EXHIBIT 10.8
CONTRIBUTION AGREEMENT
BY AND AMONG
XXXXX & X'XXXX, INC.
A TENNESSEE CORPORATION,
XXXX X. XXXXX,
XXXXX X. XXXXXX,
XXXXXX X. XXXX,
XXXXXX X. XXXXXX,
XXXXXXX X. XXXX
AND
XXXX ENTERPRISES III, LTD.
A TENNESSEE LIMITED PARTNERSHIP,
COLLECTIVELY AS THE CONTRIBUTORS,
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 24th
day of September, 2004 by and among XXXXX & O'HARA, INC., a Tennessee
corporation ("A&O"), XXXX X. XXXXX ("Xxxxx"), XXXXX X. XXXXXX ("Xxxxxx"), XXXXXX
X. XXXX ("Bird"), XXXXXX X. XXXXXX ("Xxxxxx"), XXXXXXX X. XXXX ("X. Xxxx") and
XXXX ENTERPRISES III, LTD., a Tennessee limited partnership ("Xxxx III,"
together with A&O, Bower, Porter, Bird, Xxxxxx and Xxxx are sometimes
hereinafter referred to individually as a "Contributor" and collectively
referred to as the "Contributors;" with A&O, Xxxxx and Xxxxxx sometimes
hereinafter referred to individually as an "A&O Contributor" and collectively as
the "A&O Contributors;" and Porter, Bird, X. Xxxx and Xxxx III sometimes
hereinafter referred to individually as an "Unaffiliated Contributor" and
collectively as the "Unaffiliated Contributors"); and UNIVERSITY TOWERS
OPERATING PARTNERSHIP, LP, a Delaware limited partnership (the "Acquirer").
RECITALS
A. AOD/Raleigh Residence Hall, LLC, a Tennessee limited liability
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").
B. The Contributors own all of the outstanding membership interests in
the Company (the "Company Interests"). Acquirer desires to acquire, and the
Contributors desire to sell, all of the Company Interests.
C. The members of University Towers Building, LLC, a North Carolina
limited liability company and owner the remaining 50% of the Entity ("University
Towers Building"), has or will enter into a Contribution Agreement (the "Second
Contribution Agreement") with the Acquirer to contribute all of their interests
in University Towers Building 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. The Contributors agree 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 (the "Property Loan") from Nationsbanc Mortgage Capital
Corporation or its assignee (the "Property Lender") to the Entity, as described
in Section 1.1 of the Disclosure Schedule attached hereto as Exhibit A (the
"Disclosure Schedule"), the Company Interests shall be transferred to the
Acquirer free and clear of any claim, lien, charge, security
1
interest, mortgage, deed of trust, encumbrance, purchase right or other right of
any nature whatsoever of any third party ("Liens").
1.2 Consideration. The consideration (the "Consideration") for which
the Contributors agree to contribute and assign the Company Interests to the
Acquirer, and which the Acquirer agrees to pay or deliver to the Contributors
(or the Contributors' designee for such payment and delivery), subject to the
terms of this Agreement, shall be the issuance to the Contributors or its
designees of a total number of units of limited partnership interest in the
Acquirer ("Units") equal to 50% of the positive difference between $37,500,000
and the outstanding balance of the Property Loan on the Closing Date (as
hereinafter defined) (50% of such difference being the "Closing Value") and
shall be comprised of (a) cash in the amount of the product of the Closing Value
multiplied by 0.49485 and (b) the balance in 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. All of the
Consideration that is payable to each Unaffiliated Contributor other than Bird
will be paid in cash. All of the Consideration that is payable to Bird and each
A&O Contributor will be paid in Units except for cash which will be paid in lieu
of fractional Units. The Contributors hereby direct the Acquirer to pay, issue
and distribute (as applicable) the Consideration on the Closing Date to the
Contributors (or their designees) pro rata in accordance with their ownership
interests in the Company, as set forth on Schedule I hereto. No fractional Units
will be issued as Consideration hereunder, but in lieu of issuing fractional
Units, the value thereof shall be paid in cash. Each Contributor receiving Units
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,
any Contributor or its designee (provided the designee is an accredited
investor) that receives Units 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, each Contributor acknowledges and agrees
that once the Closing (as hereinafter defined) occurs, such 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.
