CONTRIBUTION AGREEMENT

Execution Copy

CONTRIBUTION AGREEMENT

BY AND AMONG

EDUCATION REALTY OPERATING PARTNERSHIP, LP

PLACE PROPERTIES, L.P.

AND

PLACE MEZZ BORROWER, LLC

September 14, 2005

1

CONTRIBUTION AGREEMENT

THIS CONTRIBUTION AGREEMENT (the “ Agreement ”) is made and entered into as of the 14th day of September, 2005, by and among EDUCATION REALTY OPERATING PARTNERSHIP, LP , a Delaware limited partnership (hereinafter referred to as “ Transferee ”), PLACE PROPERTIES, L.P. , a Tennessee limited partnership (formerly known as Place Collegiate Properties, L.P.) (“ Place ”), and PLACE MEZZ BORROWER, LLC , a Delaware limited liability company (hereinafter referred to as “ Mezz ” and, together with Place, the “ Transferors ”).

W I T N E S S E T H T H A T:

WHEREAS, each of the entities listed on Exhibit A-1 attached hereto (each a “ Property Owner ” and collectively the “ Property Owners ”) is the owner of one or more of the fourteen (14) student housing properties listed on Exhibit A-1 , attached hereto and incorporated herein;

WHEREAS, Place is the sole member and the owner of one hundred percent of the ownership interest in and to Western Place, LLC, a Georgia limited liability company (hereinafter referred to as “ Western ”), including without limitation all economic, non-economic, management and business participation, voting and other interests in Western (hereinafter referred to collectively as “ Western Membership Interests ”);

WHEREAS, Mezz is the sole member and the owner of one hundred percent of the ownership interest in and to each of the Property Owners (other than Western) including without limitation all economic, non-economic, management and business participation, voting and other interests in the Property Owners (other than Western) (hereinafter referred to collectively as “ Mezz Membership Interests ” and, collectively with the Western Membership Interests and the General Partner Interests (as defined below), the “ Membership Interests ”);

WHEREAS, Place and Mezz desire to contribute and transfer to Transferee and Transferee desires to acquire from Place and Mezz all of the Membership Interests upon the terms and conditions hereinafter set forth, including without limitation, the condition that at Closing (as defined below), the Transferee or an affiliate of Transferee (upon acquisition of the Membership Interests by Transferee) and an affiliate of Place shall enter into one or more master leases of the Properties (as defined below) with the Transferee or its affiliate as landlord and such affiliate of Place as tenant, as provided herein;

NOW THEREFORE, in consideration of the mutual promises, covenants and agreements hereinafter set forth and of other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Transferors and Transferee, intending to be legally bound, hereby agree as follows:

1. DEFINITIONS AND MEANINGS

In addition to any other terms whose definitions are fixed and defined by this Agreement, each of the following defined terms, when used in this Agreement with an initial capital letter, shall have the meaning ascribed thereto by this Article 1:

1.1. “ Acquisition Consideration ” means the consideration that Transferee shall deliver to Transferors to consummate the acquisition of the Membership Interests as provided in Section 3.1 of this Agreement.

1.2. “ Affiliate ” means with respect to a specified Person (x) any other Person that directly or indirectly owns or controls, is under common ownership or control with, or is owned or controlled by, such specified Person, (y) any other Person who is a director, officer, member or is directly or indirectly the beneficial owner of 10% or more of any class of equity securities or membership interest of the specified Person or (z) any relative or spouse of the specified Person.

1.3. “ Agreement ” means this Contribution Agreement, together with any and all amendments, modifications, or supplements hereof and any and all exhibits, schedules, and addenda attached hereto.

1.4. “ Agreement of Principals ” is defined in Section 10.17 of this Agreement.

1.5. “ Assumed Loan ” means that certain loan made by Assumption Lender on or about December 3, 2004 to certain of the Property Owners in the original principal amount of $98,660,000.00, as more particularly described in Schedule 8.1.13 attached hereto.

1.6. “ Assumption Lender ” means Greenwich Capital Financial Products, Inc., and its successors and assigns.

1.7. “ Closing ” means the consummation of the transaction contemplated by this Agreement by the deliveries required under Article 12 hereof.

1.8. “ Closing Date ” means the time and date, established under Section 5.1 hereof, when the transaction contemplated by this Agreement is to be consummated, as such date may be extended by mutual agreement of the parties or pursuant to the express provisions of this Agreement.

1.9. “ Defeased Lenders ” means General Electric Commercial Credit and Archon Financial.

1.10. “ Defeasance Loans ” or “Defeased Loans” means (i) that certain loan made by General Electric Commercial Credit to Carrollton Place, LLC, a Georgia limited liability company, in the original principal amount of $8,000,000.00; (ii) that certain loan made by General Electric Commercial Credit to Southern Place, LLC, a Georgia limited liability company, in the original principal amount of $11,870,000.00; and (iii) that certain loan made by Archon Financial to Berkeley Place, LLC, a South Carolina limited liability company, in the original principal amount of $11,400,000.00, all as more particularly described in Schedule 8.1.13 attached hereto.

1.11. “ Documents ” is defined in Section 6.3 of this Agreement.

1.12. “ Earnest Money ” means the amount deposited by Transferee with Escrow Agent pursuant to the provisions of Article 4 hereof.

1.13. “ Effective Date ” means the date on which this Agreement has been duly executed by both Transferors and Transferee and a fully executed counterpart has been delivered by Transferors to Transferee; such date shall be inserted (by the last of Transferor or Transferee to execute this Agreement) in the preamble on the first page of this Agreement.

1.14. “ Environmental Laws ” means the following, as the same may be amended from time to time: the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (commonly known as “ CERCLA ”), as amended, the Superfund Amendment and Reauthorization Act (commonly known as “SARA”), the Resource Conservation and Recovery Act (commonly known as “ RCRA ”), and any other federal, state, city or county legislation or ordinances applicable to the Properties, and identified by its terms as relating to or regulating the protection of the environment or pertaining to hazardous substances, hazardous materials, or hazardous waste, together with their implementing regulations and guidelines.

1.15. “ Escrow Agent ” means Chicago Title Insurance Company (Atlanta, Georgia office), as Escrow Agent under this Agreement.

1.16. “ Existing Loans ” means the Assumed Loan, the Defeased Loans and the Prepaid Loans.

1.17. “ General Partner ” is defined in Section 11.2.7 of this Agreement.

1.18. “ General Partner Interests ” means all of the ownership interests in the General Partners, whether such ownership interests are in the form of limited liability company interests or shares of stock.

1.19. “ Governmental Authority ” means, with respect to any Property, any federal, state, county, municipal, or other governmental authority or quasi-governmental authority, agency, board or office having jurisdiction of such Property.

1.20. “ Hazardous Substances or Waste ” means petroleum (including gasoline, crude oil or any crude oil fraction), and chemicals or hazardous substances of any nature, including, without limitation, radioactive materials, PCBs, asbestos, pesticides, herbicides, pesticide or herbicide containers, untreated sewerage, industrial process sludge, and any item which is identified as a hazardous substance, hazardous material, or hazardous waste in any Environmental Law.

1.21. “ Inspection Period ” is defined in Section 6.1 of this Agreement.

1.22. “ Leases ” means the leases, tenancy and occupancy agreements of the occupants of the Improvements.

1.23. “ Lender Consents ” is defined in Section 10.16 of this Agreement.

1.24. “ Master Lease ” means, individually and collectively, the sublease agreement(s) for the Properties to be entered into by the Transferee or its Affiliate, as landlord, and Master Tenant, as tenant, as described in Section 10.17 of this Agreement.

1.25. “ Master Tenant ” is defined in Section 10.17 of this Agreement.

1.26. “ Mezzanine Lender ” means Greenwich Capital Financial Products, Inc., and its successors and assigns.

1.27. “ Mezzanine Loan ” means that certain loan made by the Mezzanine Lender to Mezz in the original principal amount of $21,040,000.00 and as more particularly described in Schedule 8.1.13 attached hereto.

1.28. “ Mini-Perm Lender ” means Compass Bank.

1.29. “ Mini-Perm Loan ” means that certain loan made by the Mini-Perm Lender to Western in the original principal amount of $12,330,600.00 and as more particularly described in Schedule 8.1.13 attached hereto.

1.30. “ Obligations Surviving Termination ” means those provisions hereof which, by their express terms, survive the Closing or earlier termination of this Agreement.

1.31. “ Permitted Exceptions ” is defined in Section 7.1 of this Agreement.

1.32. “ Person ” means any natural or artificial legal entity whatsoever, including, but not limited to, any individual, general partnership, limited partnership, unincorporated association, sole proprietorship, corporation, limited liability company, trust, business trust, real estate investment trust, joint venture, or government authority.

1.33. “ Prepaid Loans ” means the Mezzanine Loan and the Mini-Perm Loan.

