Document:

jfil_ex101.htm

EXHIBIT 10.1

 

LICENSE AGREEMENT

 

This AGREEMENT is dated as of September 30, 2013 by and between Jiu Feng Investment Hong Kong Ltd., a Nevada corporation (hereinafter referred to as the "Licensee"), with a place of business at 2293 Hong Qiao Rd, Shanghai China, 200336; and BioMark Technologies (Asia) Limited, a limited liability company incorporated in Hong Kong under the Companies Ordinance (the "Licensor") (Licensor and Licensee each a “Party” and collectively the “Parties”).

 

A. Licensor is the controlling shareholder of BioMark China International Ltd., a manufacturer, marketer and innovator in the field of Bone-induction artificial bone and Vacuum Sealing Drainage (the “Products”);

 

B. Licensor desires to grant to Licensee the sole and exclusive worldwide rights to the marketing, distribution and sale of the Products, for a period of five (5) years, pursuant to the terms and conditions, and subject to the rights and obligations set for the in this Agreement.

 

IN CONSIDERATION of the foregoing premises and of the mutual covenants herein contained, the parties agree as follows:

 

1. Definitions.

 

Certain words and terms as used in this Agreement shall have the meanings given to them by the definitions and descriptions in this paragraph, and such definitions shall be equally applicable to both the singular and plural forms of any of the words and terms herein defined.

 

  

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"Affiliates" shall mean all persons or business entities, whether corporations, partnerships, joint ventures or otherwise, which now or hereafter own, or are owned or controlled, directly or indirectly by Licensee.

"Collateral Statement" shall mean a statement furnished by a Sublicensee or Affiliate stating each type of Licensed Product, the aggregate amount of the Affiliate's or Sublicensee's (as the case may be) gross sales and net sales of the same, and the aggregate amount of returns of and allowances for such products, for a given Semi-Annual Accounting Period.

"Current Names" "Jiu Feng,” “Jiu Feng Investment,” “Jiu Feng Investment Hong Kong Ltd,” “Biomark,” ,“Biomark China”and “Biomark Asia” and all combinations and forms of such names.

“Effective Date” shall mean the latest date at which all Parties have executed this Agreement.

"Fee(s)" shall be the fees payable for Licensed Products sold by Licensee (including their sub-licensees and affiliates, if any), and shall be equal to thirty percent (30%) of the manufacturer’s List Price for such Licensed products.

"Fee Statement" shall mean a statement furnished by the Licensee stating each type of Licensed Product, the aggregate amount of the Licensee’s gross sales and net sales of the same, and the aggregate amount of returns of and allowances for such products, for a given Semi-Annual Accounting Period.

"License" shall have the meaning assigned to that term in paragraph 2.2 of this Agreement.

"Licensed Products" shall have the meaning assigned to that term in Exhibit A to this Agreement.

"Licensee" shall have the meaning assigned to that term in the preamble to this Agreement.

 

  

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"Affiliates" shall mean all persons or business entities, whether corporations, partnerships, joint ventures or otherwise, which now or hereafter own, or are owned or controlled, directly or indirectly by Licensee.

"Collateral Statement" shall mean a statement furnished by a Sublicensee or Affiliate stating each type of Licensed Product, the aggregate amount of the Affiliate's or Sublicensee's (as the case may be) gross sales and net sales of the same, and the aggregate amount of returns of and allowances for such products, for a given Semi-Annual Accounting Period.

"Current Names" "Jiu Feng,” “Jiu Feng Investment,” “Jiu Feng Investment Hong Kong Ltd,” “Biomark,” ,“Biomark China”and “Biomark Asia” and all combinations and forms of such names.

“Effective Date” shall mean the latest date at which all Parties have executed this Agreement.

"Fee(s)" shall be the fees payable for Licensed Products sold by Licensee (including their sub-licensees and affiliates, if any), and shall be equal to thirty percent (30%) of the manufacturer’s List Price for such Licensed products.

"Fee Statement" shall mean a statement furnished by the Licensee stating each type of Licensed Product, the aggregate amount of the Licensee’s gross sales and net sales of the same, and the aggregate amount of returns of and allowances for such products, for a given Semi-Annual Accounting Period.

"License" shall have the meaning assigned to that term in paragraph 2.2 of this Agreement.

"Licensed Products" shall have the meaning assigned to that term in Exhibit A to this Agreement.

"Licensee" shall have the meaning assigned to that term in the preamble to this Agreement.

 

  

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2. License.

 

2.1 With regard to the subject matter of this Agreement: this Agreement supersedes any former agreements and understandings between the Parties; and the rights, duties and obligations of the Parties from this date forth shall be governed by this Agreement.

 

2.2 The Licensor grants to the Licensee the exclusive right, license and privilege to (a) market, sell, and distribute the Licensed Products in the Territory; (b) right, license, and privilege to use the Names in any form or forms and any and all crests, symbols, logos and identifying marks associated with the Names, and all other names and marks which the Licensor, or any business entity which is now or hereafter owned or controlled, directly or indirectly, by Licensor may hereafter develop or own (except such other Names and marks as are not used in connection with any Licensed Products), as trade names and/or trademarks and/or product names, whether or not registered or registrable with any government authority, in connection with the manufacture, sale, marketing, use, and other commercial exploitation of the Licensed Products in the Territory; and (c) the right and license to conduct research and development of Licensor’s cancer detection scanning technology at the sole expense of Licensee (Section 2.2 (a), (b), and (c) collectively the License”). The License shall be exclusive even as to the Licensor. Except as otherwise specifically provided herein, it is understood and agreed that the License applies solely to the manufacture, marketing, sale and distribution of the Licensed Products, and use of the Names in connection with Licensed Products, and that no marketing, sale or distribution of the Licensed Products outside the Territory, and no use of the Names on any other products or outside of the Territory is authorized or permitted.

 

2.3 In the event that the research and development of Licensor’s cancer detection scanning technology provides marketable technology, Licensee shall have the right of first refusal to a license to market, sell and distribute such cancer detection scanning technology under terms consistent with those set forth in this Agreement with respect to the Licensed Products.

 

2.4 Licensee shall have the right to assign or transfer the License only as provided in paragraph 11.2 hereof and to grant sublicenses only as provided in paragraph 11.3 hereof.

 

  

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3. Term. This Agreement, and the license granted hereunder, shall be effective as of the Effective Date, and continue in full force and effect during the Term, unless otherwise terminated pursuant to Article 10.1 (a) or (b) of this Agreement.

 

4. Consideration.

 

4.1 For all product distributed by Licensee, Licensee shall pay to the Licensor a Fee equal to thirty percent (30%) of the List Price for such product. The List Price of each Licensed Product shall be set by the Licensor, and subject to change upon thirty (30) days notice to Licensee.

 

(i) Increases in Fees shall not be effective on any items for which Licensee has paid the Fee before receiving notice of a Fee increase; and

 

(ii) The Fee on any product may only be increased one time in any 6 month period; and

 

(iii) Fee increases in excess of 7.5% in any 6 month period (the “Excess Fee”) shall only be effective if approved by Licensee. Licensee shall have 10 days from the date of Fee increase notification to object to any Excess Fee. In the event that Licensee does not object to the Excess Fee within 10 days of the Fee increase notification, Licensee shall be subject to the Excess Fee.

 

4.2 The Fee shall be paid as follows: With respect to each Semi-Annual

 

Accounting Period, the entire Fee for such Semi-Annual Accounting Period shall be paid on or before the fifteenth day of the month following the end of such Semi-Annual Accounting Period.

 

  

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4.3 Stock Issuance. As soon as practicable after the Record Date:

 

(i) Licensee shall deliver to the Licensor a number of shares of Licensee’s common stock, par value $0.01 per share, that shall, immediately after issuance, be equal to 9.90% of Licensee’s then outstanding shares of common stock. No fractional shares shall be issued, and any resulting fractional shares of Licensee’s common stock shall be cancelled.

 

(ii) The Record Date may be postponed, to the minimum amount necessary, to comply with the requirements of Rule 10b-17 of the Securities Exchange Act of 1934.

 

(iii) The parties understand and agree that shares of Licensee’s common stock transferred pursuant to Section 4.3(i) of this Agreement (the ‘Shares”) have not been registered under the Securities Act of 1933 (the “Securities Act”) or any state securities laws and are being transferred to the Licensor in reliance upon specific exemptions from the registration requirements of federal and state securities laws. Licensor covenants and agrees that it shall not transfer any of the Shares in a transaction that is not registered under the Securities Act, unless an exemption from registration and qualification requirements is available under the Securities Act and applicable state securities laws and the Licensee has received an opinion of counsel satisfactory to it stating that such registration and qualification is not required. Licensor understands that certificates representing the Shares will be endorsed with a legend, together with any other legends reasonably required by counsel for the Company, stating the following:

 

“THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND HAVE BEEN ISSUED IN RELIANCE UPON AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT PROVIDED BY REGULATION S PROMULGATED UNDER THE SECURITIES ACT.  SUCH SECURITIES MAY NOT BE SOLD OR OTHERWISE TRANSFERRED, EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF REGULATION S, PURSUANT TO AN EFFECTIVE REGISTRATION UNDER THE SECURITIES ACT, OR PURSUANT TO AN AVAILABLE EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT.  HEDGING TRANSACTIONS INVOLVING SUCH SECURITIES MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE SECURITIES ACT.”

 

 

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5. Foreign Currency.

