Stock or (iii) combine the outstanding shares of Common Stock into a smaller number of shares, through a reverse stock split or otherwise, the number of Rights associated with each share of Common Stock then outstanding, or issued or delivered thereafter but prior to the Distribution Date, shall be proportionately adjusted so that the number of Rights thereafter associated with each share of Common Stock following any such event shall equal the result obtained by multiplying the number of Rights associated with each share of Common Stock immediately prior to such event by a fraction the numerator which shall be the total number of shares of Common Stock outstanding immediately prior to the occurrence of the event and the denominator of which shall be the total number of shares of Common Stock outstanding immediately following the occurrence of such event.

 

Section 12.   Certificate of Adjusted Purchase Price or Number of Shares.  Whenever an adjustment is made as provided in Section 11 and Section 13 hereof, the Company shall (a) promptly prepare a certificate setting forth such adjustment and a brief statement of the facts accounting for such adjustment, (b) promptly file with the Rights Agent, and with each transfer agent for the Preferred Stock and the Common Stock, a copy of such certificate and (c) if a Distribution Date has occurred, mail a brief summary thereof to each holder of a Rights Certificate (or, if prior to the Distribution Date, to each holder of a share of Common Stock) in accordance with Section 26 hereof.  Notwithstanding the immediately preceding sentence, the failure of the Company to make such certification or give such notice shall not affect the validity of such adjustment or the force or effect of the requirement for such adjustment.  The Rights Agent shall be fully protected in relying on any such certificate and on any adjustment therein contained.

 

Section 13.   Consolidation, Merger or Sale or Transfer of Assets, Cash Flow or Earning Power.

 

(a)   In the event that, following the Stock Acquisition Date, directly or indirectly, (x) the Company shall consolidate with or merge with and into, any other Person (other than a Subsidiary of the Company in a transaction which complies with Section 11(o) hereof), and the Company shall not be the continuing or surviving corporation of such consolidation or merger, (y) any Person (other than a Subsidiary of the Company in a transaction which complies with Section 11(o) hereof) shall consolidate with, or merge with or into, the Company, and the Company shall be the continuing or surviving corporation of such consolidation or merger and, in connection with such consolidation or merger, all or part of the outstanding shares of Common Stock shall be changed into or exchanged for stock or other securities of any other Person or cash or any other property or (z) the Company shall sell or otherwise transfer (or one or more of its Subsidiaries shall sell or otherwise transfer), in one transaction or a series of related transactions, assets, cash flow or earning power aggregating more than 50% of the assets, cash flow or earning power of the Company and its Subsidiaries (taken as a whole) to any Person or Persons (other than the Company or any Subsidiary of the Company in one or more transactions each of which complies with Section 11(o) hereof) (each event referred to in clauses (x)-(z), a “Section 13 Event”), then, and in each such case, proper provision shall be made so that:  (i) each holder of a Right, except as provided in Section 7(e) hereof, shall thereafter have the right to receive, upon the exercise thereof at the then current Purchase Price in accordance with the terms of this Agreement, such number of validly authorized and issued, fully paid, non-assessable and freely tradeable shares of Common Stock of the Principal Party (as such term is hereinafter defined), not subject to any liens, encumbrances, rights of first refusal or other adverse claims, as shall be equal to the result obtained by (1) multiplying the then current Purchase Price by the number of one one-hundredths of a share of Preferred Stock for which a Right is exercisable immediately prior to the first occurrence of a Section 13 Event (or, if a Section 11(a)(ii) Event has occurred prior to the first occurrence of a Section 13 Event, multiplying the number of such one one-hundredths of a share for which a Right was exercisable immediately prior to the first occurrence of a Section 11(a)(ii) Event by the Purchase Price in effect immediately prior to such first occurrence of a Section 11(a)(ii) Event) and (2) dividing that product (which, following the first occurrence of a Section 13 Event, shall be referred to as the “Purchase Price” for each Right and for all purposes of this Agreement) by 50% of the Current Market Price (determined pursuant to Section 11(d)(i) hereof) per share of the Common Stock of such Principal Party on the date of consummation of such Section 13 Event; (ii) such Principal Party shall thereafter be liable for, and shall assume, by virtue of such Section 13 Event, all the obligations and duties of the Company pursuant to this Agreement; (iii) the term “Company” shall thereafter be deemed to refer to such Principal Party, it being specifically intended that the provisions of Section 11 hereof shall apply only to such Principal Party following the first occurrence of a Section 13 Event; (iv) such Principal Party shall take such steps (including the reservation of a sufficient number of shares of its Common Stock) in connection with the consummation of any such transaction as may be necessary to assure that the provisions hereof shall thereafter be applicable, as nearly as reasonably may be, in relation to its shares of Common Stock thereafter deliverable upon the exercise of the Rights; and (v) the provisions of Section 11(a)(ii) hereof shall be of no effect following the first occurrence of any Section 13 Event.

 

  

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(b)   “Principal Party” shall mean:

 

(i)   in the case of any transaction described in clause (x) or (y) of the first sentence of Section 13(a) hereof, the Person that is the issuer of any securities into which shares of Common Stock of the Company are converted in such merger or consolidation, and if no securities are so issued, the Person that is the other party to such merger or consolidation; and

 

(ii)   in the case of any transaction described in clause (z) of the first sentence of Section 13(a) hereof, the Person that is the party receiving the greatest portion of the assets, cash flow or earning power transferred pursuant to such transaction or transactions; provided, however, that in any such case, (1) if the Common Stock of such Person is not at such time and has not been continuously over the preceding 12 month period registered under Section 12 of the Exchange Act, and such Person is a direct or indirect Subsidiary of another Person the Common Stock of which is and has been so registered, “Principal Party” shall refer to such other Person and (2) in case such Person is a Subsidiary, directly or indirectly, of more than one Person, the Common Stock of two or more of which are and have been so registered, “Principal Party” shall refer to whichever of such Persons is the issuer of the Common Stock having the greatest aggregate market value.

 

(c)   The Company shall not consummate any such consolidation, merger, sale or transfer unless the Principal Party shall have a sufficient number of authorized shares of its Common Stock which have not been issued or reserved for issuance to permit the exercise in full of the Rights in accordance with this Section 13 and unless prior thereto the Company and such Principal Party shall have executed and delivered to the Rights Agent an agreement confirming that the requirements of Section 13(a) and Section 13(b) hereof shall promptly be performed in accordance with their terms and further providing that, as soon as practicable after the date of any consolidation, merger, sale or transfer mentioned in paragraph (a) of this Section 13, the Principal Party will:

 

(i)   prepare and file a registration statement under the Act, with respect to the Rights and the securities purchasable upon exercise of the Rights on an appropriate form, and will use its best efforts to cause such registration statement to (A) become effective as soon as practicable after such filing and (B) remain effective (with a prospectus at all times meeting the requirements of the Act) until the Expiration Date;

 

  

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(ii)   take all such other action as may be necessary to enable the Principal Party to issue the securities purchasable upon exercise of the Rights, including the registration or qualification of such securities under all requisite securities laws of jurisdictions of the various states and the listing of such securities on such exchanges and trading markets as may be necessary or appropriate; and

 

(iii) deliver to holders of the Rights historical financial statements for the Principal Party and each of its Affiliates which comply in all respects with the requirements for registration on Form 10 (or any successor form) under the Exchange Act.

 

(d)   The provisions of this Section 13 shall similarly apply to successive mergers or consolidations or sales or other transfers.  In the event that a Section 13 Event shall occur at any time after the occurrence of a Section 11(a)(ii) Event, the Rights which have not theretofore been exercised shall thereafter become exercisable in the manner described in Section 13(a).

 

Section 14.   Fractional Rights and Fractional Shares.

 

(a)   The Company shall not be required to issue fractions of Rights, except prior to the Distribution Date as provided in Section 11(p) hereof, or to distribute Rights Certificates which evidence fractional Rights.  In lieu of issuing such fractional Rights, the Company shall pay to the registered holders of the Rights Certificates with regard to which such fractional Rights would otherwise be issuable, an amount in cash equal to the same fraction of the current market value of a whole Right.  For purposes of this Section 14(a), the current market value of a whole Right shall be the closing price of the Rights  (as determined pursuant to the second sentence of Section 11(d)(i) hereof) for the Trading Day immediately prior to the date on which such fractional Rights would have been otherwise issuable.

 

(b)   The Company shall not be required to issue fractions of shares of Preferred Stock (other than fractions which are integral multiples of one one-hundredth of a share of Preferred Stock) upon exercise of the Rights or to distribute certificates which evidence fractional shares of Preferred Stock (other than fractions which are integral multiples of one one-hundredth of a share of Preferred Stock).  In lieu of fractional shares of Preferred Stock that are not integral multiples of one one-hundredth of a share of Preferred Stock, the Company may pay to the registered holders of Rights Certificates at the time such Rights are exercised as herein provided an amount in cash equal to the same fraction of the current market value of one one-hundredth of a share of Preferred Stock.  For purposes of this Section 14(b), the current market value of one one-hundredth of a share of Preferred Stock shall be one one-hundredth of the closing price of a share of Preferred Stock (as determined pursuant to the second sentence of Section 11(d)(ii) hereof) for the Trading Day immediately prior to the date of such exercise.

