EXHIBIT 10.9
CONTRIBUTION AGREEMENT
BY AND BETWEEN
XXXXXX X. XXXXXXXXX, XX.,
as the Contributor,
AND
UNIVERSITY TOWERS OPERATING PARTNERSHIP, LP,
a Delaware limited partnership,
as the Acquirer
CONTRIBUTION AGREEMENT
THIS CONTRIBUTION AGREEMENT (this "Agreement") is made as of the 20th day
of September, 2004 by and between XXXXXX X. XXXXXXXXX, XX. (the "Contributor");
and UNIVERSITY TOWERS OPERATING PARTNERSHIP, LP, a Delaware limited partnership
(the "Acquirer").
RECITALS
A. Contributor owns 100% of the issued and outstanding membership
interests of University Towers Building, LLC, a North Carolina limited liability
company (the "Company"). The Company is a 50% owner of University Towers
Raleigh, LLC, a North Carolina limited liability company (the "Entity"). The
Entity owns the property known as University Towers located in Raleigh, North
Carolina (the "Property"). Acquirer desires to acquire, and the Contributor
desires to sell, all of its membership interests in the Company (the "Company
Interests").
B. Contributor, through the Company, desires to acquire fee simple title
to all of the underlying land (the "Land") and the parking garage (the "Garage")
that is part of the Property. The term sheet attached hereto as Exhibit A (the
"Term Sheet") sets forth the terms by which the Contributor (through the
Company) will acquire ownership of the Land and the Garage. It sets forth a
"Primary Proposal" if the Property Lender (as defined below) consents to the
distribution by the Entity to the Company of a 50% undivided interest in the
Land and Garage prior to the Closing Date (as hereinafter defined) and a "Back
Up Proposal" if the Property Lender does not consent to such distribution prior
to the Closing Date.
C. All of the members of AOD/Raleigh Residence Hall, LLC, a Tennessee
limited liability company and owner of the remaining 50% of the Entity
("AOD/Raleigh"), have or will enter into a Contribution Agreement (the "Second
Contribution Agreement") with the Acquirer to contribute all of their interests
in AOD/Raleigh to the Acquirer.
AGREEMENT
NOW, THEREFORE, for and in consideration of the mutual covenants herein
contained, the parties hereto agree as follows:
ARTICLE I
THE CONTRIBUTION
1.1 Contribution of Company Interests. Contributor agrees to contribute
and transfer the Company Interests to the Acquirer (such contribution and
transfer being the "Contribution"), and the Acquirer agrees to accept transfer
of the Company Interests pursuant to the terms and conditions set forth in this
Agreement. Although the Property is encumbered by a deed of trust securing a
loan in the original principal amount of $26,500,000 (the "Property Loan") from
Nationsbanc Mortgage Capital Corporation or its assignee (the "Property Lender")
to the Entity, the Company Interests shall be transferred to the Acquirer free
and clear of any claim, lien, charge, security interest, mortgage, deed of
trust, encumbrance, purchase right or other right of
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any nature whatsoever of any third party ("Liens"). The Property will remain
encumbered by the Property Loan following the Closing (as hereinafter defined).
1.2 Transfer of Land and Garage to the Company. Contributor and Acquirer
acknowledge and agree that they will use their commercially reasonable best
efforts to effect all of the transactions (the "Pre-Closing Transactions") that
are part of the Primary Proposal that are required to be consummated prior to
the Closing. If the Property Lender does not consent to the distribution by the
Entity of a 50% undivided interest in the Land and the Garage to the Company
prior to the Closing, then the parties agree that they will use their
commercially reasonable best efforts to cause the Land and the Garage to be
conveyed to the Company pursuant to the terms of the Back Up Proposal if the
Contributor elects to acquire the Land and the Garage.
1.3 Consideration. The consideration (the "Consideration") for which
Contributor agrees to contribute and assign the Company Interests to the
Acquirer, and which the Acquirer agrees to pay or deliver to the Contributor,
subject to the terms of this Agreement, shall equal the difference between (a)
50% of the difference between $37,500,000 and the outstanding balance of the
Property Loan on the Closing Date and (b) the appraised value (as determined
pursuant to the Term Sheet) of any Property that is distributed by the Entity to
the Company as part of the Pre-Closing Transactions. The Consideration shall be
comprised of (a) $1,000,000 of units of limited partnership interest in the
Acquirer ("Units") having a per Unit value equal to the per share price at which
the common stock (the "Common Stock") of Education Realty Trust, Inc., a
Maryland corporation (the "REIT"), are offered to the public in the underwritten
initial public offering of the Common Stock (the "Public Offering") before any
discounts or fees paid to underwriters, and (b) the balance in cash or other
immediately available funds. No fractional Units will be issued as Consideration
hereunder, but in lieu of issuing fractional Units, the value thereof shall be
paid in cash. The Contributor acknowledges that any certificates evidencing the
Units will bear appropriate legends indicating (i) that the Units have not been
registered under the Securities Act of 1933, as amended ("Securities Act"), and
(ii) that the Acquirer's Agreement of Limited Partnership (the "Acquirer's
Partnership Agreement") will restrict the transfer of the Units. Upon receipt of
the Units, the Contributor shall become a limited partner of the Acquirer and
shall execute the Acquirer's Partnership Agreement. Except as otherwise
expressly set forth in this Agreement, the Contributor acknowledges and agrees
that once the Closing (as hereinafter defined) occurs, Contributor shall no
longer be a member of the Company, shall no longer be entitled to receive any
distributions from the Company, and shall have no further right, title or
interest in the Company.
1.4 Redemption Rights for Units. Each Unit shall be redeemable at the
option of the holder, in accordance with, but subject to the restrictions
contained in, the Acquirer's Partnership Agreement; provided, however, that such
redemption option may not be exercised prior to the first anniversary of the
Closing Date.
