tax protection agreement

 

 

THIS TAX PROTECTION AGREEMENT (this “Agreement”) is made as of the 30th day of
January, 2015 by and between Roberts Realty Investors, Inc., a Georgia
corporation (the “Company”), and Roberts Properties Residential, L.P, a Georgia
limited partnership (the “Operating Partnership,” and, together with the
Company, the “Seller Parties”), A-III Investment Partners LLC, a Delaware
limited liability company (the “Purchaser”) and A-III Manager LLC, a Delaware
limited liability company (the “Manager” and, together with the Purchaser, the
“Purchaser Parties” and, together with the Purchaser and the Seller Parties, the
“Parties” and each a “Party”), for the benefit of the Eligible Investors (as
defined in this Agreement below) who shall be designated third party
beneficiaries of this Agreement.

WHEREAS, the Seller Parties and the Purchaser have entered into a Stock Purchase
Agreement (the “Stock Purchase Agreement”), dated as of November 19, 2014,
pursuant to which, among other things, (i) on the date hereof (the “Closing
Date”) the Purchaser has purchased from the Company, and the Company has issued
and sold to the Purchaser, 8,450,704 shares of common stock, $.01 par value per
share, of the Company (the “Common Stock”), (ii) the Company has agreed, subject
to the terms and conditions of the Stock Purchase Agreement, to issue additional
shares of Common Stock to the Purchaser in a Post-Closing Issuance (as defined
in the Stock Purchase Agreement), and (iii) the Company has granted to the
Purchaser a warrant to purchase additional shares of Common Stock pursuant to a
Warrant Agreement dated as of the date hereof between the Company and the
Purchaser; and

WHEREAS, pursuant to the Stock Purchase Agreement, on the date hereof, the
Seller Parties and the Manager have entered into that certain Management
Agreement pursuant to which, among other things, the Seller Parties have engaged
the Manager, and the Manager has agreed, to provide certain management services
for the Seller Parties; and

WHEREAS, under the Stock Purchase Agreement, the Parties and the Purchaser have
agreed that the Parties shall enter into this Agreement on the Closing Date.

NOW, THEREFORE, in consideration of the respective representations, warranties,
covenants and agreements set forth herein and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Parties hereto agree as follows:

1.      Definitions.

“Eligible Investors” means persons who own both units and shares.

“Offering” means the offering by the Operating Partnership pursuant to the
Memorandum to Eligible Investors.

“Memorandum” means that certain Confidential Private Offering Memorandum dated
July 8, 2013, a copy of which has been provided to the Purchaser.

“Necessary Actions” means, with respect to a specified result, all actions (to
the extent such actions are permitted by applicable law and applicable stock
exchange rules and, in the case of any action by the Company that requires a
vote or other action on the part of the Board, to the extent such action is
consistent with the fiduciary duties that the Company’s directors may have in
such capacity) necessary to cause such result, including: (i) causing members of
the Board to act in a certain manner; (ii) executing agreements and instruments;
and (iii) making or causing to be made, with governmental, administrative or
regulatory authorities, all filings, registrations or similar actions that are
required to achieve such result.

 

 

 

“Partnership Agreement” means the First Amended and Restated Partnership
Agreement of the Operating Partnership, as amended.

“shares” means shares of Common Stock, including shares of Common Stock
purchased in the future on the NYSE MKT stock exchange (or other exchange on
which the shares of Common Stock are then listed).

“units” means units of limited partnership interest in the Operating
Partnership.

2.      Agreement by the Parties.

Each Party agrees to take all Necessary Actions within its reasonable control
(a) to cause the Offering to continue to be available to Eligible Investors and
(b) to cause the Operating Partnership to retain the shares it has previously
acquired in the Offering and any shares it acquires in the future in the
Offering.

3.      Term of Agreement.

(a)      This Agreement shall continue in effect until the earlier of:

(i)      the date on which the Company has purchased, pursuant to Section 6.7(f)
of the Partnership Agreement, all (but not less than all) outstanding units held
by limited partners (other than the Company as the general partner of the
Operating Partnership);

(ii)      the dissolution of the Operating Partnership;

(iii)      the date on which all of the units issued in the Offering have been
exchanged for shares or otherwise sold or transferred by the Eligible Investor
who participated in the Offering, including via bankruptcy or death;

(iv)      the date on which this Agreement is terminated in accordance with
Section 4(g);

(v)      the date on which all of the shares held by the Operating Partnership
are converted into or exchanged for cash in connection with a merger, sale of
assets, or other extraordinary transaction involving the Company; or

(vi)      the dissolution of the Company.

(b)      Notwithstanding the foregoing, in the event the Board designation
rights (the “Board Designation Rights”) granted to the Purchaser under Section 2
of that certain Governance and Voting Agreement, dated as of the Closing Date,
by and among the Company, the Purchaser and Charles S. Roberts, (the “Governance
and Voting Agreement”) are terminated in accordance with the terms thereof
sooner than the date on which this Agreement is terminated under Section 3(a)
above, the obligations of the Purchaser and the Manager under this Agreement
shall automatically terminate on the date that the Purchaser’s Board Designation
Rights terminate under the Governance and Voting Agreement.

 

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4.      Miscellaneous.