 

(c)   Following the occurrence of a Triggering Event, the Company shall not be required to issue fractions of shares of Common Stock upon exercise of the Rights or to distribute certificates which evidence fractional shares of Common Stock.  In lieu of fractional shares of Common Stock, the Company may pay to the registered holders of Rights Certificates at the time such Rights are exercised as herein provided an amount in cash equal to the same fraction of the current market value of one share of Common Stock.  For purposes of this Section 14(c), the current market value of one share of Common Stock shall be the closing price per share of Common Stock (as determined pursuant to the second sentence of Section 11(d)(i) hereof) on the Trading Day immediately prior to the date of such exercise.

 

  

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(d)   The holder of a Right by the acceptance of the Rights expressly waives such holder’s right to receive any fractional Rights or any fractional shares upon exercise of a Right, except as permitted by this Section 14.

 

Section 15.   Rights of Action.  All rights of action in respect of this Agreement, except the rights of action given to the Rights Agent under Section 18 hereof, are vested in the respective registered holders of the Rights Certificates (and, prior to the Distribution Date, the registered holders of the Common Stock); and any registered holder of any Rights Certificate (or, prior to the Distribution Date, of the Common Stock), without the consent of the Rights Agent or of the holder of any other Rights Certificate (or, prior to the Distribution Date, of the Common Stock), may, in the holder’s own behalf and for the holder’s own benefit, enforce, and may institute and maintain any suit, action or proceeding against the Company to enforce, or otherwise act in respect of, the holder’s right to exercise the Rights evidenced by such Rights Certificate (or, prior to the Distribution Date, of the Common Stock) in the manner provided in such Rights Certificate and in this Agreement.  Without limiting the foregoing or any remedies available to the holders of Rights, it is specifically acknowledged that the holders of Rights would not have an adequate remedy at law for any breach of this Agreement and shall be entitled to specific performance of the obligations hereunder and injunctive relief against actual or threatened violations of the obligations hereunder of any Person subject to this Agreement.

 

Section 16.   Agreement of Rights Holders.  Every holder of a Right by accepting the same consents and agrees with the Company and the Rights Agent and with every other holder of a Right that:

 

(a)   prior to the Distribution Date, the Rights will be transferable only in connection with the transfer of shares of Common Stock;

 

(b)   after the Distribution Date, the Rights Certificates are transferable only on the registry books of the Rights Agent if surrendered at the principal office or offices of the Rights Agent designated for such purposes, duly endorsed or accompanied by a proper instrument of transfer and with the appropriate forms and certificates fully executed;

 

(c)   subject to Section 6(a) and Section 7(f) hereof, the Company and the Rights Agent may deem and treat the person in whose name a Rights Certificate (or, prior to the Distribution Date, the associated balance indicated in the book-entry account system of the transfer agent for the Common Stock or, in the case of certificated shares, the associated Common Stock certificate) is registered as the absolute owner thereof and of the Rights evidenced thereby (notwithstanding any notations of ownership or writing on the Rights Certificates or the associated balance indicated in the book-entry account system of the transfer agent for the Common Stock or, in the case of certificated shares, the associated Common Stock certificate, made by anyone other than the Company or the Rights Agent) for all purposes whatsoever, and neither the Company nor the Rights Agent, subject to the last sentence of Section 7(e) hereof, shall be required to be affected by any notice to the contrary; and

 

(d)   notwithstanding anything in this Agreement to the contrary, neither the Company nor the Rights Agent shall have any liability to any holder of a Right or other Person as a result of its inability to perform any of its obligations under this Agreement by reason of any preliminary or permanent injunction or other order, decree or ruling issued by a court of competent jurisdiction or by a governmental, regulatory or administrative agency or commission, or any statute, rule, regulation or executive order promulgated or enacted by any governmental authority, prohibiting or otherwise restraining performance of such obligation; provided, however, the Company must use its reasonable best efforts to have any such order, decree or ruling lifted or otherwise overturned as soon as possible.

 

  

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Section 17.   Rights Certificate Holder Not Deemed a Stockholder.  No holder, as such, of any Rights Certificate shall be entitled to vote, receive dividends or be deemed for any purpose the holder of the number of one one-hundredths of a share of Preferred Stock or any other securities of the Company which may at any time be issuable on the exercise of the Rights represented thereby, nor shall anything contained herein or in any Rights Certificate be construed to confer upon the holder of any Rights Certificate, as such, any of the rights of a stockholder of the Company or any right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or to give or withhold consent to any corporate action, or to receive notice of meetings or other actions affecting stockholders (except as provided in Section 25 hereof), or to receive dividends or subscription rights, or otherwise, until the Right or Rights evidenced by such Rights Certificate shall have been exercised in accordance with the provisions hereof.

 

Section 18.   Concerning the Rights Agent.

 

(a)   The Company agrees to pay to the Rights Agent reasonable compensation for all services rendered by it hereunder and, from time to time, on demand of the Rights Agent, its reasonable expenses and counsel fees and other disbursements incurred in the administration and execution of this Agreement and the exercise and performance of its duties hereunder.  The Company also agrees to indemnify the Rights Agent for, and to hold it harmless against, any loss, liability or expense, incurred without gross negligence or willful misconduct (each as determined by a court of competent jurisdiction) on the part of the Rights Agent, for anything done or omitted by the Rights Agent in connection with the acceptance and administration of this Agreement, including the costs and expenses of defending against any claim of liability in the premises.

 

(b)   The Rights Agent shall be protected and shall incur no liability for or in respect of any action taken, suffered or omitted by it in connection with its administration of this Agreement in reliance upon any Rights Certificate or the balance indicated in the book-entry account system of the transfer agent for the Common Stock or, in the case of certificated shares, certificate for Common Stock or for other securities of the Company, any instrument of assignment or transfer, power of attorney, endorsement, affidavit, letter, notice, direction, consent, certificate, statement or other paper or document believed by it to be genuine and to be signed, executed and, where necessary, verified or acknowledged, by the proper Person or Persons.

 

Section 19.   Merger or Consolidation or Change of Name of Rights Agent.

 

(a)   Any Person into which the Rights Agent or any successor Rights Agent may be merged or with which it may be consolidated, or any Person resulting from any merger or consolidation to which the Rights Agent or any successor Rights Agent shall be a party, or any Person succeeding to the corporate trust, stock transfer or other stockholder services business of the Rights Agent or any successor Rights Agent, shall be the successor to the Rights Agent under this Agreement without the execution or filing of any paper or any further act on the part of any of the parties hereto; but only if such Person would be eligible for appointment as a successor Rights Agent under the provisions of Section 21 hereof.  In case at the time such successor Rights Agent shall succeed to the agency created by this Agreement, any of the Rights Certificates shall have been countersigned but not delivered, any such successor Rights Agent may adopt the countersignature of a predecessor Rights Agent and deliver such Rights Certificates so countersigned; and in case at that time any of the Rights Certificates shall not have been countersigned, any successor Rights Agent may countersign such Rights Certificates either in the name of the predecessor or in the name of the successor Rights Agent; and in all such cases such Rights Certificates shall have the full force provided in the Rights Certificates and in this Agreement.

 

  

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

 

Section 20.   Duties of Rights Agent.  The Rights Agent undertakes the duties and obligations imposed by this Agreement upon the following terms and conditions, by all of which the Company and the holders of Rights Certificates, by their acceptance thereof, shall be bound:

 

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

 

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

 

(c)   The Rights Agent shall be liable hereunder only for its own gross negligence or willful misconduct (each as determined by a court of competent jurisdiction), provided, however, that the Rights Agent shall under no circumstances be liable for indirect, consequential, special or punitive damages hereunder.  Anything herein to the contrary notwithstanding, any liability of the Rights Agent under this Agreement will be limited in the aggregate to an amount equal to three times the amount of fees paid by the Company to the Rights Agent.

 

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

 

(e)   The Rights Agent shall not be under any responsibility in respect of the validity of this Agreement or the execution and delivery hereof (except the due execution hereof by the Rights Agent) or in respect of the validity or execution of any Rights Certificate (except its countersignature thereof); nor shall it be responsible for any breach by the Company of any covenant or condition contained in this Agreement or in any Rights Certificate; nor shall it be responsible for any adjustment required under the provisions of Section 11, Section 13 or Section 24 hereof or responsible for the manner, method or amount of any such adjustment or the ascertaining of the existence of facts that would require any such adjustment (except with respect to the exercise of Rights evidenced by Rights Certificates after actual notice of any such adjustment); nor shall it by any act hereunder be deemed to make any representation or warranty as to the authorization or reservation of any shares of Common Stock or Preferred Stock to be issued pursuant to this Agreement or any Rights Certificate or as to whether any shares of Common Stock or Preferred Stock will, when so issued, be validly authorized and issued, fully paid and nonassessable.

 

  

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

 

(g)   The Rights Agent is hereby authorized and directed to accept instructions with respect to the performance of its duties hereunder from the Chairman of the Board, the Chief Executive Officer, the President, any Vice President, the Secretary, any Assistant Secretary, the Treasurer or any Assistant Treasurer of the Company, and to apply to such officers for advice or instructions in connection with its duties, and it shall not be liable for any action taken or suffered to be taken by it in good faith in accordance with instructions of any such officer.