 

5.1 Licensee shall pay (or cause to be paid) all Fees due pursuant to Article 4 of this agreement in United States currency in accordance with Licensor's instructions. If payment of a Fee is made to Licensor in currency other than the United States currency, the conversion of foreign currency to United States currency shall be at the prevailing exchange rate at the close of business on the last day of each Semi-Annual Accounting Period for which such Fee payment is made. It is the intention of the Parties that the calculation of Fees due to Licensor shall be based upon a conversion to United States currency from the local currency in which the sales of Licensed Products are made without regard to any intermediary currency transactions. It is also the intention of the Parties to eliminate any speculative activity of either Party which may be undertaken to the detriment of the other with respect to the exchange rates.

 

6. Records and Reports.

 

6.1 With each payment of a Fee made pursuant to article 4 hereof, Licensee shall furnish to Licensor a Fee Statement which shall show for the relevant period, for each kind of Licensed Product: (i) the aggregate amount of Licensee's gross sales and Licensee's net sales of the same and the aggregate amount of Licensee's returns of and allowances for such products and the sales by units for each Licensed Product, and (ii) the aggregate amount of each Affiliate's and Sublicensee's net sales as reflected in Collateral Statements received by Licensee during the relevant period. A true and complete copy of each Collateral Statement referred to in a Fee Statement shall be furnished to Licensor together with the Fee Statement. Licensor shall have a period of one (1) year after receipt of each Fee Statement to object thereto by delivering to Licensee a written statement ("Notice of Disagreement") setting forth in detail the item or items objected to and the Licensor's reasons therefore. If Licensor does not timely object to items set forth in a Fee Statement by delivering a Notice of Disagreement within the time allowed, such items contained in the Fee Statement as to which timely objection was not made shall be deemed to be conclusive and binding upon Licensor and Licensee.

 

  

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Licensee shall require that its Affiliates and Sublicensees furnish to Licensee a Collateral Statement on or before the end of the fifteenth day of the second month next following the end of each Semi-Annual Accounting Period which shall show for the Semi-Annual Accounting Period then last ended prior to the date of such statement, each type of Licensed Product, the aggregate amount of the Affiliate's or Sublicensee's (as the case may be) gross sales and net sales of the same and the aggregate amount of returns of and allowances for such products. In addition to the above information, each Fee Statement and Collateral Statement shall set forth (i) with respect to each account receivable of the Licensee, Affiliate or Sublicensee, as the case may be, constituting a bad debt (as hereinabove defined) the following information: the name and address of the account receivable debtor, the amount of the account receivable of such debtor constituting a bad debt and the date of the invoice or bill which remains unpaid in whole or in part (thereby creating the bad debt) and (ii) with respect to each bad debt from a prior accounting period which was collected during the accounting period covered by a Fee Statement or Collateral Statement the following information: the name and address of the account receivable debtor, the amount of the bad debt from a prior accounting period which was collected during the accounting period covered by the Fee Statement or Collateral Statement and the date of the earlier Fee Statement or Collateral Statement on which the bad debt had been charged against Licensee's, the Affiliate's or the Sublicensee's net sales.

6.2 During the term of this Agreement Licensee shall keep at its office complete and accurate books and records pertaining to Licensee's obligations hereunder. Such books and records shall show, by kind, quantity and name of customer, (i) the volume in local currency of all sales of Licensed Products made by Licensee and its Affiliates, (ii) the accounts receivable and bad debts of Licensee and its Affiliates and (iv) the names and addresses of all Sublicensees. Licensee shall require that its Sublicensees maintain similar books and records.

 

Licensor shall have and is hereby granted the right, to be exercised no more frequently than once in any Semi-Annual Accounting Period, to have Licensee's said books and records examined by a certified public accountant or other representative selected by Licensor for the purpose of verifying the Fee Statements. Licensee shall permit access to its books and records for the purpose of such examination during the normal hours of business upon receipt of notice from Licensor not less than five (5) business days in advance of the requested date of examination. Such examination requested by Licensor shall be made at Licensor's sole cost and expense, except that if upon any such examination Licensor shall determine and demonstrate that the amount of Licensee's net sales as set forth in a Fee Statement has been understated by more than three (3%) percent then, and in such event, Licensee shall reimburse Licensor for the fair and reasonable cost to Licensor of its examination of Licensee's books and records for the period covered by such understated Fee Statement. Licensee shall procure for Licensor a similar right, to be exercisable no less frequently than once in any Semi-Annual Accounting Period, to have the books of each Affiliate and Sublicensee examined for the purpose of verifying Collateral Statements. Each Affiliate and Sublicensee shall further agree that any such examination requested by Licensor shall be made at Licensor's sole cost and expense, except that if upon any such examination Licensor shall determine and demonstrate that the amount of the Affiliate's or Sublicensee's (as the case may be) net sales as set forth in a Collateral Statement has been understated by more than three (3%) percent then, and in such event, the Affiliate or Sublicensee shall reimburse Licensor for the fair and reasonable cost to Licensor of its examination of the Affiliate's or Sublicensee's books and records for the period covered by such understated Collateral Statement.

 

  

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7. Representations and Warranties.

 

7.1 Licensor hereby makes the following representations and warranties to Licensee:

 

(a) Licensor has the full right, power and authority to execute and deliver, and perform the terms of this Agreement and the consummation of the transactions contemplated by this Agreement will not violate any agreement to which Licensor is a party or by which it may be bound; and

 

(c) Without limiting the generality of the preceding subparagraph, Licensor has the full right to grant the License. Licensor is not a party to or bound by any agreement in conflict herewith or with any provision hereof. Licensor has not granted to any other person, firm, corporation or business any right, license or privilege to use in the Territory the Names or associated crests, symbols, logos or identifying marks or any name, crest, symbol, logo or identifying mark which would be confusingly similar thereto in correction with any Licensed Product, or which would have the effect of infringing upon the exclusivity of the License granted to Licensee hereunder.

 

7.2 Licensee hereby makes the following representations and warranties to Licensor:

 

(a) Licensee has the full power and authority to enter into this Agreement and to perform its obligations hereunder and the consummation of the transactions contemplated hereunder will not violate any agreement to which Licensee is a party or by which it may be bound; and

 

(b) This Agreement constitutes a valid and binding obligation of Licensee, enforceable in accordance with its terms.

 

8. Additional Covenants.

 

  

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8.1 Licensor covenants and agrees as follows:

 

(a) Licensor will not, and will not permit any business entity owned or controlled by it to, grant any person, firm, corporation or business (other than Licensee) any right, license or privilege to use in the Territory the Names or associated crests, symbols, logos or identifying marks or any name, crest, symbol, logo or identifying mark which would be confusingly similar thereto in connection with any Licensed Product, or which would have the effect of infringing upon the exclusivity of the License granted to Licensee hereunder;

 

(b) During the term of this Agreement Licensee shall have and is hereby granted the right, without cost or expense to Licensor, to file or cause its Sublicensees to file for registration of the Names as applied to the Licensed Products in all parts of the Territory where it proposes, directly or through its Sublicensees, to market and sell Licensed Products (it being understood that such registrations shall be obtained in the name of Licensor and, accordingly, Licensor shall have the right, title and interest in any trade names or trademarks so registered subject to the exclusive License of Licensee granted hereby). Licensee shall have the right, to the extent permitted by law, to make application to register Licensee and/or its Sublicensees as permitted users or registered users of such trade names or trademarks in all parts of the Territory and Licensor hereby appoints Licensee as its attorney-in-fact to apply for and register, in the name of Licensor, in any part of the Territory all trade names and trademarks which make use of the Names or are associated therewith as applied to Licensed Products. Licensor shall have the right to approve the form of registered user agreement, which approval will not be unreasonably withheld or delayed by Licensor. Licensee shall provide Licensor with copies of all applications filed and registrations obtained and shall include Licensor on its or its trademark counsel's trademark watch and distribution list so as to keep Licensor apprised of any applications, registrations, oppositions and proceedings relating to the trade names and trademarks which make use of the Names or are associated therewith. Licensor will cooperate with Licensee in all manners and respects, but at Licensee's expense, to enable Licensee to obtain the aforesaid registrations, and Licensor will execute any further agreements, documents and instruments as my be necessary to effect the same. Nothing herein shall (x) preclude Licensee from using a Name for a Licensed Product in any part of the Territory for the purposes set forth in this Agreement without registration of the same, (y) preclude Licensor from filing, at Licensor's own cost and expense, for registration any of the Names in any part of the world, or (z) preclude Licensor from using any Name in any part of the world for any products which are not Licensed Products.