1.34. “ Property ” and “ Properties ” are defined in Section 2 of this Agreement.

1.35. “ Property Owner ” or “ Property Owners ” means the Property Owners as described in the preamble of this Agreement. Any reference to “Property Owner” in the context of a specific Property (including, without limitation, Article 8 hereof) shall refer only to the Property Owner that is the owner of that particular Property as reflected on Exhibit A-1 hereto.

1.36. “ Repair Escrow ” and “Repair Escrow Agreement” are defined in Section 5.6 hereof.

1.37. “ Required Repairs ” means the deferred maintenance and other specific repairs to the Properties described in Schedule 1.37 attached hereto.

1.41. “ Trademark License Agreement ” shall mean that certain Non-Exclusive Service Mark License Agreement from Place to Transferee in the form attached hereto as Schedule 1.41 .

1.42. “Transferor” or “Transferors” means Place and Mezz.

1.43. “WebRoomz Licenses” are defined in Section 2.2.4.

2. CONTRIBUTION OF PROPERTIES

2.1. Upon the terms and conditions hereinafter set forth, Transferors agree to contribute and Transferee agrees to acquire the following:

2.1.1 All of Place’s right, title and interest in the Western Membership Interests;

2.1.2 All of Mezz’s right, title and interest in the Mezz Membership Interests; and

2.1.3 All of Mezz’s right, title and interest in the General Partner Interests.

2.2. Through its acquisition of the Membership Interests, it is the parties’ intention that Transferee will indirectly acquire all assets of the Property Owners, including without limitation:

2.2.1 All of the Property Owners’ right, title and interest in their respective parcels of real property more particularly described in Exhibit A-2 attached hereto and incorporated herein by this reference (collectively, the “ Land ”), together with all rights and appurtenances pertaining thereto (including, without limitation, all appurtenant easements over any adjacent property);

2.2.2 All buildings, improvements, and fixtures located on the Land (collectively, the “ Improvements ”);

2.2.3 All equipment, machinery, furnishings, supplies, and other tangible personal property owned by the Property Owners that is now or hereafter located at or within the Land or the Improvements and used in connection with the operation or occupancy thereof, including, without limitation, all personal property listed in Schedule 2.3 hereof (herein referred to collectively as the “ Tangible Personal Property ”); and

2.2.4 All of the Property Owners’ right, title, and interest in and to any intangible personal property now or hereafter owned by the Property Owners in connection with the Land, the Improvements or the Tangible Personal Property, including without limitation all of the Property Owners’ rights in and to all tradenames and trademarks associated with the Properties including without limitation the tradenames and trademarks identified in Schedule 2.4(a) attached hereto (collectively, the “ Tradenames ”), any and all transferable warranties, guaranties, and lien waivers relating to the Improvements or any Tangible Personal Property, all transferable software licenses used in the management or operation of the Properties including without limitation the licensees’ rights under the WebRoomz software licenses (the “WebRoomz Licenses”) described in Schedule 2.4(b) attached hereto and all transferable certificates of occupancy, plans, specifications, permits, licenses, approvals, and authorizations by any Governmental Authority, relating to the development, construction, ownership, operation, and occupancy of the Improvements (herein referred to collectively as the “ Intangible Personal Property ”). Notwithstanding the foregoing, the parties agree that Transferors shall retain ownership of the Tradenames and Transferors shall grant to the Transferee at Closing a license to use the Tradenames pursuant to the terms of the Trademark License Agreement.

All of the foregoing Land, Improvements, Tangible Personal Property, and Intangible Personal Property comprise fourteen (14) separate student housing properties (each a “ Property ,” and collectively the “ Properties ”) located in various cities and counties in the States of Alabama, Georgia, Kentucky, Missouri, South Carolina and Tennessee, all as more particularly described on Exhibit A-1 .

3. ACQUISITION CONSIDERATION

3.1. Acquisition Consideration . In consideration of Transferors’ contribution of the Membership Interests to Transferee, Transferee shall provide to Transferors at Closing as Acquisition Consideration for the Membership Interests, the sum of ONE HUNDRED NINETY-FIVE MILLION and NO/100 DOLLARS ($195,000,000.00). Transferee and Transferors agree that the Acquisition Consideration shall be allocated among the Membership Interests in the respective Property Owners as set forth in Exhibit B attached hereto and by this reference made part hereof (the “Acquisition Consideration Allocation”). Prior to Closing, Transferors and Transferee shall endeavor in good faith to agree upon a mutually acceptable allocation of the Acquisition Consideration Allocation attributable to such Membership Interests in the respective Property Owners to the land, improvements and personal property owned by each of the Property Owners. In the event Transferors and Transferees are unable to mutually agree upon the allocation of the Acquisition Consideration Allocation by Closing as provided herein, the Acquisition Consideration Allocation shall be allocated as follows: (i) twenty percent (20%) to land; (ii) seven percent (7%) to personal property; and (iii) seventy-three percent (73%) to buildings and other improvements . The final allocation of the Acquisition Consideration Allocation as determined herein shall be attached as Exhibit A to the Agreement Regarding Contributed Properties attached hereto as Schedule 9.1.4.

3.2. Composition and Delivery of the Acquisition Consideration . At the Closing, the Acquisition Consideration, less a credit for the Earnest Money, which shall be disbursed by Escrow Agent at Closing to Transferors as a portion of the Acquisition Consideration, shall be provided by Transferee to Transferors as follows:

3.2.1. Transferee shall receive a credit at Closing in an amount equal to the unpaid principal balance of the Assumed Loan and the Defeased Loans as of the date of Closing; and

3.2.2. $500,000.00 of the Acquisition Consideration shall be satisfied by Transferees delivering to the Transferors or Transferors’ designees (the “ Designated Owners ”) at Closing units of limited partnership interest in Education Realty Operating Partnership, L.P. (“ Units ”) having a fair market value equal to $500,000.00 (the “ Total Unit Value ”). Notwithstanding the foregoing, in no event shall Transferee be required to deliver any Units to any Designated Owner who is not an “accredited investor” as such term is defined in Rule 501 of Regulation D promulgated by the SEC under the Securities Act of 1933, as amended, or who has not completed and executed the Accredited Investor Questionnaire (as defined below). On or before October 1, 2005 Transferors shall deliver to Transferee, a written notice (the “ Designation Notice ”), which shall set forth (i) the name of each Designated Owner designated to receive Units, and (ii) the portion of the Total Unit Value allocated to each of such Designated Owner. The number of Units to be issued at Closing to each Designated Owner shall be equal to (i) the portion of the Total Unit Value allocated to such party, divided by (ii) the per share closing price of the common stock (the “ Common Stock ”) of Education Realty Trust, Inc., a Maryland corporation (the “ REIT ”), on the New York Stock Exchange as of the first business day immediately preceding the Closing Date. Each Designated Owner shall also provide to Transferee within five (5) days after Transferor’s delivery to Transferee of the Designation Notice a duly executed accredited investor questionnaire (the “ Accredited Investor Questionnaire ”) in a form provided by Transferee (the form of which to be substantially similar to that provided to other persons to confirm their accredited investor status) and each Designated Owner shall be required to make to Transferees the representations and warranties set forth in Section 8.1.26 herein (which representations and warranties may be included in the Accredited Investor Questionnaire). No fractional Units will be issued as consideration hereunder, but in lieu of issuing fractional Units, the value thereof shall be paid in cash to the respective Transferor. Each Designated Owner acknowledges that any certificates evidencing the Units will bear appropriate legends indicating (1) that the Units have not been registered under the Securities Act of 1933, as amended (“ Securities Act ”); and (2) that the Agreement of Limited Partnership of Transferee (the “ Transferee’s Partnership Agreement ”) restricts the transfer of the Units but such restriction shall not be more restrictive than that which affects other third party Unit holders. Upon receipt of the Units, the Designated Owners shall become limited partners of the Transferee and shall execute the Transferee’s Partnership Agreement.

3.2.3. The balance of the Acquisition Consideration, as adjusted pursuant to the terms of this Agreement, shall be delivered by wire transfer of Federal Reserve System funds to a bank account designated by Transferors for credit not later than 2:00 p.m. Eastern time on the date of Closing.

3.3. Transferors’ and Transferees’ Joint Covenants Regarding Taxation of Cash/Unit Purchase . For all federal, state and local income tax purposes:

3.3.1. Transferee and Transferors agree to treat the Transferors’ contribution of Membership Interests to Transferee in exchange for Units as a nontaxable transaction under Section 721 of the Internal Revenue Code of 1986, as amended (the “ Code ”), and Transferee and Transferors will not take an inconsistent position therewith except to the extent required by a “determination” as that term is defined under Section 1313 of the Code. 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 Membership Interests 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 Code as the contribution of the Membership Interests by the Transferors to Transferee, in exchange for the Units.

