SECOND AMENDMENT

 

TO

 

THIRD AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP

 

OF

 

SUPERTEL LIMITED PARTNERSHIP

 

MARCH 2, 2015

 

THIS SECOND AMENDMENT TO AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP (this “Second Amendment”), dated as of March 2, 2015, is entered into by SUPERTEL HOSPITALITY REIT TRUST, a Maryland real estate investment trust, as general partner (the “General Partner”) of SUPERTEL LIMITED PARTNERSHIP, a Virginia limited partnership (the “Partnership”), for itself and on behalf of the limited partners of the Partnership.

 

WHEREAS, the Third Amended and Restated Agreement of Limited Partnership of the Partnership was executed on June 30, 2000, and an Amendment No. 1 thereto was executed on May 26, 2005 (the “Agreement”); and

 

WHEREAS, Section 4.02(a) of the Partnership Agreement authorizes the General Partner to cause the Partnership to issue additional Partnership Units in one or more classes or series, with such designations, preferences and relative, participating, optional or other special rights, powers and duties as shall be determined by the General Partner, without the approval of the Limited Partners; and

 

WHEREAS, pursuant to the authority granted to the General Partner pursuant to Sections 4.02(a) and Article XI of the Partnership Agreement, the General Partner desires to amend the Partnership Agreement to establish a new series of Partnership Units, the LTIP Units, and to set forth the designations, rights, powers, preferences and duties of such LTIP Units.

 

NOW, THEREFORE, in consideration of good and valuable consideration, the receipt and sufficiency of which hereby are acknowledged, the General Partner hereby amends the Partnership Agreement as follows:

 

1.	Defined Terms.

 

(a)   The following defined terms shall be added to Article I of the Agreement:

 

“Adjustment Events” has the meaning set forth in Section 4.10(a)(i) hereof.

 

“Capital Account Limitation” has the meaning set forth in Section 4.11(b) hereof.

 

“Common Partnership Unit Distribution” has the meaning set forth in Section 4.10(a)(ii) hereof.

 

“Common Unit Economic Balance” has the meaning set forth in Section 5.01(h) hereof.

 

“Common Unit Transaction” has the meaning set forth in Section 4.11(f) hereof.

 

“Constituent Person” has the meaning set forth in Section 4.11(f) hereof.

 

“Conversion Date” has the meaning set forth in Section 4.11(b) hereof.

 

“Conversion Notice” has the meaning set forth in Section 4.11(b) hereof.

 

“Conversion Right” has the meaning set forth in Section 4.11(a) hereof.

 

“Economic Capital Account Balances” has the meaning set forth in Section 5.01(h) hereof.

 

“Equity Incentive Plan” means any equity incentive or compensation plan in effect on the date hereof or hereafter adopted by the Partnership or HHTI.

 

“Forced Conversion” has the meaning set forth in Section 4.11(c) hereof.

 

“Forced Conversion Notice” has the meaning set forth in Section 4.11(c) hereof.

 

“Liquidating Gains” has the meaning set forth in Section 5.01(h) hereof.

 

“LTIP Unit” means a Partnership Unit which is designated as an LTIP Unit and which has the rights, preferences and other privileges designated in Section 4.10 hereof and elsewhere in this Agreement in respect of holders of LTIP Units, including both Vested LTIP Units and Unvested LTIP Units.  The allocation of LTIP Units among the Partners shall be set forth on Exhibit A hereto, as it may be amended from time to time.

 

“LTIP Unitholder” means a Partner that holds LTIP Units.

 

“Partnership Unit Designation” has the meaning set forth in Section 4.02(a)(i) hereof.

 

“Safe Harbor” has the meaning set forth in Section 10.05(d) hereof.

 

“Safe Harbor Election” has the meaning set forth in Section 10.05(d) hereof.

 

“Safe Harbor Interest” has the meaning set forth in Section 10.05(d) hereof.

 

“Unvested LTIP Units” has the meaning set forth in Section 4.10(c) hereof.

 

“Vested LTIP Units” has the meaning set forth in Section 4.10(c) hereof.

 

“Vesting Agreement” means each or any, as the context implies, agreement or instrument, other than this Agreement, entered into by a LTIP Unitholder upon acceptance of an award of LTIP Units.

 

(b)   The definition of “Partnership Unit” shall be deleted in its entirety and replaced with the following:

 

“Partnership Unit” means a fractional, undivided share of the Partnership Interests of all Partners issued hereunder, and includes Common Units, LTIP Units and any other class or series of Partnership Units that may be established after the date hereof in accordance with the terms hereof.  The number of Partnership Units outstanding and the Percentage Interests represented by such Partnership Units are set forth on Exhibit A hereto, as it may be amended from time to time.

 

(c)   The definition of “Percentage Interest” shall be deleted in its entirety and replaced with the following:

 

“Percentage Interest” means the percentage determined by dividing the number of Common Units of a Partner by the sum of the number of Common Units of all Partners, treating LTIP Units, in accordance with Section 4.10(a), as Common Units for this purpose.

 

(d)   The definition of “Common Unit” shall be deleted in its entirety and replaced with the following:

 

“Common Unit” means a Partnership Unit other than a LTIP Unit or Preferred Unit.

 

2.	Issuances of Additional Partnership Units.  Section 4.02(a)(i) of the Agreement shall be deleted in its entirety and replaced with the following:

 

(a)   Issuances of Additional Partnership Units.

 

(i)   General. The General Partner is hereby authorized to cause the Partnership to issue such additional Partnership Interests, in the form of Partnership Units, for any Partnership purpose at any time or from time to time to the Partners (including the General Partner) or to other Persons for such consideration and on such terms and conditions as shall be established by the General Partner in its sole and absolute discretion, all without the approval of any Limited Partners. The General Partner’s determination that consideration is adequate shall be conclusive insofar as the adequacy of consideration relates to whether the Partnership Units are validly issued and fully paid. Any additional Partnership Units issued thereby may be issued in one or more classes, or one or more series of any of such classes, with such designations, preferences and relative, participating, optional or other special rights, powers and duties, including rights, powers and duties senior to the then-outstanding Partnership Units held by the Limited Partners, all as shall be determined by the General Partner in its sole and absolute discretion and without the approval of any Limited Partner, subject to Virginia law that cannot be preempted by the terms hereof and, except with respect to LTIP Units, as set forth in a written document hereafter attached to and made an exhibit to this Agreement (each, a “Partnership Unit Designation”), including, without limitation, (i) the allocations of items of Partnership income, gain, loss, deduction and credit to each such class or series of Partnership Units; (ii) the right of each such class or series of Partnership Units to share in Partnership distributions; and (iii) the rights of each such class or series of Partnership Units upon dissolution and liquidation of the Partnership; provided, that no additional Partnership Units shall be issued to the General Partner (or any direct or indirect wholly owned Subsidiary of the General Partner) unless:

 

(1) (A) the additional Partnership Units are issued in connection with an issuance of REIT Shares or other capital stock of, or other interests in, HHTI, which REIT Shares, capital stock or other interests have designations, preferences and other rights, all such that the economic interests are substantially similar to the designations, preferences and other rights of the additional Partnership Units issued to the General Partner (or any direct or indirect wholly owned Subsidiary of the General Partner) by the Partnership in accordance with this Section 4.02 and (B) the General Partner (or any direct or indirect wholly owned Subsidiary of the General Partner) shall make a Capital Contribution to the Partnership in an amount equal to the cash consideration received by HHTI from the issuance of such REIT Shares, capital stock or other interests in HHTI;

 

(2) the additional Partnership Units are issued in connection with an issuance of REIT Shares or other capital stock of, or other interests in, HHTI pursuant to a taxable share dividend declared by HHTI, which REIT Shares, capital stock or interests have designations, preferences and other rights, all such that the economic interests are substantially similar to the designations, preferences and other rights of the additional Partnership Units issued to the General Partner (or any direct or indirect wholly owned Subsidiary of the General Partner) by the Partnership in accordance with this Section 4.02, provided that (A) if HHTI allows the holders of its REIT Shares to elect whether to receive such dividend in REIT Shares or other capital stock of, or other interests in HHTI or cash, the Partnership will give the Limited Partners (excluding the General Partner or any direct or indirect Subsidiary of the General Partner) the same election to elect to receive (I) Partnership Units or cash or, (II) at the election of HHTI, REIT Shares, capital stock or other interests in HHTI or cash, and (B) if the Partnership issues additional Partnership Units pursuant to this Section 4.02(a)(i)(2), then an amount of income equal to the value of the Partnership Units received will be allocated to those holders of Common Units that elect to receive additional Partnership Units;

 

(3) the additional Partnership Units are issued in exchange for property owned by the General Partner (or any direct or indirect wholly owned Subsidiary of the General Partner) with a fair market value, as determined by the General Partner, in good faith, equal to the value of the Partnership Units; or

 

(4) the additional Partnership Units are issued to all Partners in proportion to their respective Percentage Interests.