 

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

 

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

 

(j)   No provision of this Agreement shall require the Rights Agent to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder (other than internal costs incurred by the Rights Agent in providing services to the Company in the ordinary course of its business as Rights Agent) or in the exercise of its rights if there shall be reasonable grounds for believing that repayment of such funds or adequate indemnification against such risk or liability is not reasonably assured to it.

 

(k)   If, with respect to any Rights Certificate surrendered to the Rights Agent for exercise or transfer, the certificate attached to the form of assignment or form of election to purchase, as the case may be, has either not been properly completed or indicates an affirmative response to clause (1) and/or (2) thereof, the Rights Agent shall not take any further action with respect to such requested exercise or transfer without first consulting with, and receiving written instruction from, the Company.

 

Section 21.   Change of Rights Agent.  The Rights Agent or any successor Rights Agent may resign and be discharged from its duties under this Agreement upon 30 days’ notice in writing mailed to the Company, and to each transfer agent of the Common Stock and Preferred Stock, by registered or certified mail, and, if such resignation occurs after the Distribution Date, to the registered holders of the Rights Certificates by first-class mail.  The Company may remove the Rights Agent or any successor Rights Agent upon 30 days’ notice in writing, mailed to the Rights Agent or successor Rights Agent, as the case may be, and to each transfer agent of the Common Stock and Preferred Stock, by registered or certified mail, and, if such removal occurs after the Distribution Date, to the holders of the Rights Certificates by first-class mail.  If the Rights Agent shall resign or be removed or shall otherwise become incapable of acting, the Company shall appoint a successor to the Rights Agent.  If the Company shall fail to make such appointment within a period of 30 days after giving notice of such removal or after it has been notified in writing of such resignation or incapacity by the resigning or incapacitated Rights Agent or by the holder of a Rights Certificate (who shall, with such notice, submit his Rights Certificate for inspection by the Company), then any registered holder of any Rights Certificate may apply to any court of competent jurisdiction for the appointment of a new Rights Agent.  Any successor Rights Agent, whether appointed by the Company or by such a court, shall be (a) a legal business entity organized and doing business under the laws of the United States or any State thereof, in good standing, having an office in the State of New York, which is authorized under such laws to exercise corporate trust, stock transfer or stockholder services powers and which has at the time of its appointment as Rights Agent a combined capital and surplus of at least $50,000,000 or (b) an affiliate of a legal business entity described in clause (a) of this sentence.  After appointment, the successor Rights Agent shall be vested with the same powers, rights, duties and responsibilities as if it had been originally named as Rights Agent without further act or deed; but the predecessor Rights Agent shall deliver and transfer to the successor Rights Agent any property at the time held by it hereunder, and execute and deliver any further assurance, conveyance, act or deed necessary for the purpose.  Not later than the effective date of any such appointment, the Company shall file notice thereof in writing with the predecessor Rights Agent and each transfer agent of the Common Stock and the Preferred Stock, and, if such appointment occurs after the Distribution Date, mail a notice thereof in writing to the registered holders of the Rights Certificates.  Failure to give any notice provided for in this Section 21, however, or any defect therein, shall not affect the legality or validity of the resignation or removal of the Rights Agent or the appointment of the successor Rights Agent, as the case may be.

 

  

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Section 22.   Issuance of New Rights Certificates.  Notwithstanding any of the provisions of this Agreement or of the Rights to the contrary, the Company may, at its option, issue new Rights Certificates evidencing Rights in such form as may be approved by the Board to reflect any adjustment or change in the Purchase Price and the number or kind or class of shares or other securities or property purchasable under the Rights Certificates made in accordance with the provisions of this Agreement.  In addition, in connection with the issuance or sale of shares of Common Stock following the Distribution Date and prior to the redemption or expiration of the Rights, the Company (a) shall, with respect to shares of Common Stock so issued or sold pursuant to the exercise of stock options or under any employee plan or arrangement, granted or awarded as of the Distribution Date, or upon the exercise, conversion or exchange of securities hereinafter issued by the Company and (b) may, in any other case, if deemed necessary or appropriate by the Board, issue Rights Certificates representing the appropriate number of Rights in connection with such issuance or sale; provided, however, that (i) no such Rights Certificate shall be issued if, and to the extent that, the Company shall be advised by counsel that such issuance would create a significant risk of material adverse tax consequences to the Company or the Person to whom such Rights Certificate would be issued and (ii) no such Rights Certificate shall be issued if, and to the extent that, appropriate adjustment shall otherwise have been made in lieu of the issuance thereof.

 

Section 23.   Redemption and Termination.

 

(a)   The Board may, at its option, at any time prior to the earlier of (i) the Distribution Date or (ii) the Final Expiration Date, redeem all but not less than all of the then outstanding Rights at a redemption price of $0.001 per Right, as such amount may be appropriately adjusted to reflect any stock split, stock dividend or similar transaction occurring after the date hereof (such redemption price being hereinafter referred to as the “Redemption Price”).  Notwithstanding anything contained in this Agreement to the contrary, the Rights shall not be exercisable after the first occurrence of a Section 11(a)(ii) Event until such time as the Company’s right of redemption hereunder has expired.  The Company may, at its option, pay the Redemption Price in cash, shares of Common Stock (based on the Current Market Price, as defined in Section 11(d)(i) hereof, of the Common Stock at the time of redemption) or any other form of consideration deemed appropriate by the Board.

 

(b)   Immediately upon the action of the Board ordering the redemption of the Rights pursuant to Section 23(a) above, evidence of which shall have been filed with the Rights Agent and without any further action and without any notice, the right to exercise the Rights will terminate and the only right thereafter of the holders of Rights shall be to receive the Redemption Price for each Right so held.  Promptly after the action of the Board ordering the redemption of the Rights, the Company shall give notice of such redemption to the Rights Agent and the holders of the then outstanding Rights by mailing such notice to all such holders at each holder’s last address as it appears upon the registry books of the Rights Agent or, prior to the Distribution Date, on the registry books of the transfer agent for the Common Stock.  Any notice which is mailed in the manner herein provided shall be deemed given, whether or not the holder receives the notice.  Each such notice of redemption will state the method by which the payment of the Redemption Price will be made.

 

  

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Section 24.   Exchange.

 

(a)   The Board may, at its option, at any time after the Stock Acquisition Date, exchange all or part of the then outstanding and exercisable Rights (which shall not include Rights that have become void pursuant to Section 7(e) hereof or Rights that have been exercised pursuant to Section 7 hereof) for Common Stock at an exchange ratio of one share of Common Stock per Right, appropriately adjusted to reflect any stock split, stock dividend or similar transaction occurring after the date hereof (such exchange ratio being hereinafter referred to as the “Exchange Ratio”).  Notwithstanding the foregoing, the Board shall not be empowered to effect such exchange at any time after any Person (other than an Exempt Person), together with all Affiliates and Associates of such Person, becomes the Beneficial Owner of 50% or more of the Outstanding Shares.

 

(b)   Immediately upon the action of the Board ordering the exchange of any Rights pursuant to subsection (a) of this Section 24 and without any further action and without any notice, the right to exercise such Rights shall terminate and the only right thereafter of a holder of such Rights shall be to receive that number of shares of Common Stock equal to the number of such Rights held by such holder multiplied by the Exchange Ratio.  The Company shall promptly give public notice of any such exchange; provided, however, that the failure to give, or any defect in, such notice shall not affect the validity of such exchange.  The Company promptly shall mail a notice of any such exchange to all of the holders of such Rights at their last addresses as they appear upon the registry books of the Rights Agent.  Any notice which is mailed in the manner herein provided shall be deemed given, whether or not the holder receives the notice.  Each such notice of exchange will state the method by which the exchange of the Common Stock for Rights will be effected and, in the event of any partial exchange, the number of Rights which will be exchanged.  Any partial exchange shall be effected pro rata based on the number of Rights (other than Rights which have become void pursuant to the provisions of Section 7(e) hereof) held by each holder of Rights.

 

(c)   In any exchange pursuant to this Section 24, the Company, at its option, may substitute Preferred Stock (or Equivalent Preferred Stock, as such term is defined in Section 11(b) hereof) for Common Stock exchangeable for Rights, at the initial rate of one one-hundredth of a share of Preferred Stock (or Equivalent Preferred Stock) for each share of Common Stock, as appropriately adjusted to reflect stock splits, stock dividends and other similar transactions after the date hereof.

 

(d)   In the event that there shall not be sufficient shares of Common Stock issued but not outstanding or authorized but unissued to permit any exchange of Rights as contemplated in accordance with this Section 24, the Company shall take all such action as may be necessary to authorize additional shares of Common Stock for issuance upon exchange of the Rights.

 

  

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(e)   The Company shall not be required to issue fractions of shares of Common Stock or, in the case of certificated shares, to distribute certificates which evidence fractional shares of Common Stock.  In lieu of such fractional shares of Common Stock, there shall be paid to the registered holders of the Rights Certificates with regard to which such fractional shares of Common Stock would otherwise be issuable, an amount in cash equal to the same fraction of the current market value of a whole share of Common Stock.  For the purposes of this subsection (e), the current market value of a whole share of Common Stock shall be the closing price of a share of Common Stock (as determined pursuant to the second sentence of Section 11(d)(i) hereof) for the Trading Day immediately prior to the date of exchange pursuant to this Section 24.