1.5 Tax Consequences to Contributor. Notwithstanding anything to the
contrary contained in this Agreement, including without limitation the use of
words and phrases such as "sell," "sale," "purchase," and "pay," the parties
agree that it is their intent that to the extent that consideration for the
transfer of the Company Interests takes the form of the issuance of Units, the
transactions contemplated hereby shall be treated for federal income tax
purposes pursuant to
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Section 721 of the Internal Revenue Code of 1986, as amended (the "Code"), as
the contribution of the Company Interests (or portion thereof) by the
Contributor to the Acquirer, in exchange for the Units.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1 Representations by Acquirer. The Acquirer hereby represents and
warrants to the Contributor that:
(a) Organization and Power. The Acquirer is duly organized, validly
existing, and in good standing under the laws of the State of Delaware, and has
full right, power, and authority to enter into this Agreement and to perform all
of its obligations under this Agreement. The execution and delivery of this
Agreement and the performance by the Acquirer of its obligations hereunder have
been duly authorized by all requisite action of the Acquirer and require no
further action or approval of the Acquirer's partners or of any other
individuals or entities in order to constitute this Agreement as a binding and
enforceable obligation of the Acquirer.
(b) Noncontravention. Neither the entry into nor the performance of,
or compliance with, this Agreement by the Acquirer has resulted, or will result,
in any violation of, or default under, or result in the acceleration of, any
obligation under any existing certificate of limited partnership, partnership
agreement, mortgage, indenture, lien agreement, note, contract, permit,
judgment, decree, order, restrictive covenant, statute, rule, or regulation
applicable to the Acquirer.
(c) Litigation. There is no action, suit, or proceeding, pending or
known to be threatened, against or affecting the Acquirer in any court or before
any arbitrator or before any federal, state, municipal, or other governmental
department, commission, board, bureau, agency or instrumentality which (i) in
any manner raises any question affecting the validity or enforceability of this
Agreement or any other agreement or instrument to which the Acquirer is a party
or by which it is bound and that is to be used in connection with or is
contemplated by, this Agreement, (ii) could have material and adverse effect on
the business, financial position, or results of operations (a "Material Adverse
Effect") of the Acquirer, (iii) could materially and adversely affect the
ability of the Acquirer to perform its obligations hereunder, or under any
document to be delivered pursuant hereto.
(d) Units Validly Issued. The Units, when issued, will have been
duly and validly authorized and issued, free of any preemptive or similar
rights, and will be fully paid and nonassessable, without any obligation to
restore capital except as required by the Delaware Revised Uniform Limited
Partnership Act (the "Limited Partnership Act"). The Contributor shall be
admitted as a limited partner of the Acquirer as of the Closing Date and shall
be entitled to all of the rights and protections of a limited partner under the
Limited Partnership Act and the provisions of the Acquirer's Partnership
Agreement, with the same rights, preferences, and privileges as all other
limited partners on a pari passu basis. The Common Stock for which the Units may
be redeemed have been validly authorized and will be duly and validly issued,
fully paid and nonassessable, free of preemptive or similar rights.
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(e) Consents. Each consent, approval, authorization, order, license,
certificate, permit, registration, designation, or filing by or with any
governmental agency or body necessary for the execution, delivery, and
performance of this Agreement or the transactions contemplated hereby by the
Acquirer has been obtained or will be obtained on or before the Closing Date.
2.2 Representations by Contributor. The Contributor hereby represents and
warrants to the Acquirer:
(a) Organization and Power. He has full right, power, and authority
to enter into this Agreement and to assume and perform all of his obligations
under this Agreement. The execution and delivery of this Agreement and the
performance by him of his obligations hereunder require no further action or
approval of any other individuals or entities in order to constitute this
Agreement as a binding and enforceable obligation of the Contributor.
(b) Noncontravention. Neither the entry into nor the performance of,
or compliance with, this Agreement by the Contributor has resulted, or will
result, in any violation of, or default under, or result in the acceleration of,
any obligation under any of the regulations, mortgage indenture, lien agreement,
note, contract, permit, judgment, decree, order, restrictive covenant, statute,
rule, or regulation applicable to the Contributor.
(c) Litigation. There is no action, suit, or proceeding, pending or
known to be threatened against or affecting the Contributor in any court or
before any arbitrator or before any federal, state, municipal, or other
governmental department, commission, board, bureau, agency or instrumentality
which (i) in any manner asserts claims regarding the validity or enforceability
of this Agreement, (ii) could have a Material Adverse Effect with respect to the
Contributor; (iii) could have a Material Adverse Effect on the Contributor's
ability to perform its obligations hereunder or under any document to be
delivered pursuant hereto, or (iv) could create a Lien on the Contributor's
Company Interests.
(d) Solvency. The Contributor has been and will be solvent at all
times prior to and immediately following the transfer of the Company Interests
to the Acquirer. There are no attachments, executions, assignments for the
benefit of creditors, or voluntary or involuntary proceedings in bankruptcy or
under other debtor relief laws contemplated by, pending, or, to the
Contributor's knowledge, threatened against the Contributor.
(e) Ownership of Company Interests. The Contributor is the sole
owner of its Company Interests beneficially and of record, free and clear of any
Liens of any nature and has full power and authority to convey the Company
Interests, free and clear of any Liens. Upon delivery of consideration for such
Company Interests, the Contributor will transfer to Acquirer good and valid
title thereto, free and clear of any Liens except Liens created in favor of the
Acquirer by the transactions contemplated hereby. Except as provided in this
Agreement, there are no rights to purchase, subscriptions, warrants, options,
conversion rights, preemptive rights, agreements, instruments or similar
understandings of any kind outstanding (i) relating to any interest in the
Company, or (ii) to purchase, transfer or to otherwise acquire, or to in any way
encumber, any of the Company Interests, or any securities of any kind
convertible into any of the foregoing, or any equity interest or profit
participation of any kind in the Company. The Contributor does not have any
commitment or legal obligation, absolute or contingent, to any
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Person other than the Acquirer to sell, sign, transfer or effect a sale of any
right, title or interest in or to its Company Interests.
(f) No Consents. Except as shall have been obtained on or before the
Closing Date, no consent, approval, authorization, order, license, certificate,
permit, registration, designation, or filing by or with any third party
governmental agency or body is necessary for the execution, delivery, and
performance of this Agreement or the transactions contemplated hereby by the
Contributor.
(g) No Brokers. The Contributor has not engaged the services of any
real estate agent, broker, finder or any other person or entity for any
brokerage or finder's fee, commission or other amount with respect to the
transactions described herein on account of any action by the Contributor. The
Contributor hereby agrees to indemnify and hold the Acquirer and its employees,
directors, members, partners, affiliates and agents harmless against any claims,
liabilities, damages or expenses arising out of a breach of the foregoing. This
indemnification shall survive Closing or any termination of this Agreement.