3.3.2. Transferee and Transferors agree that the Assumed Loan (together with any fees and/expenses required to be paid to Assumption Lender in connection with Assumption Lender’s consent to the transfer of the Membership Interests) will be reported as a “qualified liability”, as that term is defined under Treasury Regulation Section 1.707-5 and any fees and expenses required to be paid to Assumption Lender in connection with such consent to the extent satisfied by Transferee will be treated as a qualified liability assumed by Transferee and that Transferors’ allocable share of such qualified liability with respect to its Membership Interest will be treated as a qualified liability. Transferee and Transferors agree that they will not take positions inconsistent with the preceding sentence except to the extent required by a “determination” as that term is defined under Section 1313 of the Code.

Notwithstanding the foregoing, the Transferee and Transferors make no representations concerning a proper treatment of such transactions and shall have no liability if the contribution and distribution are not so treated. If such treatment is challenged by any taxing authority on audit or otherwise, then solely with respect to such issue, (i) the Designated Owners shall have the right to participate fully, at their own expense, in all aspects of the defense of such issue, (ii) the Transferee shall not settle any such issue without the prior consent of the Designated Owners, which consent shall not be unreasonably withheld or delayed, (iii) the Transferee shall inform the Designated Owners reasonably promptly in advance, of the date, time and place of all administrative and judicial meetings, conferences, hearings and other proceedings relating to such issue, (iv) the Transferee shall provide to the Designated Owners all correspondence with governmental authorities and other documents relating to such issue promptly upon receipt, or in advance of submission to (as the case may be) the relevant taxing authority or court, and (v) the Transferee shall not file or submit any documents relating to the issue without the prior consent of the Designated Owners which consent shall not be unreasonably withheld or delayed, provided that the Transferee may make such filing or submission if required to comply with any deadline imposed by law or other governmental authority if the Transferee has made commercially reasonably efforts to obtain such prior consent. At any point in the defense of such issue, in its sole discretion, the Transferee may, upon notice to the Designated Owners, elect to have the Designated Owners conduct the defense of the issue, at the Designated Owners’ expense, and retain similar rights with respect to the defense as those granted to the Designated Owners in the immediately preceding sentence, provided that the proviso set forth in clause (ii) of the immediately preceding sentence shall not apply.

4. EARNEST MONEY

4.1. Earnest Money . Within one (1) business day after the Effective Date of this Agreement, Transferee shall deposit with Escrow Agent the sum of FOUR MILLION AND NO/100 DOLLARS ($4,000,000.00) (hereinafter the “ Earnest Money ”). Escrow Agent shall promptly invest the Earnest Money pursuant to the terms of this Agreement, and the interest and income earned thereon shall become a part thereof and shall be disbursed therewith. All interest on the Earnest Money shall be deemed earned by Transferee for income tax purposes. Transferee represents and warrants that its tax identification number is 20-1352332. The Earnest Money shall be held and disbursed by Escrow Agent pursuant to the terms of this Agreement. Whenever the Earnest Money is by the terms hereof to be disbursed by Escrow Agent, Transferors and Transferee agree promptly to execute and deliver such notice or notices as shall be necessary or, in the opinion of Escrow Agent, appropriate to authorize Escrow Agent to make such disbursement.

4.2. Escrow Agent . Escrow Agent is executing this Agreement to acknowledge Escrow Agent’s responsibilities hereunder, which may be modified only by a written amendment signed by all of the parties. Any amendment to this Agreement that is not signed by Escrow Agent shall be effective as to the parties thereto, but shall not be binding on Escrow Agent. Escrow Agent shall accept the Earnest Money with the understanding of the parties that Escrow Agent is not a party to this Agreement except to the extent of its specific responsibilities hereunder, and does not assume or have any liability of the performance or non-performance of Transferee or Transferors hereunder to either of them. Additional provisions with respect to the Escrow Agent are set forth in Article 18.

4.3. Independent Consideration . Simultaneously with the delivery of the Initial Deposit to the Escrow Agent, Transferee shall pay to Transferors One Hundred and No/100 Dollars ($100.00) as independent consideration for Transferors’ performance under this Agreement, which shall be retained by Transferors in all instances, and shall not be applied against the Acquisition Consideration.

5. CLOSING, PRORATIONS, ADJUSTMENTS,

AND CLOSING COSTS

5.1. Closing . Subject to extension in accordance with the terms of this Agreement, the closing of the purchase and sale of the Membership Interests shall occur on the earlier of fifteen (15) days after all Lender Consents have been obtained pursuant to Section 10.16, provided that, in no event will the Closing Date be later than December 30, 2005 , at 10:00 a.m. Eastern time at the offices of Morris, Manning & Martin, LLP, 1600 Atlanta Financial Center, 3343 Peachtree Road, N.E., Atlanta, Georgia 30326, or on such sooner date or at such other time of day as the parties hereto may agree upon in writing.

5.2. Prorations . All matters involving prorations or adjustments to be made in connection with Closing and not specifically provided for in some other provision of this Agreement shall be adjusted in accordance with this Section 5.2. Except as otherwise set forth herein, all items to be prorated pursuant to this Section 5.2 shall be prorated as of midnight of the day immediately preceding the Closing Date. Insofar as the Master Tenant will be responsible for all taxes, insurance, and operating expenses, and entitled to receive all rents under the Leases, from and after the Closing pursuant to the terms of the Master Lease, all prorations of such items shall be between the Transferors and the Master Tenant unless otherwise expressly provided herein, with the Master Tenant to be treated as the owner of the Properties, for purposes of computing prorations of income and operating expenses, on and after the Closing Date.

5.2.1. Taxes . Real estate and personal property taxes and special assessments, if any, payable with respect to the Properties shall be prorated at the Closing and credited against or added to the amount payable, as appropriate. Transferors shall pay all real estate and personal property taxes and special assessments attributable to the Properties to, but not including, the Closing Date. If the real estate and/or personal property tax rate and assessments for any Property have not been set for the year in which the Closing occurs, then the proration of such taxes for such Property shall be based upon the rate and assessments for the preceding tax year and such proration shall be adjusted in cash between Transferors and Master Tenant upon presentation of written evidence that the actual taxes paid for such Property for the year in which the Closing occurs differ from the amounts used at the Closing in accordance with the provisions of Section 5.2.8 hereof. All taxes imposed due to a change of use of any portion of any Property after the Closing Date shall be paid by Master Tenant. If any taxes that have been apportioned shall subsequently be reduced by abatement, the amount of such abatement, less the cost of obtaining the same, shall be equitably apportioned between the Transferors and the Master Tenant.

5.2.2. Insurance . There shall be no proration of Transferors’ insurance premiums or assignment of Transferors’ insurance policies.

5.2.3. Utilities . Transferee and Transferors hereby acknowledge and agree that the amounts of all telephone, electric, sewer, water and other utility bills, trash removal bills, janitorial and maintenance service bills and all other operating expenses relating to the Properties that are obligations of Transferors and that are allocable to the period prior to the Closing Date shall be determined and paid by the Transferors before Closing, if possible, or shall be paid thereafter by Transferors or adjusted between Master Tenant and Transferors as soon as practicable after the same have been determined. Master Tenant shall cause all utility services to be placed in Master Tenant’s name as of the Closing Date.

5.2.4. Rents . Rents payable under the Leases and all other income from the Properties shall be prorated at the Closing. Base rents and other charges payable by Tenants under the Leases (collectively, “ Rents ”) collected by Transferors prior to Closing shall be prorated at the Closing. Subject to the terms of the Assumed Loan with respect to the application of cash flow from the Properties which are subject to the Assumed Loan, during the period after Closing Transferee shall direct the Master Tenant to deliver to Transferors any and all Rents accrued but uncollected as of the Closing Date to the extent subsequently collected by the Master Tenant, net of any collection costs incurred by the Master Tenant; provided, however, Master Tenant shall be entitled to apply Rents received after Closing first to payment of current Rents then due, and thereafter to delinquent Rents. None of the Transferee, the Property Owners, or the Master Tenant shall have any obligation to institute legal proceedings, including an action for unlawful detainer, against any Tenant owing delinquent Rents or to otherwise pursue collection of any delinquent Rents.

5.2.5. Prepaid Items . Any prepaid items, including, without limitation, fees for licenses that are retained by Property Owners at the Closing and annual permit and inspection fees, shall be apportioned between Transferors and Master Tenant at the Closing.

5.2.6. Declaration Assessments . Any assessments and other charges paid by Transferors under any private declarations affecting the Properties shall be prorated between Transferors and Master Tenant at the Closing.

5.2.7. Service Contracts . Charges under any Service Contracts that are assigned to Master Tenant at Closing shall be pro rated on an accrual basis between Transferors and Master Tenant.