 

(c) Licensor will not during the term of this Agreement, or at any time thereafter, disclose to any person, firm, corporation or business any confidential information (including, without limitation, customer lists) concerning the conduct of the business and affairs of Licensee or any Affiliate of Licensee which Licensor may have acquired during the course of this Agreement except as may be required pursuant to law;

 

  

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(d) Licensor shall protect, indemnify and save harmless Licensee and each of Licensee's officers, directors, employees and agents against any and all liabilities, claims, damages, penalties, causes of action, costs and expenses, including reasonable attorneys' fees, arising out of the breach or material inaccuracy of any of the representations, warranties, covenants and agreements of Licensor contained in this Agreement. Licensee shall have the right in its discretion, and with counsel of its own choosing, to take any action, legal or otherwise, in its own name and/or in the name of Licensor, at Licensee's discretion, to protect any trade name or trademark covered by the License from infringement, counterfeiting or passing off. Prior to taking any such action, Licensee shall advise Licensor of its intention to commence the proposed action and thereafter, at Licensor's request, shall promptly furnish Licensor with copies of relevant documents and keep Licensor advised of developments relating to the action. Licensor shall cooperate with Licensee and, if requested, shall join as a plaintiff in any such action with counsel designated by Licensee. Any legal expenses incurred in the prosecution of such action shall be borne by, and any money recoveries received as a result of such action shall belong to, Licensee; provided, however, that the net amount of any such recovery upon a final, non-appealable judgment, after deducting the aggregate amount of all and every cost and expense of such an action (including attorneys' fees, court costs, printing fees, witness fees, etc.), shall be included in Licensee's net sales for the purpose of calculating the Fee;

 

(e) Licensor acknowledges that the Current Names have established prestige and good will and that it is of major importance to Licensee that the high standards and reputation of the Current Names be maintained. Licensor will not take any action, which action would be likely to injure or damage the reputation for high quality which has come to be associated with the Current Names. Licensee shall not be entitled to damages by reason of Licensor's breach or default of its obligations under this paragraph 8.1(e) and Licensee's sole ready shall be to terminate this Agreement pursuant to paragraph 10.1(b) hereof;

 

(f) If Licensor hereafter registers any new Name in any part of the world, Licensor will promptly thereafter advise Licensee; and

 

(g) At the request of Licensee, Licensor will from time to time, at no cost or expense to Licensee, deliver promptly to Licensee (i) instruments executed by Licensor granting to Licensee the exclusive license in and to each trade name or trademark (for the classes of use contemplated by this Agreement, and for the Licensed Products) used by Licensee hereunder for a Licensed Product and/or instruments evidencing such grant, which instruments shall be in form and substance satisfactory to Licensee's trademark counsel in such counsel's reasonable judgment, (ii) "short form" agreements of this Agreement (for recordings and other reasonable purposes) provided that the same shall be in all respects consistent with the rights and obligations hereunder of, respectively, Licensor and Licensee, and (iii) such other and additional documents and instruments as may reasonably be requested by Licensee in furtherance of and to implement the purposes and provisions of this Agreement and the transactions provided for herein.

 

  

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8.2 Licensee covenants and agrees as follows:

 

(a) Licensee will diligently promote the sale of the Licensed Products and will use its best efforts in this regard;

 

(b) It is understood that, to the fullest extent permitted by applicable law, Licensor assumes no liability to Licensee or third parties with respect to the performance characteristics of the Licensed Products, and Licensee will protect, defend, indemnify and save harmless Licensor, its employees and agents, against any and all liabilities, claims, damages, penalties, causes of action, costs and expenses, including reasonable attorneys' fees, for product liability claims of third persons arising out of the use of such products by such third persons. Licensee will carry product liability insurance policies in such amount as Licensee, in its sole judgment and discretion deems adequate and will cause Licensor to be included as additional named insureds under such policies and will provide Licensor with copies of insurance certificates evidencing same;

 

(c) Licensee will not during the term of this Agreement, or at any time thereafter, disclose to any person, firm, corporation, or business any confidential information concerning the conduct of the business and affairs of Licensor which Licensee my have acquired during the course of this Agreement except as may be required pursuant to law.

 

(d) Licensee acknowledges that the Current Names have established prestige and good will and that it is of major importance to Licensor that in the advertising, distribution, promotion and sale of Licensed Products, the high standards and reputation of the Current Names be maintained. Licensee will not take any action which would be likely to injure or damage the reputation for high quality which has come to be associated with the Current Names. Without limiting the generality of the foregoing, Licensee shall maintain the high prestige and good will of the Current Names in all advertising, distribution, promotion and sale of the Licensed Products. Licensor's remedies for breach or default by Licensee under this paragraph 8.2(d) shall be limited to termination of this Agreement pursuant to paragraph 10.1(a) hereof and/or injunctive relief.

 

(e) Licensee acknowledges that, except as set forth in paragraph 7.1 hereof, Licensor has not represented to Licensee that Licensor has any trademarks, trade names or other rights or interests in or to the Names or that persons other than Licensor have any such trademarks, trade names or other rights or interest. If Licensee uses any Name as a trademark, trade name or product name for a Licensed Product without registration of the same (except as may be necessary to establish its use in commerce) Licensee will protect, defend, and save harmless Licensor from and against any claim of third persons for infringement arising out of the use of such unregistered Name provided that (x) in connection therewith Licensor shall not have misrepresented to Licensee their rights or interests in or to such Name whether in this Agreement or in any other instrument, and (y) such claim shall not arise by reason of any action taken or not taken by Licensor in breach of any obligation they may have to Licensee whether arising under this Agreement or under any other instrument; and

 

  

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(f) Licensee shall protect, indemnify and save harmless Licensor, and and each of their employees and agents against any and all liabilities, claims, damages, penalties, causes of action, costs and expenses, including reasonable attorneys' fees and disbursements, arising out of the breach or material inaccuracy of any of the representations, warranties, covenants and agreements of Licensee contained in this Agreement.

 

9. Relationship of Parties.

 

This Agreement shall not create nor be considered to create the relationship of master and servant, principal and agent, partnership or joint venture between the parties hereto, and neither party shall be liable for any obligation, liability, representation, negligent act or omission to act an the part of the other except as expressly set forth herein.

 

10. Termination.

 

10.1 This Agreement and License shall continue in full force and effect until terminated in one of the following ways:

 

(a) By Licensor, in the event that (i) any fee is not paid by Licensee when due and such failure to pay is not cured within ten (10) days following notice to the Licensee of such failure (unless such payment is disputed by Licensee in good faith, in which event the time to cure a failure to make payment shall begin after the rendition of an unappealable final judgment by an arbitration panel or court of competent jurisdiction), (ii) Licensee makes an assignment for the benefit of creditors or is adjudged in any legal proceeding to be voluntarily or involuntarily bankrupt, (iii) the representations of Licensee herein are not true and correct in any material respect, or (iv) there shall be a substantial breach by Licensee of any other material provision of this agreement which breach shall not have been cured within ninety (90) days after Licensor shall have given Licensee notice of the same;

 

(b) By Licensee, in the event that (i) Licensor makes an assignment for the benefit of creditors or is adjudged in any legal proceeding to be voluntarily or involuntarily bankrupt, (ii) the representations of Licensor herein are not true and correct in any material respect, or (iii) there shall be a substantial breach by Licensor of any other material provision of this Agreement, which breach shall not have been cured within ninety (90) days after Licensee shall have given Licensor notice of the same; and

 

  

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(c) The expiration of five (5) years as measured from the Effective Date of this Agreement; However, Licensee shall have the right to extend the terms of this Agreement for an additional five (5) years provided that, at the expiration of the initial Term, the Licensee is not in breach of this Agreement which breach shall not have been cured during the Post Termination Period.

 

(d) For the purpose of subparagraphs (a), (b) and (c) of this paragraph 10.1, a breach of this Agreement shall be deemed to be cured if the course of conduct or omission comprising or causing such breach is timely brought to an end whether or not the effects of such prior conduct or omission continue thereafter.

 

10.2 The exercise by either party hereto of any of the foregoing rights of termination shall not constitute a waiver of other rights and remedies available to such terminating party, including, unless otherwise specifically provided herein, any right to damages. The failure by either party to insist upon the strict performance of any provision hereof shall not constitute a waiver by such party of its right to strict performance of such provision in the future nor shall a waiver of any right hereunder on any occasion constitute a waiver of such right on any other occasion.

 

10.3 During the Post-Termination Period, Licensee, its Affiliates and its Sub-licensees may continue to sell Licensed Products which were in inventory, in process, or for which written orders had been received from customers, as of the date of termination of this Agreement. Upon the conclusion of the Post-Termination Period (i) the License and all Sub-licenses shall terminate and Licensee, its Affiliates and its Sub-licensees shall be prohibited from making any further use of the Names or associated crests, symbols, logos and identifying marks, and (ii) all rights and interests in and to the Names shall belong to and be the property of Licensor, and Licensee, its Affiliates and its Sub-licensees shall have no further or continuing right or interest therein.

 

10.4 In the event that this Agreement is terminated after the share issuances contemplated in Section 4.3 herein, no shareholder shall be required to surrender any of the shares received pursuant to this Agreement, and such shares shall continue to be considered as validly issued and fully paid.

 

  

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11. Assignment; Sub-licenses.

 

11.1 Licensor may assign its rights to fees under this Agreement, but such assignment shall not have the effect of releasing or discharging Licensor from its obligations hereunder unless Licensee shall expressly so agree in writing.

 

11.2 Licensee my assign its rights and obligations under this Agreement only (i) to a transferee of substantially all of its business or assets and upon the express assumption of all of Licensee's obligations hereunder by such transferee or to a successor to Licensee's business by way of merger, consolidation or other business combination or (ii) to an Affiliate, in which case Licensee shall remain liable hereunder.

 

11.3 Licensee and its Affiliates who have entered into sub-license agreements hereunder shall have the right to grant sub-licenses consistent with the uses permitted by the License to Sub-Licensees, subject to the following terms and conditions:

 

(a) Each sub-license shall state that the sub-license is issued pursuant to this Agreement as it shall be amended from time to time, and shall incorporate and be subject to the relevant terms and provisions of this Agreement, as it may be amended from time to time, and shall further state that to the extent the sub-license conflicts with this Agreement, the terms of this Agreement shall control;

 

(b) Each sub-license shall provide that it shall terminate upon the termination of this Agreement and shall give Licensee the same rights of termination with respect to the Sub-licensees which Licensor has under this Agreement with respect to Licensee;

 

(c) Each sub-license shall be consistent with the provisions of the License in all other respects;

 

(d) No sub-license shall release or discharge Licensee from any of its obligations hereunder and Licensee shall remain directly and primarily liable to Licensor under this Agreement regardless of such sub-license;

 

  

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(e) Licensee shall furnish to Licensor an executed copy of each sub-license as soon as practicable after the execution thereof; and

 

(f) Each sub-license shall expressly provide that Licensor is a third party beneficiary of the sub-license and entitled to enforce the sub-license and protect any and all interests they may have therein under this Agreement. Licensor shall not institute any action against a Sub-Licensee to enforce a sub-license or to protect their interests without first extending to Licensee an opportunity to take such actions of its own as may be appropriate under the circumstances. The commencement of an action by Licensor against a Sub-Licensee shall not in and of itself be deemed to constitute a breach by Licensee hereunder.