(g) Securities Law Matters.
(i) The Contributor is knowledgeable, sophisticated and
experienced in business and financial matters; the Contributor has previously
invested in securities similar to the Units and fully understands the
limitations on transfer imposed by the federal securities laws and as described
in this Agreement. The Contributor is able to bear the economic risk of holding
the Units for an indefinite period and is able to afford the complete loss of
his, her or its investment in the Units; the Contributor has received and
reviewed all information and documents about or pertaining to the REIT, the
Acquirer, the business and prospects of the REIT and the Acquirer and the
issuance of the Units as the Contributor deems necessary or desirable, and has
been given the opportunity to obtain any additional information or documents and
to ask questions and receive answers about such information and documents, the
REIT, the Acquirer, the business and prospects of the REIT and the Acquirer and
the Units which the Contributor deems necessary or desirable to evaluate the
merits and risks related to its investment in the Units and to conduct its own
independent valuation of the Units; and the Contributor understands and has
taken cognizance of all risk factors related to the purchase of the Units. The
Contributor is a sophisticated real estate investor. In acquiring the Units and
engaging in this transaction, the Contributor is not relying upon any
representations made to it by the Acquirer, or any of the officers, employees,
or agents of the Acquirer not contained herein. The Contributor is relying upon
its own independent analysis and assessment (including with respect to taxes),
and the advice of the Contributor's advisors (including tax advisors), and not
upon that of the Acquirer or any of the Acquirer's advisors or affiliates, for
purposes of evaluating, entering into, and consummating the transactions
contemplated by this Agreement. The Contributor represents and warrants that it
has reviewed and approved the form of the Limited Partnership Agreement of
Education Realty OP, L.P. attached hereto as Exhibit C (the "UPREIT Partnership
Agreement") and acknowledges that the Acquirer's Partnership Agreement in
substantially the same form of agreement as the UPREIT Partnership Agreement, as
modified to give effect to the economic terms of set forth in the Term Sheet
will be acceptable.
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(ii) The Contributor understands that neither the Units nor
the Common Stock issuable upon redemption of the Units have been registered
under the Securities Act or any state securities acts and are instead being
offered and sold in reliance on an exemption from such registration
requirements. The Units issuable to the Contributor are being acquired solely
for its own account, for investment, and are not being acquired with a view to,
or for resale in connection with, any distribution, subdivision, or
fractionalization thereof, in violation of such laws, and the Contributor has no
present intention to enter into any contract, undertaking, agreement, or
arrangement with respect to any such resale; provided, however, that, at or
following Closing, the Contributor may distribute the Units to those of its
members or successors that (1) have represented and warranted to the Acquirer in
writing that, as of the time of such distribution, such member is an accredited
investor as that term is defined in Rule 501 of Regulation D under the
Securities Act, and (2) have executed the Acquirer's Partnership Agreement as
limited partners. The Contributor understands that any certificates evidencing
the Units will contain appropriate legends reflecting the requirement that the
Units not be resold without registration under such laws or the availability of
an exemption from such registration and that the Acquirer's Partnership
Agreement will restrict transfer of the Units.
(iii) The Contributor is an "accredited investor" as that term
is defined in Rule 501 of Regulation D under the Securities Act of 1933, as
amended. The Contributor has previously provided the Acquirer with a duly
executed Accredited Investor Questionnaire. No event or circumstance has
occurred since delivery of such Questionnaire to make the statements contained
therein false or misleading.
(h) Patriot Act Respresentations. Neither the Contributor, nor to
the knowledge of the Contributor, any direct or indirect owner of the
Contributor, (i) are included on any Government List, (ii) are Persons who have
been determined by competent authority to be subject to the prohibitions
contained in the Presidential Executive Order No. 13224 or any other similar
prohibitions contained in the rules and regulations of the OFAC or in any
enabling legislation or other Presidential Executive Orders in respect thereof,
(iii) have been indicted or convicted of any Patriot Act Offenses, or (iv) are
currently under investigation by any governmental authority for alleged criminal
activity. For purposes of this Agreement, (i) "Government List" means (A) the
Specially Designated Nationals and Blocked Persons List maintained by OFAC, (B)
any other list of terrorists, terrorist organizations or narcotics traffickers
maintained pursuant to any of the Rules and Regulations of OFAC, or (C) any
similar list maintained by the United States Department of State, the United
States Department of Commerce or any other governmental authority or pursuant to
any Executive Order of the President of the United States of America; (ii)
"OFAC" means the Office of Foreign Asset Control, U.S. Department of the
Treasury, (iii) "Patriot Act" means the Uniting and Strengthening America by
Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA
PATRIOT ACT) Act of 2001, as the same may be amended from time to time, and
corresponding provisions of future laws, and (iv) "Patriot Act Offense" means
any violation of the criminal laws of the United States of America or of any of
the several states, or that would be a criminal violation if committed within
the jurisdiction of the United States of America or any of the several states,
relating to terrorism or the laundering of monetary instruments, including any
offense under (A) the criminal laws against terrorism, (B) the criminal laws
against money laundering, (C) the Bank Secrecy Act, as amended, (D) the Money
Laundering
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Control Act of 1986, as amended, or (E) the Patriot Act and also includes the
crimes of conspiracy to commit, or aiding and abetting another to commit any of
the foregoing.
ARTICLE III
COVENANTS AND INDEMNITIES
3.1 Covenants Pending Closing.
(a) From the date hereof until the Closing, the Contributor shall
not:
(i) Sell, transfer (or agree to sell or transfer) or otherwise
dispose of, or cause the sale, transfer or disposition of (or agree to do any of
the foregoing) all or any portion of his Company Interests; or
(ii) Mortgage, pledge or encumber (or permit to become
encumbered) all or any portion of his Company Interests.