 

3.	LTIP Units. The following new Section 4.10 shall be added to the Agreement:

 

(a)   Issuance of LTIP Units. Notwithstanding anything contained herein to the contrary, the General Partner may from time to time issue LTIP Units to Persons who provide services to or for the benefit of the Partnership for such consideration as the General Partner may determine to be appropriate, and admit such Persons as Limited Partners. Subject to the following provisions of this Section 4.10 and the special provisions of Section 4.11 and Section 5.01(h) hereof, LTIP Units shall be treated as Common Units, with all of the rights, privileges and obligations attendant thereto. For purposes of computing the Partners’ Percentage Interests, holders of LTIP Units shall be treated as Common Unit holders and LTIP Units shall be treated as Common Units.  In particular, the Partnership shall maintain at all times a one-to-one correspondence between LTIP Units and Common Units for conversion, distribution and other purposes, including, without limitation, complying with the following procedures:

 

(i)   If an Adjustment Event (as defined below) occurs, then the General Partner shall make a corresponding adjustment to the LTIP Units to maintain a one-for-one conversion and economic equivalence ratio between Common Units and LTIP Units. The following shall be “Adjustment Events”: (A) the Partnership makes a distribution on all outstanding Common Units in Partnership Units, (B) the Partnership subdivides the outstanding Common Units into a greater number of units or combines the outstanding Common Units into a smaller number of units, or (C) the Partnership issues any Partnership Units in exchange for its outstanding Common Units by way of a reclassification or recapitalization of its Common Units. If more than one Adjustment Event occurs, the adjustment to the LTIP Units need be made only once using a single formula that takes into account each and every Adjustment Event as if all Adjustment Events occurred simultaneously. For the avoidance of doubt, the following shall not be Adjustment Events: (x) the issuance of Partnership Units in a financing, reorganization, acquisition or other similar business Common Unit Transaction, (y) the issuance of Partnership Units pursuant to any employee benefit or compensation plan or distribution reinvestment plan or (z) the issuance of any Partnership Units to the General Partner (or any direct or indirect wholly owned Subsidiary of the General Partner) in respect of a capital contribution to the Partnership of proceeds from the sale of Additional Securities by HHTI. If the Partnership takes an action affecting the Common Units other than actions specifically described above as “Adjustment Events” and in the opinion of the General Partner such action would require an adjustment to the LTIP Units to maintain the one-to-one correspondence described above, the General Partner shall have the right to make such adjustment to the LTIP Units, to the extent permitted by law and by any Equity Incentive Plan and Vesting Agreement, in such manner and at such time as the General Partner, in its sole discretion, may determine to be appropriate under the circumstances. If an adjustment is made to the LTIP Units, as herein provided, the Partnership shall promptly file in the books and records of the Partnership an officer’s certificate setting forth such adjustment and a brief statement of the facts requiring such adjustment, which certificate shall be conclusive evidence of the correctness of such adjustment absent manifest error. Promptly after filing of such certificate, the Partnership shall deliver a notice to each LTIP Unitholder setting forth the adjustment to his or her LTIP Units and the effective date of such adjustment; provided, the failure to deliver such notice shall not invalidate the adjustment or the authority granted hereunder, and

 

(ii)   The LTIP Unitholders shall, when, as and if authorized and declared by the General Partner out of assets legally available for that purpose, be entitled to receive distributions in an amount per LTIP Unit equal to the distributions per Common Unit (the “Common Partnership Unit Distribution”), paid to holders of Common Units on such Partnership Record Date established by the General Partner with respect to such distribution; provided, that distributions of assets on liquidation, dissolution or winding up shall be made solely in accordance with the Partners’ positive Capital Account balances as provided in Section 5.06(a). So long as any LTIP Units are outstanding, no distributions (whether in cash or in kind) shall be authorized, declared or paid on Common Units, unless equal distributions have been or contemporaneously are authorized, declared and paid on the LTIP Units; provided, that distributions of assets on liquidation, dissolution or winding up shall be made solely in accordance with the Partners’ positive Capital Account balances as provided in Section 5.06(a).

 

(b)   Priority.  Subject to the provisions of this Section 4.10, the special provisions of Section 4.11 and Section 5.01(h) hereof and any Vesting Agreement, the LTIP Units shall rank pari passu with the Common Units as to the payment of regular and special periodic or other distributions; provided, that distributions of assets on liquidation, dissolution or winding up shall be made solely in accordance with the Partners’ positive Capital Account balances as provided in Section 5.06(a). As to the payment of distributions and as to distribution of assets upon liquidation, dissolution or winding up, any class or series of Partnership Units which by its terms specifies that it shall rank junior to, on a parity with, or senior to the Common Units shall also rank junior to, or pari passu with, or senior to, as the case may be, the LTIP Units; provided, that distributions of assets on liquidation, dissolution or winding up shall be made solely in accordance with the Partners’ positive Capital Account balances as provided in Section 5.06(a). Subject to the terms of any Vesting Agreement, an LTIP Unitholder shall be entitled to transfer his or her LTIP Units to the same extent, and subject to the same restrictions as holders of Common Units are entitled to transfer their Common Units pursuant to Article IX.

 

(c)   Special Provisions.  LTIP Units shall be subject to the following special provisions:

 

(i)   Vesting Agreements.  LTIP Units may, in the sole discretion of the General Partner, be issued subject to vesting, forfeiture and additional restrictions on transfer pursuant to the terms of a Vesting Agreement. The terms of any Vesting Agreement may be modified by the General Partner from time to time in its sole discretion, subject to any restrictions on amendment imposed by the relevant Vesting Agreement or by the Equity Incentive Plan, if applicable. LTIP Units that have vested under the terms of a Vesting Agreement are referred to as “Vested LTIP Units”; all other LTIP Units shall be treated as “Unvested LTIP Units.” Upon grant, the grantee of any LTIP Unit shall be treated as a Partner for all purposes. The Partners acknowledge that the liquidation value of each LTIP Unit shall be zero upon grant, the amount equal to the zero Capital Account balance of such LTIP Unit upon grant, for all purposes (including Section 10.05(d)).

 

(ii)   Forfeiture.  Unless otherwise specified in the Vesting Agreement or in any applicable compensatory plan, program or arrangement pursuant to which LTIP Units are issued, upon the occurrence of any event specified in a Vesting Agreement, plan, program or arrangement as resulting in either the right of the Partnership or the General Partner to repurchase LTIP Units at a specified purchase price or some other forfeiture of any LTIP Units, then if the Partnership or the General Partner exercises such right to repurchase or forfeiture or upon the occurrence of the event causing forfeiture in accordance with the applicable Vesting Agreement, plan, program or arrangement, the relevant LTIP Units shall immediately, and without any further action, be treated as cancelled and no longer outstanding for any purpose.

 

Unless otherwise specified in the Vesting Agreement, plan, program or arrangement, no consideration or other payment shall be due with respect to any LTIP Units that have been forfeited, other than any distributions declared with respect to a Partnership Record Date prior to the effective date of the forfeiture. In connection with any repurchase or forfeiture of LTIP Units, the balance of the portion of the Capital Account of the LTIP Unitholder that is attributable to all of his or her LTIP Units shall be reduced by the amount, if any, by which it exceeds the product of (A) the balance of the LTIP Unitholder’s Capital Account attributable to all of the LTIP Units held prior to the repurchase or forfeiture and (B) the quotient obtained by dividing (x) the number of LTIP Units, if any, held by the LTIP Unitholder after the repurchase or forfeiture and (y) the number of LTIP Units held by the LTIP Unitholder prior to the repurchase or forfeiture.

 

(iii)   Allocations.  LTIP Unitholders shall be entitled to certain special allocations of gain under Section 5.01(h) hereof.

 

(iv)   Redemption.  The Redemption Right provided to Limited Partners under Section 8.05 hereof shall not apply with respect to LTIP Units unless and until they are converted to Common Units as provided in clause (v) below and Section 4.11 hereof.

 

(v)   Conversion to Common Units.  Vested LTIP Units are eligible to be converted into Common Units in accordance with Section 4.11 hereof.

 

(d)   Voting.  LTIP Unitholders shall (a) have the same voting rights as the holders of Common Units, with all Vested LTIP Units and Unvested LTIP Units voting as a single class with the Common Units and having one vote per LTIP Unit; and (b) have the additional voting rights that are expressly set forth below. So long as any LTIP Units remain outstanding, the Partnership shall not, without the affirmative vote of the holders of a majority of the LTIP Units (Vested LTIP Units and Unvested LTIP Units) outstanding at the time, given in person or by proxy, either in writing or at a meeting (voting separately as a class), amend, alter or repeal, whether by merger, consolidation or otherwise, the provisions of this Agreement applicable to LTIP Units so as to materially and adversely affect (as determined in good faith by the General Partner) any right, privilege or voting power of the LTIP Units or the LTIP Unitholders as such, unless such amendment, alteration, or repeal affects equally, ratably and proportionately the rights, privileges and voting powers of the holders of Common Units; but subject, in any event, to the following provisions:

 

(i)   With respect to any Common Unit Transaction, so long as the LTIP Units are treated in accordance with Section 4.11(f) hereof, the consummation of such Common Unit Transaction shall not be deemed to materially and adversely affect such rights, preferences, privileges or voting powers of the LTIP Units or the LTIP Unitholders as such; and

 

(ii)   Any creation or issuance of any Partnership Units or of any class or series of Partnership Interest including without limitation additional Common Units or LTIP Units, whether ranking senior to, junior to, or on a parity with the LTIP Units with respect to distributions and the distribution of assets upon liquidation, dissolution or winding up, shall not be deemed to materially and adversely affect such rights, preferences, privileges or voting powers of the LTIP Units or the LTIP Unitholders as such.