5.2.8. Calculations . For purposes of calculating prorations under this Agreement, Transferee and/or Master Tenant shall be deemed to be in ownership of the Properties, and therefore entitled to the income therefrom and responsible for the expenses thereof, for the entire day upon which the Closing occurs. All such prorations shall be made on the basis of the actual number of days of the month that shall have elapsed as of the day of the Closing and based upon the actual number of days in the month and a three hundred sixty five (365) day year. The calculation of such prorations shall be initially performed at Closing but shall be subject to adjustment in cash after the Closing within thirty (30) days after complete and accurate information becomes available, if such information is not available at the Closing. Transferors and Transferee agree to cooperate and to direct Master Tenant to cooperate and use their best efforts to make such adjustments as soon as practical. Upon request of either party, the parties shall provide a detailed and accurate written statement signed by such party certifying as to the payments received by such party from Tenants from and after Closing and as to the manner in which such payments were applied and shall make their books and records available for inspection by the other party during ordinary business hours upon reasonable advance notice.

5.3. Tenant Security Deposits . Transferors shall pay over to Master Tenant at Closing the aggregate of the unapplied Tenant security and other refundable deposits under the Leases held by Transferors in cash at the time of Closing, including all accrued interest thereon to the extent any Tenants may be entitled to receive such amounts in connection with the refund of any such deposit.

5.4. Existing Loans . Interest and any other periodic charges payable under the Assumed Loan and the Defeased Loans shall be prorated as of the Closing Date, with Transferee being responsible for interest accruing thereon on the Closing Date. In addition, Transferee shall pay to Transferors on a dollar for dollar basis an amount equal to any funds held by Assumption Lender in the Debt Service Sub-Account and the Replacement Reserve Sub-Account under the Assumed Loan as of the Closing Date, as well as any rents, reserves, escrows or similar funds held by the Mezzanine Lender, the Mini-Perm Lender, or the Defeasance Lenders and not received directly or indirectly by Transferors in connection with the prepayment of the Mezzanine Loan and the Mini-Perm Loan by Transferors and the defeasance of the Defeased Loans by Transferee, and in consideration thereof, Property Owners shall retain such reserves, escrows and similar funds for the benefit of Transferee and Transferors shall transfer and assign to Transferee all of Transferors’ right, title and interest in and to such reserves, escrows and similar funds. Master Tenant shall be responsible for paying to Transferors an amount equal to all funds held by the Assumption Lender as of the date of Closing in the Operating Expense Sub-Account, the Impositions and Insurance Reserve Sub-Account, and the Prepaid Rent Reserve Sub-Account, as such accounts are defined in the Loan Agreement relating to the Assumed Loan. Transferors shall retain all rights to the Holdback Reserve and the Completion/Repair Reserve under the Assumed Loan Agreement and Transferors shall be solely responsible for getting such funds released by the Assumption Lender. Transferors shall not receive any credit for the Holdback Reserve or the Completion/Repair Reserve in the event such funds are still held by the Assumption Lender on the Closing Date. If the Holdback Reserve or Completion/Repair Reserve are received by Transferee after Closing, such funds shall be paid promptly to Transferors.

5.5. Closing Costs . Transferors shall pay all closing costs and fees, including any prepayment fees or premiums relating to the prepayment of the Mezzanine Loan and the Mini-Perm Loan and all recording fees relating to the termination and cancellation of any security instruments or financing statements relating to such loan. Notwithstanding the foregoing, Transferee shall pay one-half of the termination fee payable to the Mezzanine Lender in the amount of one percent (1%) of the principal balance of the Mezzanine Loan. Transferee and Transferors shall each pay one half of the charges of Escrow Agent in connection with this Agreement. Transferors and Transferee shall share equally all transfer taxes incident to the sale and conveyance of the Membership Interests, if any. Transferee shall pay for the cost of updating the Surveys, as described in Section 7.2, the title insurance premiums for the owner’s policies and for any mortgagee policies or endorsements obtained by Transferee and all costs and fees relating to obtaining the Lender Consents related to the transfer of the Membership Interests and the defeasance of the Defeased Loans, excluding any costs or fees relating to any default by Transferors thereunder at or prior to Closing, which shall be paid by Transferors. Transferee shall pay all costs associated with Transferee’s due diligence. Each party shall be responsible for its own attorney’s fees. All other costs incurred at Closing shall be borne by the parties in accordance with local custom.

5.6. Repair Escrow . At Closing, Transferors shall deposit into an escrow account with Escrow Agent (the “ Repair Escrow ”) an amount equal to one hundred twenty percent (120%) of the estimated cost of completing the Required Repairs, as determined by Transferee in its reasonable discretion, pursuant to an escrow agreement (the “ Repair Escrow Agreement ”) in the form attached hereto as Schedule 5.6 .

5.7. Survival . The agreements of the parties set forth in this Article 5 shall survive the Closing.

6. TRANSFEREE’S RIGHT OF INSPECTION;

INSPECTION PERIOD

6.1. Right to Evaluate . Prior to the Effective Date Transferors have provided to Transferee the opportunity to review the Properties, the Property Owners and all documents and information relating to or evidencing the Membership Interests and Transferee has determined that the Properties, the Property Owners and the Membership Interests are suitable for acquisition by Transferee in Transferee’s sole and absolute discretion. As long as this Agreement continues in effect, Transferors shall give Transferee and Transferee’s agents and representatives access to the Property, and all documents and information however stored relating to the Property Owners, the Properties and the Membership Interests subject to the rights of Tenants, in order to make such inspections, surveys and other tests and surveys thereon as Transferee, in its sole discretion, shall deem advisable. Transferee shall advise Transferors in writing at least 24 hours prior to Transferee entering any Land or Improvement to conduct the inspections and tests described above and shall coordinate any such site inspections with Transferors and the property managers of the Properties to minimize disruption of the operation of the Properties. Transferee shall obtain and maintain, at Transferee’s sole cost and expense, and prior to entering any Land or Improvements shall deliver to Transferors evidence of, the following insurance coverage, and shall cause each of its agents and contractors to obtain and maintain, and, upon request of Transferors, shall deliver to Transferors evidence of, the following insurance coverage: general liability insurance in the amount of One Million and No/100 Dollars ($1,000,000.00) combined single limit for personal injury and property damage per occurrence, such policy to name Transferors as additional insured parties, which insurance shall provide coverage against any claim for personal liability or property damage caused by Transferee or its agents, employees or contractors in connection with such inspections and tests. Notwithstanding the foregoing, Transferee shall not conduct any destructive or invasive testing without the express written consent of Place, which consent shall not be unreasonably withheld or delayed. After making such tests and inspections, Transferee agrees to promptly restore the affected Improvements and surface of any affected Land to its condition prior to such tests and inspections (which obligation shall survive the Closing or any termination of this Agreement). Transferors shall have the right, in their discretion, to accompany Transferee and/or its agents during any inspection (including, but not limited to, tenant interviews or meetings with any Governmental Authority), provided Transferors or their agents do not unreasonably interfere with Transferee’s inspection.

6.2. Inspection Obligations and Indemnity . Transferee and its agents and representatives shall: (a) not unreasonably disturb the Tenants of the Properties or unreasonably interfere with their use of the Properties pursuant to their respective Leases; (b) not unreasonably interfere with the operation and maintenance of the Properties; (c) not damage any part of the Properties or any personal property owned or held by any Tenant; (d) not injure or otherwise cause bodily harm to Transferors, their agents, contractors and employees or any Tenant; (e) promptly pay when due the costs of all tests, investigations and examinations done with regard to the Properties; (f) not permit any liens arising by reason of Transferee’s actions in connection with this Agreement to remain attached to any Property for more than ten (10) days after receipt of written notice thereof; and (g) restore the Improvements and the surface of the Land to the condition in which the same was found before any such inspection or tests were undertaken. Transferee shall, at its sole cost and expense, comply with all applicable federal, state and local laws, statutes, rules, regulations, ordinances or policies in conducting its inspection of the Properties. Transferee shall and does hereby agree to indemnify, defend and hold the Transferors harmless from and against any and all claims, demands, suits, obligations, payments, damages, losses, penalties, liabilities, costs and expenses (including but not limited to attorneys’ fees) arising out of Transferee’s or Transferee’s agents’ actions taken in, on or about the Properties in the exercise of the inspection right granted pursuant to Section 6.1. This Section 6.2 shall survive the Closing and/or any termination of this Agreement.