1.3 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.
1.4 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 Entity Interest takes the form of the issuance of Units the
transactions contemplated hereby shall be treated for federal income tax
purposes, pursuant to Section 721 of the Internal Revenue Code of 1986, as
amended (the "Code"), as the contribution of the Company Interests by the
Contributors to the Acquirer, in exchange for the Units.
2
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1 Representations by Acquirer. The Acquirer hereby represents and
warrants to each 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"). Each Contributor (or its
designee) 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.
(e) Consents. Each consent, approval, authorization, order,
license, certificate, permit, registration, designation, or filing by or with
any governmental agency or
3
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 the A&O Contributors. Each A&O Contributor
hereby jointly and severally represents and warrants the following to the
Acquirer as of the date hereof and as of the Closing Date (it being acknowledged
that all references to "Contributor" in this Section 2.2 shall be deemed to
refer only to the A & O Contributors): to the Acquirer:
(a) Organization and Power. Each Contributor that is a legal entity
is duly formed, validly existing, and in good standing under the laws of the
jurisdiction of its formation. Each Contributor has full right, power, and
authority to enter into this Agreement and to assume and perform all of its
obligations under this Agreement. The execution and delivery of this Agreement
and the performance by each Contributor of its obligations hereunder have been
duly authorized by all requisite action of the Contributor and require no
further action or approval of the Contributor's members, managers, officers,
directors or shareholders or of any other individuals or entities in order to
constitute this Agreement as a binding and enforceable obligation of the
Contributor. Each of the Company and the Entity (i) is duly formed, validly
existing and in good standing under the laws of the jurisdiction of its
formation, (ii) has the requisite power and authority to carry on its business
as it is presently conducted and (iii) to the extent required applicable law, is
qualified to do business in each jurisdiction in which the nature of its
business or the character of its property makes such qualification necessary,
except where failure to be so qualified would not have a Material Adverse Effect
with respect to such entity. The general partner, managing member or
administrative member of each of the Company and of the Entity has provided to
the Acquirer true and correct copies of such entity's operating agreement and
other organizational documents, with all amendments as in effect on the date of
this Agreement (collectively, the "Organizational Documents"). Section 2.2(a) of
the Disclosure Schedule lists, with respect to the Company and the Entity, its
jurisdiction of formation and each of its partners, members or other equity
owners as of the date hereof.
(b) Noncontravention. Neither the entry into nor the performance
of, or compliance with, this Agreement by any of the Contributors has resulted,
or will result, in any violation of, or default under, or result in the
acceleration of, any obligation under any of the Organizational Documents,
regulations, mortgage indenture, lien agreement, note, contract, permit,
judgment, decree, order, restrictive covenant, statute, rule, or regulation
applicable to any Contributor, the Company, the Entity, the Company Interests or
the Property.
(c) Litigation. There is no action, suit, or proceeding, pending or
known to be threatened, against or affecting any Contributor, the Company, the
Entity or the Property 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, (ii) could have a
Material Adverse Effect with respect to any Contributor, the Company, the Entity
or the Property, (iii) could materially and adversely affect the ability of any
Contributor to perform its obligations hereunder or under any document to be
delivered pursuant hereto, or (iv) could create a Lien on the Company Interests,
the Company, the Entity, the Property, any part thereof, or any interest
therein.
4
(d) Solvency. Each Contributor, the Company and the Entity 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 Contributors' knowledge, threatened against the Contributors,
the Company, the Entity or the Property.