(b) From the date hereof through the Closing, the Contributor shall,
to the extent within his control, cause each of the Company and the Entity to
conduct its business in the ordinary course of business, consistent with past
practice, and shall, to the extent within his control, not permit the Company or
the Entity, without the prior written consent of Acquirer, to:
(i) Enter into any material transaction not in the ordinary
course of business of such entity:
(ii) Except for any transfers contemplated in the Term Sheet,
sell, transfer or dispose of, or cause the sale, transfer or disposition of (or
agree to do any of the foregoing) any assets of such entity, except in the
ordinary course of business consistent with past practice;
(iii) Mortgage, pledge or encumber (or permit to become
encumbered) any assets of such entity, except (A) liens for taxes not due, (B)
purchase money security interests in the ordinary course of such entity's
business, and (C) mechanics' liens being disputed by such entity in good faith
and by appropriate proceeding in the ordinary course of such entity's business
(provided such mechanics liens are released prior to or on the Closing Date at
no cost to the Acquirer);
(iv) Amend, modify or terminate any Lease, contract or other
instruments relating to the Property to which such entity is a party, except in
the ordinary course of the entity's business consistent with past practice;
(v) Cause or permit the Entity to change the existing use of
the Property;
(vi) Cause or permit any entity to enter into any new Lease or
terminate any existing Lease except in the ordinary course of such entity's
business consistent with past practice;
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(vii) Cause or take any action that would render any of the
representations or warranties contained herein to be untrue in any material
respect;
(viii) Terminate or amend any existing insurance policies
affecting the Property that results in a material reduction in insurance
coverage for the Property;
(ix) Knowingly cause or permit such entity to violate or fail
to use commercially reasonable efforts to cure any violation of any applicable
laws;
(x) Materially alter the manner of keeping such entity's
books, accounts or records or the accounting methods therein reflected; or
(xi) Except for any distributions contemplated in the Term
Sheet, make any distribution to its members other than consistent with the prior
practices of the entity.
(c) From the date hereof until the Closing Date, the Contributor
will afford to the officers and authorized representatives of the Acquirer
access to all of the Contributor's, the Company's and the Entity's books and
records and will furnish the Acquirer with such additional financial and
operating data and other information as to the business and properties of the
Company, the Contributor and the Entity as the Acquirer may from time to time
reasonably request.
(d) Notwithstanding anything to the contrary contained herein, any
failure by the Contributor to comply with or fulfill the covenants contained in
this Section 3.1 shall not constitute an indemnifiable claim under Section 3.4
of this Agreement, but shall constitute an unfulfilled condition precedent
pursuant to Section 5.1, provided such failure is identified to or otherwise
becomes known to the Acquirer prior to Closing.
3.2 Tax Covenants.
(a) From the date hereof and subsequent to the Closing, the
Contributor and the Acquirer shall provide each other with such cooperation and
information relating to the Company and the Entity as the parties reasonably may
request in (i) filing any tax return, amended tax return or claim for tax
refund, (ii) determining any liability for taxes or a right to a tax refund, or
(iii) conducting or defending any proceeding in respect of taxes. The Acquirer
shall promptly notify the Contributor in writing upon receipt by the Acquirer or
any of its affiliates of notice of (i) any pending or threatened tax audits or
assessments with respect to the Company or the Entity and (ii) any pending or
threatened federal, state, local or foreign tax audits or assessments of the
Acquirer or any of its affiliates, in each case which may affect the liabilities
for taxes of the Contributor with respect to any tax period ending on or before
the Closing Date. The Contributor shall promptly notify the Acquirer in writing
upon receipt by the Contributor of notice of any pending or threatened federal,
state, local or foreign tax audits or assessments relating to the income,
properties or operations of the Company or the Entity. Each of the Acquirer and
the Contributor may participate at its own expense in the prosecution of any
claim or audit with respect to taxes attributable to any taxable period ending
on or before the Closing Date, provided, that the Contributor shall have the
right to control the conduct of any such audit or proceeding or portion thereof
for which the Contributor has acknowledged liability (except as a partner of the
Acquirer) for the payment of any additional tax liability, and the
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Acquirer shall have the right to control any other audits and proceedings.
Notwithstanding the foregoing, neither the Acquirer nor the Contributor may
settle or otherwise resolve any such claim, suit or proceeding which could have
an adverse tax effect on the other party or its owners without the consent of
the other party, such consent not to be unreasonably withheld. The Contributor
and the Acquirer shall retain all tax returns, schedules and work papers, and
all material records and other documents relating thereto, until the expiration
of the statute of limitations (and, to the extent notified by any party, any
extensions thereof) of the taxable years to which such tax returns and other
documents relate to and until the final determination of any tax in respect of
such years.
(b) With respect to the Property, the Acquirer and the Contributor
agree that the Acquirer shall use the "traditional method" with "curative
allocations", as described in Regulations Section 1.704-3(c), to make
allocations of taxable income and loss among the partners of the Acquirer with
respect to the Property.
(c) (i) Subject to the exceptions set forth in Section 3.2(c)(ii)
and any transfer(s) of any interest in the Property to the Contributor
contemplated in the Term Sheet, the Acquirer covenants, agrees and guarantees
that for a period of five (5) years from the Closing Date, the Acquirer will not
transfer or dispose of or permit or suffer the transfer or disposition of any of
its interest in the Property, directly or indirectly, voluntarily or
involuntarily, by operation of law, by foreclosure or otherwise (any such
transfer or disposition other than those contemplated in the Term Sheet being a
"Disposition") unless the Acquirer pays the Contributor the Tax Damages Amount
(as defined below), if any, resulting from such Disposition. A Disposition of an
interest in the Property shall include any event or occurrence in which income
or gain is recognized pursuant to, or as a result of, Section 704(c) of the Code
directly or indirectly by the Contributor in excess of the income or gain
allocable directly or indirectly to the Contributor for book purposes under
Section 704(b) of the Code in accordance with the applicable statutes,
regulations, and rules in effect on the date of this Agreement, including, but
not limited to any voluntary or involuntary sale (including a foreclosure or
transfer in lieu of foreclosure), assignment, transfer, exchange, contribution,
merger, consolidation, distribution or other disposition or conveyance of all or
any portion of, or of all or any portion of any direct or indirect interest in,
the Property but specifically excluding any transfer of an interest in the
Property to the Contributor that is contemplated in the Term Sheet. Subject to
the exceptions set forth in Section 3.2(c)(ii), it shall also include income or
gain allocable directly or indirectly to the Contributor due to reduction by the
Acquirer in the Contributor's direct or indirect share of Non-Recourse
Indebtedness (as defined in Treasury Regulation Section 1.704-2(b)(3)) under
Section 731 of the Code, whether direct or indirect, voluntary or involuntary,
by operation of law, by foreclosure or otherwise to an amount less than
specified in Section 3.2(d).