6.3. Transferor Deliveries . On or prior to the date hereof Transferors have delivered to Transferee all of the items specified on Exhibit C attached hereto (the “ Documents ”). In addition, during the term of this Agreement Transferors shall make available to Transferee either at the Properties or at Transferors’ principal offices in Atlanta, Georgia such other documents or information regarding the ownership, construction, or operation of the Properties which are in the possession of Transferors or their agents as Transferee shall reasonably request. Transferee acknowledges that any and all of the Documents and other due diligence materials provided by Transferors to Transferee pursuant hereto that are not otherwise known by or available to the public are proprietary and confidential in nature and will be delivered to Transferee solely to assist Transferee in determining the feasibility of purchasing the Properties. Transferee agrees not to disclose such non-public Documents or other due diligence materials, or any of the provisions, terms or conditions thereof, to any party outside of Transferee’s organization other than its agents, attorneys, underwriters, consultants, representatives, lenders and financial partners and their agents, attorneys, consultants and representatives. Transferee shall return all of the Documents and other due diligence materials provided by Transferors to Transferee on or before three (3) business days after the first to occur of (a) such time as Transferee notifies Transferors in writing that it shall not acquire the Properties, or (b) such time as this Agreement is terminated for any reason. This Section 6.3 shall survive any termination of this Agreement.

6.4. Copies of Reports . As additional consideration for the transaction contemplated herein, Transferee agrees that it will provide to Transferors, within five (5) days following a written request therefor, copies of any and all third (3 ^rd ) party reports (whether in draft or final form), tests or studies relating to the Properties obtained by Transferee and in Transferee’s possession or control. Notwithstanding any provision of this Agreement, no termination of this Agreement shall terminate Transferee’s obligations pursuant to the foregoing sentence, provided that such obligations shall expire on the first anniversary of the date of any such termination of this Agreement.

7. TITLE AND SURVEY MATTERS

7.1 Title . Prior to the date hereof, Transferee has obtained (i) a current title insurance commitment issued by or on behalf of the Title Company with respect to each Property (the “ Title Commitments ”), (ii) copies of all recorded instruments designated in the Title Commitments as exceptions or exclusions from coverage, and (iii) UCC searches and similar records searches for the Property Owners. In addition, prior to the date hereof Transferee has obtained updated ALTA Surveys of Cape Place, Carrollton Place, Jacksonville Place, Macon Place, Martin Place, Murray Place, River Place, Statesboro Place, and Troy Place by surveyors licensed in the states in which each such Property is located (the “ Received Surveys ”). Attached hereto as Schedule 7.1 are Transferee’s objections and requirements (“ Title Objections ”) with respect to the matters disclosed by the Title Commitments, the Received Surveys, and the UCC Searches. Transferee and Transferors hereby agree that (i) all non-delinquent property taxes and assessments, (ii) the rights of the Tenants under the Leases, as tenants only, (iii) all matters created by or on behalf of Transferee, including, without limitation, any documents or instruments to be recorded as part of any financing for the acquisition of the Membership Interests by Transferee, (iv) any documents evidencing or securing the Assumed Loan and the Defeased Loan, and (v) all matters shown on the Received Surveys and all exceptions listed in Schedule B, Section II of the Title Commitments other than the so called “standard” exceptions, general survey exceptions, and matters listed on Schedule 7.1 hereto shall constitute “ Permitted Exceptions ” hereunder. Notwithstanding the foregoing, Transferee may have the Title Commitments and UCC and other records searches updated from time to time up to and through the Closing Date and may give Transferors notice of any additional Title Objections disclosed thereby which were not listed in the original Title Commitments and UCC and other records searches or any previous update obtained by Transferee and which are not acceptable to Transferee.

7.2 Surveys . Prior to the date hereof, Transferee has ordered current ALTA/ACSM surveys of Clayton Place, Western Place, and Berkeley Place by surveyors licensed in the states in which such Properties are located (the “ Pending Surveys ”). Within five (5) Business Days after receipt of each such Pending Survey, Transferee shall provide Transferors with copies thereof and give Transferors written notice of any matters which are disclosed thereby which are unacceptable to Transferee. Thereafter, Transferee’s objections to the matters disclosed by the Pending Surveys shall be treated as Title Objections pursuant to Section 7.1 above. Any matter shown on the Pending Surveys not disapproved by Transferee in writing within said time period shall be deemed approved by Transferee and shall constitute a “Permitted Exception” hereunder.

7.3 Resolution of Title Objections . Within five (5) Business Days after receipt from Transferee of a written notice of any Title Objection arising after the date hereof, Transferors shall notify Transferee in writing as to whether or not Transferors will cure such Title Objection, and if Transferors elect to cure any such Title Objection, Transferors shall satisfy or correct, at Transferors’ expense, such Title Objection on or before the date of Closing. Failure of Transferors to give such notice within such five (5) day period shall be deemed to be an election not to cure such Title Objection. In the event Transferors do not elect to satisfy or cure any such Title Objection of which they are notified, then within five (5) days after receipt of written notice of Transferors’ election, or within five (5) days after the expiration of Transferors’ five (5) day notification period if Transferors fail to give any such notice, Transferee shall by written notice to Transferors elect one of the following:

7.3.1. To waive such Title Objection and to proceed with the purchase and sale of the Membership Interests in accordance with the terms of this Agreement, in which event the title exception which is the subject of such Title Objection shall become part of the Permitted Exceptions; or

7.3.2. To cancel this Agreement and to receive a complete refund of all Earnest Money, in which event neither Transferors nor Transferee shall have any further rights, duties or obligations under this Agreement, except for Obligations Surviving Termination.

The failure of Transferee to give notice of its election as to the foregoing alternatives within the applicable five (5) day period shall be deemed an election to proceed with the Closing in accordance with subparagraph 7.3.1 above.

7.4 Transferors’ Obligations Regarding Title Objections . Except as expressly agreed by Transferors pursuant to Section 7.3 above or pursuant to this Section 7.4, Transferors shall not be required and are not obligated to bring any action or proceedings, convey or acquire any interest in real property, or incur any expense to render title to the Land and Improvements free and clear of any Title Objections, and Transferee shall have no right of specific performance against Transferors to cause any Title Objections to be removed. Notwithstanding the foregoing, Transferors covenant and agree that at or prior to Closing, Transferors shall (i) pay in full and cause to be canceled and discharged or otherwise cause the Title Company to insure over all mechanics’ and contractors’ liens which are listed in Schedule 7.1 and any other mechanics’ and contractors’ liens which encumber any Property as of the date of Closing and which have been placed on such Property by a contractor of a Transferor, (ii) pay in full all past due ad valorem taxes and assessments of any kind then due constituting a lien against any Property, (iii) pay in full and discharge to Transferee’s satisfaction all liens and encumbrances upon the Membership Interests, (iv) pay in full the Mezzanine Loan, the Mini-Perm Loan and any other indebtedness or other monetary encumbrance relating to any Property other than any claims, liens or encumbrances arising through Transferees and other than the Assumed Loan and the Defeased Loans, and cause to be released and/or satisfied all documents and instruments relating to such items which encumber any Property (including, without limitation, the documents relating thereto which are listed in Schedule 7.1 hereto), (v) cause to be terminated and released all other miscellaneous mortgages, assignments of leases, UCC Financing Statements, and other security documents listed in Schedule 7.1 , as well as the instruments referenced in Section 11(k) and 13(a) of Schedule 7.1 , (vi) provide the documents, affidavits, and other items described in Sections 7, 8, 9(a), 9(b), and 11(j) of Schedule 7.1 , (vii) use commercially reasonable efforts to obtain the estoppels described in Sections 11(g), 11(i), 12(b), and 12(c) of Schedule 7.1 , (viii) use its best efforts to provide the documents described in Sections 5(a), 9(c), 9(d), 11(h), 11(l), and 12(a) of Schedule 7.1 , and (ix) provide to the Title Company the title affidavits and other instruments described in Section 12.1.7, including an affidavit and indemnity in the form attached hereto as Schedule 7.4 (the “ Non-Imputation Indemnity ”). Notwithstanding the foregoing, in the event any Title Objection relates to a matter willfully caused by Transferors from and after the effective date of the Title Commitments without the consent of Transferee, Transferors must take affirmative action to cure such title defect and encumbrances and the failure of Transferors to do so shall constitute a breach of this Agreement.

8. REPRESENTATIONS AND WARRANTIES

OF TRANSFERORS

8.1. Transferors’ Representations . Transferors, jointly and severally, represent and warrant that the following matters are true and correct as of the Effective Date:

8.1.1. Authority . Mezz is a limited liability company and Place is a limited partnership, each duly organized, validly existing and in good standing under the laws of its state of formation. This Agreement has been duly authorized, executed and delivered by each Transferor, is the legal, valid and binding obligation of each Transferor enforceable in accordance with its terms, and does not violate any provision of any agreement or judicial order to which any Transferor or Property Owner is a party or to which Transferor or any Property Owner is subject. All documents to be executed by Transferors which are to be delivered at Closing, will (i) be duly authorized, executed and delivered by Transferors, (ii) be legal, valid and binding obligations of Transferors enforceable in accordance with their respective terms, and (iii) not violate any provision of any agreement or judicial order to which any Transferor is a party or to which any Transferor is subject.