(e) Ownership of Company Interests and the Entity. The Company
Interests listed on Section 2.2(e) of the Disclosure Schedule constitute all of
the issued and outstanding equity interests in the Company, and all such
interests are owned by the Contributors. Each 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 Acquirer will acquire good and valid title thereto, free and
clear of any Liens except Liens created in favor of the Acquirer by the
transactions contemplated hereby. The Company owns 50% of the issued and
outstanding equity interests in the Entity, beneficially and of record, free and
clear of any Liens of any nature. Except for those to be acquired by the
Acquirer in connection with this Agreement, the Second Contribution Agreement
and those provided in the Operating Agreement of the Entity delivered by the
Company to the Acquirer, 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 the Entity or the Property, or (ii) to purchase, transfer or
to otherwise acquire, or to in any way encumber, any of the Company Interests,
the Property, any interest in the Company or the Entity, 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 or the Entity (other than in connection
with the existing management agreements for the Property provided to Acquirer).
None of the Contributors has any commitment or legal obligation, absolute or
contingent, to any other individual, corporation, limited liability company,
partnership, trust or other entity ("Person") other than the Acquirer to sell,
sign, transfer or effect a sale of any right, title or interest in or to the
Company, any of the Company Interests, the Property or the Entity.
(f) No Consents. Except as shall have been obtained on or before
the Closing Date, and, for informational purposes, as set forth in Section
2.2(f) of the Disclosure Schedule, 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 any Contributor.
(g) Securities Law Matters.
(i) Each Contributor is knowledgeable, sophisticated and
experienced in business and financial matters; each 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. Each 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; each Contributor has received and
reviewed all information and documents about or pertaining to the REIT, the
Acquirer, the business and prospects of the REIT
5
and the Acquirer and the issuance of the Units as each 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 such 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 each Contributor understands and has taken cognizance of all risk
factors related to the purchase of the Units. Each Contributor is a
sophisticated real estate investor. In acquiring the Units and engaging in this
transaction, no Contributor is relying upon any representations made to it by
the Acquirer, or any of the officers, employees, or agents of the Acquirer not
contained herein. Each Contributor is relying upon its own independent analysis
and assessment (including with respect to taxes), and the advice of such
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. Each Contributor represents and warrants that it has reviewed
and approved the form of the Limited Partnership Agreement of Education Realty
Operating Partnership, LP and acknowledges that the Acquirer's Partnership
Agreement will be in substantially the form of such agreement with such changes
to effect the transactions contemplated by this Agreement and the Second
Contribution Agreement.
(ii) Each 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 each Contributor (or its designee) 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. Each 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) Each Contributor is an "accredited investor" as that
term is defined in Rule 501 of Regulation D under the Securities Act of 1933, as
amended. Each 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) No Brokers. None of the Contributors has 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 any Contributor. The
Contributors hereby agree to indemnify and hold the Acquirer and its employees,
directors, members, partners, affiliates and agents harmless against any
6
claims, liabilities, damages or expenses arising out of a breach of the
foregoing. This indemnification shall survive Closing or any termination of this
Agreement.
(i) Title to the Property. The Entity owns good and marketable fee
simple title of record to the Property identified in the recitals hereto and
further described on Section 2.2(i) of the Disclosure Schedule that is not
transferred to University Towers Building pursuant to the Second Contribution
Agreement prior to the Closing, free and clear of any Liens other than the deed
of trust securing the Property Loan, the lien for current year real estate taxes
and assessments not yet due or payable, and such recorded utility easements
serving the Property which do not materially and adversely affect the
marketability of title to the Property or the use of the Property.
(j) No Agreements to Sell. Except as contemplated in the Second
Contribution Agreement, neither the Company nor the Entity has made any
agreement with, and will not enter into any agreement with, and has no
obligation (absolute or contingent) to, any other person or firm to sell,
transfer or in any way encumber the Property or to not sell the Property, or to
enter into any agreement with respect to a sale, transfer or encumbrance of or
put or call right with respect to the Property.