 

Section 25.   Notice of Certain Events.

 

(a)   In case the Company shall propose, at any time after the Distribution Date, (i) to pay any dividend payable in stock of any class to the holders of Preferred Stock or to make any other distribution to the holders of Preferred Stock (other than a regular quarterly cash dividend out of earnings or retained earnings of the Company), or (ii) to offer to the holders of Preferred Stock rights or warrants to subscribe for or to purchase any additional shares of Preferred Stock or shares of stock of any class or any other securities, rights or options, or (iii) to effect any reclassification of its Preferred Stock (other than a reclassification involving only the subdivision of outstanding shares of Preferred Stock), or (iv) to effect any consolidation or merger into or with any other Person (other than a Subsidiary of the Company in a transaction which complies with Section 11(o) hereof), or to effect any sale or other transfer (or to permit one or more of its Subsidiaries to effect any sale or other transfer), in one transaction or a series of related transactions, of more than 50% of the assets, cash flow or earning power of the Company and its Subsidiaries (taken as a whole) to any other Person or Persons (other than the Company and/or any of its Subsidiaries in one or more transactions each of which complies with Section 11(o) hereof) or (v) to effect the liquidation, dissolution or winding up of the Company, then, in each such case, the Company shall give to each holder of a Rights Certificate, to the extent feasible and in accordance with Section 26 hereof, a notice of such proposed action, which shall specify the record date for the purposes of such stock dividend, distribution of rights or warrants, or the date on which such reclassification, consolidation, merger, sale, transfer, liquidation, dissolution or winding up is to take place and the date of participation therein by the holders of the shares of Preferred Stock, if any such date is to be fixed, and such notice shall be so given in the case of any action covered by clause (i) or (ii) above at least 20 days prior to the record date for determining holders of the shares of Preferred Stock for purposes of such action, and in the case of any such other action, at least 20 days prior to the date of the taking of such proposed action or the date of participation therein by the holders of the shares of Preferred Stock, whichever shall be the earlier.

 

(b)   In case any of the events set forth in Section 11(a)(ii) hereof shall occur, then, in any such case, (i) the Company shall as soon as practicable thereafter give to each holder of a Rights Certificate, to the extent feasible and in accordance with Section 26 hereof, a notice of the occurrence of such event, which shall specify the event and the consequences of the event to holders of Rights under Section 11(a)(ii) hereof and (ii) all references in the preceding paragraph to Preferred Stock shall be deemed thereafter to refer to Common Stock and/or, if appropriate, other securities.

 

Section 26.   Notices.  Notices or demands authorized by this Agreement to be given or made by the Rights Agent or by the holder of any Rights Certificate to or on the Company shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed (until another address is filed in writing by the Company with the Rights Agent) as follows:

 

  

28

  

 

Imation Corp.

1 Imation Place

Oakdale, Minnesota 55128

Attention:  Corporate Secretary

 

Subject to the provisions of Section 21, any notice or demand authorized by this Agreement to be given or made by the Company or by the holder of any Rights Certificate to or on the Rights Agent shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed (until another address is filed in writing by the Rights Agent with the Company) as follows:

 

Wells Fargo Bank, N.A.

1110 Centre Pointe Curve, Suite 101

Mendota Heights, MN 55210

Attention:  Dawn Coleman

 

Notices or demands authorized by this Agreement to be given or made by the Company or the Rights Agent to or on the holder of any Rights Certificate (or, if prior to the Distribution Date, to the holder of shares of Common Stock) shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed to such holder at the address of such holder as shown on the registry books of the Company.

 

Section 27.   Supplements and Amendments.  Prior to the Distribution Date, the Company and the Rights Agent shall, if the Company so directs, supplement or amend any provision of this Agreement without the approval of any holders of the Rights.  From and after the Distribution Date, the Company and the Rights Agent shall, if the Company so directs, supplement or amend this Agreement without the approval of any holders of Rights Certificates in order (i) to cure any ambiguity, (ii) to correct or supplement any provision contained herein which may be defective or inconsistent with any other provisions herein or (iii) to change or supplement the provisions hereunder in any manner which the Company may deem necessary or desirable and which shall not adversely affect the interests of the holders of Rights Certificates (other than an Acquiring Person or an Affiliate or Associate of an Acquiring Person).  Upon the delivery of a certificate from an appropriate officer of the Company which states that the proposed supplement or amendment is in compliance with the terms of this Section 27, the Rights Agent shall execute such supplement or amendment.  Prior to the Distribution Date, the interests of the holders of Rights shall be deemed coincident with the interests of the holders of Common Stock.  Notwithstanding anything herein to the contrary, this Agreement may not be amended (other than pursuant to clauses (i) or (ii) of the second preceding sentence) at a time when the Rights are not redeemable.  Notwithstanding anything herein to the contrary, the Rights Agent may, but shall not be obligated to, enter into any supplement or amendment that affects the Rights Agent’s own rights, duties, obligations or immunities under this Agreement.

 

Section 28.   Successors.  All the covenants and provisions of this Agreement by or for the benefit of the Company or the Rights Agent shall bind and inure to the benefit of their respective successors and assigns hereunder.

 

Section 29.   Determinations and Actions by the Board, etc.  The Board shall have the exclusive power and authority to administer this Agreement and to exercise all rights and powers specifically granted to the Board or as may be necessary or advisable in the administration of this Agreement, including the right and power to (i) interpret the provisions of this Agreement and (ii) make all determinations deemed necessary or advisable for the administration of this Agreement (including a determination to redeem or not redeem the Rights or to amend the Agreement).  All such actions, calculations, interpretations and determinations (including, for purposes of clause (y) below, all omissions with respect to the foregoing) which are done or made by the Board in good faith, shall (x) be final, conclusive and binding on the Company, the Rights Agent, the holders of the Rights and all other parties and (y) not subject the Board or any of the directors on the Board to any liability to the holders of the Rights.

 

  

29

  

 

Section 30.   Benefits of this Agreement.  Nothing in this Agreement shall be construed to give to any Person other than the Company, the Rights Agent and the registered holders of the Rights Certificates (and, prior to the Distribution Date, registered holders of the Common Stock) any legal or equitable right, remedy or claim under this Agreement; but this Agreement shall be for the sole and exclusive benefit of the Company, the Rights Agent and the registered holders of the Rights Certificates (and, prior to the Distribution Date, registered holders of the Common Stock).

 

Section 31.   Severability.  If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction or other authority to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated; provided, however, that notwithstanding anything in this Agreement to the contrary, if any such term, provision, covenant or restriction is held by such court or authority to be invalid, void or unenforceable and the Board determines in its good faith judgment that severing the invalid language from this Agreement would adversely affect the purpose or effect of this Agreement, the right of redemption set forth in Section 23 hereof shall be reinstated and shall not expire until the Close of Business on the 10th Business Day following the date of such determination by the Board.  Without limiting the foregoing, if any provision requiring a specific group of directors of the Company to act is held by any court of competent jurisdiction or other authority to be invalid, void or unenforceable, such determination shall then be made by the Board in accordance with applicable law and the Company Charter and the Company Bylaws.

 

Section 32.   Governing Law.  This Agreement, each Right and each Rights Certificate issued hereunder shall be deemed to be a contract made under the laws of the State of Delaware and for all purposes shall be governed by and construed in accordance with the laws of such State applicable to contracts made and to be performed entirely within such State.

 

Section 33.   Counterparts.  This Agreement may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument.

 

Section 34.   Descriptive Headings.  Descriptive headings of the several sections of this Agreement are inserted for convenience only and shall not control or affect the meaning or construction of any of the provisions hereof.

 

[Signature page follows.]

 

 

  

30

  

 

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

 

 

	 	IMATION CORP.
	 	 	 
	 	By:	/s/ John P. Breedlove
	 	Name:	John P. Breedlove
	 	Title:	Vice President, General Counsel and Corporate Secretary
	 	 	 
	 	 	 
	 	WELLS FARGO BANK, N.A.
	 	 	 
	 	By:	/s/ Darcie Rummel
	 	Name:	Darcie Rummel
	 	Title:	Officer

 

  

[Signature Page to 382 Rights Agreement]

  

Exhibit A

 

FORM OF

CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS

 

OF

 

SERIES A PARTICIPATING PREFERRED STOCK

 

OF

 

IMATION CORP.

 

 

Pursuant to Section 151 of the General Corporation Law

of the State of Delaware

 

Imation Corp., a Delaware corporation (the “Corporation”), pursuant to the provisions of Sections 103 and 151 of the General Corporation Law of the State of Delaware, does hereby state and certify that pursuant to the authority vested in the Board of Directors of the Corporation (the “Board”) by the Restated Certificate of Incorporation of the Corporation, the Board on August 6, 2015 duly adopted the following resolutions creating a series of Preferred Stock designated as Series A Participating Preferred Stock:

 

RESOLVED, that pursuant to the authority vested in the Board in accordance with the provisions of its Restated Certificate of Incorporation, a series of Preferred Stock of the Corporation be and hereby is created, and that the designation and amount thereof and the voting powers, preferences and relative, participating, optional and other special rights of the shares of such series, and the qualifications, limitations or restrictions thereof are as follows:

 

Section 1.  Designation and Amount.  The shares of such series shall be designated as “Series A Participating Preferred Stock” and the number of shares constituting such series shall be 1,000,000.  Such number of shares may be increased or decreased by resolution of the Board; provided, that no decrease shall reduce the number of shares of Series A Participating Preferred Stock to a number less than the number of shares then outstanding plus the number of shares reserved for issuance upon the exercise of outstanding options, rights or warrants or upon the conversion of any outstanding securities issued by the Corporation convertible into Series A Participating Preferred Stock.