 

The foregoing voting provisions will not apply if, at or prior to the time when the act with respect to which such vote would otherwise be required will be effected, all outstanding LTIP Units shall have been converted into Common Units.

 

4.	Conversion of LTIP Units. The following new Section 4.11 shall be added to the Agreement:

 

(a)   Subject to the provisions of this Section 4.11, an LTIP Unitholder shall have the right (the “Conversion Right”), at such holder’s option, at any time to convert all or a portion of such holder’s Vested LTIP Units into Common Units; provided, that a holder may not exercise the Conversion Right for less than 1,000 Vested LTIP Units or, if such holder holds less than 1,000 Vested LTIP Units, all of the Vested LTIP Units held by such holder. LTIP Unitholders shall not have the right to convert Unvested LTIP Units into Common Units until they become Vested LTIP Units; provided, that when an LTIP Unitholder is notified of the expected occurrence of an event that will cause such LTIP Unitholder’s Unvested LTIP Units to become Vested LTIP Units, such LTIP Unitholder may give the Partnership a Conversion Notice conditioned upon and effective as of the time of vesting and such Conversion Notice, unless subsequently revoked by the LTIP Unitholder, shall be accepted by the Partnership subject to such condition. The General Partner shall have the right at any time to cause a conversion of Vested LTIP Units into Common Units. In all cases, the conversion of any LTIP Units into Common Units shall be subject to the conditions and procedures set forth in this Section 4.11.

 

(b)   A holder of Vested LTIP Units may convert such LTIP Units into an equal number of fully paid and non-assessable Common Units, giving effect to all adjustments (if any) made pursuant to Section 4.10 hereof. Notwithstanding the foregoing, in no event may a holder of Vested LTIP Units convert a number of Vested LTIP Units that exceeds (x) the Economic Capital Account Balance of such Limited Partner, to the extent attributable to its ownership of LTIP Units, divided by (y) the Common Unit Economic Balance, in each case as determined as of the effective date of conversion (the “Capital Account Limitation”).

 

In order to exercise the Conversion Right, an LTIP Unitholder shall deliver a notice (a “Conversion Notice”) in the form attached as Exhibit D to the Partnership (with a copy to the General Partner) not less than ten nor more than 60 days prior to a date (the “Conversion Date”) specified in such Conversion Notice; provided, that if the General Partner has not given to the LTIP Unitholders notice of a proposed or upcoming Common Unit Transaction at least 30 days prior to the effective date of such Common Unit Transaction, then LTIP Unitholders shall have the right to deliver a Conversion Notice until the earlier of (x) the tenth day after such notice from the General Partner of a Common Unit Transaction or (y) the third Trading Day immediately preceding the effective date of such Common Unit Transaction. A Conversion Notice shall be provided in the manner provided in Section 12.01 hereof. Each LTIP Unitholder covenants and agrees with the Partnership that all Vested LTIP Units to be converted pursuant to this Section 4.11(b) shall be free and clear of all liens. Notwithstanding anything herein to the contrary, a holder of LTIP Units may deliver a Notice of Redemption pursuant to Section 8.05(a) hereof relating to those Common Units that will be issued to such holder upon conversion of such LTIP Units into Common Units in advance of the Conversion Date; provided, that the redemption of such Common Units by the Partnership shall in no event take place until after the Conversion Date. For clarity, it is noted that the objective of this paragraph is to put an LTIP Unitholder in a position where, if such holder so wishes, the Common Units into which such holder’s Vested LTIP Units will be converted can be tendered to the Partnership for redemption simultaneously with such conversion, with the further consequence that, if HHTI elects to assume the Partnership’s redemption obligation with respect to such Common Units under Section 8.05(b) hereof by delivering to such holder the REIT Shares Amount, then such holder can have the REIT Shares Amount issued to such holder simultaneously with the conversion of such holder’s Vested LTIP Units into Common Units. The General Partner and LTIP Unitholder shall reasonably cooperate with each other to coordinate the timing of the events described in the foregoing sentence.

 

(c)   The Partnership, at any time at the election of the General Partner, may cause any number of Vested LTIP Units held by an LTIP Unitholder to be converted (a “Forced Conversion”) into an equal number of Common Units, giving effect to all adjustments (if any) made pursuant to Section 4.10 hereof. In order to exercise its right of Forced Conversion, the Partnership shall deliver a notice (a “Forced Conversion Notice”) in the form attached as Exhibit E to the applicable LTIP Unitholder not less than ten nor more than 60 days prior to the Conversion Date specified in such Forced Conversion Notice. A Forced Conversion Notice shall be provided in the manner provided in Section 12.01 hereof and shall be revocable by the General Partner at any time prior to the Forced Conversion.  The Partnership, at any time at the election of the General Partner may cause any Common Units converted from Vested LTIP Units to be submitted by the holder for redemption pursuant to the exercise of a Redemption Right set forth in Section 8.05, notwithstanding any holding period, on a Specified Redemption Date determined by the Partnership, by giving notice to the holder in the manner provided by Section 12.01.

 

(d)   A conversion of Vested LTIP Units for which the holder thereof has given a Conversion Notice or the Partnership has given a Forced Conversion Notice shall occur automatically after the close of business on the applicable Conversion Date without any action on the part of such LTIP Unitholder, as of which time such LTIP Unitholder shall be credited on the books and records of the Partnership with the issuance as of the opening of business on the next day of the number of Common Units issuable upon such conversion. After the conversion of LTIP Units as aforesaid, the Partnership shall deliver to such LTIP Unitholder, upon his or her written request, a certificate of the General Partner certifying the number of Common Units and remaining LTIP Units, if any, held by such person immediately after such conversion. The assignee of any Limited Partner pursuant to Article IX hereof may exercise the rights of such Limited Partner pursuant to this Section 4.11 and such Limited Partner shall be bound by the exercise of such rights by the assignee.

 

(e)   For purposes of making future allocations under Section 5.01(h) hereof and applying the Capital Account Limitation, the portion of the Economic Capital Account Balance of the applicable LTIP Unitholder that is treated as attributable to his or her LTIP Units shall be reduced, as of the date of conversion, by the product of the number of LTIP Units converted and the Common Unit Economic Balance.

 

(f)   If the Partnership or the General Partner shall be a party to any Common Unit Transaction (including without limitation a merger, consolidation, unit exchange, self tender offer for all or substantially all Common Units or other business combination or reorganization, or sale of all or substantially all of the Partnership’s assets, but excluding any Common Unit Transaction which constitutes an Adjustment Event) in each case as a result of which Common Units shall be exchanged for or converted into the right, or the holders of Common Units shall otherwise be entitled, to receive cash, securities or other property or any combination thereof (each of the foregoing being referred to herein as a “Common Unit Transaction”), then the General Partner shall, subject to the terms of any applicable Equity Incentive Plan or Vesting Agreement, exercise immediately prior to the Common Unit Transaction its right to cause a Forced Conversion with respect to the maximum number of LTIP Units then eligible for conversion, taking into account any allocations that occur in connection with the Common Unit Transaction or that would occur in connection with the Common Unit Transaction if the assets of the Partnership were sold at the Common Unit Transaction price or, if applicable, at a value determined by the General Partner in good faith using the value attributed to the Partnership Units in the context of the Common Unit Transaction (in which case the Conversion Date shall be the effective date of the Common Unit Transaction).

 

In anticipation of such Forced Conversion and the consummation of the Common Unit Transaction, the Partnership shall use commercially reasonable efforts to cause each LTIP Unitholder to be afforded the right to receive in connection with such Common Unit Transaction in consideration for the Common Units into which such LTIP Unitholder’s LTIP Units will be converted the same kind and amount of cash, securities and other property (or any combination thereof) receivable upon the consummation of such Common Unit Transaction by a holder of the same number of Common Units, assuming such holder of Common Units is not a Person with which the Partnership consolidated or into which the Partnership merged or which merged into the Partnership or to which such sale or transfer was made, as the case may be (a “Constituent Person”), or an affiliate of a Constituent Person. In the event that holders of Common Units have the opportunity to elect the form or type of consideration to be received upon consummation of the Common Unit Transaction, prior to such Common Unit Transaction the General Partner shall give prompt written notice to each LTIP Unitholder of such election, and shall use commercially reasonable efforts to afford the LTIP Unitholders the right to elect, by written notice to the General Partner, the form or type of consideration to be received upon conversion of each LTIP Unit held by such holder into Common Units in connection with such Common Unit Transaction. If an LTIP Unitholder fails to make such an election, such holder (and any of its transferees) shall receive upon conversion of each LTIP Unit held by such LTIP Unitholder (or by any of such LTIP Unitholder’s transferees) the same kind and amount of consideration that a holder of a Common Unit would receive if such Common Unit holder failed to make such an election.