(k) Leases. The Entity holds the lessor's interest under all
leases, licenses, tenancies, possession agreements and occupancy agreements with
the tenants of the Property (the "Leases"). A true and complete copy of all
Leases have been made available to the Acquirer; to the Contributors' knowledge,
such Leases are in full force and effect, except as indicated otherwise in
Section 2.2(k) the Disclosure Schedule, the Entity, as lessor under such Leases,
has not received any notice that it is in default of any of its obligations
under such Leases beyond any applicable grace period which has not been cured;
to the Contributors' knowledge, except as set forth in Section 2.2(k) of the
Disclosure Schedule, no tenant is in default under any Lease except to the
extent such default would not have a Material Adverse Effect with respect to the
Entity; rent is being billed to the tenants in accordance with the Leases; no
tenant is entitled to "free" rent, rent concessions, rebates, rent abatements,
set-offs, or offsets against rent and no tenant under any such Lease claims a
right to any of the foregoing, except as set forth in Section 2.2(k) of the
Disclosure Schedule; the Entity has received no written notice that any tenant
under any such Lease contests any rent or other charges billed to it, except as
set forth in Section 2.2(k) of the Disclosure Schedule; no assignment of the
Entity's rights under any Lease is in effect on the date hereof other than
collateral assignments to secure mortgage indebtedness; and, except as set forth
in Section 2.2(k) of the Disclosure Schedule with respect to any Leases entered
into by the Entity, no brokerage commissions will be due upon the failure of any
tenant under any such Lease to exercise any cancellation right granted in its
Lease or upon any extension or renewal of such Leases. To the Contributors'
knowledge, all material obligations of the lessor under the Leases that have
accrued to the date hereof have been performed or satisfied.
(l) Liabilities; Indebtedness. Except for the Property Loan,
neither the Company nor the Entity has any indebtedness or any liabilities
whatsoever, contingent, accrued or otherwise, except in each instance for trade
payables and obligations for other customary and ordinary expenses incurred in
the ordinary course of business that are not more than 30-days delinquent and
that have been disclosed to the Acquirer.
7
(m) Insurance. The Entity currently has in place public liability,
casualty and other insurance coverage with reputable insurance companies with
respect to the Property in customary amounts for projects similar to the
Property in the market in which the Property is located, and in all cases in
compliance with the existing financing arrangements. To the Contributors'
knowledge, each of such policies is in full force and effect, and all premiums
due and payable thereunder have been fully paid when due. No written notice of
cancellation, default or non-renewal has been received or to the Contributors'
knowledge threatened with respect thereto.
(n) Personal Property. The Entity owns all of the tangible personal
property constituting "Fixtures and Personal Property" (as defined below) which
is used in and, individually or in the aggregate with other such property, is
material to the operation of the Property. "Fixtures and Personal Property"
shall mean all fixtures, furniture, furnishings, apparatus and fittings,
equipment, machinery, appliances, building supplies, tools, and other items of
personal property located on the Property and used in connection with the
operation or maintenance of the Property; excluding, however, all furniture,
furnishings, and other items of personal property owned by tenants. To the
Contributors' knowledge, except as set forth in Section 2.2(n) of the Disclosure
Schedule, such Fixtures and Personal Property are free and clear of all Liens.
All equipment, fixtures and personal property located at or on the Property
shall remain and not be removed prior to the Closing, except for equipment that
becomes obsolete or unusable, which may be replaced in the ordinary course of
business.
(o) Employees and Contracts. Except as set forth in Section 2.2(o)
of the Disclosure Schedule, (i) there are no contracts with employees of the
Company or the Entity as of the date hereof, nor (ii) service or maintenance
contracts affecting the Property, in each case which are not cancelable upon
thirty (30) days notice or less or which are for a contract amount greater than
$100,000 per annum. True and correct copies of all service, equipment,
franchise, operating, management, parking, supply, utility and maintenance
agreements relating to the Property (the "Service Contracts") have been made
available to the Acquirer and the same are in full force and effect and have not
been modified or amended except in the ordinary course of the Entity's business.
To the Contributors' knowledge, no event of default exists (which remains
uncured) under any of the Service Contracts which would have a Material Adverse
Effect with respect to the Entity. To the Contributors' knowledge, there are no
union contracts or similar agreements between the Company or the Entity and its
employees. Except as set forth in Section 2.2(o) of the Disclosure Schedule, no
employee is entitled to receive annual compensation (including bonus) from the
Company or the Entity in excess of $100,000.