 

Prior to executing a sub-license, Licensee shall advise Licensor of the identity of the proposed Sub-Licensee which Licensee shall reasonably believe to be economically sound and capable of performing under the Sub-Licensee agreement. Prior notice will not be required if the proposed Sub-Licensee is an affiliate of Licensee. Each Sub-licensee shall enter a sub-license pursuant to the foregoing provisions of this paragraph 11.3. Licensee shall have, and is hereby granted, the right and privilege to cause Licensor to grant a license, consistent with the uses permitted by the License, to any person (whether an individual, firm, joint venture, corporation or other entity, and whether or not affiliated with Licensee) to whom a sub-license could be granted pursuant to the provisions of this paragraph 11.3, which license will be granted by Licensor on such terms and conditions as Licensee may reasonably require provided the same are not inconsistent with the rights and obligations hereunder of, respectively, Licensor and Licensee, and provided further that Licensor approves the form of such license which approval will not be unreasonably withheld or delayed by Licensor. All references in this Agreement to Sub-licensee(s) include any such person (whether or not an Affiliate) to whom a license is granted by Licensor pursuant to the last preceding sentence.

 

12. Arbitration, Equitable Remedies and Damages.

 

12.1 Any controversy, claim or dispute arising out of or relating to this Agreement or breach thereof, except with respect to an application pursuant to paragraph 12.2 hereof, shall be settled by binding arbitration in accordance with the rules of the International Chamber of Commerce, by three arbitrators selected in accordance with such rules, and Judgment upon any award so rendered may be entered in any court having jurisdiction thereof. The arbitration shall be held in New York, New York. Notice of arbitration shall be sufficient if made or given in accordance with the provisions of article 15 hereof.

 

  

16

  

 

12.2 In the event of a breach or threatened breach of this Agreement, any party hereto shall have the right, without the necessity of proving any actual damages, to obtain temporary or permanent injunctive or mandatory relief, it being the intention of the parties that this Agreement be specifically enforced to the maximum extent permitted by law.

 

12.3 If the representations of Licensor contained herein are not true and correct in any material respect or if there shall be a substantial breach by Licensor of any covenant contained herein, which breach shall not have been cured within ninety (90) days after Licensee shall have given Licensor notice of the same then, and in such event, Licensee shall have the right, in addition to any and all other rights and remedies the Licensee has against Licensor by reason of the same, to set off any and all damages, costs, expenses, losses and other injuries sustained by Licensee by reason of such misrepresentation or breach against any sums payable by Licensee to Licensor under this Agreement.

 

13. Licensor's Right of Approval.

 

Licensor has been given the right of approval in this Agreement with respect to various actions and classes of actions, which may be taken or are proposed to be taken by Licensee during the term hereof. If Licensor fails to exercise such right within thirty (30) days (by informing Licensee whether Licensor grants or withholds its said approval) Licensor shall be deemed to have given its approval to Licensee with respect to the Letter as to which its approval was sought.

 

14. Further Assurances.

 

Each of the parties hereto forthwith upon request from the other shall execute and deliver such documents and take such action as may be reasonably requested in order fully to carry out the intent and accomplish the purposes of this Agreement.

 

  

17

  

 

15. Notices.

 

All notices, approvals or other communications required under or contemplated by this Agreement shall be in writing and shall be deemed given when delivered in person or fifteen (15) days after sent, postage prepaid, by registered mail, as follows:

 

	 	
(a)

	
If to Licensee, addressed as follows: 

Jiu Feng Investment Hong Kong Ltd , Inc.

2293 Hongqiao Road Shanghai China 200336

Attention: President

 

with a copy to:

 

	 	 	

Andrew J Befumo, Esq.

Befumo & Schaeffer, PLLC

1629 K Street, NW

Washington, DC 20006

 

	 	
(b)

	

If to Licensor, addressed as follows:

BioMark Technologies (Asia) Limited.

397 Hennessey Road, Suite 1002, Wanchai Hong Kong

  

Any party to this Agreement may change the address to which notices or other communications are to be sent to it hereunder by notice similarly given.

 

  

18

  

 

16. Binding Effect.

 

This Agreement shall be binding upon and inure to the benefit of the successors and permitted assigns of the parties hereto.

 

17. Governing Law.

 

This Agreement shall be construed and governed in accordance with the internal laws of the State of Nevada, USA without regard to choice of law provisions.

 

18. Entire Agreement

 

This Agreement contains the entire agreement between the parties hereto with respect to the transactions contemplated hereby and may not be changed or terminated orally. No modification or waiver of any provisions hereof shall be valid unless signed by the party to be charged therewith.

 

19. Severability.

 

The provisions of this Agreement are severable, and if any provision shall be held invalid or unenforceable in whole or in part in any jurisdiction, then such invalidity or unenforceability shall affect only such provision, or part thereof, in such jurisdiction and shall not in any manner affect such provision in any other jurisdiction, or any other provision in this Agreement in any jurisdiction.

 

20. Counterparts.

 

This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, but all of which shall constitute one and the same instrument. An electronic copy of this Agreement shall be considered an original.

 

  

19

  

 

IN WITNESS WHEREOF, the parties hereto have executed this Agreement or caused the same to be executed by a duly authorized person as of the 30th day of September, 2013:

	 	
JIU FENG INVESTMENT HONG KONG LTD.

	 
	 	 	 	 
	 	
By: 

	/s/ Robert Ireland	 
	 	 	
Robert Ireland

	 
	 	 	Secretary	 
	 	 	 	 
	 	 	 	 
	 	BIOMARK TECHNOLOGIES (ASIA) LIMITED.	 
	 	 	 	 
	 	By:	/s/ Yan Li	 
	 	 	Yan Li 	 
	 	 	President	 

 

 

  

20

  

 

EXHIBIT A to License Agreement, dated September ____ 2013, between Jiu Feng Investment Hong Kong Ltd.,; and BioMark Technologies (Asia) Limited:

 

Product List

 

	 	
Name

	 	
Year

	 	
Description

	 	
VSD 1

	 	
2011

	 	
Negative pressure drainage special bolster

	 	
VSD 2

	 	
2011

	 	
Negative pressure drainage special bolster

	 	
VSD 3

	 	
2011

	 	
Medical Operation Film

	 	
VSD 4

	 	
2011

	 	
Medical Operation Film

	 	
VSD 5

	 	
2011

	 	
Negative pressure drainage device

	 	
VSD 6

	 	
2011

	 	
Negative pressure drainage device

	 	
Bone induction Artificial bone A1

	 	
2009

	 	
Bone induction to tissue regeneration membrane

	 	
Artificial bone A1

	 	
2009

	 	
Artificial bone to tissue regeneration membrane

	 	
Bone induction Artificial bone A2

	 	
2009

	 	
Bone induction to albumin layer

	 	
Artificial bone A2

	 	
2009

	 	
Artificial bone to collagen layer

	 	
Bone induction Artificial bone A3

	 	
2010

	 	
Bone induction to regeneration microporous membrane

	 	
Artificial bone A3

	 	
2010

	 	
Artificial bone to regeneration microporous membrane

	 	
Bone induction Artificial bone A4

	 	
2010

	 	
Bone induction to microporous albumin layer

	 	
Artificial bone A4

	 	
2010

	 	
Artificial bone to microporous albumin layer

	 	
Xishu Qing

	 	
2011

	 	
Gynecological antibacterial care dressing

	 	
Microcyn Skin and Wound Hydrogel

	 	
2012

	 	
Gel dressing

	 	
Incision protection sleeve

	 	
2011

	 	
Incision protection sleeve

	 	
Kangfu Shengyuan

	 	
2012

	 	
Collagen antimicrobial dressing

 

VSD: Vacuum Sealing Drainage Dressing

 

 

21Exhibit 4.4 - Second_Amended_and_Restated_Warrant_Agreement_Global_Warrant

 
 
 
Preferred Apartment Communities, Inc. 
 
and 
 
Computershare Trust Company, N.A., 
 
Warrant Agent 
 
 
 

Second Amended and Restated Warrant Agreement 
 
Dated as of [__________], 2013

TABLE OF CONTENTS
       Page
		
	Section 1.
	Certain Definitions    1

Appointment of Warrant Agent.    2
		
	Section 3.
	Issuance and Form of Global Warrant Certificate.    2

		
	Section 4.
	Warrant Register    3

		
	Section 5.
	Transfer and Exchange of Warrants.    3

		
	Section 6.
	Exercise of Warrants; Mechanics of Exercise.    4

		
	Section 7.
	Adjustment of Exercise Price    6

		
	Section 8.
	Certain Representations; Reservation and Availability of Shares of Common Stock or Cash.    7

		
	Section 9.
	Fractional Shares of Common Stock.    8

		
	Section 10.
	Warrant Holder Not Deemed a Stockholder    8

		
	Section 11.
	The Warrant Agent.    9

		
	Section 12.
	Purchase or Consolidation or Change of Name of Warrant Agent.    10

Duties of Warrant Agent.    11
Change of Warrant Agent.    12
Issuance of New Global Warrant Certificates.    13
Notices.    13
		