 

Section 2.  Dividends and Distributions.

 

 (A)  Subject to the prior and superior rights of the holders of any shares of any series of Preferred Stock ranking prior and superior to the shares of Series A Participating Preferred Stock with respect to dividends, the holders of shares of Series A Participating Preferred Stock shall be entitled to receive, when, as and if declared by the Board out of funds legally available for the purpose, quarterly dividends payable in cash on the last day of March, June, September and December in each year (each such date being referred to herein as a “Quarterly Dividend Payment Date”), commencing on the first Quarterly Dividend Payment Date after the first issuance of a share or fraction of a share of Series A Participating Preferred Stock, in an amount per share (rounded to the nearest cent) equal to the greater of (a) $1.00 or (b) subject to the provision for adjustment hereinafter set forth, 100 times the aggregate per share amount of all cash dividends, and 100 times the aggregate per share amount (payable in kind) of all non-cash dividends or other distributions other than a dividend payable in shares of Common Stock or a subdivision of the outstanding shares of Common Stock (by reclassification or otherwise), declared on the common stock, par value $0.01 per share, of the Corporation (the “Common Stock”), since the immediately preceding Quarterly Dividend Payment Date, or, with respect to the first Quarterly Dividend Payment Date, since the first issuance of any share or fraction of a share of Series A Participating Preferred Stock.  In the event the Corporation shall at any time after the Rights Dividend Declaration Date (i) declare any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock or (iii) combine the outstanding Common Stock, through a reverse stock split or otherwise, into a smaller number of shares, then in each such case the amount to which holders of shares of Series A Participating Preferred Stock were entitled immediately prior to such event under clause (b) of the preceding sentence shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.

 

  

A-1

  

 

(B)  The Corporation shall declare a dividend or distribution on the Series A Participating Preferred Stock as provided in Paragraph (A) of this Section 2 immediately after it declares a dividend or distribution on the Common Stock (other than a dividend payable in shares of Common Stock); provided that, in the event no dividend or distribution shall have been declared on the Common Stock during the period between any Quarterly Dividend Payment Date and the next subsequent Quarterly Dividend Payment Date, a dividend of $0.10 per share on the Series A Participating Preferred Stock shall nevertheless be payable on such subsequent Quarterly Dividend Payment Date.

 

(C)  Dividends shall begin to accrue and be cumulative on outstanding shares of Series A Participating Preferred Stock from the Quarterly Dividend Payment Date next preceding the date of issue of such shares of Series A Participating Preferred Stock, unless the date of issue of such shares is prior to the record date for the first Quarterly Dividend Payment Date, in which case dividends on such shares shall begin to accrue from the date of issue of such shares, or unless the date of issue is a Quarterly Dividend Payment Date or is a date after the record date for the determination of holders of shares of Series A Participating Preferred Stock entitled to receive a quarterly dividend and before such Quarterly Dividend Payment Date, in either of which events such dividends shall begin to accrue and be cumulative from such Quarterly Dividend Payment Date.  Accrued but unpaid dividends shall not bear interest.  Dividends paid on the shares of Series A Participating Preferred Stock in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding.  The Board may fix a record date for the determination of holders of shares of Series A Participating Preferred Stock entitled to receive payment of a dividend or distribution declared thereon, which record date shall be no more than 30 days prior to the date fixed for the payment thereof.

 

Section 3.  Voting Rights.  The holders of shares of Series A Participating Preferred Stock shall have the following voting rights:

 

(A)  Subject to the provision for adjustment hereinafter set forth, each share of Series A Participating Preferred Stock shall entitle the holder thereof to 100 votes on all matters submitted to a vote of the stockholders of the Corporation.  In the event the Corporation shall at any time after the Rights Dividend Declaration Date (i) declare any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock or (iii) combine the outstanding Common Stock into a smaller number of shares, through a reverse stock split or otherwise, then in each such case the number of votes per share to which holders of shares of Series A Participating Preferred Stock were entitled immediately prior to such event shall be adjusted by multiplying such number by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.

 

(B)  Except as otherwise provided herein or by law, the holders of shares of Series A Participating Preferred Stock and the holders of shares of Common Stock shall vote together as one class on all matters submitted to a vote of stockholders of the Corporation.

 

  

A-2

  

 

(C)  (i)  If at any time dividends on any Series A Participating Preferred Stock shall be in arrears in an amount equal to six quarterly dividends thereon, the occurrence of such contingency shall mark the beginning of a period (herein called a “default period”) which shall extend until such time when all accrued and unpaid dividends for all previous quarterly dividend periods and for the current quarterly dividend period on all shares of Series A Participating Preferred Stock then outstanding shall have been declared and paid or set apart for payment.  During each default period, all holders of Preferred Stock (including holders of the Series A Participating Preferred Stock) with dividends in arrears in an amount equal to six quarterly dividends thereon, voting as a class, irrespective of series, shall have the right to elect two directors.

 

(ii)  During any default period, such voting right of the holders of Series A Participating Preferred Stock may be exercised initially at a special meeting called pursuant to Paragraph (C)(iii) of this Section 3 or at any annual meeting of stockholders, and thereafter at annual meetings of stockholders; provided that such voting right shall not be exercised unless the holders of 10% in number of shares of Preferred Stock outstanding shall be present in person or by proxy.  The absence of a quorum of the holders of Common Stock shall not affect the exercise by the holders of Preferred Stock of such voting right.  At any meeting at which the holders of Preferred Stock shall exercise such voting right initially during an existing default period, they shall have the right, voting as a class, to elect directors to fill such vacancies, if any, in the Board as may then exist up to two directors or, if such right is exercised at an annual meeting, to elect two directors.  If the number which may be so elected at any special meeting does not amount to the required number, the holders of the Preferred Stock shall have the right to make such increase in the number of directors as shall be necessary to permit the election by them of the required number.  After the holders of the Preferred Stock shall have exercised their right to elect directors in any default period and during the continuance of such period, the number of directors shall not be increased or decreased except by vote of the holders of Preferred Stock as herein provided or pursuant to the rights of any equity securities ranking senior to or pari passu with the Series A Participating Preferred Stock.

 

(iii)  Unless the holders of Preferred Stock shall, during an existing default period, have previously exercised their right to elect directors, the Board may order, or any stockholder or stockholders owning in the aggregate not less than 10% of the total number of shares of Preferred Stock outstanding, irrespective of series, may request, the calling of a special meeting of the holders of Preferred Stock, which meeting shall thereupon be called by the President, a Vice President or the Secretary of the Corporation.  Notice of such meeting and of any annual meeting at which holders of Preferred Stock are entitled to vote pursuant to this Paragraph (C)(iii) shall be given to each holder of record of Preferred Stock by mailing a copy of such notice to such holder at such holder’s last address as the same appears on the books of the Corporation.  Such meeting shall be called for a time not earlier than 20 days and not later than 60 days after such order or request or in default of the calling of such meeting within 60 days after such order or request; such meeting may be called on similar notice by any stockholder or stockholders owning in the aggregate not less than 10% of the total number of shares of Preferred Stock outstanding.  Notwithstanding the provisions of this Paragraph (C)(iii), no such special meeting shall be called during the period within 60 days immediately preceding the date fixed for the next annual meeting of the stockholders.

 

  

A-3

  

 

(iv)  In any default period, the holders of Common Stock, and other classes of stock of the Corporation if applicable, shall continue to be entitled to elect the whole number of directors until the holders of Preferred Stock shall have exercised their right to elect two directors voting as a class, after the exercise of which right (x) the directors so elected by the holders of Preferred Stock shall continue in office until their successors shall have been elected by such holders or until the expiration of the default period and (y) any vacancy in the Board may (except as provided in Paragraph (C)(ii) of this Section 3) be filled by vote of a majority of the remaining directors theretofore elected by the holders of the class of stock which elected the director whose office shall have become vacant.  References in this Paragraph (C) of this Section 3 to directors elected by the holders of a particular class of stock shall include directors elected by such directors to fill vacancies as provided in clause (y) of the foregoing sentence.

 

(v)  Immediately upon the expiration of a default period, (x) the right of the holders of Preferred Stock as a class to elect directors shall cease, (y) the term of any directors elected by the holders of Preferred Stock as a class shall terminate and (z) the number of directors shall be such number as may be provided for in the certificate of incorporation or bylaws irrespective of any increase made pursuant to the provisions of Paragraph (C)(ii) of this Section 3 (such number being subject, however, to change thereafter in any manner provided by law or in the certificate of incorporation or bylaws).  Any vacancies in the Board effected by the provisions of clauses (y) and (z) in the preceding sentence may be filled by a majority of the remaining directors.

 

(D)  Except as set forth herein, holders of Series A Participating Preferred Stock shall have no special voting rights and their consent shall not be required (except to the extent they are entitled to vote with holders of Common Stock as set forth herein) for taking any corporate action.