 

Subject to the rights of the Partnership and the General Partner under any Vesting Agreement and any Equity Incentive Plan, the Partnership shall use commercially reasonable efforts to cause the terms of any Common Unit Transaction to be consistent with the provisions of this Section 4.11(f) and to enter into an agreement with the successor or purchasing entity, as the case may be, for the benefit of any LTIP Unitholders whose LTIP Units will not be converted into Common Units in connection with the Common Unit Transaction that will (i) contain provisions enabling the holders of LTIP Units that remain outstanding after such Common Unit Transaction to convert their LTIP Units into securities as comparable as reasonably possible under the circumstances to the Common Units and (ii) preserve as far as reasonably possible under the circumstances the distribution, special allocation, conversion, and other rights set forth in this Agreement for the benefit of the LTIP Unitholders.

 

5.	Capital Accounts. Section 4.04 of the Agreement shall be deleted in it entirety and replaced with the following:

 

A separate capital account (a “Capital Account”) shall be established and maintained for each Partner in accordance with Regulations Section 1.704-1(b)(2)(iv). If (i) a new or existing Partner acquires an additional Partnership Unit in exchange for more than a de minimis Capital Contribution, (ii) the Partnership distributes to a Partner more than a de minimis amount of Partnership property as consideration for a Partnership Unit, (iii) the Partnership is liquidated within the meaning of Regulation Section 1.704-1(b)(2)(ii)(g) or (iv) the Partnership grants a Partnership Unit (other than a de minimis Partnership Unit) as consideration for the provision of services to or for the benefit of the Partnership to an existing Partner acting in a Partner capacity, or to a new Partner acting in a Partner capacity or in anticipation of being a Partner, the General Partner shall revalue the property of the Partnership to its fair market value (as determined by the General Partner, in its sole and absolute discretion, and taking into account Section 7701(g) of the Code) in accordance with Regulations Section 1.704-1(b)(2)(iv)(f); provided, that (i) the issuance of any LTIP Unit shall be deemed to require a revaluation pursuant to this Section 4.04 and (ii) the General Partner may elect not to revalue the property of the Partnership in connection with the issuance of additional Partnership Units pursuant to Section 4.02 to the extent it determines, in its sole and absolute discretion, that revaluing the property of the Partnership is not necessary or appropriate to reflect the relative economic interests of the Partners. When the Partnership’s property is revalued by the General Partner, the Capital Accounts of the Partners shall be adjusted in accordance with Regulations Sections 1.704-1(b)(2)(iv)(f) and (g), which generally require such Capital Accounts to be adjusted to reflect the manner in which the unrealized gain or loss inherent in such property (that has not been reflected in the Capital Accounts previously) would be allocated among the Partners pursuant to Section 5.01 hereof if there were a taxable disposition of such property for its fair market value (as determined by the General Partner, in its sole and absolute discretion, and taking into account Section 7701(g) of the Code) on the date of the revaluation.

 

6.	Special Allocations Regarding LTIP Units.  The following new Section 5.01(h) shall be added to the Agreement and the current Section 5.01(h) shall be redesignated as Section 5.01(i):

 

(g)           Special Allocations Regarding LTIP Units. Notwithstanding the provisions of Section 5.01(a) hereof, Liquidating Gains shall first be allocated to the LTIP Unitholders until their Economic Capital Account Balances, to the extent attributable to their ownership of LTIP Units, are equal to (i) the Common Unit Economic Balance, multiplied by (ii) the number of their LTIP Units. For this purpose, “Liquidating Gains” means net capital gains realized in connection with the actual or hypothetical sale of all or substantially all of the assets of the Partnership, including but not limited to net capital gain realized in connection with an adjustment to the value of Partnership assets under Section 704(b) of the Code. The “Economic Capital Account Balances” of the LTIP Unit holders will be equal to their Capital Account balances plus shares of Partner Nonrecourse Debt Minimum Gain or Partnership Minimum Gain (after reduction to reflect the items described in Regulations Section 1.704-1(b)(2)(ii)(d)(4), (5) and (6)) to the extent attributable to their ownership of LTIP Units. Similarly, the “Common Unit Economic Balance” shall mean (i) the Capital Account balance of HHTI, plus the amount of HHTI’s share of any Partner Nonrecourse Debt Minimum Gain or Partnership Minimum Gain (after reduction to reflect the items described in Regulations Section 1.704-1(b)(2)(ii)(d)(4), (5) and (6)), in either case to the extent attributable to HHTI’s direct or indirect ownership of Common Units and computed on a hypothetical basis after taking into account all allocations through the date on which any allocation is made under this Section 5.01(h), divided by (ii) the number of Common Units directly or indirectly owned by HHTI. Any such allocations shall be made among the LTIP Unitholders in proportion to the amounts required to be allocated to each under this Section 5.01(h). The parties agree that the intent of this Section 5.01(h) is to make the Capital Account balance associated with each LTIP Unit to be economically equivalent to the Capital Account balance associated with Common Units directly or indirectly owned by HHTI (on a per-Unit basis).

 

7.	Redemption Right. The first sentence of Section 8.05 shall be deleted and replaced with the following:

 

(a)   Subject to Sections 8.05(b), 8.05(c), 8.05(d), 8.05(e) and 8.05(f) and the provisions of any agreement between the Partnership and one or more Limited Partners, beginning on the date that is twelve months after the date of issuance of any Common Units, or, in the case of any Common Units that are issued upon the conversion of LTIP Units, the date that is twelve months after the date of issuance of any LTIP Units that have been converted into Common Units, each Limited Partner (other than HHTI or any Subsidiary of HHTI) shall have the right (the “Redemption Right”) to require the Partnership to redeem on a Specified Redemption Date all or a portion of such Limited Partner’s Common Units at a redemption price equal to and in the form of the Cash Amount.

 

8.	Tax Matters Partner; Tax Elections; Special Basis Adjustments.  The following new Section 10.05(d) is added to the end of Section 10.05:

 

(d)           The Partners, intending to be legally bound, hereby authorize the Partnership to make an election (the “Safe Harbor Election”) to have the “liquidation value” safe harbor provided in Proposed Treasury Regulation § 1.83-3(1) and the Proposed Revenue Procedure set forth in Internal Revenue Service Notice 2005-43, as such safe harbor may be modified when such proposed guidance is issued in final form or as amended by subsequently issued guidance (the “Safe Harbor”), apply to any interest in the Partnership transferred to a service provider while the Safe Harbor Election remains effective, to the extent such interest meets the Safe Harbor requirements (collectively, such interests are referred to as “Safe Harbor Interests”). The Tax Matters Partner is authorized and directed to execute and file the Safe Harbor Election on behalf of the Partnership and the Partners. The Partnership and the Partners (including any person to whom an interest in the Partnership is transferred in connection with the performance of services) hereby agree to comply with all requirements of the Safe Harbor (including forfeiture allocations) with respect to all Safe Harbor Interests and to prepare and file all U.S. federal income tax returns reporting the tax consequences of the issuance and vesting of Safe Harbor Interests consistent with such final Safe Harbor guidance. The Partnership is also authorized to take such actions as are necessary to achieve, under the Safe Harbor, the effect that the election and compliance with all requirements of the Safe Harbor referred to above would be intended to achieve under Proposed Treasury Regulation § 1.83-3, including amending this Agreement. In the event the Safe Harbor Election is rendered moot or obsolete by future legislation that amends Section 83 of the Code, this Section 10.05(d) shall have no effect. The liquidation value of each LTIP Unit shall be zero upon grant as provided in Section 4.10(c)(i).

 

9.	In order to reflect the issuance of the LTIP Units, Exhibit A to the Agreement is hereby amended by adding to the end of such Exhibit A the following table:

 

10.	New Exhibit D and Exhibit E to the Agreement are added to the Agreement in the form attached hereto.

 

11.	The foregoing recitals are incorporated in and are part of this Second Amendment.

 

12.

Except as specifically defined herein, all capitalized terms shall have the definitions provided in the Partnership Agreement.  This Second Amendment has been authorized by the General Partner pursuant to Article XI of the Partnership Agreement and does not require execution by the Limited Partners.  No other changes to the Partnership Agreement are authorized under this Second Amendment.

 

 

[Signature Page Follows.]

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

 

GENERAL PARTNER:

 

SUPERTEL HOSPITALITY REIT TRUST,

 

a Maryland real estate investment trust

 

By:  /s/ Patrick E. Beans

Name:  Patrick E. Beans

Title:     President and Secretary

EXHIBIT D

 

NOTICE OF ELECTION BY PARTNER TO CONVERT

 

LTIP UNITS INTO COMMON UNITS

 

The undersigned holder of LTIP Units hereby irrevocably: (i) elects to convert the number of LTIP Units in Supertel Limited Partnership (the “Partnership”) set forth below into Common Units in accordance with the terms of the Agreement of Limited Partnership of the Partnership, as amended; and (ii) directs that any cash in lieu of Common Units that may be deliverable upon such conversion be delivered to the address specified below. The undersigned hereby represents, warrants and certifies that the undersigned: (a) has title to such LTIP Units, free and clear of the rights or interests of any other person or entity other than the Partnership or the General Partner; (b) has the full right, power, and authority to cause the conversion of such LTIP Units as provided herein; and (c) has obtained the consent to or approval of all persons or entities, if any, having the right to consent to or approve such conversion.