(ii) The restrictions on a Disposition under Section
3.2(c)(i), including the requirement not to change the Contributor's direct or
indirect share of Non-Recourse Indebtedness under Section 731 of the Code, shall
not apply to events outside of the control of the Acquirer, the general partner
of the Acquirer and their respective affiliates ("Non-Control Events"), such as
a Disposition pursuant to a condemnation, eminent domain proceeding or other
involuntary conversion. However, without limitation, Non-Control Events shall
not include:
(A) financial inability to pay or perform any
obligation;
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(B) a bankruptcy, insolvency, receivership or similar
proceeding, or any Disposition resulting therefrom or any assignment
for the benefit of creditors; or
(C) a foreclosure.
(iii) The Acquirer shall be entitled to exchange the Property
in an exchange qualifying under Code Section 1031 provided that no gain is
recognized for federal or state income tax purposes in or as a result of the
exchange. Nothing in this Section 3.2(c) shall prevent the Acquirer from (A)
pledging or encumbering any of the Property or (B) assigning, transferring or
otherwise disposing of the Property, as applicable to a subsidiary 100% of the
beneficial ownership interests of which is owned by the Acquirer as long as such
transfer does not result in the allocation of taxable income or gain to the
Contributor under Code Section 704(c).
(d) Subject to future changes in applicable law or an adverse
determination by applicable tax authorities, so long as the Contributor holds
Units constituting at least twenty five percent (25%) of the Units received by
the Contributor on account of the Contribution, the Acquirer shall maintain at
all times during the term of this Agreement, Non-Recourse Indebtedness, without
any prepayment or other reduction, in an amount so that the Contributor's
allocable share from the Acquirer of such Non-Recourse Indebtedness is no less
than the sum of (i) Contributor's aggregate deficit capital account in the
Entity as of the date of the Contribution and (ii) any increase in Contributor's
aggregate deficit capital account in Acquirer upon any distribution of the
Property by Acquirer after the Closing Date pursuant to the Back Up Proposal.
(e) (i) If there is a Disposition described in 3.2(c) of this
Agreement which requires payment of the Tax Damages Amount (a "Tax Event
Disposition"), the Acquirer shall pay to the Contributor an amount (the "Tax
Damages Amount") which shall be equal to the sum of X plus Y below.
(A) X shall be equal to the Tax Amount (as determined
below). The Tax Amount determined as follows:
(1) The "Tax Amount" shall equal, as to the
Contributor, the amount determined by multiplying the
difference between (a) the "Gain Amount" with respect to the
Property allocable to such Contributor reduced by (b) the
cumulative losses, if any, previously allocated to such
Contributor by the Acquirer with respect to the Units received
in the Contribution times (c) the actual combined federal,
state and local income tax rate applicable to such income or
gain (taking into account the amount and character of the
income and gain) for the taxable year of the Contributor in
which the Disposition occurs and reducing the resulting
product by (d) the amount of any credits, if any, allocated to
such Contributor.
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(2) The "Gain Amount" shall equal the sum of the
"Deferred Gain Amount" plus the "Section 752 Gain Amount."
(3) The "Deferred Gain Amount" shall equal the
taxable gain recognized by the Acquirer upon a Tax Event
Disposition to be allocated directly or indirectly to the
Contributor under Section 704(c) of the Code with respect to
the Property reduced by any gain resulting from the
Contributor's prior direct or indirect voluntary or
involuntary disposition of Units.
(4) The "Section 752 Gain Amount" shall equal the
amount of taxable gain, if any, recognized by the Contributor
under Section 752 and Section 731 of the Code as a direct
result of the reduction in the amount of the Non-Recourse
Indebtedness resulting from the Contributor's prior direct or
indirect voluntary or involuntary disposition of Units.
(B) Y shall be the reasonable expenses for the
Contributor associated with determining the Tax Amount, including,
without limitation, attorney's and accountant's fees.
(ii) The Acquirer shall notify the Contributor in writing of a
Tax Event Disposition within thirty (30) days after such Tax Event Disposition
(such thirtieth day of such notice period being herein referred to as the
"Notice Date"). On or before January 30 of the year following the year in which
the Tax Event Disposition occurs, the Contributor shall notify the Acquirer of
the Contributor's adjusted tax basis in such Contributor's interest in the
Acquirer as of the last day of the calendar year of the Tax Event Disposition
together with such other tax information the Acquirer may reasonably request in
connection with the computation of the Tax Damages Amount (the "Contributor's
Computational Information"). The Tax Damages Amount shall be paid by the
Acquirer to the Contributor within ten (10) days after receipt of the
Contributor's Computational Information required to compute the Tax Damages
amount. Any late payment of such Tax Damages Amount shall bear interest at a
rate equal to the lesser of (A) 12% per annum, compounded daily, or (B) the
highest rate permitted by applicable law.
(iii) Collection of the Tax Damages Amount (and any accrued
interest thereon) shall be the Contributor's sole and exclusive remedy with
respect to a Tax Event Disposition.
(iv) Determination of liability with respect to
the Tax Amount shall be fixed upon the expiration of the statute of limitations
for all taxable years covered by the five-year lockup. The obligation to pay the
Tax Damages Amount will continue until the expiration of the statute of
limitations for collection of the Tax Damages Amount.
3.3 Financial Records.
(a) The Contributor acknowledges that Acquirer may be required to
comply with certain acquisition audit or disclosure requirements pursuant to
applicable regulations of the
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Securities Exchange Commission ("SEC") in connection with the Public Offering.
As such, Acquirer may be required to file with the SEC audited financial
statements of the Company, the Entity, the Property and/or pro forma financial
statements giving effect to the acquisition of the Company Interests.
Accordingly, the Contributor agrees to cooperate and make available to Acquirer
such records as may be necessary to permit Acquirer to comply with SEC
requirements.