 

Section 4.  Certain Restrictions.  (A)  Whenever quarterly dividends or other dividends or distributions payable on the Series A Participating Preferred Stock as provided in Section 2 are in arrears, thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on shares of Series A Participating Preferred Stock outstanding shall have been paid in full, the Corporation shall not:

 

(i)  declare or pay dividends on, make any other distributions on, or redeem or purchase or otherwise acquire for consideration any shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Participating Preferred Stock;

 

(ii)  declare or pay dividends on or make any other distributions on any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Participating Preferred Stock, except dividends paid ratably on the Series A Participating Preferred Stock and all such parity stock on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled;

 

(iii)  except as provided in Paragraph (A)(iv) of this Section 4, redeem or purchase or otherwise acquire for consideration shares of any stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Participating Preferred Stock; provided that the Corporation may at any time redeem, purchase or otherwise acquire shares of any such parity stock in exchange for shares of any stock of the Corporation ranking junior (either as to dividends or upon dissolution, liquidation or winding up) to the Series A Participating Preferred Stock; or

 

(iv)  purchase or otherwise acquire for consideration any shares of Series A Participating Preferred Stock, or any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Participating Preferred Stock, except in accordance with a purchase offer made in writing or by publication (as determined by the Board) to all holders of such shares upon such terms as the Board, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, shall determine in good faith will result in fair and equitable treatment among the respective series or classes.

 

  

A-4

  

 

(B)  The Corporation shall not permit any subsidiary of the Corporation to purchase or otherwise acquire for consideration any shares of stock of the Corporation unless the Corporation could, under Paragraph (A) of this Section 4, purchase or otherwise acquire such shares at such time and in such manner.

 

Section 5.  Reacquired Shares.  Any shares of Series A Participating Preferred Stock purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and cancelled promptly after the acquisition thereof.  All such shares shall upon their cancellation become authorized but unissued shares of Preferred Stock and may be reissued as part of a new series of Preferred Stock to be created by resolution or resolutions of the Board, subject to the conditions and restrictions on issuance set forth herein, in the Restated Certificate of Incorporation, or in any other Certificate of Designations creating a series of preferred stock or similar stock of the Company or as otherwise required by law.

 

Section 6.  Liquidation, Dissolution or Winding Up.

 

(A)  Upon any liquidation (voluntary or otherwise), dissolution or winding up of the Corporation, no distribution shall be made to the holders of shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Participating Preferred Stock unless, prior thereto, the holders of shares of Series A Participating Preferred Stock shall have received an amount equal to $100 per share of Series A Participating Preferred Stock, plus an amount equal to accrued and unpaid dividends and distributions thereon, whether or not declared, to the date of such payment (the “Series A Liquidation Preference”).  Following the payment of the full amount of the Series A Liquidation Preference, no additional distributions shall be made to the holders of shares of Series A Participating Preferred Stock unless, prior thereto, the holders of shares of Common Stock shall have received an amount per share (the “Common Adjustment”) equal to the quotient obtained by dividing (i) the Series A Liquidation Preference by (ii) 100 (as appropriately adjusted as set forth in Paragraph (C) of this Section 6 to reflect such events as stock splits, stock dividends and recapitalizations with respect to the Common Stock) (such number in clause (ii), the “Adjustment Number”).  In the event, however, that there are not sufficient assets available to permit payment in full of the Common Adjustment, then such remaining assets shall be distributed ratably to the holders of Common Stock.  Following the payment of the full amount of the Series A Liquidation Preference and the Common Adjustment in respect of all outstanding shares of Series A Participating Preferred Stock and Common Stock, respectively, holders of Series A Participating Preferred Stock and holders of shares of Common Stock shall receive their ratable and proportionate share of the remaining assets to be distributed in the ratio of the Adjustment Number to one with respect to such Preferred Stock and Common Stock, on a per share basis, respectively.

 

(B)  In the event, however, that there are not sufficient assets available to permit payment in full of the Series A Liquidation Preference and the liquidation preferences of all other series of Preferred Stock, if any, which rank on a parity with the Series A Participating Preferred Stock, then such remaining assets shall be distributed ratably to the holders of such parity shares in proportion to their respective liquidation preferences.

 

(C)  In the event the Corporation shall at any time after the Rights Dividend Declaration Date (i) declare any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock or (iii) combine the outstanding Common Stock into a smaller number of shares, through a reverse stock split or otherwise, then in each such case the Adjustment Number in effect immediately prior to such event shall be adjusted by multiplying such Adjustment Number by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.

 

  

A-5

  

 

Section 7.  Consolidation, Merger, etc.  In case the Corporation shall enter into any consolidation, merger, combination or other transaction in which the shares of Common Stock are exchanged for or changed into other stock or securities, cash and/or any other property, then in any such case the shares of Series A Participating Preferred Stock shall at the same time be similarly exchanged or changed in an amount per share (subject to the provision for adjustment hereinafter set forth) equal to 100 times the aggregate amount of stock, securities, cash and/or any other property (payable in kind), as the case may be, into which or for which each share of Common Stock is changed or exchanged.  In the event the Corporation shall at any time after the Rights Dividend Declaration Date (i) declare any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock or (iii) combine the outstanding Common Stock into a smaller number of shares, through a reverse stock split or otherwise, then in each such case the amount set forth in the preceding sentence with respect to the exchange or change of shares of Series A Participating Preferred Stock shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.

 

Section 8.  No Redemption.  The shares of Series A Participating Preferred Stock shall not be redeemable.

 

Section 9.  Ranking.  The Series A Participating Preferred Stock shall rank junior to all other series of the Corporation’s Preferred Stock as to the payment of dividends and the distribution of assets, unless the terms of any such series shall provide otherwise.

 

Section 10.  Amendment.  At any time when any shares of Series A Participating Preferred Stock are outstanding, neither the Restated Certificate of Incorporation of the Corporation nor this Certificate of Designation shall be amended in any manner which would materially alter or change the powers, preferences or special rights of the Series A Participating Preferred Stock so as to affect them adversely without the affirmative vote of the holders of a majority of the outstanding shares of Series A Participating Preferred Stock, voting separately as a class.

 

Section 11.  Fractional Shares.  Series A Participating Preferred Stock may be issued in fractions of a share which shall entitle the holder, in proportion to such holder’s fractional shares, to exercise voting rights, receive dividends, participate in distributions and to have the benefit of all other rights of holders of Series A Participating Preferred Stock.

 

IN WITNESS WHEREOF, this Certificate of Designations, Preferences and Rights is executed on behalf of the Corporation by its duly authorized officer on this __ day of August, 2015.

 

	 	IMATION CORP.
	 	 	 
	 	 	 
	 	By:	 
	 	Name:	 
	 	Title:	 

 

  

A-6

  

Exhibit B

 

[Form of Rights Certificate]

 

Certificate No.  R-                                           Rights

 

NOT EXERCISABLE AFTER 5:00 P.M., NEW YORK CITY TIME ON AUGUST 7, 2018, UNLESS THE RIGHTS ARE PREVIOUSLY REDEEMED, EXCHANGED OR TERMINATED.  THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE COMPANY, AT $.001 PER RIGHT ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT.  UNDER CERTAIN CIRCUMSTANCES, RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING PERSON OR AN AFFILIATE OR ASSOCIATE OF AN ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT) AND ANY SUBSEQUENT HOLDER OF SUCH RIGHTS MAY BECOME NULL AND VOID.  [IF APPLICABLE, THE FOLLOWING LEGEND SHALL REPLACE THE PRECEDING SENTENCE – THE RIGHTS REPRESENTED BY THIS RIGHTS CERTIFICATE ARE OR WERE BENEFICIALLY OWNED BY A PERSON WHO WAS OR BECAME AN ACQUIRING PERSON OR AN AFFILIATE OR ASSOCIATE OF AN ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT).  ACCORDINGLY, THIS RIGHTS CERTIFICATE AND THE RIGHTS REPRESENTED HEREBY MAY BECOME NULL AND VOID IN THE CIRCUMSTANCES SPECIFIED IN SECTION 7(e) OF SUCH AGREEMENT.]

 

Rights Certificate

 

Imation Corp.

 

This certifies that _______________, or registered assigns, is the registered owner of the number of Rights set forth above, each of which entitles the owner thereof, subject to the terms, provisions and conditions of the 382 Rights Agreement, dated as of August 7, 2015 (the “Rights Agreement”), as it may be amended, restated, renewed or extended from time to time, between Imation Corp., a Delaware corporation (the “Company”), and Wells Fargo Bank, N.A., a national banking association (the “Rights Agent”), to purchase from the Company at any time prior to 5:00 P.M., New York City time on August 7, 2018, unless the Rights are previously redeemed, exchanged or terminated, at the office or offices of the Rights Agent designated for such purpose, or its successors as Rights Agent, one one-hundredth of a fully paid, non-assessable share of Series A Participating Preferred Stock (the “Preferred Stock”) of the Company, at a purchase price of $15.00 per one one-hundredth of a share (the “Purchase Price”), upon presentation and surrender of this Rights Certificate with the Form of Election to Purchase and related Certificate duly executed.  The number of Rights evidenced by this Rights Certificate (and the number of shares which may be purchased upon exercise thereof) set forth above, and the Purchase Price per share set forth above, are the number and Purchase Price as of August 7, 2015, based on the Preferred Stock as constituted at such date.  The Company reserves the right to require prior to the occurrence of a Triggering Event (as such term is defined in the Rights Agreement) that a number of Rights be exercised so that only whole shares of Preferred Stock will be issued.

