December 8, 2010 PRIVATE AND CONFIDENTIAL Mr. Ed Cofrancesco President International Assets Advisory, LLC
December
8, 2010
PRIVATE AND
CONFIDENTIAL
Xx. Xx
Xxxxxxxxxxx
President
International
Assets Advisory, LLC
000 X.
Xxxxxx Xxxxxx, Xxxxx 0000
Orlando,
Florida 32801
Dear Xx.
Xxxxxxxxxxx:
This
letter agreement (this “Agreement”) amends
and restates in its entirety that certain letter agreement dated as of October
18, 2010, between Preferred Apartment Communities, Inc. (the “Company”) and
International Assets Advisory, LLC (“IAA”) in connection
with the initial public offering (“IPO”) of the
Company’s Class A common stock (“Class A Common
Stock”) and listing of its Class A Common Stock on NYSE
Amex. Reference is made to that certain amended and restated letter
agreement of even date herewith between the Company and Xxxxxxxx &
Xxxxxxxxx, Incorporated (the “Company/A&S Letter
Agreement”).
The
Company and IAA acknowledge that the target size of the proposed IPO transaction
shall be $60,000,000 (sixty million U.S. dollars) in shares of Class A Common
Stock (the “Initial
Shares”) in such amount of shares and at a price per share to be
determined and set forth in the Company’s Form S-11 registration statement filed
and as amended from time to time with the U.S. Securities and Exchange
Commission. In addition, the lead underwriter and lead manager in the IPO shall
have the right, exercisable in its sole discretion, to purchase up to an
additional 15% of the amount of the Initial Shares to cover overallotments (the
“Green Shoe
Shares”) on the same terms as the purchase of the Initial
Shares. The Initial Shares and the Green Shoe Shares, if any, shall
be referred to collectively as the “Public Offering
Shares.” The Public Offering Shares shall exclude any shares of Class A
Common Stock pursuant to a private placement offering to Xxxxxxxx Opportunity
Fund, LLC at the same price offered to purchasers of the Public Offering Shares
and as described in the Company’s registration statement.
Fees
The
Company agrees to pay IAA a transaction fee (the “Transaction Fee”) in
an amount equal to (a) 1.0% (one percent) of the total gross proceeds of the
Public Offering Shares, less (b) the aggregate
amount of Expenses (as defined in the Company/A&S Letter Agreement)
reimbursed to the lead underwriter and lead manager in connection with the IPO
transaction, less (c)
the aggregate amount of other expenses incurred by or on behalf of the Company
(including without limitation expenses and fees payable or reimbursable to IAA
pursuant to this Agreement, but excluding the General Advisory Fee (as defined
below)) in connection with the IPO transaction (excluding the costs of the
Company’s counsel and internal and external accounting
expenses). Notwithstanding the foregoing, the parties hereto agree
that the Transaction Fee shall not exceed an amount equal to
$100,000. The Company shall provide evidence of all such expenses in
reasonable detail to IAA. The Transaction Fee shall be payable on the
earliest to occur of (i) if the option to purchase Green Shoe Shares is
exercised, the fifth business day after the closing date of the purchase of the
Green Shoe Shares, (ii) if the option to purchase the Green Shoe Shares is not
exercised prior to the expiration of the applicable overallotment period, the
fifth business day after the expiration of such overallotment period, and (iii)
if the option to purchase the Green Shoe Shares is irrevocably waived by the
underwriter(s) in the IPO, the fifth business day after such
waiver. For the avoidance of doubt, no Transaction Fee shall be
payable to IAA if the IPO is not consummated.
In
addition, the Company agrees, on the date of the closing of the purchase of the
Initial Shares in the IPO, to (x) pay IAA a general advisory fee equal to
$125,000 (the “General
Advisory Fee”) payable in U.S. dollars, and (y) issue a warrant (the
“Warrant”) to
purchase 150,000 shares of Class A Common Stock of the Company, which Warrant
will have an exercise price per share of 125% of the gross per share offering
price in the IPO, will expire on the fourth anniversary of the closing of the
purchase of the Initial Shares in the IPO, and will be on such other terms and
subject to the conditions set forth in a warrant agreement to be entered into
between the Company and IAA. For the avoidance of doubt, no General
Advisory Fee shall be payable to IAA and no Warrant shall be issued to IAA if
the IPO is not consummated.