 

Name of Holder:_______________________________________________________________

(Please Print: Exact Name as Registered with Partnership)

Number of LTIP Units to be Converted: ___________________________

Date of this Notice: ____________________________________________

 
 

____________________________________________________________

(Signature of Holder: Sign Exact Name as Registered with Partnership)

____________________________________________________________

(Street Address)

____________________________________________________________

(City) (State) (Zip Code)

Signature Guaranteed by:_______________________________________

EXHIBIT E

 

NOTICE OF ELECTION BY PARTNERSHIP TO FORCE CONVERSION

 

OF LTIP UNITS INTO COMMON UNITS

 

Supertel Limited Partnership (the “Partnership”) hereby elects to cause the LTIP Units held by the holder of the LTIP Units set forth below to be converted into Common Units in accordance with the terms of the Agreement of Limited Partnership of the Partnership, as amended, effected as of _______________ (the “Conversion Date”).

 

Name of Holder: _____________________________________________________________

(Please Print: Exact Name as Registered with Partnership)

Number of LTIP Units to be Converted: ______________________________

Date of this Notice: _______________________________________________

EMPLOYMENT AGREEMENT

 

Employment Agreement, dated effective as of March 2, 2015, by and between Supertel Hospitality, Inc., a Maryland corporation (the “Company”) and J. William Blackham, an individual (the “Executive”).

 

WHEREAS, the Company and the Executive desire to enter into an employment agreement on the terms set forth herein;

 

NOW, THEREFORE, for and in consideration of the premises, covenants, conditions and obligations thereafter set forth, the parties hereto agree as follows:

 

Section 1.   Employment .  The Company employs the Executive, and the Executive accepts employment, upon the terms and subject to the conditions hereinafter set forth.

 

Section 2.   Duties .  The Executive will be employed as Chief Executive Officer of the Company. The Executive will perform the duties attendant to his executive position with the Company as may be assigned by the Company’s Board of Directors. The Executive agrees to devote his full time and best efforts to the performance of his duties to the Company.  The Executive shall be permitted to participate in charitable activities and accept positions on the boards of non-profit entities.  The Executive may also serve on the boards of other corporations and entities with the consent of the Board of Directors, not to be unreasonably withheld.

 

Section 3.   Term .  The term of employment of the Executive shall commence on the first date written above and shall continue for a period of three (3) years thereafter unless terminated earlier by either party pursuant to the terms of this Agreement.  The term of employment may be extended thereafter for periods of one (1) year with the mutual consent of Company and Executive.

 

Section 4.   Compensation and Benefits .  In consideration for the services of the Executive, the Company will compensate the Executive as follows:

 

(a)

Base Salary .  The Company will pay the Executive a base annual salary of Three Hundred and Fifty Thousand Dollars ($350,000) (the “Base Salary”).  The Base Salary shall be paid in accordance with the Company’s standard and customary payroll practices.  The Base Salary is subject to increase on annual review by the Compensation Committee of Company’s Board of Directors (the “Compensation Committee”) but shall not be decreased without Executive’s consent.

 

(b)

Annual Bonus .  The Company will consider the Executive for cash bonuses on an annual basis, payable within ninety (90) days following fiscal year end as determined by the Compensation Committee. The Company and Executive agree that the annual bonus plan shall be developed with respect to the principles set forth on Exhibit A.

 

(c)

Long Term Incentive Awards .  Executive shall be eligible to participate in any Supertel long-term incentive program, which shall entitle Executive to receive equity grants (i.e., options to purchase stock of the Company, restricted stock grants, performance-based awards, profits-interest/OP units, etc.) in accordance with Company’s equity plan, at the discretion of the Compensation Committee.  The amount of awards will be no less than that granted to other senior executives and shall be reasonable in light of the contribution made, or expected to be made, by the Executive for the period for which such grant is made.

 

(d)

Executive Benefit Plans and Relocation Expenses . Company shall provide Executive and his eligible dependents with coverage under all employee benefit programs, plans and practices, in accordance with the terms thereof, which Company makes available to senior executive officers (provided that such plans are open to new participants as of the date of this Agreement). This will include vacation benefits for the Executive pursuant to the standard Company vacation policy which shall not be less than three (3) weeks per calendar year. To assist with Executive’s relocation, the Company will reimburse Executive up to Sixty-Five Thousand Dollars ($65,000) of reasonable moving expenses (including broker fees for house sale).

 

(e)

Inducement Award .  As inducement material to Executive’s acceptance of employment, Executive is granted an equity award of 5,263,152 long-term incentive plan units representing profit interests in Supertel Limited Partnership (“LTIP Units”) earned in one-third (1/3) increments upon the Company’s common stock first achieving during the term of this Agreement each of the following volume weighted average common stock price per share milestones for twenty (20) consecutive trading days:

 

(i)           $3.50

 

(ii)           $4.50

 

(iii)           $5.50

 

Earned LTIP Units will vest three (3) years from the date of this Agreement.  Vested LTIP Units shall convert into an equal number of common operating units of Supertel Limited Partnership, provided , however , that redemption of such common operating units by Executive shall be delayed as necessary, such that any equity issued by the Company would not cause Executive to exceed the ownership limitations set forth in Company’s charter.

 

Section 5.   Expenses .  The Executive, in connection with the services to be performed by him pursuant to this Agreement, may be required to make payments for travel and similar expenses. The Company will reimburse the Executive within thirty (30) days after Executive renders an accounting for all reasonable expenses of types authorized by the Company and incurred by the Executive in the performance of his duties hereunder.  The Executive will comply with such budget limitations and approval and reporting requirements with respect to expenses as the Company may reasonably establish from time to time.

 

Section 6.   Termination .

 

(a)

Termination For Cause by Company or Termination by Executive for Good Reason .  The Company may terminate Executive’s employment for Cause (as defined below) at any time upon written notice to the Executive.  Executive may terminate employment at any time for Good Reason (as defined below) upon written notice to the Company.

 

(b)	Termination Without Cause or by the Executive Without Good Reason .  The Company may terminate Executive’s employment at any time without Cause, or the Executive may terminate employment without Good Reason, each in their sole discretion, upon 30 days written notice to the other party.

 

(c)

Death or Disability .  Executive’s employment will terminate upon the death of the Executive and, at the option of the Company, in the event of the Executive’s disability, upon 30 days written notice to the Executive.  The Executive will be deemed disabled if he is unable to perform his duties for a period of ninety (90) consecutive days, or one hundred and eighty (180) days in the aggregate during any twelve (12) month period, on account of injury or sickness.  Any refusal by the Executive to submit to a medical examination upon reasonable request for the purpose of certifying disability under this Section 6(c) will be deemed conclusively to constitute evidence of the Executive’s disability.

 

(d)

Payments Upon Termination For Cause .  If Executive’s employment is terminated for Cause by Company, all outstanding unvested equity awards will be forfeited and the Executive will be entitled solely to (i) accrued and unpaid Base Salary to the date of termination, (ii) the accrued and unused vacation to the date of termination, (iii) unpaid expense reimbursements under Section 5, and (iv) vested amounts under qualified retirement plans.

 

(e)

Payments Upon Termination by Executive Without Good Reason.   If Executive terminates his employment without Good Reason, all outstanding unvested equity awards will be forfeited and Executive will be entitled solely to (i) the benefits provided for in Section 6(d) and (ii) unpaid bonuses earned for completed prior fiscal years.

 

(f)

Payments Upon Death or Disability.   If Executive’s employment is terminated upon death or disability as provided in Section 6(c), Executive (or his estate, as applicable) will be entitled solely to (i) the benefits provided for in Section 6(e), (ii) any benefits payable on death or disability, as applicable, under the Company’s benefit plans, and (iii) the immediate vesting of equity awards if solely subject to time vesting and (iv) any awards, not yet earned but may be earned based on the achievement of the applicable performance criteria, will vest at a pro rata amount based on the performance period to the date of termination.

 

(g)

Payments Upon Termination Without Cause or Termination for Good Reason.   If the Executive’s employment is terminated by the Company without Cause or is terminated by the Executive for Good Reason, Executive will be entitled solely to (i) the benefits provided for in Section 6(e), (ii) if termination occurs on or prior to December 31, 2015, an amount equal to one and a half times (1.5x) Base Salary as in effect at time of termination, (iii) if termination occurs after December 31, 2015, an amount equal to one times (1x) Base Salary as in effect at the time of termination, (iv) if termination occurs after December 31, 2015, an amount equal to one times (1x) the average annual bonus previously earned for up to the prior three (3) years, (v) the immediate vesting of equity awards solely subject to time vesting, and (vi) any awards, not yet earned but may be earned based on the achievement of the applicable performance criteria, will vest at a pro rata amount based on the performance period to the date of termination.  Additionally, the Company will pay the Executive’s COBRA premiums during the period that Executive elects to receive COBRA coverage under the Company’s group health plans, not to exceed eighteen (18) months.

 

(h)

Termination Following Change in Control .  If at the time of or within twelve (12) months following a Change in Control (as defined below), and the Company (or its successor) terminates the Executive’s employment other than for Cause or by reason of death or disability or the Executive terminates his employment for Good Reason, Executive will be entitled solely to the benefits set forth in Section 6(g), provided, however, the additional Base Salary payment will be increased to two times (2x) Base Salary and the annual bonus payment will be increased to two times (2x) the average annual bonus previously earned for up to the prior three (3) years.  If a Change in Control occurs in 2016, the annual bonus payment for 2015 will be determined and, if earned, paid before the Change in Control occurs.