(a)                Successors and Assigns. The terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the respective
successors and assigns of the Parties. Nothing in this Agreement, express or
implied, is intended to confer upon any Party other than the Parties hereto or
their respective successors and assigns any rights, remedies, obligations,
or liabilities under or by reason of this Agreement, except as expressly
provided in this Agreement.

(b)               Governing Law. This Agreement shall be governed by the laws of
the State of Georgia.

(c)               Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. Counterparts may be
delivered via facsimile, electronic mail (including pdf) or other transmission
method and any counterpart so delivered shall be deemed to have been duly and
validly delivered and be valid and effective for all purposes.

(d)               Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.

(e)                Notices. All notices and other communications given or made
pursuant to this Agreement shall be in writing and shall be deemed effectively
given upon the earlier of actual receipt or: (i) personal delivery to the Party
to be notified, (ii) one (1) business day after deposit with a nationally
recognized overnight courier, freight prepaid, specifying next business day
delivery, with written verification of receipt, or (iii) delivery via email. All
communications shall be sent to the respective Parties at their address or email
address, as applicable, as set forth on the signature page hereto, or to such
address as subsequently modified by written notice given in accordance with this
Section 4(e). Notices and other communications to Eligible Investors shall be
delivered, using any of the same means described above, to the attention of
Charles S. Roberts c/o Roberts Properties, Inc., 375 Northridge Road, Suite 330
Atlanta, GA 30350; Email: cr@robertsproperties.com.

(f)                Attorneys’ Fees. If any action at law or in equity (including
arbitration) is necessary to enforce or interpret the terms of this Agreement,
the prevailing Party shall be entitled to reasonable attorneys’ fees, costs and
necessary disbursements in addition to any other relief to which such Party may
be entitled.

 

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(g)               Amendments and Waivers. It is expressly agreed that the
purchasers of units in the Offering, but not their successors and assigns, shall
be third party beneficiaries of this Agreement for as long as they hold the
units they purchased in the Offering and that each of them may enforce the
provisions of this Agreement. Accordingly, any term of this Agreement may be
amended, terminated or waived only with the written consent of (i) each of the
Parties hereto and (ii) each of the original purchasers of units in the Offering
if and only if they hold at the time of such amendment, termination or waiver
any of the units they purchased in the Offering. Any amendment or waiver
effected in accordance with this Section 4(g) shall be binding upon the Parties.

(h)               Severability. The invalidity or unenforceability of any
provision hereof shall in no way affect the validity or enforceability of any
other provision.

(i)                 Delays or Omissions. No delay or omission to exercise any
right, power or remedy accruing to any Party under this Agreement, upon any
breach or default of any other Party under this Agreement, shall impair any such
right, power or remedy of such non-breaching or non-defaulting Party nor shall
it be construed to be a waiver of any such breach or default, or an acquiescence
therein, or of any similar breach or default thereafter occurring; nor shall any
waiver of any single breach or default be deemed a waiver of any other breach or
default theretofore or thereafter occurring. Any waiver, permit, consent or
approval of any kind or character on the part of any Party of any breach or
default under this Agreement, or any waiver on the part of any Party of any
provisions or conditions of this Agreement, must be in writing and shall be
effective only to the extent specifically set forth in such writing. All
remedies, either under this Agreement or by law or otherwise afforded to any
Party, shall be cumulative and not alternative.

(j)                 Specific Performance. The Parties agree that irreparable
damage would occur if any provision of this Agreement were not performed in
accordance with the terms hereof and that the Parties (including the purchasers
of units in the Offering) shall be entitled to specific performance of the terms
hereof, in addition to any other remedy to which they are entitled at law or in
equity.

[Signatures are on the following page.]

 

 

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IN WITNESS WHEREOF, the Parties have executed this Tax Protection Agreement as
of the date first written above.

ROBERTS REALTY INVESTORS, INC.

 

By:    /s/ Charles S. Roberts                              

Name: Charles S. Roberts

Title: CEO and President

 

Address:

399 Park Avenue

New York, New York 10022

Attention: Edward Gellert

Telephone: 212-850-7534

Email: egellert@avenuecapital.com

 

ROBERTS PROPERTIES RESIDENTIAL, L.P.

By: Roberts Realty Investors, Inc., its general partner

 

 

 

By:   /s/ Charles S. Roberts                               

Name: Charles S. Roberts

Title: President

 

Address:

399 Park Avenue

New York, New York 10022

Attention: Edward Gellert

Telephone: 212-850-7534

Email: egellert@avenuecapital.com

 

A-III INVESTMENT PARTNERS LLC

 

 

 

By:   /s/ Edward Gellert                                      

Name: Edward Gellert

Title: Authorized Signatory

 

 

Address:

c/o Avenue Capital Group

399 Park Avenue

New York, New York 10022

Attention: Edward Gellert

Telephone: 212-850-7534

Email: egellert@avenuecapital.com

 

A-III MANAGER LLC

 

 

 

By:   /s/ Edward Gellert                                      

Name: Edward Gellert

Title: Authorized Signatory

 

 

Address:

c/o Avenue Capital Group

399 Park Avenue

New York, New York 10022

Attention: Edward Gellert

Telephone: 212-850-7534

Email: egellert@avenuecapital.com

 

 

[Signature page to Tax Protection Agreement]

 

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