(p) Loans. To the Contributors' knowledge, the Property Loan and
the documents entered into in connection therewith (collectively, the "Loan
Documents") are in full force and effect as of the date hereof. To the
Contributors' knowledge, no event of default or event that with the passage of
time or giving of notice or both would constitute an event of default has
occurred as of the date hereof under any of the Loan Documents which would have
a Material Adverse Effect. True and correct copies of the existing Loan
Documents have been made available to the Acquirer.
(q) Taxes. To the Contributors' knowledge, the transactions
contemplated hereby will not result in any income tax liability to the Entity,
the Company or the Acquirer, and
8
no tax lien or other charge exists or will exist upon consummation of the
transactions contemplated hereby with respect to the Company, the Entity or the
Property, except such tax liens for which the tax is not due and which has been
properly reserved for payment by the Entity or tax liens or other charges which
individually or in the aggregate would not have a Material Adverse Effect with
respect to the Entity or the Company. The copies of the real property tax bills
for the Property for the current tax year which have been furnished or made
available to the Acquirer are true and correct copies of all of the tax bills
for such tax year actually received by the Entity or the Entity's agents for the
Property. For federal income tax purposes, the Entity is, and at all times
during its existence has been, a partnership or limited liability company
taxable as a partnership (rather than an association or a publicly traded
partnership taxable as a corporation). The Entity has timely and properly filed
all tax returns required to be filed by it and has timely paid all taxes
required to be paid by it. The Entity has not requested any extension of time or
agreed to any extension of the applicable statue of limitations within which to
file any pending tax returns. None of the tax returns filed by the Entity is the
subject of a pending or ongoing audit, and no federal, state, local or foreign
taxing authority has asserted any tax deficiency or other assessment against the
Property or the Entity.
(r) Zoning. None of the Contributors, the Company or the Entity has
received any written notice (which remains uncured) from any governmental
authority stating that the Property is currently violating any zoning, land use
or other similar rules or ordinances in any material respect that would
reasonably be expected to have a Material Adverse Effect with respect to the
Company or the Entity.
(s) Property Management Agreements. All of the property management
agreements for the Property are listed in Section 2.2(s) of the Disclosure
Schedule and are in full force and effect and neither the Entity or, to the
knowledge of the Contributors, any other party to such management agreements is
in default thereunder.
(t) No Agreements. Except as set forth in the Organizational
Documents or Section 2.2(t) of the Disclosure Schedule or as contemplated by the
Second Contribution Agreement, the Property is not subject to any outstanding
agreement of sale or ground lease, option to purchase or other right of any
third party to acquire any interest therein (other than under the Leases).
(u) Environmental Conditions. None of the Contributors, the Entity
or the Company has received any written notice of the presence or release of any
substance that is regulated under any Environmental Laws as a pollutant,
contaminant or toxic, radioactive or otherwise hazardous substance, including
petroleum, its derivatives or by-products and other hydrocarbons (collectively
and individually, "Hazardous Substances") that would cause the Property, the
Entity or the Company to be in violation of any applicable Environmental Laws
and that remains uncured, nor has any Contributor, the Entity or the Company
received written notice that the Property is not in compliance with applicable
Environmental Laws. There are no Hazardous Substances located at, on or under
the Property and no Hazardous Substances have leaked, escaped or been
discharged, emitted or otherwise released from the Property onto any adjoining
properties. For the purposes of this Section, "Environmental Laws" means any and
all federal, state and local statutes, laws, regulations and rules in effect on
the date hereof relating to
9
the protection of the environment or to the use, transportation and disposal of
Hazardous Substances.