	Section 17.
	Supplements and Amendments    14

		
	Section 18.
	Successors    14

		
	Section 19.
	Benefits of this Agreement    14

		
	Section 20.
	Governing Law    14

		
	Section 21.
	Counterparts    14

		
	Section 22.
	Captions    14

		
	Section 23.
	Information    14

		
	Section 24.
	Force Majeure    14

Exhibit A  –  Form of Global Warrant Certificate 

i

SECOND AMENDED AND RESTATED WARRANT AGREEMENT
SECOND AMENDED AND RESTATED WARRANT AGREEMENT dated as of [_______], 2013 (this “Agreement”), between Preferred Apartment Communities, Inc., a Maryland corporation (the “Company”), Computershare, Inc., a Delaware corporation (“Computershare”) and its fully owned subsidiary Computershare Trust Company, N.A., national banking association (collectively with Computershare, the “Warrant Agent”). 
W I T N E S S E T H
WHEREAS, the Company proposes to issue up to 150,000 units (the “Units”) in connection with the Company’s public offering (the “Primary Series A Offering”), with each unit comprised of (i) one share of Series A Redeemable Preferred Stock (the “Series A Preferred Stock”), and (ii) one warrant (each, a “Warrant,” and collectively, the “Warrants”) to purchase 20 shares of common stock of the Company, par value $0.01 (the “Common Stock”).  The Units will not be certificated.  The shares of Series A Preferred Stock and the Warrants are immediately detachable and will be issued separately;
WHEREAS, the Company proposes to issue up to an additional 900,000 Units in connection with the Company's follow-on public offering (the "Follow-On Series A Offering" and together with the Primary Series A Offering, the "Series A Offerings") on substantially the same terms as the Primary Series A Offering.
WHEREAS, the Company desires that the Warrant Agent to act on behalf of the Company in connection with the issuance, transfer, exchange, exercise and replacement of the Warrants, and this Agreement sets forth, among other things, the form and provisions of the Warrants and the terms and conditions on which they may be issued, transferred, exchanged, exercised and replaced;

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

WHEREAS, the Company and the Warrant Agent entered into the certain Amended and Restated Warrant Agreement dated as of March 14, 2012 (the "Amended and Restated Agreement"); and

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

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

Section 1.Certain Definitions.  For purposes of this Agreement, the following terms have the meanings indicated:
“Affiliate” has the meaning ascribed to it in Rule 12b-2 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
 “Business Day” means any day other than a Saturday, Sunday or a day on which the New York Stock Exchange is authorized or obligated by law or executive order to close.
“Close of Business” on any given date means 5:00 p.m., New York City time, on such date; provided, however, that if such date is not a Business Day, it means 5:00 p.m., New York City time, on the next succeeding Business Day.
“Exercise Price”, for any particular Warrant, means the Initial Exercise Price, as adjusted from time to time pursuant to Section 7.
“Holder” means a holder of beneficial interest in a Warrant.
“Initial Exercise Price”, for any particular Warrant, means the greater of (i) $9.00 and (ii) 120% of the VWAP for the consecutive 20 Trading Days immediately prior to the date of issuance of such Warrant.
“NYSE MKT” means the NYSE MKT exchange.
 “OP Units” means units of equity interests in Preferred Apartment Communities Operating Partnership, L.P., a Delaware limited partnership, which is a subsidiary of the Company.
“Person” means an individual, corporation, association, partnership, limited liability company, joint venture, trust, unincorporated organization, government or political subdivision thereof or governmental agency or other entity.
“Securities Act” means the Securities Act of 1933, as amended.
“Trading Day” means, (i) if the Common Stock is listed or admitted to trading on the NYSE MKT, a day on which the NYSE MKT is open for the transaction of business, (ii) if the Common Stock is not listed or admitted to trading on the NYSE MKT but is listed or admitted to trading on another national securities exchange or automated quotation system, a day on which the principal national securities exchange or automated quotation system, as the case may be, on which the Common Stock is listed or admitted to trading is open for the transaction of business, or (iii) if the Common Stock is not listed or admitted to trading on any national securities exchange or automated quotation system, any day other than a Saturday, a Sunday or a day on which banking institutions in the State of New York are authorized or obligated by law or executive order to close.

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“VWAP” means, for any Trading Day, the volume-weighted average price, calculated by dividing the aggregate value of Common Stock traded on the NYSE MKT during regular hours (price per share multiplied by number of shares traded) by the total volume (number of shares) of Common Stock traded on the NYSE MKT for such Trading Day, or if such volume-weighted average price is unavailable, the market value of one share of Common Stock on such Trading Day as determined by the Board of Directors of the Company in a commercially reasonable manner, using a volume-weighted average price method.
“Warrant Shares” means shares of Common Stock issuable upon exercise of Warrants.  Initially, the number of shares of Common Stock with respect to which a Warrant may be exercised is 20.
Section 2.    Appointment of Warrant Agent.   The Company hereby appoints the Warrant Agent to act as agent for the Company in accordance with the terms and conditions hereof, and the Warrant Agent hereby accepts such appointment.  The Company may from time to time appoint such Co-Warrant Agents as it may, in its sole discretion, deems necessary or desirable.
Section 3.    Issuance and Form of Global Warrant Certificate.
(a)    The Company shall execute and the Warrant Agent shall countersign and deliver one or more global certificates (each, a “Global Warrant Certificate”), evidencing the Warrants, and each such Global Warrant Certificate (i) shall be registered in the name of The Depository Trust Company (the “Depository”) or of the nominee of the Depository, and (ii) shall be delivered by the Warrant Agent to the Depository or pursuant to the Depository’s instructions or held by the Warrant Agent as custodian for the Depository.  Each Global Warrant Certificate shall evidence such number of Warrants as is set forth therein.
(b)    Each Global Warrant Certificate shall be substantially in the form set forth in Exhibit A attached hereto.  The Global Warrant Certificate may bear such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Agreement, and may have such letters, numbers or other marks of identification and such legends or endorsements placed thereon as may be required to comply with the rules and regulations of the Depository, any law or with any rules made pursuant thereto or with any rules of any securities exchange or as may, consistently herewith, be determined by the officers of the Company executing such Global Warrant Certificate, as evidenced by their execution of the Global Warrant Certificate, which shall be reasonably acceptable to the Warrant Agent.
(c)    The Company shall supply the Warrant Agent with an opinion of counsel indicating that the Warrants and any shares of Common Stock issued upon exercise thereof were registered under the Securities Act or issued pursuant to an exemption from the registration requirements of the Securities Act and that the Warrants and any shares of Common Stock issued upon exercise thereof will be, when issued, validly issued, fully paid and non-assessable.

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Section 4.    Warrant Register.  The Warrants will be issued in registered form only.  The Warrant Agent will keep or cause to be kept, at one of its offices in Canton, Massachusetts, or at the office of one of its agents, books for registration and transfer of the Global Warrant Certificates issued hereunder.  The Warrant Agent will create a special account for the issuance of Global Warrant Certificates.
Section 5.    Transfer and Exchange of Warrants.
(a)    The registration of the transfer and exchange of Warrants or beneficial interests therein shall be effected through the Depository in accordance with this Agreement and the procedures and requirements of the Depository. Such requirements shall include, inter alia, a signature guarantee from an eligible guarantor institution participating in a signature guarantee program approved by the Securities Transfer Association. The Company may instruct the Warrant Agent from time to time that certain Warrants are subject to restrictions on transfer, in which case the Warrant Agent shall not permit the transfer of such Warrants without the consent of the Company.  A Global Warrant Certificate may only be transferred as a whole, and not in part, and only by (i) the Depository to a nominee of the Depository, (ii) a nominee of the Depository to the Depository or another nominee of the Depository, or (iii) the Depository or any such nominee to a successor Depository or its nominee. 
(b)    To permit registrations of transfers and exchanges, the Company shall execute and the Warrant Agent shall countersign, by either manual or facsimile or other electronic submission, each Global Warrant Certificate.  No service charge shall be made for any registration of transfer or exchange. Any transfer tax, assessments, or similar governmental charge payable in connection with any registration of transfer or exchange shall be paid by the Holder of such Warrants.  All Warrants issued upon any transfer or exchange pursuant to the terms of this Agreement shall be valid obligations of the Company, entitled to the same benefits under this Agreement as the Warrants surrendered upon such transfer or exchange.
(c)    If any Global Warrant Certificate shall be mutilated, lost, stolen or destroyed, the Company shall issue, and the Warrant Agent shall countersign and deliver, in exchange and substitution for, and upon cancellation of the mutilated Global Warrant Certificate, or in lieu of and substitution for the Global Warrant Certificate lost, stolen or destroyed, a new Global Warrant Certificate of like tenor and representing an equivalent number of Warrants, but only upon receipt of evidence reasonably satisfactory to the Warrant Agent of the loss, theft or destruction of such Global Warrant Certificate and an affidavit and the posting of an indemnity or bond satisfactory to it. Applicants for such substitute Global Warrant Certificates shall also comply with such other reasonable regulations and pay such other reasonable charges as the Warrant Agent may prescribe and as required by Section 8-405 of the Uniform Commercial Code as in effect in the State of New York. 
Section 6.    Exercise of Warrants; Mechanics of Exercise.  
(a)    Subject to the terms and conditions set forth herein and set forth in each Global Warrant Certificate, each Warrant shall be exercisable for 20 shares of Common 