8.1.2. Foreign Person . Transferors are not foreign persons within the meaning of Section 1445(f) of the Internal Revenue Code, and Transferors agree to execute (and to cause the Property Transferors to execute) any and all documents necessary or required by the Internal Revenue Service or Transferee in connection with such declaration(s).

8.1.3. No Default . The execution and delivery of this Agreement, and consummation of the transactions described in this Agreement, will not (subject to obtaining the Lender Consents) constitute a default under any contract, lease, or agreement to which any Transferor or Property Owner is a party and relating to the Properties, the Property Owners or the Membership Interests.

8.1.4. Litigation . Except as referenced in Schedule 8.1.4 hereto, there is no action, suit or proceeding pending or, to Transferors’ knowledge, threatened against Transferors, the Property Owners, any General Partner, or any Property (excluding immaterial tenant disputes in the ordinary course of business) in any court or before or by any federal, state, or municipal department, commission, board, bureau or agency or other governmental instrumentality. To the best of Transferors’ knowledge, no such litigation would materially and adversely affect Transferors’ ability to perform its obligations under this Agreement or the documents to be executed in connection herewith, title to any Property, the value or operation of any Property, Property Owners or the Membership Interests.

8.1.5. Environmental Conditions . Except for the conditions identified or referenced in the documents listed on Schedule 8.1.5 hereof, Transferors have no actual knowledge of the release of any Hazardous Substances onto the Properties in violation of applicable Environmental Laws. Subject to the foregoing, Transferors represent, to the actual knowledge of Transferors, that neither Transferors nor any Property Owner has received any summons, citation, directive, letter or other written communication from any Governmental Authority indicating that a Hazardous Substances or Waste release at any Property has occurred or that any Property fails to comply with any applicable Environmental Law.

8.1.6. Validity of Transaction . No approval, consent, order or authorization of, or designation, registration or filing (other than for recording purposes) with any Governmental Authority or other third party is required in connection with the consummation by Transferors of the transactions herein described, other than the Lender Consents.

8.1.7. No Taking . There are no pending or, to Transferors’ actual knowledge, threatened condemnation, expropriation, eminent domain or similar proceedings against any Property or any portion thereof. Neither the Transferors nor the Property Owners have received written notice that any such proceeding is contemplated.

8.1.8. Employees . None of the Property Owners or any General Partner has any employees.

8.1.9. Rent Rolls; Leases . All information set forth in the rent rolls provided by Transferors pursuant to Section 6.3 (the “ Rent Rolls ”) is accurate in all material respects as of the effective date thereof; (ii) there are no Leases in force for the Properties other than as identified in such Rent Rolls; (iii) the copies of the Leases made available to Transferee pursuant to Section 6.3 are complete and accurate copies of all of the Leases, and there are no material written or oral promises, understandings or commitments between any Transferors or any Property Owner and any Tenant other than as set forth in such copies; (iv) except as otherwise disclosed in the aged receivables report provided by Transferors to Transferee pursuant to Section 6.3 hereof or in Schedule 8.1.9 hereof, no material monetary default and no material non-monetary default or breach exists on the part of any Tenant.

8.1.10. Service Contracts . Schedule 8.1.10 sets forth a list of the material maintenance and service agreements relating to the maintenance and operation of the Properties (collectively, the “ Service Contracts ”), and the copies of such Service Contracts delivered or to be delivered or made available to Transferee pursuant to Section 6.3 are complete and accurate copies of such Service Contracts. The list of Service Contracts may not be complete. Transferors reserve the right to supplement such list at any time prior to Closing by delivery of written notice to Transferee together with copies of any additional agreements. To Transferors’ knowledge, all such Service Contracts are in full force and effect, and Transferors have no actual knowledge of, and have received no notice of, any material default or claim of default on the part of any party to such Service Contracts. All such Service Contracts shall be assigned to Master Tenant by the applicable Property Owner, and assumed by Master Tenant, at Closing.

8.1.11. Notices from Governmental Authorities . No Transferor or Property Owner has received from any Governmental Authority written notice of any material violation of any zoning, building, subdivision, fire and safety or business laws, rules or regulations applicable to any Property that has not been corrected.

8.1.12. Notices from Third Parties . No Transferor or Property Owner has received any written notice or claim of any violations of any covenants, restrictions, easements, or other agreements benefiting, burdening, or otherwise affecting the Properties from any third party that have not been corrected.

8.1.13. Existing Loans . Attached hereto as Schedule 8.1.13 is a description of all of the Existing Loans, including the holders of such loans, the outstanding principal balances of such loans (as of July 31, 2005), applicable interest rates and payment terms, the maturity dates, balances of required reserves for repairs, impositions or other items (as of July 31, 2005), and a list of all documents evidencing and securing such loans. The information contained in such Schedule 8.1.13 is accurate and complete in all material respects, and the copies of the documents relating to the Existing Loans delivered to Transferee pursuant to Section 6.3 are complete and accurate copies of all such documents evidencing and securing such Existing Loans including without limitation all amendments and modifications thereto. No Transferor or Property Owner has received any written notice of any default or breach under such Existing Loans, and to the best of Transferors’ knowledge there are no existing or uncured defaults or breaches under such Existing Loans and any required repairs under such Existing Loans have been completed. Any required reserves under the Existing Loans have been fully funded by the Property Owners.

8.1.14. Assumed Loan . With reference to the Properties that are subject to the Assumed Loan:

(i)

All “Immediate Repairs” referred to in Section 6.7 of the Loan and Security Agreement between Transferors and Assumption Lender (the “ Assumed Loan Agreement ”) have been fully completed, all costs in connection therewith have been fully paid, and all funds in the Completion/Repair Reserve under the Assumed Loan Agreement previously have been disbursed to the Property Owners except for $661,729.47 (as of July 31, 2005);

 

(ii)

All “Remaining Work” with respect to Phase II of the Clayton Place Property, as referred to in Section 6.9 of the Assumed Loan Agreement, has been fully completed, all costs in connection therewith have been fully paid, all permanent certificates of occupancy for such Property have been issued, and Transferors shall use their good faith efforts to obtain a release of all funds in the Holdback Reserve under the Assumed Loan Agreement prior to the Closing Date;

 

(iii)

No “Cash Trap Condition,” as defined in the Assumed Loan Agreement, exists with respect to the Properties which are subject to the Assumed Loan; and

 

(iv)

Transferors have provided to Transferee true and accurate copies of the 2005 Operating Budget and Capital Expenditure Budget for the Properties that are subject to the Assumed Loan, as approved by the Assumption Lender. The operations of the Properties subject to the Assumed Loan, including capital expenditures made with respect to such Properties, have been consistent with such approved budgets year-to-date through the Effective Date of this Agreement.

 

(v)

The Assumed Loan is a “qualified liability” within the meaning of Section 1.707-5(a)(6) of the Treasury Regulations.

8.1.15. No Other Contracts . None of the Transferors or the Property Owners have entered into any contracts for the sale of any or all of the Properties or the Membership Interests, and there are no rights of first refusal or options to purchase any of the Properties or any of the Membership Interests.

8.1.16. No Assessments . To the best of Transferors’ knowledge, no assessments have been made against any Property that are unpaid or shall not be paid in full at or prior to the Closing (except those ad valorem taxes, if any, for the then current year which are not yet due and payable), whether or not they have become liens; and Transferors have no actual knowledge of any assessments against any Property for public improvements not yet in place.

8.1.17. No Attachments . There are no attachments, executions or assignments for the benefit of creditors or voluntary proceedings in bankruptcy or under any other debtor relief laws pending or, to Transferors’ actual knowledge, threatened by or against Transferors or any Property Owner or, to Transferors’ actual knowledge, otherwise affecting any Property.

8.1.18. Permits . To Transferors’ actual knowledge, all material licenses, certificates of occupancy and other permits for the ownership, development and operation of the Improvements have been obtained, and are in full force and effect, where the failure to have such license, permit or certificate would have a material adverse effect on the Improvements.

8.1.19. Patriot Act Compliance . Transferors and all Property Owners are in compliance with the requirements of Executive Order No. 133224, 66 Fed. Regarding. 49079 (Sept. 25, 2001) (the “ Order” ) and other similar requirements contained in the rules and regulations of the Office of Foreign Assets Control, Department of the Treasury (“ OFAC ”) and in any enabling legislation or other Executive Orders or regulations in respect thereof (the Order and such other rules, regulations, legislation, or orders are collectively called the “ Orders” ).