(v) Compliance With Laws. The Company and the Entity possess and/or
on or prior to Closing will possess such certificates, authorities or permits
issued by the appropriate state or federal agencies or bodies necessary to
conduct the business to be conducted by it, and neither the Company nor the
Entity has received any written notice of proceedings that have been or may be
commenced relating to the revocation or modification or any such certificate,
authority or permit which, singly or in the aggregate, if the subject of an
unfavorable decision, ruling, or finding, would have a Material Adverse Effect
with respect to the Company or the Entity. Neither the Company nor the Entity
has received any written or other notice of any violation of any applicable
zoning, building or safety code, rule, regulation or ordinance, or of any
employment, environmental, wetlands or other regulatory law, order, regulation
or other requirement, including without limitation the Americans with
Disabilities Act, or any restrictive covenants or other easements, encumbrances
or agreements, relating to the Property, which remains uncured and would have a
Material Adverse Effect with respect to the Company or the Entity.
(w) Condemnation and Moratoria. There are (i) no pending or
threatened condemnation or eminent domain proceedings, or negotiations for
purchase in lieu of condemnation, which affect or would affect the Property;
(ii) no pending or threatened moratoria on utility or public water or sewer
hook-ups or the issuance of permits, licenses or other inspections or approvals
necessary in connection with the construction or reconstruction of improvements
which affect or would affect any portion of the Property; and (iii) no pending
or threatened proceeding to change adversely the existing zoning classification
as to any portion of the Property. No portion of the Property is a designated
historic property or located within a designated historic area or district, and
there are no graveyards or burial grounds located within the Property. The
Contributors have no actual knowledge of any change or proposed change in the
route, grade or width of or otherwise affecting, any street or road adjacent to
or serving the Property which could reasonably be expected to have a Material
Adverse Effect with respect to the Entity.
(x) Condition of Improvements. There is no material defect in the
condition of the Property, including the improvements thereon, the roof,
foundation, load-bearing walls or other structural elements thereof, and the
mechanical, electrical, plumbing and safety systems therein. No material damage
to the Property has occurred from casualty or other cause, nor is there any soil
condition of any nature that will not support all of the improvements thereon
without the need for unusual or new subsurface excavations, fill, footings,
caissons or other installations. All utilities necessary for the current
operation of the Property are available to the Property.
(y) Patriot Act Representations. No Contributor, or to the
knowledge of any Contributors, any direct or indirect owner of a 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
10
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 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.
2.3 Representations by Unaffiliated Contributors. Each Unaffiliated
Contributor represents and warrants, as to itself and not as to any other
Contributor, the following to the Acquirer as of the date hereof and as of the
Closing Date (it being acknowledged that all references to "Contributor" in this
Section 2.3 shall be deemed to refer only to the Unaffiliated Contributor making
such representation or warranty):
(a) Power. If such Contributor is an entity, it is duly formed,
validly existing, and in good standing under the laws of the jurisdiction of its
formation. It has full right, power, and authority to enter into this Agreement
and to assume and perform all of its obligations under this Agreement. If such
Contributor is and entity, the execution and delivery of this Agreement and the
performance by it of its obligations hereunder have been duly authorized by all
requisite action of such Contributor and require no further action or approval
of such Contributor's members, managers, officers, directors or shareholders or
of any other individuals or entities in order to constitute this Agreement as a
binding and enforceable obligation of such Contributor.
(b) Noncontravention. Neither the entry into nor the performance
of, or compliance with, this Agreement by such 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 organizational documents, regulations, mortgage
indenture, lien agreement, note, contract, permit, judgment, decree, order,
restrictive covenant, statute, rule, or regulation applicable to such
Contributor.
(c) Litigation. There is no action, suit, or proceeding, pending or
known to be threatened against or affecting such 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 challenging the validity or
enforceability of this Agreement, (ii) could have a Material Adverse Effect with
respect to such Contributor; (iii) could have a Material Adverse Effect on such
Contributor's ability to perform
11
its obligations hereunder or under any document to be delivered pursuant hereto,
or (iv) could create a Lien on such Contributor's Company Interests.
(d) Solvency. Such 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 such
Contributor's knowledge, threatened against such Contributor.
(e) Ownership of Company Interests. Such Contributor's Company
Interests listed on Section 2.2(e) of the Disclosure Schedule constitute all of
the issued and outstanding equity interests of said Contributor in the Company,
and all such interests are owned by said Contributors. Such 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 its
Company Interests, free and clear of any Liens. Upon delivery of consideration
for such Company Interests, such 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. Such Contributor does
not have any commitment or legal obligation, absolute or contingent, to any
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 such
Contributor.