 

Upon the occurrence of a Section 11(a)(ii) Event (as such term is defined in the Rights Agreement), if the Rights evidenced by this Rights Certificate are Beneficially Owned by (i) an Acquiring Person or an Affiliate or Associate of any such Acquiring Person (as such terms are defined in the Rights Agreement), (ii) a transferee of any such Acquiring Person, Associate or Affiliate or (iii) under certain circumstances specified in the Rights Agreement, a transferee of a person who, after such transfer, became an Acquiring Person or an Affiliate or Associate of an Acquiring Person, such Rights shall become null and void and no holder hereof shall have any right with respect to such Rights from and after the occurrence of such Section 11(a)(ii) Event.

 

  

B-1

  

 

As provided in the Rights Agreement, the Purchase Price and the number and kind of shares of Preferred Stock or other securities, which may be purchased upon the exercise of the Rights evidenced by this Rights Certificate, are subject to modification and adjustment upon the happening of certain events, including Triggering Events (as defined in the Rights Agreement).

 

This Rights Certificate is subject to all of the terms, provisions and conditions of the Rights Agreement, which terms, provisions and conditions are hereby incorporated herein by reference and made a part hereof and to which Rights Agreement reference is hereby made for a full description of the rights, limitations of rights, obligations, duties and immunities hereunder of the Rights Agent, the Company and the holders of the Rights Certificates, which limitations of rights include the temporary suspension of the exercisability of such Rights under the specific circumstances set forth in the Rights Agreement.  Copies of the Rights Agreement are on file at the above-mentioned office of the Rights Agent and are also available upon written request to the Rights Agent.

 

This Rights Certificate, with or without other Rights Certificates, upon surrender at the office of the Rights Agent designated for such purpose, may be exchanged for another Rights Certificate or Rights Certificates of like tenor and date evidencing Rights entitling the holder to purchase a like aggregate number of one one-hundredths of a share of Preferred Stock as the Rights evidenced by the Rights Certificate or Rights Certificates surrendered shall have entitled such holder to purchase.  If this Rights Certificate shall be exercised in part, the holder shall be entitled to receive upon surrender hereof another Rights Certificate or Rights Certificates for the number of whole Rights not exercised.

 

Subject to the provisions of the Rights Agreement, the Rights evidenced by this Certificate may be redeemed by the Company at its option at any time prior to the earlier of (A) the Distribution Date (as such term is defined in the Rights Agreement) and (B) the Final Expiration Date (as such term is defined in the Rights Agreement), at a redemption price of $0.001 per Right.  Such Rights may also be exchanged by the Company in whole or in part for shares of Common Stock as provided in the Rights Agreement.

 

No fractional shares of Preferred Stock will be issued upon the exercise of any Right or Rights evidenced hereby (other than fractions which are integral multiples of one one-hundredth of a share of Preferred Stock, which may, at the election of the Company, be evidenced by depositary receipts), but in lieu thereof a cash payment will be made, as provided in the Rights Agreement.  The Company, at its election, may require that a number of Rights be exercised so that only whole shares of Preferred Stock would be issued.

 

No holder of this Rights Certificate shall be entitled to vote or receive dividends or be deemed for any purpose the holder of shares of Preferred Stock or of any other securities of the Company which may at any time be issuable on the exercise hereof, nor shall anything contained in the Rights Agreement or herein be construed to confer upon the holder hereof, as such, any of the rights of a stockholder of the Company or any right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or to give consent to or withhold consent from any corporate action, or to receive notice of meetings or other actions affecting stockholders (except as provided in the Rights Agreement), or to receive dividends or subscription rights, or otherwise, until the Right or Rights evidenced by this Rights Certificate shall have been exercised as provided in the Rights Agreement.

 

This Rights Certificate shall not be valid or obligatory for any purpose until it shall have been countersigned by the Rights Agent.

 

  

B-2

  

 

WITNESS the facsimile signature of the proper officers of the Company.

 

Dated as of __________, _____

 

	ATTEST:	 	Imation Corp.
	 	 	 	 
	 	 	By:	 
	Secretary 	 	Title:	 

 

Countersigned:

 

Wells Fargo Bank, N.A.

 

	By:	 	 
	 	Authorized Signature	 

 

  

B-3

  

 

[Form of Reverse Side of Rights Certificate]

 

FORM OF ASSIGNMENT

 

(To be executed by the registered holder if such

holder desires to transfer the Rights Certificate.)

 

FOR VALUE RECEIVED _____________________________________________________________________________

hereby sells, assigns and transfers unto ________________________________________________________________________

_______________________________________________________________________________________________________

(Please print name and address of transferee)

this Rights Certificate, together with all right, title and interest therein, and does hereby irrevocably constitute and appoint _________ Attorney, to transfer the within Rights Certificate on the books of the within named Company, with full power of substitution.

 

	Dated: __________, _____	 
	 	Signature:

 

Signature Medallion Guaranteed:

 

CERTIFICATE

 

 

The undersigned hereby certifies by checking the appropriate boxes that:

 

(1)  this Rights Certificate [  ] is [  ] is not being sold, assigned and transferred by or on behalf of a Person who is or was an Acquiring Person or an Affiliate or Associate of any such Acquiring Person (as such terms are defined pursuant to the Rights Agreement);

 

(2)  after due inquiry and to the best knowledge of the undersigned, it [  ] did [  ] did not acquire the Rights evidenced by this Rights Certificate from any Person who is, was or subsequently became an Acquiring Person or an Affiliate or Associate of an Acquiring Person.

 

	Dated: __________, _____	 
	 	Signature:

 

Signature Medallion Guaranteed:

 

NOTICE

 

The signature to the foregoing Assignment and Certificate must correspond to the name as written upon the face of this Rights Certificate in every particular, without alteration or enlargement or any change whatsoever.

 

  

B-1

  

FORM OF ELECTION TO PURCHASE

 

(To be executed if holder desires to exercise Rights

represented by the Rights Certificate.)

 

To: IMATION CORP.

 

The undersigned hereby irrevocably elects to exercise __________ Rights represented by this Rights Certificate to purchase the shares of Preferred Stock issuable upon the exercise of the Rights (or such other securities of the Company or of any other person which may be issuable upon the exercise of the Rights) and requests that certificates for such shares be issued in the name of and delivered to:

 

 

Please insert social security

or other identifying number _____________________________________________________

 

Please print name and address

__________________________________________________________________________________________

 

__________________________________________________________________________________________

If such number of Rights shall not be all the Rights evidenced by this Rights Certificate, a new Rights

Certificate for the balance of such Rights shall be registered in the name of and delivered to:

 

 

Please insert social security

or other identifying number _____________________________________________________

 

Please print name and address

__________________________________________________________________________________________

 

__________________________________________________________________________________________

 

	Dated: __________, _____	 
	 	Signature:

 

Signature Medallion Guaranteed:

 

  

B-2

  

CERTIFICATE

 

The undersigned hereby certifies by checking the appropriate boxes that:

 

(1)  the Rights evidenced by this Rights Certificate [  ] are [  ] are not being exercised by or on behalf of a Person who is or was an Acquiring Person or an Affiliate or Associate of any such Acquiring Person (as such terms are defined pursuant to the Rights Agreement);

 

(2)  after due inquiry and to the best knowledge of the undersigned, it [  ] did [  ] did not acquire the Rights evidenced by this Rights Certificate from any Person who is, was or became an Acquiring Person or an Affiliate or Associate of an Acquiring Person.

 

  

	Dated: __________, _____	 
	 	Signature:

 

Signature Medallion Guaranteed:

 

 

 

NOTICE

 

The signature to the foregoing Election to Purchase and Certificate must correspond to the name as written upon the face of this Rights Certificate in every particular, without alteration or enlargement or any change whatsoever.

 

  

B-3

  

Exhibit C

 

FORM OF

SUMMARY OF RIGHTS TO PURCHASE

STOCK UNDER 382 RIGHTS AGREEMENT

 

On August 6, 2015, the Board of Directors (the “Board”) of Imation Corp. (the “Company”) authorized and declared a dividend distribution of one right (a “Right”) for each outstanding share of Common Stock, par value $0.01 per share, of the Company (the “Common Stock”), to stockholders of record at the close of business on September 10, 2015 (the “Record Date”).  Each Right entitles the registered holder to purchase from the Company a unit consisting of one one-hundredth of a share (a “Unit”) of Series A Participating Preferred Stock, par value $0.01 per share (the “Preferred Stock”) at a purchase price of $15.00 per Unit, subject to adjustment (the “Purchase Price”).  The description and terms of the Rights are set forth in a 382 Rights Agreement, dated as of August 7, 2015 (the “Rights Agreement”), by and between the Company and Wells Fargo Bank, N.A., a national banking association, as Rights Agent.  The Rights are intended to avoid an “ownership change” within the meaning of Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”), and thereby preserve the current ability of the Company to utilize certain net operating loss carryovers and other tax benefits of the Company and its subsidiaries (the “Tax Benefits”).