 

(i)

Timing of Payments and Release .  Subject to Section 6(j) below and any applicable deferral election, all cash payments required following termination of employment based on Base Salary and bonus shall be made at the times such cash payments would have been made pursuant to the Company’s payroll and bonus payment practices, unless otherwise provided in an applicable retirement, equity compensation or other benefit plan or program of Company. Any payments or benefits made pursuant to Section 6(g) or Section 6(h) are conditioned on Executive having first signed a release agreement in a form provided by Company and the release becoming irrevocable by its terms within seven (7) days following the date of termination.

 

(j)

Section 409A .  Notwithstanding anything herein to the contrary, this Agreement is intended to be interpreted and operated to the extent possible so that the payments set forth herein either shall be exempt from the requirements of Section 409A of the Code or shall comply with the requirements of such provision; provided however that in no event shall the Company be liable to the Executive for or with respect to any taxes, penalties or interest which may be imposed upon the Executive pursuant to Section 409A.  To the extent that any amount payable pursuant to this Agreement constitutes a “deferral of compensation” subject to Section 409A (a “409A Payment”), then, if on the date of the Executive’s “separation from service,” as such term is defined in Treas. Reg. Section 1.409A-1(h)(1), from the Company (“Separation from Service”), the Executive is a “specified employee,” as such term is defined in Treas. Reg. Section 1.409-1(i), as determined from time to time by the Company, then such 409A Payment shall not be made to the Executive earlier than the earlier of (i) six (6) months after the Executive’s Separation from Service; or (ii) the date of Executive’s death.  The 409A Payment under this Agreement that would otherwise be made during such period shall be aggregated and paid in one lump sum, with interest (compounded monthly) at the prime rate reported by the Wall Street Journal on the date the payment otherwise would have been made, on the first business day following the end of the six (6) month period or following the date of the Executive’s death, whichever is earlier.  The Executive hereby acknowledges that Executive has been advised to seek and has sought the advice of a tax advisor with respect to the tax consequences to the Executive of all payments pursuant to this Agreement, including any adverse tax consequences or penalty taxes under Section 409A and applicable federal and state tax law.  Executive hereby agrees to bear the entire risk of any such adverse federal and state tax consequences and penalty taxes in the event any payment pursuant to this Agreement is deemed to be subject to Section 409A, and that no representations have been made to the Executive relating to the tax treatment of any payment pursuant to this Agreement under Section 409A and the corresponding provisions of any applicable state income tax laws.  If payments under Section 6 constitute 409A Payment, references within Section 6 and this Section 6(j) to termination of employment or similar language shall mean Executive’s “separation from service” as defined in Treas. Reg. Section 1.409A-1(h), including the default presumptions thereunder.  No 409A Payment payable under this Agreement shall be subject to acceleration or to any change in the specified time or method of payment, except as otherwise provided under this Agreement and consistent with Section 409A.

 

(k)

Additional Matters .  Executive accepts the payments as specified herein as full satisfaction of all amounts owed to Executive by Company pursuant to this Agreement in the event of Executive’s termination.  Upon termination of Executive’s employment for any reason and except as otherwise provided herein, (i) the vesting, exercise and all of the terms of any equity awards and stock options held by Executive at termination shall be governed by the plans and programs and the agreements and other documents pursuant to which such awards were granted; and (ii) all other rights of Executive under any other compensatory or benefit plan shall be governed by such plan.

 

(l)	Section 6 Definitions.   For purposes of this Agreement, “Cause” shall mean:

 

(i)

dishonest or fraudulent actions by the Executive in the conduct of his duties for the Company or the conviction of the Executive of a felony;

 

(ii)

a material failure by the Executive to devote substantially all of his business time to the business of the Company;

 

(iii)

a material failure by the Executive to follow the Company’s good faith instructions and directives that is not cured by the Executive within forty-five (45)  days after receiving notice;

 

(iv)

unreasonable and material neglect, refusal or failure by the Executive to perform the duties assigned to him that is not cured by the Executive within forty-five (45) days after receiving notice;

 

(v)

the Executive’s material breach of this Agreement that is not cured by the Executive within forty-five (45) days after receiving notice;

 

(vi)

the Executive’s breach of the Company’s Code of Business Conduct and Ethics or similar successor or augmented codes of conduct or ethics;

 

(vii)

any other act or omission which subjects the Company or its subsidiaries or affiliates to substantial public disrespect, scandal or ridicule; or

 

(viii)

any governmental regulatory agency recommends or orders that the Company terminate the employment of the Executive or relieve him of his duties.

 

“Change in Control” shall mean:

 

(i)

The acquisition (other than from the Company) by any person, entity or “group”, within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities and Exchange Act of 1934, as amended (the “Act”), (excluding any acquisition or holding by (i) the Company or its subsidiaries, (ii) any employee benefit plan of the Company or its subsidiaries which acquires beneficial ownership of voting securities of the Company or (iii) IRSA Inversiones y Representaciones Sociedad Anónima or its affiliates) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Act) of 50% or more of either the then outstanding shares of common stock or the combined voting power of the Company’s then outstanding voting securities entitled to vote generally in the election of directors; or

 

(ii)

Individuals who, as of the date hereof, constitute the Board of Directors of Company (as of the date hereof the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board, provided that any person becoming a director subsequent to the date hereof whose election, or nomination for the election by the Company’s stockholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be, for purposes of this Plan, considered as though such person were a member of the Incumbent Board; or

 

(iii)

Consummation of a reorganization, merger or consolidation, in each case, with respect to which persons who were the stockholders of the Company immediately prior to such reorganization, merger or consolidation do not, immediately thereafter, own more than 50% of the combined voting power entitled to vote generally in the election of directors of the reorganized, merged or consolidated Company’s then outstanding voting securities, or a liquidation or dissolution of the Company or of the sale of 50% or more of all of the assets of the Company.

 

A Change in Control shall not be deemed to have occurred if a transaction described above occurs with a subsidiary of the Company unless such transaction results in the consequences described above.

 

“Code” shall mean the Internal Revenue Code of 1986, as amended

 

“Good Reason” shall mean the occurrence of one of the following events, without the Executive’s prior written consent, provided such event is not corrected within sixty (60) days following the Board of Directors’ receipt of written notice from Executive of Executive’s intention to terminate his employment with the Company for Good Reason, which notice must be provided within ninety (90) days of the initial existence of one of the following events:

 

(i)	a material breach of this Agreement by the Company, with the determination as to whether there has been a breach and whether the breach is material to be determined by the Audit Committee of the Company’s Board of Directors in the reasonable and good faith exercise of its discretion; or

 

(ii)

a diminution of, or reduction or adverse alteration of, Executive’s compensation, duties or responsibilities, or the Company’s assignment of duties, responsibilities or reporting requirements that are materially inconsistent with his positions or that materially expand his duties, responsibilities, or reporting requirements; or

 

(iii)

a Change in Control has occurred and Executive is involuntarily removed from the Board of Directors or at any time Executive has requested to be nominated but is not nominated for election to the Board of Directors at the subsequent election of directors; or

 

(iv)	a Change in Control has occurred and within twelve (12) months thereafter the Executive is required to relocate more than fifty (50) miles from his first relocation site.

 

Section 7.   Confidential Information .  The Executive recognizes and acknowledges that certain assets of the Company and its affiliates, including without limitation information regarding methods of operation, proprietary computer programs, sales, products, profits, costs, markets and key personnel (hereinafter called “Confidential Information”) are valuable, special and unique assets of the Company and its affiliates.  The Executive will not, during or after his term of employment, disclose any of the Confidential Information to any person, firm, corporation, association, or any other entity for any reason or purpose whatsoever, directly or indirectly, except as may be required pursuant to his employment hereunder, unless and until such Confidential Information becomes publicly available other than as a consequence of the breach of the Executive of his confidentiality obligations hereunder.  In the event of the termination of his employment, whether voluntary or involuntary and whether by the Company or the Executive, the Executive will deliver to the Company all documents and data pertaining to the Confidential Information and will not take with him any documents or data or any kind or any reproductions (in whole or in part) of any items relating to the Confidential Information.

 

Section 8.   Noncompetition .  During the term hereof and for twelve (12) months thereafter, the Executive will not (i) engage directly or indirectly, alone or as a shareholder, partner, officer, director, employee or consultant of any other business organization, in any business activities (A) related to publicly traded or private hotel REIT in North America (“Designated Industry) and (B) that were either conducted by the Company prior to the Executive’s termination and directly competitive with the Company or proposed to be conducted by the Company at the time of such termination, (ii) divert to any competitor of the Company in the Designated Industry any business opportunity of the Executive, or (iii) solicit or encourage any officer, employee, or consultant of the Company to leave its employ for employment by or with any competitor of the Company in the Designated Industry.  It is expressly agreed that (A) above shall not apply in the instance of termination for cause. The Executive’s noncompetition obligations hereunder will not preclude the Executive from owning less than 5% of the common stock of any publicly traded corporation conducting business activities in the Designated Industry.  The Executive will continue to be bound by the provisions of this Section 8 until their expiration and will not be entitled to any compensation from the Company with respect thereto.  If at any time the provisions of this Section 8 will be determined to be invalid or unenforceable, by reason of being vague or unreasonably as to area, duration or scope of activity, this Section 8 will be considered divisible and will become and be immediately amended to only such area, duration and scope of activity as will be determined to be reasonable and enforceable by the court or other body having jurisdiction over the matter; and the Executive agrees that this Section 8 as so amended will be valid and binding as though any invalid or unenforceable provision had not been included herein.  Further, during and following employment hereunder, Executive shall not publicly or privately make disparaging statements concerning the Company or its affiliates, directors, officers, employees or representatives.