(g) No Brokers. Such 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 such Contributor. Such
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.
(h) Patriot Act Representations. Neither such Contributor, nor to
the knowledge of such Contributor, any direct or indirect owner of such
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.
(i) Securities Law Matters. If such Contributor is receiving Units,
the representations contained in Section 2.2(g) as to itself only.
12
ARTICLE III
COVENANTS AND INDEMNITIES
3.1 Covenants Pending Closing.
(a) From the date hereof until the Closing, each Contributor agrees
that with respect to itself and not to any other Contributor, it 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 its Company Interests; or
(ii) Mortgage, pledge or encumber (or permit to become
encumbered) all or any portion of its Company Interests.
(b) From the date hereof through the Closing, each Contributor
shall, to the extent within his or its control, cause 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 or its 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 as contemplated by the Second Contribution
Agreement, 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 the entity's
business consistent with past practice;
13
(vii) Cause or take any action that would render any of the
representations or warranties regarding the Property as set forth herein 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 the 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) Make any distribution to its members except in the
ordinary course of business of such entity, or as is contemplated by the Second
Contribution Agreement.
(c) From the date hereof until the Closing Date, the Contributors
will afford to the officers and authorized representatives of the Acquirer
access to all of 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 and the Entity as
the Acquirer may from time to time reasonably request.
(d) Notwithstanding anything to the contrary contained herein, any
failure by an 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, each
Contributor and the Acquirer shall provide each other with such cooperation and
information relating to the Company 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 Contributors 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 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 any Contributor with respect to any tax period ending on or before the
Closing Date. Each Contributor shall promptly notify the Acquirer in writing
upon receipt by such 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. Each of the Acquirer and each
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 such Contributor shall have the right to
control the conduct of any such audit or proceeding or portion thereof for which
the Contributors (or its owners) has acknowledged liability (except as a partner
of the Acquirer) for the payment of any additional tax liability, and the
Acquirer shall have the
14
right to control any other audits and proceedings. Notwithstanding the
foregoing, neither the Acquirer nor any 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. Each 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 each
Contributor agrees 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),
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 (a "Disposition") unless the Acquirer pays the
Contributors 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 Contributors
in excess of the income or gain allocable directly or indirectly to the
Contributors 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. 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 Contributors due to reduction by the Acquirer in
the Contributors' 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 Contributors' 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;
(B) a bankruptcy, insolvency, receivership or similar
proceeding, or any Disposition resulting therefrom or any
assignment for the benefit of creditors; or
15
(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 any
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 Contributors hold
Units constituting at least twenty five percent (25%) of the Units received by
such 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 Contributors'
allocable share from the Acquirer of all "excess non-recourse liability" under
Treasury Regulation Section 1.752-3(c) shall be no less than the Contributors'
aggregate deficit capital account in the Acquirer as of the date of the
Contribution.
(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 each 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 each
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.
(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
16
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 Contributors 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 each 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 Contributors' 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) Each Contributor acknowledges that Acquirer may be required to
comply with certain acquisition audit or disclosure requirements pursuant to
applicable regulations of the 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, each Contributor agrees to cooperate and
make available to Acquirer such records as may be necessary to permit Acquirer
to comply with SEC requirements.
17
(b) At the Closing, each A&O Contributor agrees to deliver to
Acquirer the most recent audited financial statements of the Company, the Entity
and the Property, if any, and any more current unaudited balance sheets and
income statements for the Company, the Entity and the Property for the current
fiscal year through the Closing Date and for the comparable portion of the prior
fiscal year.
(c) Subsequent to the Closing, each 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 Contributors' Indemnity.
(a) Each A&O Contributor hereby agrees to jointly and severally
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 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.
(b) Each Unaffiliated Contributor hereby agrees to indemnify and
hold each of the Indemnified Acquirer Parties harmless of and from all Losses
which any Indemnified Acquirer Party may suffer or incur by reason of any breach
of the representations or warranties of such Unaffiliated Contributor (and not
as to any other Contributor) contained in Section 2.3 of this Agreement.