(b) Subsequent to the Closing, the Contributor agrees to cooperate
with Acquirer's independent auditors to provide access to financial records and
accounting personnel that may be required to permit the preparation and audit of
financial statements of the Company, the Entity and/or the Property for the
required periods pursuant to applicable SEC regulations. This provision shall
survive the Closing.
3.4 Contributor's Indemnity. The Contributor hereby agrees to indemnify
and hold each of the Acquirer, the REIT, and each of their respective employees,
directors, members, partners, affiliates and agents (each of which is an
"Indemnified Acquirer Party") harmless of and from all liabilities, losses,
damages, costs, and expenses (including reasonable attorneys' fees)
(collectively, "Losses") which the Indemnified Acquirer Party may suffer or
incur by reason of (a) any breach of the Contributor's representations or
warranties contained in Section 2.2 of this Agreement, (b) any act or cause of
action occurring or accruing prior to the Closing Date and arising from the
ownership of the Company Interests prior to the Closing Date, and (c) the
ownership or operation of the Property and relating to the period prior to the
Closing Date, including, without limitation, actions or claims relating to
damage to property or injury to or death of any person occurring or arising
during the period prior to the Closing Date, or any claims for any debts or
obligations occurring on or about or in connection with the Property or any
portion thereof or with respect to the Property' operations at any time prior to
the Closing Date.
3.5 Acquirer's Indemnity. The Acquirer agrees to indemnify and hold the
Contributor, and the Contributor's employees, directors, members, partners,
affiliates and agents (each of which is an "Indemnified Contributor Party")
harmless of and from all Losses which the Indemnified Contributor Party may
suffer or incur by reason of (a) any breach of the Acquirer's representations or
warranties contained in Section 2.1 of this Agreement, (b) any act or cause of
action occurring or accruing on or after the Closing Date and arising from the
ownership of the Company Interests or the operation of the Property on or after
the Closing Date, and (c) the ownership or operation of the Property and
relating to the period on or after the Closing Date, including, without
limitation, actions or claims relating to damage to property or injury to or
death of any person occurring or arising during the period on or after the
Closing Date, or any claims for any debts or obligations occurring on or about
or in connection with the Property or any portion thereof or with respect to the
Property' operations at any time on or after the Closing Date.
3.6 Restructuring. Contributor acknowledges that following the Closing,
the Entity will restructure its ownership of the Property and the services
provided by the Entity into two separate entities, the Entity and University
Towers Services, LLC, a North Carolina limited liability company ("Services").
Such restructuring will be effected to prevent any "non-qualifying income" from
the operation or ownership of the Property from being earned by the
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REIT (through its ownership of Acquirer) and instead to be earned by Services.
So long as such restructuring does not have any material adverse tax or economic
consequence to the Contributor, the Contributor agrees to cooperate with respect
to such restructuring and to take all actions and to execute all documents
necessary to effect such restructuring.
ARTICLE IV
RELEASES AND WAIVERS
Each of the releases and waivers enumerated in this Article 4 shall become
effective only upon the Closing.
4.1 General Release of Acquirer.
As of the Closing, the Contributor and the Contributor irrevocably waives,
releases and forever discharges the Acquirer and the Acquirer's affiliates,
partners (including the Company), agents, attorneys, successors and assigns of
and from, any and all charges, complaints, claims, liabilities, damages,
actions, causes of action, losses and costs of any nature whatsoever
(collectively, "Contributor Claims"), known or unknown, suspected or
unsuspected, arising out of or relating to any of the Contributor, the Company,
the Entity, the Property or any other matter which exists at the Closing, except
for Contributor Claims arising from the breach of any representation, warranty,
covenant or obligation by the Acquirer under this Agreement or any agreement
contemplated hereby.
4.2 General Release of Contributor.
As of the Closing, the Acquirer irrevocably waives, releases and forever
discharges the Contributor and the Contributor's agents, attorneys, successors
and assigns of and from, any and all charges, complaints, claims, liabilities,
damages, actions, causes of action, losses and costs of any nature whatsoever
(collectively, "Acquirer Claims"), known or unknown, suspected or unsuspected,
arising out of or relating to any of the Contributor, the Company, the Entity,
the Property or any other matter which exists at the Closing, except for
Acquirer Claims arising from the breach of any representation, warranty,
covenant, or obligation by the Contributor under this Agreement or any agreement
contemplated hereby.
ARTICLE V
CONDITIONS PRECEDENT TO THE CLOSING
5.1 Conditions to Acquirer's Obligations. In addition to any other
conditions set forth in this Agreement, the Acquirer's obligation to consummate
the Closing is subject to the timely satisfaction of each and every one of the
conditions and requirements set forth in this Section 5.1, all of which shall be
conditions precedent to the Acquirer's obligations under this Agreement.
(a) Contributor's Obligations. The Contributor shall have performed
all obligations of the Contributor hereunder which are to be performed prior to
Closing, and shall have delivered or caused to be delivered to the Acquirer, all
of the documents and other information required of the Contributor pursuant to
Section 6.2.
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(b) Contributor's Representations and Warranties. The Contributor's
representations and warranties set forth in Section 2.2 shall be true and
correct as if made again on the Closing Date.
(c) No Injunction. On the Closing Date, there shall be no effective
injunction, writ, preliminary restraining order or other order issued by a court
of competent jurisdiction restraining or prohibiting the consummation of the
transactions contemplated hereby.
(d) Third Party Consents. To the extent required by the Loan
Documents, the Acquirer shall have obtained the consent of the Lender to the
Acquirer's acquisition of the Company Interests.
(e) Completion of Public Offering. The Public Offering shall have
been completed.
(f) Title Policies. Acquirer shall have received updated title
policies for the Property as of the Closing Date satisfactory to the Acquirer.
(g) Second Contribution Agreement. The prior or concurrent closing
of the transactions contemplated by the Second Contribution Agreement.
5.2 Conditions to Contributor's Obligations. In addition to any other
conditions set forth in this Agreement, the Contributor's obligation to
consummate the Closing is subject to the timely satisfaction of each and every
one of the conditions and requirements set forth in this Section 5.2, all of
which shall be conditions precedent to the Contributor's obligations under this
Agreement.
(a) Acquirer's Obligations. The Acquirer shall have performed all
obligations of the Acquirer hereunder which are to be performed prior to
Closing, and shall have delivered or caused to be delivered to the Contributor,
all of the documents and other information required of the Acquirer pursuant to
Section 6.3.