Finally,
the Company agrees reimburse IAA for all reasonable out-of-pocket expenses
payable to unaffiliated third parties incurred by IAA in connection with the IPO
(“IAA Expenses”);
provided, however, that
IAA shall receive prior written approval of the Company in respect of any IAA
Expenses to be incurred in an amount equal to or in excess of $5,000
individually (the “IAA
Individual Threshold”) or $20,000 in the aggregate (the “IAA Aggregate
Threshold”), such approvals not to be unreasonably withheld or delayed;
provided further,
however, that once the Company has approved exceeding the IAA Aggregate
Threshold, then IAA shall notify the Company promptly in respect of any IAA
Expenses incurred in an amount less than the IAA Individual
Threshold. In any event, IAA shall not incur IAA Expenses in excess
of $25,000 in the aggregate without the prior written approval of the Company,
which may be withheld in its sole discretion. Notwithstanding the
foregoing, the parties hereto agree that IAA Expenses reimbursable to IAA shall
not exceed an amount equal to $45,000 in the aggregate. IAA shall
provide evidence to the Company of all the IAA Expenses incurred by IAA in
accordance with this paragraph, which evidence shall be in reasonable
detail. Any IAA Expenses reimbursable to IAA in accordance with this
paragraph shall be paid within three business days following receipt of the
evidence of the incurrence thereof; provided, however, that no
IAA Expenses shall be reimbursed by the Company to IAA unless the IPO is
consummated. For the avoidance of doubt, the sum of all IAA Expenses
shall be considered independent of, and in addition to, the General Advisory
Fee, Transaction Fee and the Warrant.
Indemnification
IAA will
indemnify, defend and hold harmless the Company, XXXX Partners, LLC, their
affiliates and their respective officers, directors, agents, employees,
subsidiaries, partners, members, employees, agents and each person who controls
(within the meaning of Section 15 of the Securities Act of 1933) any of such
persons (each an “Indemnified Party”),
from and against any and all losses, claims (including without limitation any
claim by a third party that such party is owed any fees, expenses, securities or
any compensation), damages, expenses (including without limitation reasonable
fees, disbursements and other charges of counsel incurred by an Indemnified
Party in any action or any written threat of a claim and costs of investigation)
or other liabilities (collectively, “Losses”), resulting
from or arising out of this Agreement or any other agreement involving IAA, on
the one hand, and the Company or Xxxxxxxx & Xxxxxxxxx, Incorporated, on the
other hand. IAA’s maximum aggregate liability for Losses under this
indemnification provision to all Indemnified Parties shall not exceed the sum of
(a) the Transaction Fee, (b) the General Advisory Fee, (c) the value of the
Warrant, and (d) the amount of IAA Expenses actually reimbursed.
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General
This
Agreement shall terminate automatically upon the termination of the
Company/A&S Letter Agreement and may be terminated by either the Company or
IAA at any time upon written notice to that effect to the other
party.
The parties hereto acknowledge that the
execution and delivery of this Agreement does not create any legally binding
obligations between the parties relating to the IPO transaction or for the Company to consummate the
IPO.
The
invalidity or unenforceability of any provision of this Agreement shall not
affect the validity or enforceability of any other provisions of this Agreement,
which shall remain in full force and effect.
No
waiver, amendment or other modification of this Agreement shall be effective
unless in writing and signed by each party to be bound thereby.
This
Agreement shall be governed by and construed in accordance with the laws of the
State of New York applicable to contracts executed and to be wholly performed
therein without giving effect to its conflicts of laws principles or
rules. Any dispute hereunder shall be brought in a federal or state
court in the State of New York.
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If the foregoing correctly sets forth our understanding, we would appreciate your signing two copies of this letter in the space provided below and returning one of them to us.
Very
truly yours,
PREFERRED
APARTMENT COMMUNITIES, INC.
By: /s/ Xxxx X. Xxxxxxxx
Xxxx X. Xxxxxxxx
President and Chief Executive
Officer
Accepted
and agreed to as of
the date
first above written:
INTERNATIONAL
ASSETS ADVISORY, LLC
By:
/s/ Xxxxxx Xxxxxxxxxxx
Xxxxxx Xxxxxxxxxxx
President
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