4

Stock at the Exercise Price (subject to any adjustment pursuant to Section 7) commencing one year from the date of issuance thereof (the “Initial Exercise Date”).  Such Warrant shall cease to be exercisable and shall terminate and become void, and all rights thereunder and under this Agreement shall cease, at the Close of Business on the third anniversary of the Initial Exercise Date (the “Expiration Date”).
(b)    A Holder may exercise a Warrant in whole, but not in part, by delivering, not later than 5:00 p.m. New York time, on any Business Day to the Warrant Agent at its office:  (i) the exercise notice set forth in Exhibit A to the Global Warrant Certificate (the “Exercise Notice”) and (ii) payment, for the account of the Company, of an amount equal to the product of (A) the Exercise Price and (B) 20.  Such payment shall be made in United States dollars by certified or official bank check payable to the order of the Company or by wire transfer of funds to an account designated by the Company for such purpose. Any Holder shall effect compliance with the requirements in clauses (i) and (ii) above through the relevant members of the Depository in accordance with the procedures of the Depository. If the Exercise Notice or the Exercise Price is received by the Warrant Agent after the Close of Business, the Warrant will be deemed to be received and exercised on the next Business Day. If the Warrant is received or deemed to be received after the Expiration Date, the exercise thereof will be null and void and any funds delivered to the Warrant Agent will be returned to the Holder as soon as practicable. In no event will interest accrue on funds deposited with the Warrant Agent in respect of an exercise or attempted exercise of a Warrant. 
(c)    Notwithstanding any provision herein to the contrary, if on the date of any exercise of any Warrant a registration statement covering the Warrant Shares is not effective and an exemption from registration is not available for the resale of such Warrant Shares, the Holder may satisfy its obligation to pay the Exercise Price through a “cashless exercise,” in which event the Warrant Agent shall issue to the Holder, subject to confirmation by the Company, the number of Warrant Shares as follows (the “Cashless Exercise Ratio”):
X = Y [(A-B)/A]
where:
X = the number of shares of Common Stock to be issued to the holder
Y = the number of shares of Common Stock with respect to which the Warrant is being exercised
A = the Fair Market Value of one share of Common Stock
B = the Exercise Price
For the purpose of computation of the Cashless Exercise Ratio, the “Fair Market Value” per share of Common Stock at any date shall be deemed to be the closing price of the Common Stock on the Trading Day immediately preceding the date as of which the Fair Market Value is being determined.

5

(d)    No payment or adjustment shall be made on account of any distributions or dividends on the Warrant Shares.  The Company shall calculate and transmit to the Warrant Agent, and the Warrant Agent shall have no obligation under this section to calculate, the Cashless Exercise Ratio.
(e)    If less than all the Warrants evidenced by a Global Warrant Certificate surrendered are exercised, a new Global Warrant Certificate shall be issued for the remaining number of Warrants evidenced by the Global Warrant Certificate so surrendered, and the Warrant Agent is hereby authorized to countersign the new Global Warrant Certificate pursuant to the provisions of Section 3 and this Section 6.
(f)    The Warrant Agent shall not effect any exercise of any Warrant, and a Holder shall not have the right to exercise a Warrant to the extent that after giving effect to such issuance, the Holder (together with the Holder’s Affiliates, and any other persons acting as a group together with the Holder or any of the Holder’s Affiliates), would beneficially own in excess of the Beneficial Ownership Limitation (as defined below).  For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder and its Affiliates shall include the Warrant Shares issuable upon exercise of the Warrant, but shall exclude the number of shares of Common Stock which would be issuable upon exercise or conversion of the unexercised or nonconverted portion of any other Warrants or any other securities of the Company subject to a limitation on conversion or exercise analogous to the limitation contained herein, in each case beneficially owned by the Holder or any of its Affiliates.  Except as set forth in the preceding sentence, for purposes of this Section 6(f), beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder, it being acknowledged by the Holder that the Company is not representing to the Holder that such calculation is in compliance with Section 13(d) of the Exchange Act and the Holder is solely responsible for any schedules required to be filed in accordance therewith.  To the extent that the limitation contained in this Section 6(f) applies, the determination of whether the Warrant is exercisable (in relation to other securities owned by the Holder together with any Affiliates) and of which portion of the Warrant is exercisable shall be in the sole discretion of the Holder, and the Company shall have no obligation to verify or confirm the accuracy of such determination and shall have no liability for exercises of the Warrant that are in non-compliance with the Beneficial Ownership Limitation.  In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder.  The “Beneficial Ownership Limitation” shall be 9.8% in value of the shares of the Company’s capital stock outstanding, or 9.8% (in value or number of shares, whichever is more restrictive) of the shares of the Common Stock outstanding, in each case immediately after giving effect to the issuance of the Warrant Shares.  The provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 6 to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended Beneficial Ownership Limitation herein contained or to make changes or supplements necessary or desirable to properly give effect to such limitation.  The limitations contained in this paragraph shall apply to a successor Holder of the Warrant.

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(g)    As soon as reasonably practicable after the exercise of any Warrant, the Company shall issue, or otherwise deliver, in authorized denominations to or upon the order of the holder of such by same-day or next-day credit to the Depository for the account of such holder or for the account of a participant in the Depository the Warrant Shares to which such holder is entitled, in each case registered in such name and delivered to such account as directed in the Exercise Notice by such Holder or by the direct participant in the Depository through which such holder is acting.
(h)    The Company acknowledges that the bank accounts maintained by Computershare in connection with the services provided under this Agreement will be in its name and that Computershare may receive investment earnings in connection with the investment at Computershare for the benefit of funds held in those accounts from time to time. Neither the Company nor the Warrantholders will receive interest on any deposits or Exercise Price.
Section 7.    Adjustment of Exercise Price.  The Exercise Price and the Warrant Shares are subject to adjustment from time to time as set forth in this Section 7.
(a)    In case the Company shall, while any Warrants remain outstanding and unexpired, (i) declare a dividend or make a distribution on its outstanding Common Stock in Common Stock, (ii) subdivide or reclassify its outstanding Common Stock into a greater number of shares, (iii) combine or reclassify its outstanding Common Stock into a smaller number of shares, or (iv) enter into any transaction whereby the outstanding shares of Common Stock are at any time changed into or exchanged for a different number or kind of shares or other securities of the Company or of another entity through reorganization, merger, consolidation, liquidation or recapitalization, then an appropriate adjustment in the number of shares of Common Stock (or other securities for which such shares of Common Stock have previously been exchanged or converted) purchasable under the Warrants shall be made and the Exercise Price in effect at the time of the record date for such dividend or distribution or of the effective date of such subdivision, combination, reclassification, reorganization, merger, consolidation, liquidation or recapitalization shall be proportionately adjusted so that the holder of this warrant exercised after such date shall be entitled to receive the aggregate number and kind of shares or other securities which, if the Warrant had been exercised by such holder immediately prior to such date, the holder would have been entitled to receive upon such dividend, distribution, subdivision, combination, reclassification, reorganization, merger, consolidation, liquidation or recapitalization.  For example, if the Company declares a two-for-one stock subdivision (split) and the Exercise Price hereof immediately prior to such event was $10.00 and the number of shares of Common Stock issuable upon exercise of the Warrant was 20, the adjusted Exercise Price immediately after such event would be $5.00 and the adjusted number of shares of Common Stock issuable upon exercise of the Warrant would be 40.  Any such adjustment shall be made successively whenever any event listed above shall occur.
(b)    No adjustment in the Exercise Price shall be required unless such adjustment would require an increase or decrease of at least one percent (1%) in the number of shares of Common Stock purchasable upon the exercise of each Warrant; provided, however, 

7

that any adjustments which by reason of this Section 7(b) are not required to be made shall be carried forward and taken into account in any subsequent adjustment(s). All calculations shall be made to the nearest one hundredth (1/100) of a share.
(c)    When a specified event requiring an adjustment occurs, the Company shall promptly prepare a certificate setting forth, as applicable:  (i) the Exercise Price of each Warrant, and (ii) the number of Warrant Shares covering each Warrant, each as adjusted, and a brief statement of the facts accounting for such adjustment.  The Company shall promptly file with the Warrant Agent and with each transfer agent for the Common Stock a copy of such certificate and instruct the Warrant Agent to mail a brief summary thereof to each Holder.
Section 8.    Certain Representations; Reservation and Availability of Shares of Common Stock or Cash.  
(a)    This Agreement has been duly authorized, executed and delivered by the Company and, assuming due authorization, execution and delivery hereof by the Warrant Agent, constitutes a valid and legally binding obligation of the Company enforceable against the Company in accordance with its terms, and the Warrants have been duly authorized, executed and issued by the Company and, assuming due authentication thereof by the Warrant Agent pursuant hereto, constitute valid and legally binding obligations of the Company enforceable against the Company in accordance with their terms and entitled to the benefits hereof; in each case except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium and other similar laws relating to or affecting creditors’ rights generally or by general equitable principles (regardless of whether such enforceability is considered in a proceeding in equity or at law).
(b)    As of the date hereof, the authorized capital stock of the Company consists of (i) 400,066,666 shares of Common Stock, of which (A) 11,073,731 shares of Common Stock are issued and outstanding, (B) 21,000,000 shares of Common Stock are reserved for issuance upon exercise of the Warrants, (C) 210,000,000 shares are reserved for issuance upon redemption of the Series A Preferred Stock, (D) 150,000 shares of Common Stock are issuable upon exercise of previously issued and outstanding warrants, and (E) 859,164 shares of Common Stock are reserved for issuance upon exercise of an equity incentive plan, and (ii) 15,000,000 shares of preferred stock, $0.01 par value per share, of which 1,050,000 shares have been designated as shares of Series A Preferred Stock, which are issuable in connection with the Series A Offerings.  As of the date hereof, there are no other outstanding obligations, warrants, options or other rights to subscribe for or purchase from the Company any class of capital stock of the Company, other than the rights of holders of OP Units to convert their OP Units into shares of Common Stock.
(c)    The Company covenants and agrees that it will cause to be reserved and kept available out of its authorized and unissued shares of Common Stock or its authorized and issued shares of Common Stock held in its treasury, free from preemptive rights, the number of shares of Common Stock that will be sufficient to permit the exercise in full of all outstanding Warrants.