 

Initially, the Rights will be attached to the shares of Common Stock underlying the balances indicated in the book-entry account system of the transfer agent for the Common Stock or, in the case of certificated shares, all Common Stock certificates representing shares then outstanding, and no separate rights certificates (“Rights Certificates”) will be distributed.  Subject to certain exceptions specified in the Rights Agreement, the Rights will separate from the Common Stock and a distribution date (a “Distribution Date”) will occur upon the earlier of (i) 10 business days (or such later date as the Board shall determine) following a public announcement that a person or group of affiliated or associated persons has become an Acquiring Person (as described below) or (ii) 10 business days (or such later date as the Board shall determine) following the commencement of a tender offer, exchange offer or other transaction that, upon consummation thereof, would result in a person or group of affiliated or associated persons becoming an Acquiring Person.  Until the Distribution Date, (A) the Rights will be evidenced by the balances indicated in the book-entry account system of the transfer agent for the Common Stock registered in the names of the holders of the Common Stock or, in the case of certificated shares, the Common Stock certificates, and will be transferred with and only with such shares or, in the case of certificated shares, Common Stock certificates, (B) confirmation and account statements sent to the holders of shares of Common Stock in book-entry form or, in the case of certificated shares, new Common Stock certificates issued after the Record Date, will contain a notation incorporating the Rights Agreement by reference and (C) the transfer of any shares of Common Stock or, in the case of certificated shares, certificates for Common Stock, outstanding will also constitute the transfer of the Rights associated with such shares of Common Stock or, in the case of certificated shares, the Common Stock represented by such certificates.  Pursuant to the Rights Agreement, the Company reserves the right to require prior to the occurrence of a Triggering Event (as defined below) that, upon any exercise of Rights, a number of Rights be exercised so that only whole shares of Preferred Stock will be issued.

 

An Acquiring Person is any person or group of affiliated or associated persons who is or becomes the beneficial owner of 4.90% or more of the outstanding shares of Common Stock other than as a result of repurchases of stock by the Company, dividends or distributions by the Company, stock issued under certain benefit plans or certain inadvertent actions by stockholders.  Beneficial ownership is determined as provided in the Rights Agreement and generally includes, without limitation, any ownership of securities a Person would be deemed to actually or constructively own for purposes of Section 382 of the Code or the Treasury Regulations promulgated thereunder.  The Rights Agreement provides that the following shall not be deemed an Acquiring Person for purposes of the Rights Agreement:  (i) the Company or any Subsidiary of the Company and any employee benefit plan of the Company, or of any Subsidiary of the Company, or any Person or entity organized, appointed or established by the Company for or pursuant to the terms of any such plan or (ii) any person that, as of August 7, 2015, is the beneficial owner of 4.90% or more of the outstanding shares of Common Stock (such person, an “Existing Holder”) unless and until such Existing Holder acquires beneficial ownership of additional shares of Common Stock in an amount in excess of 0.5% of the outstanding shares of Common Stock (other than pursuant to a dividend or distribution paid or made by the Company on the outstanding shares of Common Stock or pursuant to a split or subdivision of the outstanding shares of Common Stock) and after such acquisition is the beneficial owner of 4.90% or more of the then outstanding shares of Common Stock.

 

  

C-1

  

 

The Rights Agreement provides that a Person shall not become an Acquiring Person for purpose of the Rights Agreement in a transaction that the Board determines, in its sole discretion, is exempt from the Rights Agreement, which determination shall be made in the sole and absolute discretion of the Board, upon request by any Person prior to the date upon which such Person would otherwise become an Acquiring Person, including, without limitation, if the Board determines that (i) neither the beneficial ownership of shares of Common Stock by such Person, directly or indirectly, as a result of such transaction nor any other aspect of such transaction would jeopardize or endanger the availability to the Company of the Tax Benefits or (ii) such transaction is otherwise in the best interests of the Company.

 

The Rights are not exercisable until the Distribution Date and will expire on the earliest of (i) 5:00 P.M., New York City time on August 7, 2018 (the “Final Expiration Date”), (ii) the time at which the Rights are redeemed or exchanged as provided in the Rights Agreement, (iii) the date on which the Board determines in its sole discretion that this Agreement is no longer necessary for the preservation of material valuable Tax Benefits, (iv) the beginning of a taxable year of the Company to which the Board determines in its sole discretion that no Tax Benefits may be carried forward, (v) the date on which the Board determines in its sole discretion that the Rights Agreement is no longer in the best interest of the Company and its stockholders and (vi) the first anniversary of the adoption of the Agreement if shareholder approval has not been received by or on such date.

 

As soon as practicable after the Distribution Date, Rights Certificates will be mailed to holders of record of the Common Stock as of the close of business on the Distribution Date and, thereafter, the separate Rights Certificates alone will represent the Rights.

 

In the event that a person or group of affiliated or associated persons becomes an Acquiring Person, each holder of a Right will thereafter have the right to receive, upon exercise on or after the Distribution Date, Common Stock (or, in certain circumstances, cash, property or other securities of the Company) having a value equal to two times the exercise price of the Right.  Notwithstanding any of the foregoing, following the occurrence of the event set forth in this paragraph, all Rights that are, or (under certain circumstances specified in the Rights Agreement) were, beneficially owned by any Acquiring Person will be null and void.

 

For example, at an exercise price of $15.00 per Right, each Right not owned by an Acquiring Person (or by certain related parties) following the event set forth in the preceding paragraph would entitle its holder to purchase $30.00 worth of Common Stock (or other consideration, as noted above) for $15.00.  Assuming that the Common Stock had a per share value of $5.00 at such time, the holder of each valid Right would be entitled to purchase six shares of Common Stock for $15.00.

 

In the event that, at any time following the first date of public announcement that a person has become an Acquiring Person or that discloses information which reveals the existence of an Acquiring Person or such earlier date as a majority of the Board becomes aware of the existence of an Acquiring Person (any such date, the “Stock Acquisition Date”), (i) the Company engages in a merger or other business combination transaction in which the Company is not the surviving corporation, (ii) the Company engages in a merger or other business combination transaction in which the Company is the surviving corporation and the Common Stock of the Company is changed or exchanged or (iii) 50% or more of the Company’s assets, cash flow or earning power is sold or transferred, each holder of a Right (except Rights which have previously been voided as set forth above) shall thereafter have the right to receive, upon exercise, common stock of the acquiring company having a value equal to two times the Purchase Price.  The events set forth in this paragraph and in the second preceding paragraph are referred to as the “Triggering Events.”

 

  

C-2

  

 

At any time after a the Stock Acquisition Date and prior to the acquisition by such person or group of 50% or more of the “outstanding shares” of Common Stock, the Board may exchange the Rights (other than Rights owned by such person or group which have become void), in whole or in part, for Common Stock or Preferred Stock at an exchange ratio of one share of Common Stock, or one one-hundredth of a share of Preferred Stock (or of a share of a class or series of the Company’s preferred stock having equivalent rights, preferences and privileges), per Right (subject to adjustment).

 

The Purchase Price payable, and the number of Units of Preferred Stock or other securities or property issuable, upon exercise of the Rights are subject to adjustment from time to time to prevent dilution (i) in the event of a stock dividend on, or a subdivision, combination or reclassification of, the Preferred Stock, (ii) if holders of the Preferred Stock are granted certain rights or warrants to subscribe for Preferred Stock or convertible securities at less than the current market price of the Preferred Stock or (iii) upon the distribution to holders of the Preferred Stock of evidences of indebtedness or assets (excluding regular quarterly cash dividends) or of subscription rights or warrants (other than those referred to above).

 

With certain exceptions, no adjustment in the Purchase Price will be required until cumulative adjustments amount to at least 1% of the Purchase Price.  No fractional Units will be required to be issued and, in lieu thereof, an adjustment in cash will be made based on the market price of the Preferred Stock on the last trading date prior to the date of exercise.

 

At any time until the earlier of (A) the Distribution Date or (B) the Final Expiration Date, the Company may redeem the Rights in whole, but not in part, at a price of $0.001 per Right.  Immediately upon the action of the Board ordering redemption of the Rights, the Rights will terminate and the only right of the holders of Rights will be to receive the $0.001 redemption price.

 

Until a Right is exercised, the holder thereof, as such, will have no separate rights as a stockholder of the Company, including the right to vote or to receive dividends in respect of Rights.  While the distribution of the Rights generally should not be taxable to stockholders or to the Company, stockholders may, depending upon the circumstances, recognize taxable income in the event that the Rights become exercisable for Common Stock (or other consideration) of the Company or for common stock of the acquiring company or in the event of the redemption of the Rights as set forth above.

 

Any of the provisions of the Rights Agreement may be amended by the Board prior to the Distribution Date.  After the Distribution Date, the provisions of the Rights Agreement may be amended by the Board in order to cure any ambiguity, to correct defective or inconsistent provisions or to make changes which do not adversely affect the interests of holders of Rights other than an Acquiring Person.

 

A copy of the Rights Agreement has been or will be filed with the Securities and Exchange Commission as an Exhibit to a Registration Statement on Form 8-A or Current Report on Form 8-K.  A copy of the Rights Agreement is available free of charge from the Rights Agent.  This summary description of the Rights does not purport to be complete and is qualified in its entirety by reference to the Rights Agreement, which is incorporated herein by reference.

 

 

C-3

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