8.1.20. Prohibited Dealings . None of the Transferors, any General Partner, the Property Owners, or any beneficial owner of Transferors or Property Owners, or, to Transferor’s actual knowledge, any Person who provides loans to any Transferor or Property Owner:

(i)

is listed on the Specially Designated Nationals and Blocked Persons List maintained by OFAC pursuant to the Order and/or on any other list of terrorists or terrorist organizations maintained pursuant to any of the rules and regulations of OFAC or pursuant to any other applicable Orders (such lists are collectively referred to as the “ Lists” );

 

(ii)

is a Person who has been determined by competent authority to be a Person with whom a U.S. Person is prohibited from transacting business, whether such prohibition arises under U.S. law, regulation, executive orders or any lists published by the United States Department of Commerce, the United States Department of Treasury or the United States Department of State including any agency or office thereof;

 

(iii)

is owned or controlled by, or acts for or on behalf of, any Person on the Lists or any other Person who has been determined by competent authority to be a Person with whom a U.S. Person is prohibited from transacting business, whether such prohibition arises under U.S. law, regulation, executive orders or any lists published by the United States Department of Commerce, the United States Department of Treasury or the United States Department of State including any agency or office thereof; or

 

(iv)

is under investigation by any governmental authority for, or has been charged with, or convicted of, money laundering, drug trafficking, terrorist-related activities, any crimes which in the United States would be predicate crimes to money laundering, or any violation of any Anti-Money Laundering Laws.

For purposes of this Section and Section 9.1.3, “ U.S. Person ” means any United States citizen, any entity organized under the laws of the United States or its constituent states or territories, or any entity, regardless of where organized, with a principal place of business within the United States or any of its territories. For purposes of this Section and Section 9.1.3, “ Anti-Money Laundering Laws ” means those laws, rules, regulations, orders and sanctions, state and federal, criminal and civil, that (i) limit the use of and/or seek the forfeiture of proceeds from illegal transactions; (ii) limit commercial transactions with designated countries or individuals believed to be terrorists, narcotic dealers or otherwise engaged in activities contrary to the interests of the United States; or (iii) are designed to disrupt the flow of funds to terrorist organizations. Such laws, regulations and sanctions are deemed to include the Executive Order Number 13224 on Terrorism Financing (September 23, 2001), the Patriot Act; the Currency and Foreign Transactions Reporting Act (also known as the Bank Secrecy Act, 31), the Trading with the Enemy Act, 50 U.S.C. Appx. Section 1 et seq ., the International Emergency Economics Powers Act, 50 U.S.C. Section 1701 et seq., and the sanction regulations promulgated pursuant thereto by OFAC, as well as laws relating to prevention and detection of money laundering in 18 U.S.C. Sections 1956 and 1957, as amended.

8.1.21. Personal Property . The list of Tangible Personal Property set forth in Schedule 2.3 is true and correct in all material respects (to the extent such Schedule is found to be incomplete or missing any items of Tangible Personal Property, Transferors shall be permitted to supplement such Schedule by notice to Transferee). The Tangible Personal Property is adequate for the operation of the Properties in the ordinary course of business for their intended purposes as student housing apartment complexes. All material intellectual property that is included within the Intangible Personal Property is either owned by Property Owners or licensed to Property Owners under licenses that are in good standing and uncontested, and Transferors have not received any notice of infringement from others with respect to any such intellectual property. Except for the Existing Loans, the Tangible Personal Property and Intangible Personal Property are free and clear of all liens.

8.1.22. Environmental Reports . The environmental reports delivered pursuant to Section 6.3 constitute all of the environmental reports obtained by Transferors or Property Owners with respect to the respective Properties within the last 6 years with respect to Western Place and within the last eighteen months with respect to all other Properties. (Transferee acknowledges the Properties have been owned for a substantial period of time and Transferors or their affiliates may have obtained other environmental reports that Transferors are unable to locate or produce).

8.1.23. Zoning . There is no pending or, to Transferors’ actual knowledge, threatened change in zoning affecting any Property. Except as disclosed in writing to Transferee, no portion of any Property is a designated historic property or located within a designated historic area.

8.1.24. Redecoration Fees . There are no so-called “redecorating fees” collected from Tenants of the Properties.

8.1.25. Representations Regarding Property Owners . Each Property Owner is a single purpose entity whose sole purpose is to own, hold, sell, assign, transfer, operate, lease, mortgage, pledge and otherwise deal with the student housing project located on its respective Property (or Properties), and no Property Owner has any other assets or engages in any other business. Without limiting the foregoing, no Property Owner holds any management contracts or development contracts. Each Property Owner is duly organized, validly existing and in good standing under the laws of its state of formation. Once and if formed, the General Partners will be single purpose entities whose sole purpose is to own, hold, sell, assign or transfer all of the general partnership interests in the converted Berkeley Place, LLC and/or Clemson Place (DE), LLC.

8.1.26. Accredited Investor Representations . Each Designated Owner electing to receive Units hereunder:

(i)

is knowledgeable, sophisticated and experienced in business and financial matters; each Designated Owner 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 Contract. Each Designated Owner is able to bear the economic risk of holding the Units and the Common Stock issuable upon redemption of the Units (the “ Underlying Common Stock ”) for an indefinite period and is able to afford the complete loss of his, her or its investment in the Units and the Underlying Common Stock; each Designated Owner has received and reviewed all information and documents about or pertaining to the REIT, the Transferee, the business and prospects of the REIT and the Transferee and the issuance of the Units as each Designated Owner 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 Transferee, the Properties, the business and prospects of the REIT, and the Transferee, the Units and the Underlying Common Stock that such Designated Owner deems necessary or desirable to evaluate the merits and risks related to its investment in the Units and the Underlying Common Stock; and each Designated Owner understands and has taken cognizance of all risk factors related to the purchase of the Units and the Underlying Common Stock. Each Designated Owner is a sophisticated real estate investor. In acquiring the Units and engaging in this transaction, no Designated Owner is relying upon any representations made to it by the Transferee or any of the officers, employees, or agents of the Transferee not contained herein. Each Designated Owner is relying upon its own independent analysis and assessment (including with respect to taxes), and the advice of such Designated Owner’s advisors (including tax advisors), and not upon that of the Transferee or any of the Transferee’s advisors or affiliates, for purposes of evaluating, entering into, and consummating the transactions contemplated by this Agreement. Each Designated Owner represents and warrants that it has reviewed and approved the form of the Transferee’s Partnership Agreement attached hereto as Schedule 8.1.26 ;

 

(ii)

understands that neither the Units nor the Underlying Common Stock 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 Designated Owner (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 Designated Owner 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 Designated Owner may distribute the Units to those of its members or successors that (1) have represented and warranted to the Transferee 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 Transferee’s Partnership Agreement as limited partners. Each Designated Owner understands that any certificates evidencing the Units and the Underlying Common Stock 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 Transferee’s Partnership Agreement will restrict transfer of the Units;

 

(iii)

is an “accredited investor” as that term is defined in Rule 501 of Regulation D under the Securities Act of 1933, as amended. Each Designated Owner will provide the Transferee with a duly executed Accredited Investor Questionnaire; and

 

(iv)

understands that each Unit shall be redeemable at the option of the holder, in accordance with, but subject to the restrictions contained in, the Transferee’s Partnership Agreement; provided, however, that such redemption option may not be exercised prior to the first anniversary of the Closing Date.

8.1.27. Financial Controls . Each of the Transferors and Property Owners maintains complete and accurate books and records reflecting its assets and liabilities and maintains proper and adequate internal accounting controls, which provide assurance that (i) transactions are executed with management’s authorization; (ii) transactions are recorded as necessary to permit preparation of the consolidated financial statements of the Transferor or Property Owner and to maintain accountability for the Transferor’s or Property Owner’s consolidated assets; (iii) access to such Transferor’s or Property Owner’s assets is permitted only in accordance with management’s authorization; (iv) the reporting of such Transferor’s or Property Owner’s assets is compared with existing assets at regular intervals; and (v) accounts, notes and other receivables and inventory are recorded accurately, and proper and adequate procedures are implemented to effect the collection thereof on a current and timely basis.

8.1.28. Sarbarnes-Oxley Compliance . Each of the Transferors and Property Owners, its directors and its senior financial officers have consulted with such Transferor’s or Property Owner’s independent auditors and with such Transferor’s or Property Owner’s outside counsel with respect to, and is familiar in all material respects with all of the requirements of the Sarbanes-Oxley Act of 2002 (“ SOX ”) that are applicable to Transferors or Property Owners. Each of the Transferors and Property Owners is in compliance with the provisions of SOX to the extent applicable to it as of the date hereof.

8.1.29. Subsidiaries of Property Owners . The sole asset of each Property Owner is its respective Property (or Properties, if more than one), and none of the Property Owners (i) own, either directly or indirectly, any capital stock or other equity or membership interest in any other subsidiary, person or business, (ii) have any liabilities or obligations with respect to any former subsidiary, and (iii) participate in any partnership or joint venture or own any stock of any other corporation, limited liability company or other entity.