(b) Acquirer's Representations and Warranties. The Acquirer's
representations and warranties set forth in Section 2.1 shall be true and
correct as if made again on the Closing Date.
(c) Completion of Public Offering. The Public Offering shall have
been completed.
(d) Second Contribution Agreement. The prior or concurrent closing
of the transactions contemplated by the Second Contribution Agreement.
ARTICLE VI
CLOSING AND CLOSING DOCUMENTS
6.1 Closing. The consummation and closing (the "Closing") of the
transactions contemplated under this Agreement shall take place at 10:00 a.m. at
the offices of Xxxxxx,
14
Xxxxxxx & Xxxxxx, LLP in Atlanta, Georgia, or such other place as is mutually
agreeable to the parties, on the day the Acquirer receives the proceeds from the
Public Offering from the underwriter(s); provided, however, that this Agreement
shall terminate if Closing does not occur prior to March 31, 2004.
6.2 Contributor's Deliveries. At the Closing, the Contributor shall
deliver the following to the Acquirer in addition to all other items required to
be delivered to the Acquirer by the Contributor:
(a) Assignment of Company Interests. The Contributor shall have
executed and delivered an Assignment, in substantially the form of Exhibit B
attached hereto, granting and conveying to the Acquirer good and indefeasible
title to the Company Interests, free and clear of all Liens.
(b) Execution of Acquirer's Partnership Agreement. Signature pages
of the Acquirer's Partnership Agreement duly executed by the Contributor, as
limited partner.
(c) FIRPTA Certificate. An affidavit from the Contributor certifying
pursuant to Section 1445 of the Internal Revenue Code that the Contributor is
not a foreign corporation, foreign partnership, foreign trust, foreign estate or
foreign person (as those terms are defined in the Internal Revenue Code and the
Income Tax Regulations promulgated thereunder).
(d) Books and Records. All books and records, title insurance
policies, leases, lease files, contracts, stock certificates, original
promissory notes, another indicia of ownership with respect to the Company which
are in the Contributor's possession or which can be obtained through the
Contributor's reasonable efforts.
(e) Other Documents. Any other document or instrument reasonably
requested by the Acquirer or required hereby. Without limiting the generality of
the foregoing, to the extent that individuals associated with the Contributor
serve as managers, officers or directors in the Company or the Entity, the
Contributor shall cause such individuals to resign and withdraw from such
positions at Closing. Upon request of the Acquirer, the Contributor shall
provide a certified copy of all appropriate corporate actions executing the
execution, delivery and performance by the Contributor of this agreement.
6.3 Acquirer's Deliveries. At the Closing, the Acquirer shall deliver the
following:
(a) Consideration/Certificates for Units. The Consideration. If
certificates are issued, certificates representing Units duly issued by the
Acquirer in the name of the Contributor as of the Closing Date representing the
Units to which the Contributor is entitled pursuant to Section 1.2 of this
Agreement.
(b) Executed Acquirer's Partnership Agreement. The fully executed
Acquirer's Partnership Agreement, with the original duly executed signature of
Education Realty OP Limited Partner Trust, a Maryland business trust which is
the wholly-owned subsidiary of the REIT, as general partner, and original or
photostatic copies of the signatures of all limited partners.
15
(c) Other Documents. Any other document or instrument reasonably
requested by the Contributor or required hereby.
6.4 Fees and Expenses; Closing Costs. The Acquirer shall pay any
documentary transfer taxes, escrow charges, title charges and recording taxes
for fees incurred in connection with the transactions contemplated by this
Agreement; provided however, that the Contributor shall pay their own legal fees
and expenses.
ARTICLE VII
MISCELLANEOUS
7.1 Notices. Any notice provided for by this Agreement and any other
notice, demand, or communication required hereunder shall be in writing by
either (i) personal delivery (including recognized overnight delivery service),
(ii) confirmed facsimile transmission or (iii) certified or registered mail,
postage prepaid, with return receipt requested. All notices shall be addressed
as follows:
Acquirer:
UNIVERSITY TOWERS OPERATING PARTNERSHIP, LP
000 Xxx Xxxxx Xxxxx
Xxxxx 000
Xxxxxxx, Xxxxxxxxx 00000
Attention: Xxxx X. Xxxxx
Fax No.: (000)000-0000
with a copy to:
Xxxxxx, Xxxxxxx & Xxxxxx, LLP
0000 Xxxxxxxxx Xxxx, X.X.
Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxxxxxxx X. Xxxxxxxx
Fax No.: (000) 000-0000
Contributor:
0 XxXxxxxx Xxxxxx
Xxxxxxx, Xxxxx Xxxxxxxx 00000
with a copy to:
Sink & Potter, LLP
X.X. Xxx 0000
Xxxxxxx, Xxxxx Xxxxxxxx 00000
Attention: Xxxxx X. Xxxx, Xx.
16
Any address or name specified above may be changed by a notice given by the
addressee to the other party. Any notice, demand or other communication shall be
deemed given and effective as of the date of delivery. The inability to deliver
because of changed address of which no notice was given, or rejection or other
refusal to accept any notice, demand or other communication, shall be deemed to
be receipt of the notice, demand or other communication as of the date of such
attempt to deliver or rejection or refusal to accept.
7.2 Entire Agreement; Modifications and Waivers; Cumulative Remedies. This
Agreement supersedes any existing letter of intent between the parties,
constitutes the entire agreement among the parties hereto and may not be
modified or amended except by instrument in writing signed by the parties
hereto, and no provisions or conditions may be waived other than by a writing
signed by the party waiving such provisions or conditions. In the event of any
conflict or apparent inconsistency between the exhibits attached hereto and the
text of this Agreement or among the exhibits attached hereto, the terms of
Exhibit A shall control.
No delay or omission in the exercise of any right or remedy accruing to
Acquirer or the Contributor upon any breach under this Agreement shall impair
such right or remedy or be construed as a waiver of any such breach theretofore
or thereafter occurring. The waiver by the Contributor or the Acquirer of any
breach of any term, covenant, or condition herein stated shall not be deemed to
be a waiver of any other breach, or of a subsequent breach of the same or any
other term, covenant, or condition herein contained. All rights, powers,
options, or remedies afforded to Contributor or the Acquirer either hereunder or
by law shall be cumulative and not alternative, and the exercise of one right,
power, option, or remedy shall not bar other rights, powers, options, or
remedies allowed herein or by law, unless expressly provided to the contrary
herein.