8

(d)    The Company further covenants and agrees that it will pay when due and payable any and all federal and state transfer taxes and charges which may be payable in respect of the original issuance or delivery of the Global Warrant Certificate or the Warrant Shares.  The Company shall not, however, be required to pay any tax or governmental charge which may be payable in respect of any transfer involved in the transfer or delivery of a Global Warrant Certificate or the issuance of Warrant Shares in a name other than that of the Holder until any such tax or governmental charge shall have been paid (any such tax or governmental charge being payable by the Holder at the time of surrender) or until it has been established to the Company’s reasonable satisfaction that no such tax or governmental charge is due.
Section 9.    Fractional Shares of Common Stock.  
(a)    The Company shall not issue fractions of Warrant Shares.  Whenever any fraction of Warrant Shares would otherwise be required to be issued or distributed, (i) a cash adjustment shall be paid in respect of such fraction in an amount equal to such fraction multiplied by the Exercise Price, or (ii) the actual issuance or distribution made shall reflect a rounding of such fraction to the nearest whole share (up or down), with half shares or less being rounded down and fractions in excess of half of a share being rounded up.
(b)    The Holder of a Warrant by the acceptance of the Warrant expressly waives his right to receive any fractional Warrant Share.
Section 10.    Warrant Holder Not Deemed a Stockholder.   No Holder of a Warrant or record holder of a Global Warrant Certificate shall be entitled to vote, receive dividends or distributions on, or be deemed for any purpose the holder of Common Stock or any other securities of the Company which may at any time be issuable on the exercise of the Warrants represented thereby, nor shall anything contained herein or in any Global Warrant Certificate be construed to confer upon the Holder of a Warrant or record holder of a Global Warrant Certificate, as such, any of the rights of a stockholder of the Company or any right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or to give or withhold consent to any corporate action, or to receive notice of meetings or other actions affecting stockholders, or to receive dividends or distributions or subscription rights, or otherwise, until such Warrant(s) evidenced by such Global Warrant Certificate shall have been exercised in accordance with the provisions hereof.
Section 11.    The Warrant Agent.
(a)    The Company agrees to pay to the Warrant Agent reasonable compensation for all services rendered by it hereunder and, from time to time, on demand of the Warrant Agent, its reasonable expenses and counsel fees and other disbursements incurred in the administration and execution of this Agreement and the exercise and performance of its duties hereunder, as set forth in the Fee Schedule provided to the Company and attached hereto as Schedule 1.  
(b)    The Company covenants and agrees to indemnify and to hold the Warrant Agent harmless against any costs, expenses (including reasonable fees of its legal 

9

counsel), losses or damages, which may be paid, incurred or suffered by or to which it may become subject, arising from or out of, directly or indirectly, any claims or liability resulting from its actions as Warrant Agent pursuant hereto; provided, that such covenant and agreement does not extend to, and the Warrant Agent shall not be indemnified with respect to, such costs, expenses, losses and damages incurred or suffered by the Warrant Agent as a result of, or arising out of, its gross negligence, bad faith, or willful misconduct.  
(c)    Promptly after the receipt by the Warrant Agent of notice of any demand or claim or the commencement of any action, suit, proceeding or investigation, the Warrant Agent shall, if a claim in respect thereof is to be made against the Company, notify the Company thereof in writing.   The Company shall be entitled to participate as its own expense in the defense of any such claim or proceeding, and, if it so elects at any time after receipt of such notice, it may assume the defense of any suit brought to enforce any such claim or of any other legal action or proceeding. For the purposes of this Section 11, the term “expense or loss” means any amount paid or payable to satisfy any claim, demand, action, suit or proceeding settled with the express written consent of the Warrant Agent, and all reasonable costs and expenses, including, but not limited to, reasonable counsel fees and disbursements, paid or incurred in investigating or defending against any such claim, demand, action, suit, proceeding or investigation.
(d)    The Warrant Agent shall be responsible for and shall indemnify and hold the Company harmless from and against any and all losses, damages, costs, charges, counsel fees, payments, expenses and liability arising out of or attributable to the Warrant Agent’s refusal or failure to comply with the terms of this Agreement, or which arise out of Warrant Agent’s negligence or willful misconduct or which arise out of the breach of any representation or warranty of the Warrant Agent hereunder, for which the Warrant Agent is not entitled to indemnification under this Agreement; provided, however, that Warrant Agent’s aggregate liability during any term of this Agreement with respect to, arising from, or arising in connection  with  this  Agreement, or from all services provided or omitted to be provided under this Agreement, whether in contract, or in tort, or otherwise, is limited to, and shall not exceed, the amounts paid under this Agreement by the Company to Warrant Agent as fees and charges, but not including reimbursable expenses.
(e)    Promptly after the receipt by the Company of notice of any demand or claim or the commencement of any action, suit, proceeding or investigation, the Company shall, if a claim in respect thereof is to be made against the Warrant Agent, notify the Warrant Agent thereof in writing.  The Warrant Agent shall be entitled to participate at its own expense in the defense of any such claim or proceeding, and, if it so elects at any time after receipt of such notice, it may assume the defense of any suit brought to enforce any such claim or of any other legal action or proceeding.  For the purposes of this Section 11, the term “expense or loss” means any amount paid or payable to satisfy any claim, demand, action, suit or proceeding settled with the express written consent of the Company, and all reasonable costs and expenses, including, but not limited to, reasonable counsel fees and disbursements, paid or incurred in investigating or defending against any such claim, demand, action, suit, proceeding or investigation.

10

(f)    Neither party to this Agreement shall be liable to the other party for any consequential, indirect, special or incidental damages under any provisions of this Agreement or for any consequential, indirect, penal, special or incidental damages arising out of any act or failure to act hereunder even if that party has been advised of or has foreseen the possibility of such damages.
Section 12.    Purchase or Consolidation or Change of Name of Warrant Agent.  
(a)    Any corporation into which the Warrant Agent or any successor Warrant Agent may be merged or with which it may be consolidated, or any corporation resulting from any merger or consolidation to which the Warrant Agent or any successor Warrant Agent shall be party, or any corporation succeeding to the corporate trust business of the Warrant Agent or any successor Warrant Agent, shall be the successor to the Warrant Agent under this Agreement without the execution or filing of any paper or any further act on the part of any of the parties hereto, provided that such corporation would be eligible for appointment as a successor Warrant Agent under the provisions of Section 14.  In case at the time such successor Warrant Agent shall succeed to the agency created by this Agreement any of the Global Warrant Certificates shall have been countersigned but not delivered, any such successor Warrant Agent may adopt the countersignature of the predecessor Warrant Agent and deliver such Global Warrant Certificates so countersigned; and in case at that time any of the Global Warrant Certificates shall not have been countersigned, any successor Warrant Agent may countersign such Global Warrant Certificates either in the name of the predecessor Warrant Agent or in the name of the successor Warrant Agent; and in all such cases such Global Warrant Certificates shall have the full force provided in the Global Warrant Certificates and in this Agreement.
(b)    If at any time the name of the Warrant Agent shall be changed and at such time any of the Global Warrant Certificates shall have been countersigned but not delivered, the Warrant Agent may adopt the countersignature under its prior name and deliver Global Warrant Certificates so countersigned; and in case at that time any of the Global Warrant Certificates shall not have been countersigned, the Warrant Agent may countersign such Global Warrant Certificates either in its prior name or in its changed name; and in all such cases such Global Warrant Certificates shall have the full force provided in the Global Warrant Certificates and in this Agreement.
Section 13.    Duties of Warrant Agent.   The Warrant Agent undertakes the duties and obligations imposed by this Agreement upon the following terms and conditions, by all of which the Company and the Holders of the Warrants, by their acceptance thereof, shall be bound:
(a)    The Warrant Agent may consult with legal counsel (who may be legal counsel for the Company), and the opinion of such counsel shall be full and complete authorization and protection to the Warrant Agent as to any action taken or omitted by it in good faith and in accordance with such opinion.
(b)    Whenever in the performance of its duties under this Agreement the Warrant Agent shall deem it necessary or desirable that any fact or matter be proved or 

11

established by the Company prior to taking or suffering any action hereunder, such fact or matter (unless other evidence in respect thereof be herein specifically prescribed) may be deemed to be conclusively proved and established by a certificate signed by the Chairman, President or any Vice President of the Company and by the Treasurer or any Assistant Treasurer or the Secretary of the Company and delivered to the Warrant Agent; and such certificate shall be full authentication to the Warrant Agent for any action taken or suffered in good faith by it under the provisions of this Agreement in reliance upon such certificate.
(c)    The Warrant Agent shall be liable hereunder only for its own gross negligence, bad faith or willful misconduct pursuant to Section 11.
(d)    The Warrant Agent shall not be liable for or by reason of any of the statements of fact or recitals contained in this Agreement or in the Global Warrant Certificates (except its countersignature thereof) or be required to verify the same, but all such statements and recitals are and shall be deemed to have been made by the Company only.
(e)    The Warrant Agent shall not be under any responsibility in respect of the validity of this Agreement or the execution and delivery hereof (except the due execution hereof by the Warrant Agent) or in respect of the validity or execution of any Global Warrant Certificate (except its countersignature thereof); nor shall it be responsible for any breach by the Company of any covenant or condition contained in this Agreement or in any Global Warrant Certificate; nor shall it be responsible for the adjustment of the Exercise Price or the making of any change in the number of Warrant Shares required under the provisions of Section 7 or responsible for the manner, method or amount of any such change or the ascertaining of the existence of facts that would require any such adjustment or change (except with respect to the exercise of Warrants evidenced by a Global Warrant Certificate after actual notice of any adjustment of the Exercise Price); nor shall it by any act hereunder be deemed to make any representation or warranty as to the authorization or reservation of any shares of Common Stock to be issued pursuant to this Agreement or any Global Warrant Certificate or as to whether any shares of Common Stock will, when issued, be duly authorized, validly issued, fully paid and nonassessable.
(f)    The Company agrees that it will perform, execute, acknowledge and deliver or cause to be performed, executed, acknowledged and delivered all such further and other acts, instruments and assurances as may reasonably be required by the Warrant Agent for the carrying out or performing by the Warrant Agent of the provisions of this Agreement.
(g)    The Warrant Agent is hereby authorized to accept instructions with respect to the performance of its duties hereunder from the Chairman or the President or any Vice President or the Secretary of the Company, and to apply to such officers for advice or instructions in connection with its duties, and it shall not be liable and shall be indemnified and held harmless for any action taken or suffered to be taken by it in good faith in accordance with instructions of any such officer, provided Warrant Agent carries out such instructions without gross negligence, bad faith or willful misconduct.