3.5 Acquirer's Indemnity. The Acquirer agrees to indemnify and hold
each Contributor, and each 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
18
Property or any portion thereof or with respect to the Property' operations at
any time on or after the Closing Date.
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, each 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 Organizational Documents, 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 Contributors.
As of the Closing, the Acquirer irrevocably waives, releases and
forever discharges each Contributor and each 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 Organizational Documents,
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 any 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) Contributors' Obligations. The Contributors shall have
performed all obligations of the Contributors 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
Contributors pursuant to Section 6.2.
19
(b) Contributors' Representations and Warranties. The Contributors'
representations and warranties set forth in Section 2.2 and 2.3 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 Contributors' Obligations. In addition to any other
conditions set forth in this Agreement, each 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,
20
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, 2005.
6.2 Contributors' Deliveries. At the Closing, the Contributors shall
deliver the following to the Acquirer in addition to all other items required to
be delivered to the Acquirer by the Contributors:
(a) Assignment of Company Interests. The Contributors 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 each Contributor (or
its designee that is receiving Units), as limited partner.
(c) FIRPTA Certificate. An affidavit from each of the Contributors
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 and
the Entity which are in each Contributor's possession or which can be obtained
through such 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 any 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 Contributors shall
provide a certified copy of all appropriate corporate actions executing the
execution, delivery and performance by each Contributor of this agreement.
6.3 Acquirer's Deliveries. At the Closing, the Acquirer shall deliver
the following:
(a) The Consideration Certificates for Units. The Consideration. If
certificates are issued, certificates representing Units duly issued by the
Acquirer in the name the Contributor (or its designee) receiving Units 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
University Towers OP GP, LLC, a Delaware limited liability company, which is the
wholly-owned subsidiary of the REIT, as general partner, and original or
photostatic copies of the signatures of all limited partners.
21
(c) Other Documents. Any other document or instrument reasonably
requested by the Contributors 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 Contributors 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, XX 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
Contributors:
At the address for each Contributor set forth on Schedule I hereto.
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.
22
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.
No delay or omission in the exercise of any right or remedy accruing to
Acquirer or the Contributors 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 Contributors 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 Contributors 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 Contributors, 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 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 1.4, 3.2, 3.3, 3.4, 3.5, 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 Contributors, the Acquirer and Contributors shall perform, execute,
and deliver or cause to be performed,
23
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. Each 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 such 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. Each 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, each 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; provided, however, that the Information may be revealed
only to the Contributors' 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
24
counsel is legally required and will exercise all reasonable efforts to obtain
reliable assurance that confidential treatment will be accorded the Information.
Each 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]
25
IN WITNESS WHEREOF, this Agreement has been entered into effective
as of the 24 day of September, 2004.
CONTRIBUTORS:
XXXXX & X'XXXX, INC.
By: /s/ Xxxx X. Xxxxx
---------------------------------------------
Name: Xxxx X. Xxxxx
Title: President
XXXX ENTERPRISES III, LTD.
By: /s/ Xxxxx X. Xxxx
---------------------------------------------
Name: Xxxxx X. Xxxx
Title: General Partner
/s/ Xxxx X. Xxxxx
------------------------------------------------
XXXX X. XXXXX
/s/ Xxxxx X. Xxxxxx
------------------------------------------------
XXXXX X. XXXXXX
/s/ Xxxxxx X. Xxxx
------------------------------------------------
XXXXXX X. XXXX
/s/ Xxxxxx X. Xxxxxx
------------------------------------------------
XXXXXX X. XXXXXX
/s/ Xxxxxxx X. Xxxx
-----------------------------------------------
XXXXXXX X. XXXX
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
SCHEDULE I
ALLOCATION OF CONSIDERATION
EXHIBIT A
DISCLOSURE SCHEDULE
A-1
EXHIBIT B
ASSIGNMENT
B-1
EXHIBIT C
UPREIT PARTNERSHIP AGREEMENT
C-1