7.3 Exhibits. All exhibits referred to in this Agreement and attached
hereto are hereby incorporated in this Agreement by reference.
7.4 Successors and Assigns. This Agreement may not be assigned by any
party without the prior approval of the other parties hereto, except that the
Acquirer may assign its rights and obligations to an affiliate. This Agreement
shall be binding upon, and inure to the benefit of, the Contributor, the
Acquirer, and their respective legal representatives, successors, and permitted
assigns.
7.5 Article Headings. Article headings and article and section numbers are
inserted herein only as a matter of convenience and in no way define, limit, or
prescribe the scope or intent of this Agreement or any part hereof and shall not
be considered in interpreting or construing this Agreement.
7.6 Governing Law. This Agreement shall be construed and interpreted in
accordance with the laws of the State of Delaware, without regard to conflicts
of laws principles.
7.7 Counterparts. This Agreement may be executed in any number of
counterparts and by any party hereto on a separate counterpart, each of which
when so executed and delivered shall
17
be deemed an original and all of which taken together shall constitute but one
and the same instrument.
7.8 Survival. All representations and warranties contained in this
Agreement, and all covenants and agreements contained in the Agreement which
contemplate performance after the Closing Date and the obligations of the
parties not fully performed at the Closing (including, without limitation, those
covenants and agreements contained in Sections 1.2, 1.5, 3.2, 3.3, 3.4, 3.5,
3.6, 4.1, 4.2, 6.4, and 7.14 hereof) shall survive the Closing.
7.9 Further Acts. In addition to the acts, instruments and agreements
recited herein and contemplated to be performed, executed and delivered by the
Acquirer and the Contributor and the Acquirer and Contributor shall perform,
execute, and deliver or cause to be performed, executed, and delivered at the
Closing or after the Closing, any and all further acts, instruments, and
agreements and provide such further assurances as the other parties may
reasonably require to consummate the transaction contemplated hereunder.
7.10 Severability. In case any one or more of the provisions contained in
this Agreement shall for any reason be held to be invalid, illegal, or
unenforceable in any respect, such invalidity, illegality, or unenforceability
shall not affect any other provision hereof, and this Agreement shall be
construed as if such invalid, illegal, or unenforceable provision had never been
contained herein.
7.11 Equitable Remedies. The Contributor agrees that irreparable damage
would occur to the Acquirer in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the Acquirer shall be entitled
to an injunction or injunctions to prevent breaches of this Agreement by the
Contributor and to enforce specifically the terms and provisions hereof in any
federal or state court located in Tennessee (as to which the parties agree to
submit to jurisdiction for the purposes of such action), this being in addition
to any other remedy to which the Acquirer is entitled under this Agreement or
otherwise at law or in equity.
7.12 Time of the Essence. TIME IS OF THE ESSENCE with respect to all
obligations of the parties under this Agreement.
7.13 Attorneys' Fees. Should a party employ an attorney or attorneys to
enforce any of the provisions hereof or to protect its interest in any manner
arising under this Agreement, or to recover damages for breach of this
Agreement, any non-prevailing party in any action pursued in a court of
competent jurisdiction (the finality of which is not legally contested) shall
pay to the prevailing party all reasonable costs, damages, and expenses,
including reasonable attorneys' fees, expended or incurred in connection
therewith.
7.14 Confidentiality. The Contributor acknowledges that the matters
relating to the REIT, the Public Offering, this Agreement, and the other
documents, terms, conditions and information related thereto (collectively, the
"Information") are confidential in nature. Therefore, the Contributor covenants
and agrees to keep the Information confidential and will not (except as required
by applicable law, regulation or legal process including applicable securities
laws), without the Acquirer's prior written consent, disclose any Information in
any manner whatsoever;
18
provided, however, that the Information may be revealed only to the
Contributor's key employees, legal counsel and financial advisors and to the
Property Lender, each of whom shall be informed of the confidential nature of
the Information and shall agree to act in accordance with the terms of this
Section 7.14. In the event that the Contributor or its key employees, legal
counsel or financial advisors or the Property Lender (collectively, the
"Information Group") are requested pursuant to, or required by, applicable law
(other than in connection with the Public Offering), regulation or legal process
to disclose any of the Information, the applicable member of the Information
Group will notify the Acquirer promptly so that it may seek a protective order
or other appropriate remedy or, in its sole discretion, waive compliance with
the terms of this Section 7.14. In the event that no such protective order or
other remedy is obtained, or that the Acquirer waives compliance with the terms
of this Section 7.14, the applicable member of the Information Group may furnish
only that portion of the Information which it is advised by counsel is legally
required and will exercise all reasonable efforts to obtain reliable assurance
that confidential treatment will be accorded the Information. The Contributor
acknowledges that remedies at law may be inadequate to protect the Acquirer or
the REIT against any actual or threatened breach of this Section 7.14, and,
without prejudice to any other rights and remedies otherwise available, the
Contributor agrees to the granting of injunctive relief in favor of the REIT
and/or the Acquirer without proof of actual damages.
[SIGNATURES APPEAR ON FOLLOWING PAGE]
19
IN WITNESS WHEREOF, this Agreement has been entered into effective as of
the 20th day of September, 2004.
CONTRIBUTOR:
/s/ Xxxxxx X. Xxxxxxxxx, Xx.
---------------------------------------
XXXXXX X. XXXXXXXXX, XX.
ACQUIRER:
UNIVERSITY TOWERS OPERATING
PARTNERSHIP, LP
By: UNIVERSITY TOWERS OP GP, LLC,
its general partner
By: /s/ Xxxx X. Xxxxx
---------------------------------------
Name: Xxxx X. Xxxxx
Title: President and Chief Executive Officer
20
EXHIBIT A
EDUCATION REALTY TRUST, INC.
TERMS FOR THE ACQUISITION OF
UNIVERSITY TOWERS, LLC
A-1
EXHIBIT B
Assignment
B-1
EXHIBIT C
UPREIT Partnership Agreement
C-1