8.1.30. Member . Place is the sole member of Western and the owner of all the Western Membership Interests. Mezz is the sole member of all the Property Owners (other than Western) and the owner of all the Mezz Membership Interests. The Membership Interests have not been previously assigned, pledged, or otherwise encumbered (in whole or in part) other than in connection with the Mezzanine Loan. The Membership Interests have been duly authorized, validly issued, are fully paid and non-assessable, were issued in compliance with all applicable federal and state laws regulating the issuance and sale of securities and were not issued in violation of preemptive or other rights of any Person to acquire securities of the Property Owners or the General Partners. Transferors own the Membership Interests free and clear of any and all liens, mortgages, adverse claims, charges, security interests, encumbrances or other restrictions or limitations whatsoever (except for the pledge of the Membership Interests to secure the Mezzanine Loan and limitations imposed under the constituent documents of the Property Owners or General Partners and U.S. federal or applicable state securities laws).

8.1.31. Options, Rights and Agreements . Except as provided in this Agreement, neither the Property Owners nor the Transferors have reserved any membership interests for any purpose, nor are any Transferors or Property Owners obligated or committed to issue, sell, or transfer any membership interests or other ownership interest of any Transferor or Property Owner or any securities or obligations convertible into or exchangeable for, or give any Person any right to subscribe for or acquire from Transferors or the Property Owners any membership interests or other ownership interest of any Transferor or Property Owner; and no options, warrants, rights or other securities or obligations evidencing any such rights are outstanding; and neither any Transferor nor any Property Owner has any outstanding agreement, undertaking, commitment or obligation to repurchase, reacquire or redeem any outstanding Membership Interests.

8.1.32. Operating Agreements and Articles of Organizations . A true, correct and complete copy of the operating agreement, limited liability company agreement, bylaws or other operational document of the each of Property Owners and all amendments thereto (collectively, “ PT Operating Agreements ”) is attached hereto as Schedule 8.1.32(a) , and a true, correct and complete copy of the articles of organization, certificate of formation, charter or such other similar organizational document for each the Property Owners, including all amendments thereto (collectively, “ PT Articles of Organization ”) is attached hereto as Schedule 8.1.32(b) . Following the receipt of the Lender Consents, neither the execution and delivery of this Agreement nor the effectuation of any of the transactions contemplated hereby will violate or conflict with any of the terms, conditions or provisions of the PT Articles of Organization or the PT Operating Agreements, or result in the creation of any lien, charge or other encumbrance on the Membership Interests.

8.1.33. Taxes . Each of the Property Owners is and has at all times been a disregarded entity for purposes of federal and state income and other taxation since it was organized. Each of the Property Owners has filed or caused to be filed in a timely manner (within any applicable extension periods) and in the appropriate jurisdictions all returns, reports and forms (“ Returns ”) required to be filed with any government, court, administrative agency or commission or other governmental agency, authority or instrumentality, domestic or foreign, of competent authority (each a “ Tax Governmental Authority ”) responsible for the imposition of a Tax and such Returns are and will be true, correct and complete in all material respects. All Taxes due from and payable by, or due in connection with and payable with respect to, the Transferors or Property Owners on or prior to the Closing Date have been or will be fully paid on a timely basis. No liens have been filed and no claims are being asserted by or against any Transferor, any Property Owner or any entity that is deemed to own the assets of a Transferor or Property Owner with respect to any Taxes. The Transferors and Property Owners have complied and will comply with all applicable Legal Requirements relating to the payment and withholding of Taxes (including withholding and reporting requirements under Sections 1441 through 1464, 3401 through 3406, and 6041 and 6049 of the Code and similar provisions under any other applicable Legal Requirements) and, within the time and in the manner prescribed by law, have withheld from wages, fees and other payments and paid over to the proper governmental or regulatory authorities all amounts required. No Transferor or Property Owner has received a notice of assessment or proposed assessment of any Taxes claimed to be owed by them or any other Person on their behalf. To the knowledge of the Transferors, no Return filed by or on behalf of any Transferors or Property Owner with respect to Taxes are currently being audited or examined. The Transferors have no notice of any such audit or examination. No Property Owner is a party to any Tax-sharing or Tax indemnity agreement or any other agreement of a similar nature that remains in effect. No Transferor or Property Owner has consented to any waiver of the statute of limitations for the assessment of any Taxes and have not requested any extension of time for the payment of any Taxes. For purposes of this section, “ Tax ” or “ Taxes ” shall mean all (i) federal, state, local and foreign taxes, assessments and other governmental charges, including, without limitation, (a) taxes based upon or measured by gross receipts, income, profits, sales, use or occupation, and (b) value added, ad valorem, transfer, franchise, withholding, payroll, employment, excise, or property taxes, together with (ii) (a) all interest, penalties and additions imposed with respect to such amounts and (b) any obligations under any agreements or arrangements with any other Person with respect to such amounts. For purposes of this section, “ Legal Requirements ” shall mean any constitution, act, statute, law, ordinance, treaty, rule, regulation or official interpretation of, or judgment, injunction, order, decision, decree, license, permit or authorization issued by, any Tax Governmental Authority.

8.1.34. Employee Benefit Plans . The Property Owners do not have, and have never had, any employees. The Property Owners do not maintain or contribute to, and have not maintained or contributed to, an employee pension benefit plan subject to the provisions of Title IV of ERISA. The Property Owners do not and have not had an obligation to contribute to any multiemployer plan (within the meaning of Section 3(37) of ERISA).

8.1.35. Litigation and Claims . There are no pending or threatened actions, lawsuits, arbitrations, attachments, executions, assignments for the benefit of creditors, regulatory proceedings or other litigation against or affecting the Membership Interests.

8.1.36. Contracts and Commitments . Other than the Service Contracts (including any additional Service Contracts supplementing Schedule 8.1.10 pursuant to Section 8.1.10), the WebRoomz Licenses, the existing management agreements for the Properties, the Prepaid Loans (which will be satisfied at Closing as provided in this Agreement), the Assumed Loan, the Defeasance Loans, the Leases and the other Permitted Exceptions, none of the Property Owners has (i) any contract for employment, or a non-competition agreement with any present or former employee of the Property Owners; (ii) any contract with any labor union or other representative of employees; (iii) any contract for the lease or use of equipment; (iv) any contract for the purchase, sale, production or supply of goods or services; (v) any distributor, sales agency contract or any franchise or license agreement; (vi) any note, debenture, bond, equipment, trust agreement, letter of credit agreement, loan agreement, or other contract for borrowing or lending of money, or agreement or arrangement for a line of credit or guaranty, pledge, or undertaking of the indebtedness of any person; (vii) any contract under the terms of which any Property Owner is, directly or indirectly, liable upon or with respect thereto or is obligated in any other way to provide funds with respect of, or to guaranty or assume, any debt or obligation of any other person or entity, except endorsements made in the ordinary course of business in connection with the deposit of items for collection; (viii) any other contract or agreement of a material nature relating to the ownership or operation of the Properties. No Property Owner’s payroll, property, or receipts, or other factors used in a particular state’s apportionment or allocation formula results in an apportionment or allocation of business income to any state other than the state in which the Land that comprises such Property Owner’s Property (as set forth in Exhibit A attached hereto) is located, and none of the Property Owners has any non business income that is allocated or apportioned to any state other than the state in which the Land that comprises such Property Owner’s Property (as set forth in Exhibit A attached hereto) is located.

8.1.37. Solvency . Each of the Transferors and the Property Owners is solvent and will be solvent following the closing of the transactions contemplated by this Agreement.

8.1.38. Absence of Undisclosed Liabilities . Other than (A) the obligations of the Property Owners with respect to the Service Contracts, the WebRoomz Licenses and the existing management agreements for the Properties, (B) the obligations of the Property Owners under the Defeased Loans, (C) the obligations of the Property Owners under or with respect to the Prepaid Loans, which Prepaid Loans will be satisfied at or prior to Closing as provided in this Agreement, (D) the obligations of the Property Owners under or with respect to the Assumed Loan, (E) the obligations of the Property Owners with respect to ad valorem property taxes relating to the Land and Personal Property due for the current year only, (F) the obligations of the Property Owners under the Leases, which will be fulfilled as provided in this Agreement, (G) the obligations under the other Permitted Exceptions relating to the sharing of costs thereunder, and (H) customary unsecured trade debt, which shall be paid in the ordinary course of business, the Property Owners have no liabilities whatsoever, whether deemed, contingent or otherwise.

If any Property Owner is converted to a limited partnership pursuant to Section 11.2.7 hereof, then the General Partner of such converted Property Owner shall, for purposes of this Section 8.1, be deemed to be a “Property Owner” except that any representation or warranty to such General Partner as a “Property Owner” shall be made as of the Closing Date (and not the Effective Date).

8.2. Survival . Subject to Section 8.3 hereof, the continued accuracy in all respects of the aforesaid representations and warranties shall be a condition precedent to Transferee’s obligation to close. The express representations and warranties made in this Agreement shall not merge into any instrument or conveyance delivered at the Closing and shall survive the Closing; provided , however , that any action, suit or proceeding with respect to the truth, accuracy or completeness of any represe