 

Section 9.   Executive Representations .

 

(a)

No Restrictions .  Executive represents to Company that Executive is not a party to or bound by any employment, retainer, consulting, license, non-competition, non-disclosure, trade secrets or other agreement between Executive and any other person, partnership, corporation, joint venture, association or other entity that would restrict, impair or in any manner negatively impact the performance of his services pursuant to this Agreement. This representation is an express condition to this Agreement and, in the event of a breach of this representation, this Agreement shall be null and void.

 

(b)

Cooperation .  Executive shall cooperate with the Company, to the extent reasonably requested by the Company, in any investigation or litigation in which the Company or its affiliates, directors, officers, employees or representatives is a party and of which Executive has relevant information by virtue of his employment with the Company.  The Company shall reimburse Executive reasonable expenses related to such cooperation.

 

(c)

Consultation.   Executive has had the opportunity to consult with an attorney or other advisors of his choice with respect to this Agreement and the matters herein.

 

Section 10.   General .

 

(a)

Notices .  All notices and other communications hereunder will be in writing or by written telecommunication, and will be deemed to have been duly given if delivered personally or if mailed by certified mail, return receipt requested or by written telecommunication, to the relevant address set forth below, or to such other address as the recipient of such notice of communication will have specified to the other party hereto in accordance with this Section 10:

 

If to the Company, to:

 

Supertel Hospitality, Inc.

1800 West Pasewalk Avenue, Suite 200

Norfolk, NE 68701

 

If to the Executive, to:

 

The address shown on the records of the Company.

(b)

Equitable Remedies . Each of the parties hereto acknowledges and agrees that upon any breach by the Executive of his obligations under Section 7 and 8 hereof, the Company will have no adequate remedy at law, and accordingly will be entitled to specific performance and other appropriate injunctive and equitable relief.

 

(c)	Severability .  If any provision of this Agreement is or becomes invalid, illegal or unenforceable in any respect under any law, the validity, legality and enforceability of the remaining provisions hereof will not in any way be affected or impaired.

 

(d)

Waivers .  No delay or omission by either party hereto in exercising any right, power or privilege hereunder will impair such right, power or privilege, nor will any single or partial exercise of any such right, power or privilege preclude any further exercise thereof or the exercise of any other right, power or privilege.

 

(e)	Assigns .  This Agreement will be binding upon and inure to the benefit of the heirs and successors of each of the parties hereto.

 

(f)	Entire Agreement .  This Agreement contains the entire understanding of the parties, supersedes all prior agreements and understandings relating to the subject matter hereof, and will not be amended except by a written instrument signed by each of the parties hereto.

 

(g)	Governing Law .  This Agreement and the performance hereof will be construed and governed in accordance with the laws of the State of Maryland.

 

(h)

Arbitration.   Any dispute, claim or controversy arising out of or relating to this Agreement or the breach, termination, enforcement, interpretation or validity thereof, including the determination of the scope or applicability of this agreement to arbitrate, shall be determined by arbitration in Maryland before three arbitrators. The arbitration shall be administered by JAMS pursuant to its Comprehensive Arbitration Rules and Procedures or pursuant to JAMS’ Streamlined Arbitration Rules and Procedures. Judgment on the Award may be entered in any court having jurisdiction. The arbitrators shall not have the power to award punitive or exemplary damages. In any arbitration arising out of or related to this Agreement, the arbitrators shall award to the prevailing party, if any, the costs and attorneys’ fees reasonably incurred by the prevailing party in connection with the arbitration. This clause shall not preclude parties from seeking provisional remedies in aid of arbitration from a court of appropriate jurisdiction. Notwithstanding the foregoing, the Company may seek interim injunctive relief to enforce restrictive covenants herein pending resolution of any arbitration.

 

(i)

Directors and Officers Liability Coverage.   Executive shall be entitled to the same coverage under the Company’s directors and officers liability insurance policies as is available to senior executive officers and directors with Company.  In any event, Company shall indemnify and hold Executive harmless, to the fullest extent permitted by the Company’s charter, bylaws and other organizational documents and the laws of the State of Maryland, from and against all costs, charges and expenses (including advancement of reasonable attorneys’ fees) incurred or sustained in connection with any action, suit or proceeding to which Executive may be made a party by reason of Executive’s being or having been a director or officer of Company or any of its affiliates or employee benefit plans.  The provisions of this Section shall survive the termination and expiration of this Agreement for any reason, and continue for the duration of Executive’s employment or service as a member of the Company’s Board of Directors in accordance with the terms of this Section, including any acts and omissions to act occurring after the termination or expiration of this Agreement.

 

IN WITNESS WHEREOF, and intending to be legally bound hereby, the parties hereto have caused this Agreement to be duly executed as of the date and year first above written.

 

EXHIBIT A

ANNUAL BONUS

The bonus shall be reasonable in light of the contribution made by Executive for such year in relation to the contributions made and bonuses paid to other senior Company executives for such year.  Executive will have an annual target performance bonus equal to 100% of Base Salary.  The annual cash bonus will be predicated based on both objective and individual measures determined by the Compensation Committee.  Objective performance criteria shall generally be based on a combination of management based objectives (e.g. building a strong, new management team) as well as company-wide metrics (e.g. improving FFO, EBITDA, RevPAR growth) and balance sheet metrics (e.g. capital raising of $25-50M, per annum), market capitalization growth ($60-$100M), and additional individual criteria to be determined by the Compensation Committee in consultation with the CEO.

 

The Compensation Committee retains discretion to take into account market events not contemplated when performance objectives were set.

 

 

NEITHER THIS SECURITY NOR THE SECURITIES FOR WHICH THIS SECURITY IS EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE HOLDER, REASONABLY ACCEPTABLE TO THE CORPORATION, TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE CORPORATION.

 

COMMON STOCK PURCHASE WARRANT

 

SUPERTEL HOSPITALITY, INC.

 

 

THIS COMMON STOCK PURCHASE WARRANT (the “ Warrant ”) certifies that, for value received, J. William Blackham (the “ Holder ”) is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at any time on or after March 2, 2015 (the “ Initial Exercise Date ”) and on or prior to the close of business on the Termination Date but not thereafter, to subscribe for and purchase from Supertel Hospitality, Inc., a Maryland corporation (the “ Company ”), 657,894 shares (subject to adjustment hereunder, the “ Warrant Shares ”) of Common Stock.  The purchase price of one share of Common Stock under this Warrant shall be equal to the applicable Exercise Price hereunder.

 

Section 1.   Definitions .  In addition to the definitions provided throughout this Agreement and unless the context otherwise requires, the following terms, when capitalized, shall have the following meanings for the purposes of construing this Agreement:

 

(a)   “ Affiliates ” means, with respect to any person, any person directly or indirectly controlling, controlled by or under common control with, such other person.  For purposes of this definition, “control” (including, with correlative meanings, the terms “controlled by” and “under common control with”) when used with respect to any person, means the possession, directly or indirectly, of the power to cause the direction of management or policies of such person, whether through the ownership of voting securities by contract or otherwise.

 

(b)   “ Beneficial Ownership ” has the meaning ascribed to such term in Article IX of the Amended and Restated Articles of Incorporation of the Company.

 

(c)    “ Common Stock ” means the common stock, $0.01 par value per share, of the Company.

 

(d)   “ Company ” is defined in the first paragraph of the Warrant.

 

(e)   “ Constructive Ownership ” has the meaning assigned to such term in Article IX of the Amended and Restated Articles of Incorporation of the Company.

 

(f)   “ Employment Agreement ” means the Employment Agreement dated effective as of March 2, 2015 between Holder and the Company.

 

(g)   “ Exchange ” means the Nasdaq Stock Market LLC (or, if the shares of Common Stock are not listed or admitted for trading on the Nasdaq Stock Market LLC, on the principal national securities exchange on which such securities are listed, or if not so listed, the OTC Bulletin Board (or any successors to any of the foregoing)).

 

(h)   “ Exercise Price ” means the purchase price of one share of Common Stock upon exercise of this Warrant in whole or in part from time to time in the amount at the times as follows:

 

(i)           $1.52 for Warrant Shares purchased on or prior to March 17, 2015 provided Holder purchases at least one-third (1/3 rd ) but not more than one-half (1/2) of the Total Warrant Shares, and

 

(ii)           $1.92 for Warrant Shares purchased after March 17, 2015, provided , that Holder has purchased one-third (1/3 rd ) of the Warrant Shares on or prior to March 17, 2015.