12

(h)    The Warrant Agent and any stockholder, director, officer or employee of the Warrant Agent may buy, sell or deal in any of the Warrants or other securities of the Company or become pecuniarily interested in any transaction in which the Company may be interested, or contract with or lend money to the Company or otherwise act as fully and freely as though it were not Warrant Agent under this Agreement.  Nothing herein shall preclude the Warrant Agent from acting in any other capacity for the Company or for any other legal entity.
(i)    The Warrant Agent may execute and exercise any of the rights or powers hereby vested in it or perform any duty hereunder either itself or by or through its attorney or agents, and the Warrant Agent shall not be answerable or accountable for any act, default, neglect or misconduct of any such attorney or agents or for any loss to the Company resulting from any such act, default, neglect or misconduct, provided reasonable care was exercised in the selection and continued employment thereof.
Section 14.    Change of Warrant Agent.   The Warrant Agent may resign and be discharged from its duties under this Agreement upon 30 days’ notice in writing mailed to the Company and to each transfer agent of the Common Stock by registered or certified mail, and to the Holders by first-class mail.  The Company may remove the Warrant Agent or any successor Warrant Agent upon 30 days’ notice in writing, mailed to the Warrant Agent or successor Warrant Agent, as the case may be, and to each transfer agent of the Common Stock by registered or certified mail, and to the Depository by first-class mail.  If the Warrant Agent shall resign or be removed or shall otherwise become incapable of acting, the Company shall appoint a successor to the Warrant Agent.  If the Company shall fail to make such appointment within a period of 30 days after such removal or after it has been notified in writing of such resignation or incapacity by the resigning or incapacitated Warrant Agent or by the Depository, then the Depository may apply to any court of competent jurisdiction for the appointment of a new Warrant Agent.  Any successor Warrant Agent appointed hereunder shall execute, acknowledge and deliver to the Warrant Agent and to the Company an instrument accepting such appointment hereunder and thereupon such new warrant agent without any further act or deed shall become vested with all the rights, powers, duties and responsibilities of the Warrant Agent hereunder with like effect as if it had been named as warrant agent; but if for any reason it becomes necessary or expedient to have the former warrant agent execute and deliver any further assurance, conveyance, act or deed, the same shall be done at the expense of the Company and shall be legally and validly executed and delivered by the former warrant agent. Not later than the effective date of any such appointment, the Company shall file notice thereof with the former Warrant Agent and each transfer agent for the Common Stock, and shall forthwith mail notice thereof to the registered holders at their addresses as they appear on the registry books. Failure to file or mail such notice, or any defect therein, shall not affect the legality or validity of the appointment of the successor Warrant Agent.
Section 15.    Issuance of New Global Warrant Certificates.   Notwithstanding any of the provisions of this Agreement or of the Warrants to the contrary, the Company may, at its option, issue new Global Warrant Certificate(s) evidencing the Warrants in such form as may be approved by its Board of Directors to reflect any adjustment or change in the Exercise Price per share and the number or kind or class of shares of stock or other securities or property purchasable under Global Warrant Certificate(s) made in accordance with the provisions of this Agreement.
Section 16.    Notices.   All notices, demands, approvals, consents and other communications provided for or permitted hereunder (each a “Notice”) shall be in writing and shall be sent by (a) registered or certified first-class mail (return receipt requested), (b) courier service, (c) personal delivery, or (d) telecopier (provided that, in the case of this clause (d), such Notice also is sent concurrently by another means specified above) as follows:

13

(a)    If to the Company, to:
Preferred Apartment Communities, Inc. 
3625 Cumberland Boulevard, Suite 1150 
Atlanta, Georgia 30339 
Attention:  Jeffrey Sprain, Esq. 
Fax:  (770) 818-4105
(b)    If to the Warrant Agent, to:
Computershare Trust Company, N.A. 
250 Royall Street 
Canton, Massachusetts 02021 
Attention:  Client Administration 
Fax:  (781) 575-2549
Any notice required to be delivered by the Company to the registered holder of any Global Warrant Certificate may be given by the Warrant Agent on behalf of the Company.
Each Notice shall be deemed to have been duly given and effective upon actual receipt (or refusal of receipt).  Any party may by Notice to the other parties given in accordance with this Section 16 designate another address or person for receipt of Notices hereunder.  If the address of a party has changed, then such party promptly shall by Notice to the other parties given in accordance with this Section 16 designate a new address for receipt of Notices hereunder.  For the avoidance of doubt, if a Notice given in accordance with this Section 16 to a party is returned to the sender as being refused or undeliverable (or having a similar status), then such Notice to such party shall be deemed to have been duly given and effective on the date that such Notice was originally sent.
Section 17.    Supplements and Amendments.  The Company and the Warrant Agent may from time to time supplement or amend this Agreement without the approval of any Holders in order to cure any ambiguity, to correct or supplement any provision contained herein which may be defective or inconsistent with any other provisions herein, or to make any other provisions with regard to matters or questions arising hereunder which the Company and the Warrant Agent may deem necessary or desirable and which shall not adversely affect the interests of the Holders.
Section 18.    Successors.  All covenants and provisions of this Agreement by or for the benefit of the Company or the Warrant Agent shall bind and inure to the benefit of their respective successors and assigns hereunder.
Section 19.    Benefits of this Agreement.  Nothing in this Agreement shall be construed to give any Person other than the Company and the Warrant Agent any legal or 

14

equitable right, remedy or claim under this Agreement; but this Agreement shall be for the sole and exclusive benefit of the Company, the Warrant Agent and the Holders.
Section 20.    Governing Law.  This Agreement and each Global Warrant Certificate issued hereunder shall be governed by, and construed in accordance with, the laws of the State of New York without giving effect to the conflicts of law principles thereof.
Section 21.    Counterparts.  This Agreement may be executed (including by facsimile or other electronic transmission) with counterpart signature pages or in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument.
Section 22.    Captions.  The captions of the sections of this Agreement have been inserted for convenience only and shall not control or affect the meaning or construction of any of the provisions hereof.
Section 23.    Information.  The Company agrees to promptly provide the Holders the information it is required to provide to the holders of the Common Stock, which information may be provided via the Securities and Exchange Commission's EDGAR filing system.
Section 24.    Force Majeure.  Notwithstanding anything to the contrary contained herein, Warrant Agent shall not be liable for any delays or failures in performance resulting from acts beyond its reasonable control including, without limitation, acts of God, terrorist acts, shortage of supply, breakdowns or malfunctions, interruptions or malfunction of computer facilities, or loss of data due to power failures or mechanical difficulties with information storage or retrieval systems, labor difficulties, war, or civil unrest.

15

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year first above written.
PREFERRED APARTMENT 
COMMUNITIES, INC.
		
	By: 
	        
Name:  
Title:   

COMPUTERSHARE TRUST COMPANY, N.A.
		
	By: 
	 
Name:  
Title:

COMPUTERSHARE INC.
		
	By: 
	 
Name:  
Title:

16

Exhibit A

Form of Global Warrant Certificate

Schedule 1 

Warrant Agent Proposal
For Preferred Apartment Communities 

Project Management and Processing Fees*
	
		
	Project Management and Setup Fee
	$12,500

	Per Warrant Exercise Processed
	$50

	Annual Maintenance Fee (waived first year)
	$1,500

*The above fees apply if the Agreement is in accordance with the Computershare’s standard forms. This proposal is based upon information provided to date and may be subject to change. 
Services Covered
		
	▪
	Designating an operational team to establish Warrant Agent procedures and duties, including document review, execution of legal agreement, operations management, and on-going updates and reporting

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

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

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

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

		
	▪
	Processing warrants received and converted

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

		
	▪
	Providing receipt summation of checks and wire transfers received

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

		
	▪
	Calculating cash in lieu of fractional shares

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

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

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

		
	▪
	Replacing lost or destroyed checks

		
	▪
	Responding to shareholder telephone and correspondence inquiries

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

		
	▪
	Process and post address changes plus mail confirmations if required

		
	▪
	Obtain W-9 and W8-BEN certifications

		
	▪
	Comply with SEC mandated annual lost shareholder search

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

		
	▪
	Produce daily transfer reports and post them for online viewing

Items Not Covered
		
	▪
	Services associated with new duties, legislation or regulatory fiat which become effective after the date of this proposal (these will be provided on an appraisal basis)

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

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

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

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

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

		
	▪
	Subsequent changes or updates to the certified shareholder records

		
	▪
	Shareholder processing rush fee of $250 per presentation 

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

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

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

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