 

(i)   “ Holder ” is defined in the first paragraph of the Warrant.

 

(j)   “ Initial Exercise Date ” is defined in the first paragraph of the Warrant.

 

(k)   “ Ownership Limit ” has the meaning ascribed to such term in Article IX of the Amended and Restated Articles of Incorporation of the Company.

 

(l)   “ Preferred Shares ” means the Company’s Series C Cumulative Convertible Preferred Stock.

 

(m)   “ RES ” means Real Estate Strategies, L.P. or its Affiliates, including IRSA Inversiones Representaciones Sociedad Anonima, an Argentine sociedad anonima.

 

(n)   “ Termination Date ” means the earlier of (i) March 17, 2015 if Holder fails to purchase at least one-third of the Total Warrant Shares on or before that date, or (ii) March 2, 2018 if Holder purchases at least one-third (1/3 rd ) of the Total Warrant Shares on or before March 17, 2015.

 

(o)   “ Total Warrant Shares ” means the total number of Warrant Shares for which this Warrant may be exercised on the Initial Exercise Date without regard to the Ownership Limit.

 

(p)   “ Trading Day ” means a day on which the Exchange is open for trading.

 

(q)   “ Warrant ” is defined in the first paragraph of the Warrant.

 

(r)   “ Warrant Shares ” is defined in the first paragraph of the Warrant.

 

Section 2.   Exercise .

 

(a)   Exercise of Warrant .  Subject to the Ownership Limit (set forth below), exercise of this Warrant may be made, in whole or in part, at any time or times on or after the Initial Exercise Date and on or before the Termination Date, provided , that Holder has purchased at least one-third (1/3 rd ) of the Total Warrant Shares on or prior to March 17, 2015, by delivery to the Company (or such other office or agency of the Company as it may designate by notice in writing to the Holder at the address of the Holder appearing on the books of the Company) of a duly executed copy of the Notice of Exercise form annexed hereto.  Within five (5) Trading Days following the date of exercise as aforesaid and upon delivery by Holder of this Warrant and the aggregate Exercise Price for the shares specified in the applicable Notice of Exercise (by wire transfer or cashier’s check drawn on a United States bank), the Company shall issue and cause to be delivered to Holder the certificate or certificates (or electronic equivalent thereof) representing the number of fully-paid and non-assessable Warrant Shares for which the Warrant is being exercised.  Partial exercises of this Warrant resulting in purchases of a portion of the total number of Warrant Shares available hereunder shall have the effect of lowering the outstanding number of Warrant Shares purchasable hereunder in an amount equal to the applicable number of Warrant Shares purchased and, following such partial exercise, the Company shall deliver to the Holder a new Warrant evidencing the rights of the Holder to purchase the unpurchased Warrant Shares called for by this Warrant, which new Warrant shall in all other respects be identical with this Warrant.

 

(b)   Charges, Taxes and Expenses .  Issuance of certificates for Warrant Shares shall be made without charge to the Holder for any issue or transfer tax or other incidental expense in respect of the issuance of such certificate, all of which taxes and expenses shall be paid by the Company.

 

(c)   Share Ownership Limit .  The Company shall not effect any exercise of this Warrant, and a Holder shall not have the right to exercise any portion of this Warrant, to the extent that, after giving effect to the exercise set forth on the applicable Notice of Exercise, the Holder would have Beneficial Ownership or Constructive Ownership of equity stock of the Company in excess of the Ownership Limit.

 

(d)   Legend.   The Holder agrees that all certificates or other instruments representing the Warrant Shares will bear a legend substantially to the following effect:

 

THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED, OR SECURITIES LAWS OF ANY STATE AND MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF EXCEPT WHILE A REGISTRATION STATEMENT RELATING THERETO IS IN EFFECT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT OR SUCH LAWS.

 

Section 3.   Certain Adjustments .

 

(a)   If the Company, at any time while this Warrant is outstanding: (i) pays a stock dividend or makes a distribution to holders of any class or series of capital stock of the Company in shares of Common Stock (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Company upon exercise of this Warrant or warrants issued prior to this Warrant), (ii) subdivides outstanding shares of Common Stock into a greater number of shares, (iii) combines its outstanding shares of Common Stock into a smaller number of shares, or (iv) issues any shares of its capital stock by reclassification of the Common Stock, then the Exercise Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding any treasury shares of the Company) outstanding immediately before such event, and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event.  Additionally, if the Exercise Price is adjusted pursuant to this Section 3(a), the number of Warrant Shares subject to this Warrant shall also be adjusted by multiplying the number of Warrant Shares then subject to this warrant by a fraction of which the numerator shall be the number of shares of Common Stock (excluding any treasury shares of the Company) outstanding immediately after such event and which the denominator shall be the number of shares of Common Stock (excluding any treasury shares of the Company) outstanding immediately before such e vent.  Any adjustment made pursuant to this ‎Section 3(a) shall become effective immediately after the record date for the determination of shareholders entitled to receive such dividend or distribution and shall become effective immediately after the effe ctive date in the case of a subdivision, combination or reclassification.

 

(b)   Whenever the Exercise Price is adjusted pursuant to any provision of this ‎Section 3, the Company shall promptly deliver to the Holder a notice setting forth the Exercise Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment.  Notwithstanding anything herein to the contrary, no adjustment of the Exercise Price shall be made pursuant to this Section 3 in an amount less than $.01 per share, and any such lesser adjustment shall be carried forward and shall be made at the time and together with the next subsequent adjustment which together with any adjustments so carried forward shall amount to $.01 per share or more.

 

Section 4.   Miscellaneous .

 

(a)   No Rights as Shareholder .  This Warrant does not entitle the Holder to any voting rights, dividends or other rights as a shareholder of the Company.

 

(b)   Loss, Theft, Destruction or Mutilation of Warrant .  The Company covenants that upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant or any stock certificate relating to the Warrant Shares, and in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it (which, in the case of the Warrant, shall not include the posting of any bond), and upon surrender and cancellation of such Warrant or stock certificate, if mutilated, the Company will make and deliver a new Warrant or stock certificate of like tenor and dated as of such cancellation, in lieu of such Warrant or stock certificate.

 

(c)   Authorized Shares .  The Company covenants that, during the period the Warrant is outstanding, it will reserve from its authorized and unissued Common Stock a sufficient number of shares to provide for the issuance of the Warrant Shares upon the exercise of any purchase rights under this Warrant.  The Company further covenants that its issuance of this Warrant shall constitute full authority to its officers who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for the Warrant Shares upon the exercise of the purchase rights under this Warrant.  The Company will take all such reasonable action as may be necessary to assure that such Warrant Shares may be issued as provided herein without violation of any applicable law or regulation, or of any requirements of the exchange upon which the Common Stock may be listed.  The Company covenants that all Warrant Shares which may be issued upon the exercise of the purchase rights represented by this Warrant will, upon exercise of this Warrant and payment for such Warrant Shares in accordance herewith, be duly authorized, validly issued, fully paid and nonassessable and free from all taxes, liens and charges created by the Company in respect of the issue thereof (other than taxes in respect of any transfer occurring contemporaneously with such issue).

 

(d)   Governing Law and Forum.   This Warrant shall be governed by, and construed in accordance with, the internal laws of the State of Maryland without regard to the principles of conflicts of laws and shall be subject to the arbitration provision set forth in the Employment Agreement.

 

(e)   Notices .  Any notice, request or other document required or permitted to be given or delivered to the Holder by the Company shall be delivered in accordance with the notice provision of the Employment Agreement.

 

(f)   Successors and Assigns .  This Warrant and the rights and obligations evidenced hereby shall inure to the benefit of and be binding upon the successors and permitted assigns of the Company and the successors and permitted assigns of Holder.

 

(g)   Amendment .  This Warrant may be modified or amended or the provisions hereof waived with the written consent of the Company and the Holder.

 

(h)   Severability .  Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provisions or the remaining provisions of this Warrant.

 

(i)   Headings .  The headings used in this Warrant are for the convenience of reference only and shall not, for any purpose, be deemed a part of this Warrant.

 

 

[SIGNATURE PAGE FOLLOWS]

 

 

IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officer thereunto duly authorized as of the date first above indicated.

 

	SUPERTEL HOSPITALITY, INC.
	/s/ James H. Friend
	By:  James H. Friend
	Title:  Chairman of the Board
Acknowledged and accepted
/s/ J. William Blackham
J. William Blackham

 

NOTICE OF EXERCISE

 

TO:  SUPERTEL HOSPITALITY, INC.

 

(1)   The undersigned hereby elects to purchase ________ Warrant Shares of the Company pursuant to the terms of the attached Warrant, and tenders herewith payment of the exercise price in full, together with all applicable transfer taxes, if any.

 

The Warrant Shares shall be delivered to:

 

_______________________________

 

_______________________________

 

(2)   Accredited Investor .  The undersigned is an “accredited investor” as defined in Regulation D promulgated under the Securities Act of 1933, as amended.

 

The undersigned further requests that if the number of shares elected to be purchased herein shall not be all of the shares purchasable pursuant to the terms of the attached Warrant, that a new Warrant of like tenor for the balance of the shares purchasable hereunder be delivered to the undersigned.

 

 

 

J. William Blackham

 

Date: