Document:

Exhibit 10.1

 

Execution Version

 

PURCHASE AND SALE AGREEMENT

 

dated

 

October 12, 2016,

 

by and between

 

LANDMARK INFRASTRUCTURE OPERATING COMPANY LLC

 

as Buyer,

 

and

 

RECURRENT ENERGY LANDCO LLC

 

as Seller

 

 

TABLE OF CONTENTS

 

	
 
    	
 
    	
PAGE
    
	
 
    	
 
    	
 
    
	
1.
    	
PURCHASE AND SALE
    	
1
    
	
 
    	
 
    	
 
    
	
2.
    	
PURCHASE PRICE
    	
1
    
	
 
    	
2.1
    	
Deposit
    	
2
    
	
 
    	
2.2
    	
Additional Deposit
    	
2
    
	
 
    	
 
    	
 
    	
 
    
	
3.
    	
BUYER’S DUE DILIGENCE   PERIOD
    	
2
    
	
 
    	
 
    	
 
    
	
4.
    	
BUYER’S   ACKNOWLEDGEMENT; WAIVERS AND RELEASES
    	
3
    
	
 
    	
4.1
    	
Natural Hazard   Disclosures
    	
3
    
	
 
    	
4.2
    	
AS-IS
    	
4
    
	
 
    	
4.3
    	
Waivers
    	
4
    
	
 
    	
 
    	
 
    	
 
    
	
5.
    	
CONDITIONS TO CLOSING
    	
4
    
	
 
    	
5.1
    	
Buyer’s Closing   Conditions
    	
4
    
	
 
    	
5.2
    	
Failure of Buyer’s   Closing Conditions
    	
5
    
	
 
    	
5.3
    	
Seller’s Closing   Conditions
    	
6
    
	
 
    	
5.4
    	
Failure of Seller’s Closing   Conditions
    	
6
    
	
 
    	
 
    	
 
    	
 
    
	
6.
    	
TERMINATION BEFORE   CLOSING
    	
7
    
	
 
    	
 
    	
 
    
	
7.
    	
EFFECT OF TERMINATION
    	
7
    
	
 
    	
 
    	
 
    
	
8.
    	
DEFAULT
    	
7
    
	
 
    	
8.1
    	
Buyer Default
    	
7
    
	
 
    	
8.2
    	
Liquidated Damages
    	
7
    
	
 
    	
8.3
    	
Buyer’s Remedy Upon   Seller’s Default
    	
8
    
	
 
    	
 
    	
 
    	
 
    
	
9.
    	
CLOSING
    	
8
    
	
 
    	
9.1
    	
Closing Date
    	
8
    
	
 
    	
9.2
    	
Deliveries by Seller
    	
8
    
	
 
    	
9.3
    	
Deliveries by Buyer
    	
10
    
	
 
    	
9.4
    	
Prorations
    	
10
    
	
 
    	
9.5
    	
Closing Costs
    	
11
    
	
 
    	
9.6
    	
Estoppel Certificate
    	
12
    
	
 
    	
 
    	
 
    	
 
    
	
10.
    	
SELLER’S   REPRESENTATIONS AND WARRANTIES
    	
12
    
	
 
    	
10.1
    	
Due Organization of   Seller and the Land Holding Companies
    	
12
    
	
 
    	
10.2
    	
Seller’s Authority;   Validity of Agreements
    	
12
    
	
 
    	
10.3
    	
Consents
    	
13
    
	
 
    	
10.4
    	
Compliance with Laws   and Permits
    	
13
    
	
 
    	
10.5
    	
Equity Interests
    	
13
    
	
 
    	
10.6
    	
Nature of Company’s   Business
    	
13
    
	
 
    	
10.7
    	
Properties
    	
14
    
	
 
    	
10.8
    	
Litigation
    	
14
    

 

i

 

	
 
    	
10.9
    	
Condemnation and   Expropriation
    	
15
    
	
 
    	
10.10
    	
Employee Matters
    	
15
    
	
 
    	
10.11
    	
Tax Matters
    	
15
    
	
 
    	
10.12
    	
Environmental Matters
    	
16
    
	
 
    	
10.13
    	
No Material Adverse   Change
    	
17
    
	
 
    	
10.14
    	
Insurance
    	
17
    
	
 
    	
10.15
    	
Financial Information
    	
17
    
	
 
    	
10.16
    	
Patriot Act Compliance
    	
17
    
	
 
    	
10.17
    	
Seller’s Knowledge
    	
17
    
	
 
    	
10.18
    	
Survival and Limitation   of Liability
    	
18
    
	
 
    	
 
    	
 
    	
 
    
	
11.
    	
BUYER’S REPRESENTATIONS   AND WARRANTIES
    	
18
    
	
 
    	
11.1
    	
Due Organization
    	
18
    
	
 
    	
11.2
    	
Buyer’s Authority; Validity   of Agreements
    	
18
    
	
 
    	
11.3
    	
Patriot Act Compliance
    	
19
    
	
 
    	
11.4
    	
Survival
    	
19
    
	
 
    	
 
    	
 
    	
 
    
	
12.
    	
INDEMNIFICATION
    	
19
    
	
 
    	
12.1
    	
Indemnification by   Seller
    	
19
    
	
 
    	
12.2
    	
Indemnification by   Buyer
    	
20
    
	
 
    	
12.3
    	
Damages Disallowed
    	
20
    
	
 
    	
 
    	
 
    	
 
    
	
13.
    	
OTHER COVENANTS AND   AGREEMENTS
    	
20
    
	
 
    	
13.1
    	
Operations
    	
20
    
	
 
    	
13.2
    	
Government Filings
    	
21
    
	
 
    	
13.3
    	
Grant of Easements
    	
21
    
	
 
    	
13.4
    	
Option to Repurchase   Properties
    	
22
    
	
 
    	
13.5
    	
Audit Cooperation by   Seller
    	
22
    
	
 
    	
13.6
    	
Tax Matters
    	
22
    
	
 
    	
13.7
    	
Certificate of   Compliance
    	
26
    
	
 
    	
 
    	
 
    	
 
    
	
14.
    	
BROKERS
    	
26
    
	
 
    	
 
    	
 
    
	
15.
    	
MISCELLANEOUS   PROVISIONS
    	
26
    
	
 
    	
15.1
    	
Governing Law
    	
26
    
	
 
    	
15.2
    	
Entire Agreement
    	
26
    
	
 
    	
15.3
    	
Modification; Waiver
    	
27
    
	
 
    	
15.4
    	
Notices
    	
27
    
	
 
    	
15.5
    	
Expenses
    	
27
    
	
 
    	
15.6
    	
Assignment
    	
27
    
	
 
    	
15.7
    	
Severability
    	
28
    
	
 
    	
15.8
    	
Successors and Assigns;   Third Parties
    	
28
    
	
 
    	
15.9
    	
Confidentiality
    	
28
    
	
 
    	
15.10
    	
Public Statements
    	
28
    
	
 
    	
15.11
    	
Drafts Not an Offer to   Enter Into a Legally Binding Contract
    	
29
    
	
 
    	
15.12
    	
Counterparts
    	
29
    
	
 
    	
15.13
    	
Headings
    	
29
    

 

ii

 

	
 
    	
15.14
    	
Time of Essence
    	
29
    
	
 
    	
15.15
    	
Further Assurances
    	
29
    
	
 
    	
15.16
    	
Number and Gender
    	
29
    
	
 
    	
15.17
    	
Construction
    	
29
    
	
 
    	
15.18
    	
Exhibits
    	
29
    
	
 
    	
15.19
    	
Attorneys’ Fees
    	
29
    
	
 
    	
15.20
    	
Business Days
    	
29
    
	
 
    	
15.21
    	
Waiver of Known   Defaults
    	
30
    
	
 
    	
15.22
    	
No Course of Dealing
    	
30
    
	
 
    	
15.23
    	
Currency
    	
30
    
	
 
    	
15.24
    	
No Registration of   Agreement
    	
30
    

 

iii

 

PURCHASE AND SALE AGREEMENT

 

THIS PURCHASE AND SALE AGREEMENT (this “Agreement”) is made and entered into as of October 12, 2016 (the “Execution Date”), by and between LANDMARK INFRASTRUCTURE OPERATING COMPANY LLC, a Delaware limited liability company (“Buyer”), and RECURRENT ENERGY LANDCO LLC, a Delaware limited liability company (“Seller”).  Capitalized terms used herein without definition shall have the meanings given to them in Exhibit A attached hereto.

 

R E C I T A L S

 

A.                                    Seller owns 100% of the outstanding equity interests (the “Equity Interests”) in each of the entities (each a “Land Holding Company” and collectively, the “Land Holding Companies”) as set forth on Exhibit B attached hereto.

 

B.                                    Each Land Holding Company owns certain real property interests and related rights at the site(s) as set forth opposite such Land Holding Company’s name on Exhibit B attached hereto.  The real property interests and related rights at each site is defined and described on Exhibit C attached hereto (each a “Property” and collectively, the “Properties”).

 

C.                                    Seller desires to sell, assign, transfer and convey the Equity Interests in each and all of the Land Holding Companies to Buyer, and Buyer desires to purchase, accept and assume such Equity Interests from Seller, upon and subject to the terms and conditions set forth in this Agreement.

 

A G R E E M E N T

 

NOW, THEREFORE, in consideration of the mutual covenants contained in this Agreement and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Buyer and Seller hereby agree as follows:

 

1.             PURCHASE AND SALE.  Subject to all of the terms and conditions of this Agreement, Seller agrees to sell, assign, transfer and convey to Buyer, and Buyer agrees to purchase, accept and assume from Seller, the Equity Interests in each and all of the Land Holding Companies, in each case free and clear from all Liens, other than the restrictions on transfer that may be imposed by applicable securities Laws and any Liens created by or through Buyer.

 

2.             PURCHASE PRICE.  The aggregate purchase price of the Equity Interests in the Land Holding Companies shall be $72,740,000 (the “Purchase Price”).  The allocation of the Purchase Price with respect to each Land Holding Company is set forth opposite such Land Holding Company’s name on Exhibit E attached hereto.  At Closing, Buyer shall pay to Seller the Purchase Price, net of all prorations as provided in Section 9.4 hereof.  In addition, at Closing, Buyer shall receive a credit of $250,000 (the “Initial Payment”) toward the Purchase Price, which amount was previously deposited by Buyer with Seller pursuant to that certain Term Sheet Purchase of Interests in Solar Project Real Estate dated July 1, 2016.

 

 

2.1              Deposit.  Buyer has delivered the Initial Payment to Stewart Title of California, Inc., a California corporation (“Escrow Holder”), 5740 Fleet Street, #100, Carlsbad, CA 92008, Attn: Carla Burchard, Branch Operation Manager/Commercial Escrow Officer.

 

2.2          Additional Deposit.  If Buyer delivers the Buyer’s Notice prior to the end of the Due Diligence Period (as defined in Section 3 below), Buyer shall deposit with Escrow Holder an additional amount of Five Hundred Thousand Dollars ($500,000) (the “Additional Deposit”) in cash or other immediately available funds within two (2) business days following Buyer’s delivery of the Buyer’s Notice.  The Initial Payment and the Additional Deposit (if and when the Additional Deposit is deposited with Escrow Holder as provided herein) are collectively referred to as the “Deposit.”  The Deposit shall be held by the Escrow Holder in escrow and invested in an account satisfactory to Buyer, and all interest thereon, less any fees, if any, shall be deemed a part of the Deposit.

 

3.             BUYER’S DUE DILIGENCE PERIOD.  Buyer acknowledges that it commenced its due diligence prior to the Execution Date and that its accountants, PricewaterhouseCoopers, LLP, reviewed copies of certain tax information pertaining to Seller and the Land Holding Companies, and Seller and Buyer agree that Buyer shall have the right to continue its due diligence until October 24, 2016 (such period being referred to herein as the “Due Diligence Period”):  (a) to review documents containing information regarding each Land Holding Company and Property, to include without limitation (i) the Charter Documents, (ii) the Ground Leases, (iii) a current preliminary title report for a standard coverage owner’s policy of title insurance for each Property (the “PTR”) and copies of all documents referenced as exceptions therein (collectively, the “Underlying Documents”), (iv) a survey of each Property (the “Survey”) (the PTR, the Underlying Documents and the Survey shall be collectively referred to herein as the “Title Documents”), (v) a Phase I Environmental Site Assessment (“Phase I”) and, if applicable, a Phase II Environmental Site Assessment (“Phase II”) for each Property, and (vi) such other documents and materials, unaudited financial statements and other financial documents pertaining to the Land Holding Companies and the Properties delivered to or made available on a secured website accessible to Buyer (the “Data Room”), the index for which is set forth on Schedule II attached hereto, together with responses within diligence log exchanged from time to time between parties, and (b) to otherwise conduct its Due Diligence of each Land Holding Company and Property as Buyer has deemed or shall deem necessary or appropriate (all such documents, agreements, reports, materials and information, collectively, the “Diligence Documents”).  In connection with the Data Room:  (1) Seller delivered to Buyer a notice of substantial completion of the Data Room on August 15, 2016; (2) Buyer provided Seller with a written notice of material due diligence items absent from the Data Room that Buyer believed to be in Seller’s reasonable possession or control on August 17, 2016 (the “Diligence Deficiency Notice”); (3) Seller delivered to Buyer Seller’s response to the Diligence Deficiency Notice on August 22, 2016; and (4) Buyer delivered to Seller a notice of substantial completion of the Data Room on August 23, 2016.  Notwithstanding anything to the contrary as set forth herein, Seller shall be under no obligation to create or commission any Diligence Documents.  Seller shall have the right to redact documents or materials furnished or made available to Buyer to delete pricing and other sensitive or proprietary information, unrelated to the Equity Interests, obligations or liabilities of the Land Holding Companies.  The date Seller and Buyer agree the Data Room is substantially complete shall be referred to as the “Diligence Start Date”.  Buyer acknowledges that Seller shall provide Buyer with copies of the existing Title Documents, Phase I, and Phase II

 

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that are in Seller’s possession, and Buyer shall be responsible for the cost (or shall reimburse Seller) of any updates to the Title Documents, Phase I, and Phase II desired by Seller in accordance with Section 9.5 below at Closing or upon the earlier termination of this Agreement.

 

If Buyer determines not to proceed with the purchase of the Land Holding Companies for any reason or no reason, then Buyer may, before the end of the Due Diligence Period, notify Seller in writing that Buyer has elected to terminate this Agreement and not to proceed with the Closing, and thereafter, the Initial Payment, less the sum of $100 (the “Non-Refundable Portion”) shall be returned to Buyer by Seller within five (5) business days, and neither party shall have any further rights or obligations hereunder except as provided in Section 14, Section 15.9, and Section 15.10 of this Agreement.  If Buyer determines to proceed with the purchase of the Land Holding Companies, then Buyer shall, before the end of the Due Diligence Period, so notify Seller in writing (“Buyer’s Notice”), in which case Buyer shall be deemed to have approved all of the Diligence Documents, shall deposit the Additional Deposit with the Escrow Holder, and the Deposit shall become nonrefundable except as otherwise provided in Section 7 and Section 8.3.  If Buyer does not provide written notice of its intent to proceed with the purchase of the Land Holding Companies to Seller prior to the expiration of the Due Diligence Period, Buyer shall be deemed to have elected to terminate this Agreement and not to proceed with the Closing, and within five (5) business days after the end of the Due Diligence Period, the Initial Payment, less the Non-Refundable Portion, shall be returned to Buyer, and neither party shall have any further rights or obligations hereunder except as provided in Section 14, Section 15.9, and Section 15.10 of this Agreement.

 

4.             BUYER’S ACKNOWLEDGEMENT; WAIVERS AND RELEASES.  Buyer acknowledges, agrees and covenants as follows (subject, in any event, to Seller’s representations and warranties in Section 10 hereof (as such representations and warranties may be deemed modified or waived by Buyer pursuant to this Agreement, “Seller’s Warranties”)):

 

4.1              Natural Hazard Disclosures.  As used herein, the term “Natural Hazard Area” shall mean those areas identified as natural hazard areas or natural hazards in the Natural Hazard Disclosure Act, California Government Code Sections 8589.3, 8589.4 and 51183.5, and California Public Resources Code Sections 2621.9, 2694 and 4136, and any successor statutes or laws (the “Act”).  Buyer and Seller acknowledge that pursuant to the Act, Seller is required to disclose if any of the Property lies within the following natural hazard areas or zones:  (i) a special flood hazard area designated by the Federal Emergency Management Agency; (ii) an area of potential flooding; (iii) a very high fire hazard severity zone; (iv) a wild land area that may contain substantial forest fire risks and hazards; (v) an earthquake fault or special studies zone; or (vi) a seismic hazard zone.  Buyer acknowledges that Seller will employ the services of the Title Companies and/or another third party selected by Seller (“Natural Hazard Expert”) to examine the maps and other information specifically made available to the public by government agencies and to post the results of its examination in the Data Room prior to the Execution Date.  Subject to any applicable provision(s) of the Act, the written report prepared by the Natural Hazard Expert pursuant to the Act regarding the results of its examination, fully and completely discharges Seller from its disclosure obligations with respect to the Act, and, for the purposes of this Agreement, the provisions of California Civil Code Section 1103.4 regarding the non-liability of Seller for errors and/or omissions not within its personal knowledge shall be deemed to apply, and the Natural Hazard Expert shall be deemed to be an expert dealing with matters 

 

3

 

within the scope of its expertise with respect to the examination and written report regarding the natural hazards referred to above.  Without limitation of Seller’s express warranties hereunder, Buyer acknowledges and agrees that nothing contained herein releases Buyer from its obligation to fully investigate and satisfy itself with the condition of each Property prior to the date hereof, including, without limitation, whether such Property is located in any Natural Hazard Area.  Buyer is solely responsible for all disclosures to subsequent prospective purchasers of each Property.

 

4.2              AS-IS.  Each Land Holding Company is being sold to Buyer in its present “AS IS, WHERE IS” condition “WITH ALL FAULTS.”  THE PARTIES HEREBY ACKNOWLEDGE AND AGREE AS FOLLOWS:  (A) BUYER IS A SOPHISTICATED BUYER WHO IS FAMILIAR WITH LIMITED LIABILITY COMPANY INTERESTS SUCH AS THE EQUITY INTERESTS, ENTITIES SUCH AS THE LAND HOLDING COMPANIES, AND REAL PROPERTY SUCH AS THE PROPERTY; (B) EXCEPT AS MAY BE SPECIFICALLY SET FORTH IN THIS AGREEMENT, NEITHER SELLER NOR ANY OF ITS AGENTS, REPRESENTATIVES, BROKERS, OFFICERS, DIRECTORS, SHAREHOLDERS, OR EMPLOYEES HAS MADE OR WILL MAKE ANY REPRESENTATIONS OR WARRANTIES OF ANY KIND WHATSOEVER, WHETHER ORAL OR WRITTEN, EXPRESS OR IMPLIED, WITH RESPECT TO ANY LAND HOLDING COMPANY OR PROPERTY; AND (C) EXCEPT AS MAY BE SPECIFICALLY SET FORTH IN THIS AGREEMENT, THE EQUITY INTERESTS ARE BEING SOLD TO BUYER IN ITS PRESENT “AS IS, WHERE IS” CONDITION “WITH ALL FAULTS.”  SUBJECT TO THE TERMS HEREOF, BUYER HAS BEEN OR WILL BE AFFORDED THE OPPORTUNITY TO MAKE ANY AND ALL INSPECTIONS OF THE LAND HOLDING COMPANY, THE PROPERTY OWNED BY SUCH LAND HOLDING COMPANY AND SUCH RELATED MATTERS AS BUYER MAY REASONABLY DESIRE AND, ACCORDINGLY, BUYER WILL RELY SOLELY ON ITS OWN DUE DILIGENCE AND INVESTIGATIONS IN PURCHASING THE EQUITY INTERESTS IN SUCH LAND HOLDING COMPANY.

 

4.3              Waivers.  Buyer acknowledges and agrees that the Diligence Documents furnished or made available by Seller to Buyer are for informational purposes only.  Subject to Section 3 hereof, Buyer shall independently confirm to its satisfaction all information that it considers material to its purchase of the Equity Interests in each Land Holding Company, and Buyer shall not rely on any representation or warranty by Seller other than Seller’s Warranties set forth in Section 10 herein or the correctness, accuracy or completeness of any information contained in any Diligence Document or otherwise furnished or made available to Buyer by Seller in determining the Purchase Price or the allocation thereof.

 

5.             CONDITIONS TO CLOSING.

 

5.1              Buyer’s Closing Conditions.  The obligation of Buyer to complete the transactions contemplated by this Agreement is subject to the following conditions precedent (and conditions concurrent, with respect to deliveries to be made by the parties at Closing) (the “Buyer’s Closing Conditions”), which conditions may be waived, or the time for satisfaction thereof extended, by Buyer only in a writing executed by Buyer:

 

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5.1.1       Seller’s Representations and Warranties.  All of the representations and warranties of Seller set forth in this Agreement shall be true, correct and complete in all material respects as of the Closing Date.

 

5.1.2       Due Diligence.  Buyer’s completion of its due diligence during the Due Diligence Period as provided in Section 3 above.

 

5.1.3       Bankruptcy.  No action or proceeding shall have been commenced by or against Seller under the federal bankruptcy code or any state or provincial Law for the relief of debtors or for the enforcement of the rights of creditors, and no attachment, execution, lien or levy shall have attached to or been issued with respect to the Equity Interests or Seller’s or the respective Land Holding Company’s interest in the Property or any portion thereof and not fully satisfied and released as of the Closing Date.

 

5.1.4       Deliveries.  Seller shall have delivered to Escrow or Buyer, as the case may be, such documents or instruments as are required to be delivered or caused to be delivered by Seller pursuant to the terms of this Agreement.

 

5.1.5       Title Policies.  The applicable Title Company shall be committed to issue to the applicable Land Holding Company the applicable Owner’s Title Policy with respect to each Property, including an endorsement confirming that Buyer is an additional insured party thereunder and a non-imputation endorsement.

 

5.1.6       Estoppel Certificates.  Seller shall have used commercially reasonable efforts to deliver or cause to be delivered to Buyer an estoppel certificate substantially in the form of Exhibit I attached hereto executed by each tenant/lessee of each Ground Lease.

 

5.1.7       Board Approval.  Buyer shall have obtained approval of the board of directors of Landmark LP (as defined herein) for the purchase and sale of the Equity Interests for the transaction contemplated herein.

 

5.2              Failure of Buyer’s Closing Conditions.  If any of Buyer’s Closing Conditions have not been fulfilled by the Closing Date in accordance with this Agreement, Buyer may:

 

5.2.1       waive the Buyer’s Closing Condition and complete the transactions contemplated by this Agreement in accordance with this Agreement, without adjustment or abatement of the Purchase Price; or

 

5.2.2       at any time after delivery of Buyer’s notice, terminate this Agreement by written notice to Seller within five (5) business days of becoming aware that the Buyer’s Closing Condition has not been fulfilled (which is not caused by a breach of any of the covenants or agreements contained in this Agreement to be complied with by Seller or a breach of any representation or warranty of Seller, which breach shall be governed by Section 6.3), in which event this Agreement (except for any provisions which

 

5

 

survive termination by their terms) shall automatically terminate, and Seller shall pay for all of the cancellation charges of the Title Company(ies), if any.

 

5.3              Seller’s Closing Conditions.  The obligation of Seller to complete the transactions contemplated by this Agreement is subject to the following conditions precedent (and conditions concurrent, with respect to deliveries to be made by the parties at Closing) (the “Seller’s Closing Conditions”), which conditions may be waived, or the time for satisfaction thereof extended, by Seller only in a writing executed by Seller:

 

5.3.1       Buyer’s Representations and Warranties.  All of the representations and warranties of Buyer set forth in this Agreement shall be true, correct and complete in all material respects as of the Closing Date.

 

5.3.2       Bankruptcy.  No action or proceeding shall have been commenced by or against Buyer under the federal bankruptcy code or any state or provincial Law for the relief of debtors or for the enforcement of the rights of creditors.

 

5.3.3       Assignment and Assumption.  As of Closing, Buyer shall have executed and delivered to Escrow Buyer’s counterparts of the Assignment and Assumption as set forth in Section 9.3.2.

 

5.3.4       Option Agreement for the Purchase and Sale of Real Property.  As of Closing, Buyer shall have executed and delivered as the sole member of each Land Holding Company to Escrow each Land Holding Company’s counterparts of (a) the Repurchase Option, and (b) an original executed and acknowledged applicable Memorandum of Repurchase Option for recording following the Closing in the official records of Kern County, California, and Kings County, California.

 

5.3.5       Deliveries.  Buyer shall have delivered to Escrow or Seller, as the case may be, such documents or instruments as are required to be delivered by Buyer pursuant to the terms of this Agreement.

 

5.4              Failure of Seller’s Closing Conditions.  If any of the Seller’s Closing Conditions have not been fulfilled by the Closing Date in accordance of this Agreement, Seller may:

 

5.4.1       waive the Seller’s Closing Condition in accordance with this Agreement, without adjustment of the Purchase Price; or

 

5.4.2       terminate this Agreement by written notice to Buyer within five (5) business days of becoming aware that the Seller’s Closing Condition has not been fulfilled (which is not caused by a breach of any of the covenants or agreements contained in this Agreement to be complied with by Buyer or a breach of any representation or warranty of Buyer, which breach shall be governed by Section 6.4), in which event this Agreement (except for any provisions which survive termination by their terms) shall automatically terminate and Buyer shall pay for all of the cancellation charges of the Title Company(ies), if any.

 

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6.             TERMINATION BEFORE CLOSING.  This Agreement may be terminated and the transaction may be abandoned at any time prior to the Closing:

 

6.1          By mutual written agreement of Seller and Buyer.

 

6.2          By Buyer pursuant to Section 5.2.2 or by Seller pursuant to Section 5.4.2.

 

6.3          By Buyer upon written notice to Seller if (a) Seller shall have breached any of the covenants or agreements contained in this Agreement to be complied with by Seller such that any closing condition set forth in Section 5.1 would not be satisfied, or (b) there exists a breach of any representation or warranty of Seller contained in this Agreement such that the closing condition set forth in Section 5.1.1 would not be satisfied prior to the Closing Date, in each case, only if (i) Buyer shall have first given written notice to Seller identifying such breach, and (ii) Seller has not cured or remedied such breach within ten (10) business days of receipt of such notice; or

 

6.4          By Seller upon written notice to Buyer if (a) Buyer shall have breached any of the covenants or agreements contained in this Agreement to be complied with by Buyer such that any closing condition set forth in Section 5.3 would not be satisfied, or (b) there exists a breach of any representation or warranty of Buyer contained in this Agreement such that the closing condition set forth in Section 5.3.1 would not be satisfied prior to the Closing Date, in each case, only if (i) Seller shall have first given written notice to Buyer identifying such breach, and (ii) Buyer has not cured or remedied such breach within ten (10) business days of receipt of such notice.

 

7.             EFFECT OF TERMINATION.  In the event of a termination of this Agreement as provided in Section 6, this Agreement shall cease to have force and effect, and there shall be no further liability or obligation on the part of Seller or Buyer, except that (a) the applicable provisions of Section 5.2.2, Section 5.4.2, Section 6, this Section 7, Section 8.1 (Buyer Default), Section 8.2 (Liquidated Damages), Section 8.3 (Buyer’s Remedy Upon Seller’s Default), Section 14 (Brokers), Section 15.9 (Confidentiality), and Section 15.10 (Public Statements) shall continue to apply following any such termination, (b) in the event of a termination by Buyer pursuant to Section 6.3, Buyer’s sole and exclusive remedy shall be as set forth in Section 8.3, (c) in the event of a termination by Seller pursuant to Section 6.4, Seller’s sole and exclusive remedy shall be the receipt and retention of the Deposit as liquidated damages as set forth in Section 8.1 and Section 8.2, and (d) nothing in this Section 7 or elsewhere in the Agreement shall be deemed to release any party from liability (or any limit thereof) for any fraud or willful breach of its obligations under this Agreement in any material respect.

 

8.             DEFAULT.

 

8.1           Buyer Default.  Should Buyer default under any of the terms, covenants or conditions of this Agreement prior to Closing, Seller shall have as its sole and exclusive remedy the right to terminate this Agreement in accordance with Section 6 and to retain the Deposit as liquidated damages.

 

8.2           Liquidated Damages.  IN THE EVENT THE TRANSACTION CONTEMPLATED HEREBY IS NOT CONSUMMATED BECAUSE OF A DEFAULT

 

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UNDER THIS AGREEMENT ON THE PART OF BUYER, AS SELLER’S SOLE AND EXCLUSIVE REMEDY BY REASON OF SUCH DEFAULT BY BUYER, THE AMOUNT OF THE DEPOSIT (COMPRISED OF THE INITIAL PAYMENT AND, IF APPLICABLE, THE ADDITIONAL DEPOSIT, PLUS ANY INTEREST) SHALL BE PAID TO AND RETAINED BY SELLER AS LIQUIDATED DAMAGES, ALL OTHER CLAIMS TO DAMAGES OR OTHER REMEDIES BEING HEREIN EXPRESSLY WAIVED BY SELLER.  THE PARTIES ACKNOWLEDGE THAT, IN THE EVENT THE TRANSACTION CONTEMPLATED HEREBY IS NOT CONSUMMATED BECAUSE OF A DEFAULT UNDER THIS AGREEMENT ON THE PART OF BUYER, SELLER’S ACTUAL DAMAGES BY REASON OF SUCH DEFAULT BY BUYER WOULD BE EXTREMELY DIFFICULT OR IMPRACTICABLE TO DETERMINE.  THEREFORE, BY PLACING THEIR INITIALS BELOW, THE PARTIES ACKNOWLEDGE THAT THE AMOUNT OF THE DEPOSIT HAS BEEN AGREED UPON, AFTER NEGOTIATION, AS THE PARTIES’ REASONABLE ESTIMATE OF SELLER’S DAMAGES IN THE EVENT THE TRANSACTION CONTEMPLATED HEREBY IS NOT CONSUMMATED BECAUSE OF A DEFAULT UNDER THIS AGREEMENT ON THE PART OF BUYER.  NOTWITHSTANDING THE FOREGOING, NOTHING IN THIS SECTION SHALL IN ANY WAY LIMIT ANY DAMAGES FOR WHICH BUYER IS OR MAY BE LIABLE AS SET FORTH ELSEWHERE IN THIS AGREEMENT.

 

	
Seller:
    	
 
    	
 
    	
Buyer:
    	
 
    

 

8.3           Buyer’s Remedy Upon Seller’s Default.  Should Seller default under any of the terms, covenants or conditions of this Agreement prior to Closing, Buyer shall have as its sole and exclusive remedies, only the following: (a) the right to terminate this Agreement in accordance with Section 6 and receive a return of the Deposit; or (b) pursue a remedy of specific performance, provided that any action for specific performance is commenced within ninety (90) days after the occurrence of such default.

 

9.             CLOSING.

 

9.1              Closing Date.  Subject to the provisions of this Agreement, closing of the transactions contemplated by this Agreement (“Closing”) shall take place at the office of Seller or the offices of Escrow Holder on the earlier of October 31, 2016 or five (5) business days following Seller’s receipt of Buyer’s Notice or on such other date and time as Buyer and Seller may mutually agree upon in writing (the “Closing Date”).  As with respect to this transaction, time is of the essence, and such date and time shall not be extended without the prior written approval of both Seller and Buyer.

 

9.2              Deliveries by Seller.  On or before the Closing Date, Seller, at its sole cost and expense, shall deliver or cause to be delivered into the escrow established by the applicable insuring Title Company (the “Escrow”) the following documents and instruments, each dated as of the Closing Date, in addition to all other items and payments required by this Agreement to be delivered by Seller at Closing:

 

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9.2.1       Assignment and Assumption.  Two (2) executed originals of an assignment and assumption agreement substantially in the form of Exhibit G attached hereto (the “Assignment and Assumption”) executed by Seller;

 

9.2.2       Non-Foreign Affidavit.  A non-foreign affidavit with respect to the transfer of the Equity Interests in the Land Holding Companies, substantially in the form of Exhibit H attached hereto, executed by Seller (the “Non-Foreign Affidavit”), and if required by the Title Company, a California Form 593 or other form executed by Seller and to the effect that neither Buyer nor Title Company is required to withhold any portion of the Purchase Price for payment of Taxes under any applicable Law;

 

9.2.3       Option Agreement for the Purchase and Sale of Real Property. (a) Two (2) executed originals of the Repurchase Option (as defined in Section 13.3 below), and (b) two (2) executed and acknowledged originals of the Memorandum of Repurchase Option (as defined in Section 13.3 below) executed by Seller, for recording following the Closing in the official records of Kern County, California, and Kings County, California;

 

9.2.4       Agreement Regarding Easement Form.  Two (2) executed originals of the Agreement Regarding Easement Form (as defined in Section 13.2 below);

 

9.2.5       Closing Statement.  A Closing Statement (as hereinafter defined) executed by Seller;

 

9.2.6       Proof of Authority.  Certificates of good standing and certified copies of certificate of formation of Seller, together with such proof of Seller’s authority and authorization to enter into this Agreement and the transaction contemplated hereby, and such proof of the power and authority of the individual(s) executing or delivering any instruments, documents or certificates on behalf of Seller to act for and bind Seller as may be reasonably required by applicable Title Company(ies) or Buyer; and

 

9.2.7       Title Documents.  Such affidavits, indemnities and/or similar certifications in customary form and executed by Seller as maybe required by the Title Company to issue each Owner’s Title Policy at the Closing; provided, however, that such documents and instruments shall be in a form reasonably acceptable to Seller; and

 

9.2.8       Other.  Such other documents and instruments (or any keys, access codes and/or combinations, if available), signed and properly acknowledged by Seller, if appropriate, as may be reasonably required by Buyer and/or the Title Company(ies) or otherwise in order to effectuate the provisions of this Agreement and Closing; provided, however, that such documents and instruments shall be in a form reasonably acceptable to Seller.

 

9.2.9       A Guaranty of Seller’s Post-Closing Obligations in the form of Exhibit M attached hereto executed by Recurrent Energy, LLC, a Delaware limited liability company.

 

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9.3              Deliveries by Buyer.  On or before the Closing Date, Buyer, at its sole cost and expense, shall deliver or cause to be delivered into Escrow the following funds, documents and instruments, each dated as of the Closing Date, in addition to all other items and payments required by this Agreement to be delivered by Buyer at Closing:

 

9.3.1       Purchase Price.  Cash in an amount equal to the Purchase Price (less the Deposit) and all of the Buyer’s Closing Costs (and otherwise sufficient to close the transaction contemplated herein);

 

9.3.2       Assignment and Assumption.  Two (2) executed originals of the Assignment and Assumption, executed by Buyer;

 

9.3.3       Option Agreement for the Purchase and Sale of Real Property. (a) Two (2) executed originals of the Repurchase Option executed by Buyer as the sole member of each Land Holding Company, and (b) two (2) executed and acknowledged originals of the Memorandum of Repurchase Option executed by Buyer as sole member of each applicable Land Holding Company for recording following the Closing in the official records of Kern County, California, and Kings County, California.

 

9.3.4       Agreement Regarding Easement Form.  Two (2) executed originals of the Agreement Regarding Easement Form;

 

9.3.5       Closing Statement.  A Closing Statement executed by Buyer;

 

9.3.6       Proof of Authority.  Certificates of good standing and certified copy of the certificates of formation of Buyer, together with such proof of Buyer’s authority and authorization to enter into this Agreement and the transaction contemplated hereby, and such proof of the power and authority of the individual(s) executing or delivering any instruments, documents or certificates on behalf of Buyer to act for and bind Buyer as may be reasonably required by the Title Company(ies) or Seller; and

 

9.3.7       Other.  Such other documents and instruments, signed and properly acknowledged by Buyer, if appropriate, as may reasonably be required by Seller, the Title Company(ies) or otherwise in order to effectuate the provisions of this Agreement and Closing; provided, however, that such documents and instruments shall be in a form reasonably acceptable to Buyer.

 

9.4          Prorations.

 

9.4.1       Rentals, revenues, and other income, if any, from the applicable Property, and ad valorem or real estate Taxes and assessments (collectively, “Real Estate Taxes”), improvement bonds, utility costs, and other expenses affecting such Property shall be prorated between Buyer and Seller as of the Closing Date based on a 365-day year, if applicable.  Real Estate Taxes shall be determined without regard to any increased assessment resulting from the transactions contemplated by this Agreement or the development or construction of the Properties after the Closing Date.  For purposes of

 

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calculating prorations, Buyer shall be deemed to be title holder of the applicable Property, and therefore entitled to the income and responsible for the expenses, from and after 12:01 a.m. Pacific Standard Time on the Closing Date.  Delinquent rentals as of Closing Date, if any, shall not be prorated, but any rental paid to Buyer after Closing shall be applied first to such delinquent rentals, if any, and Buyer shall deliver the rentals so applied to Seller within 30 days after receiving the same.  After Closing, any delinquent rent shall remain the property of Seller, but Buyer shall have no obligation to collect such delinquent rent.  Notwithstanding the foregoing, any scheduled payments that are not delinquent and that are received after Closing shall be applied to the applicable period and prorated as of the Closing Date.  All non-delinquent Real Estate Taxes  shall be prorated based on the actual current tax bill, but if such tax bill has not yet been received by Seller by the Closing Date or if supplemental Real Estate Taxes  are assessed after Closing for the period prior to Closing, the parties shall make any necessary adjustment after Closing by cash payment to the party entitled thereto so that Seller shall have borne all Real Estate Taxes, including all supplemental Real Estate Taxes, allocable to the period prior to Closing and Buyer shall bear all real property taxes, including all supplemental taxes, allocable to the period from and after Closing.  If any expenses attributable to the applicable Property and allocable to the period prior to such Closing are discovered or billed after Closing, the parties shall make any necessary adjustment after Closing by cash payment to the party entitled thereto so that Seller shall have borne all expenses allocable to the period prior to Closing and Buyer shall bear all expenses allocable to the period from and after Closing.  Upon Closing, and except as provided in this Section 9.4.1, Buyer assumes all expenses and Real Estate Taxes, including all supplemental Real Estate Taxes, allocable to the period from and after Closing.  For the avoidance of doubt, nothing in this Section alters or modifies any obligation of any lessee under any of the Ground Leases to pay Real Estate Taxes to the extent required thereunder.  The provisions of this Section 9.4.1 shall survive Closing.

 

9.4.2                     The escrow officer handling the Escrow for each Title Company (the “Escrow Agent”) shall deliver to each of the parties for their review and approval a preliminary closing statement (the “Preliminary Closing Statement”) setting forth:  (a) the proration amounts allocable to each of the parties pursuant to Section 9.4 hereof; and (b) the Closing Costs allocable to each of the parties pursuant to Section 9.5 hereof.  Based on each of the party’s comments, if any, to the Preliminary Closing Statement, Escrow Agent shall revise the Preliminary Closing Statement and delivered a final, fully executed version of a closing statement to each of the parties as of Closing (the “Closing Statement”).

 

9.5                                           Closing Costs.  Each party shall pay its own costs and expenses arising in connection with the Closing (including, without limitation, its own attorneys’, consultants’ and advisors’ fees, charges and disbursements), except the following costs (the “Closing Costs”), which shall be allocated between the parties as follows:

 

9.5.1                     all documentary transfer, land transfer, stamp, sales (including harmonized sales or goods and services) and other taxes related to the transfer of the Equity Interests, if any, which shall be paid by Buyer;

 

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9.5.2                     Escrow Agent’s escrow fees and costs, which shall be paid one-half (1⁄2) by Seller and one-half (1⁄2) by Buyer;

 

9.5.3                     the cost of the Surveys, the Phase I’s and Phase II’s (if any), shall be paid by Buyer.  To the extent Seller incurs any costs relating to the Surveys and the Phase I’s and Phase II’s (if any), Buyer shall reimburse Seller for such costs at Closing; and

 

9.5.4                     the cost of the Owner’s Title Policies and the endorsements thereto shall be paid by Buyer.

 

9.6                                           Estoppel Certificate.  Seller shall use commercially reasonable efforts to deliver or cause to be delivered to Buyer an estoppel certificate substantially in the form of Exhibit I attached hereto executed by each tenant/lessee of the applicable Ground Lease (the “Estoppel Certificate”).

 

10.                               SELLER’S REPRESENTATIONS AND WARRANTIES FOR ITSELF AND THE LANDHOLDING COMPANIES.  Seller represents and warrants to and agrees with Buyer, as of the Execution Date and as of the Closing Date, as follows:

 

10.1                                    Due Organization of Seller and the Land Holding Companies.  Seller is a Delaware limited liability company duly organized and existing in good standing under the laws of the State of Delaware and is qualified to do business in the State of California.  Each Land Holding Company is duly organized, validly existing and in good standing under the laws of the state of its organization.  Each Land Holding Company is qualified to do business in all jurisdictions in which the nature of the business conducted by it makes such qualification necessary and where failure so to qualify would have a material adverse effect on such Land Holding Company or its Property.  Each Land Holding Company has all requisite power and authority to own the Property owned by such Land Holding Company and to fulfill its obligations under the Ground Lease to which it is a party.  Each Land Holding Company has at all times complied in all material respects with the provisions of its Charter Documents and the laws of the state in which such Land Holding Company was formed.

 

10.2                                    Seller’s Authority; Validity of Agreements.  Seller has full right, power and authority to sell the Equity Interests to Buyer as provided in this Agreement and to carry out its obligations hereunder and under all other instruments, documents and agreement to be executed and delivered by Seller hereunder (“Seller’s Transaction Documents”).  The individual(s) executing this Agreement and Seller’s Transaction Documents on behalf of Seller have the legal power, right and actual authority to bind Seller to the terms hereof and thereof.  This Agreement and Seller’s Transaction Documents shall be, duly authorized, executed and delivered by Seller and shall be valid, binding and enforceable obligations of Seller (except as enforcement may be limited by bankruptcy, insolvency or similar laws) and, to Seller’s Knowledge (as hereinafter defined), do not, and as of the Closing Date will not, violate any provisions of any Contract or judicial order to which Seller is a party or to which Seller, the applicable Land Holding Company or the applicable Property is subject.

 

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10.3                                    Consents.  Except as otherwise specifically stated herein, no consent, approval, license, permit, order or authorization (each, a “Consent”) of, or registration, declaration or filing (each, a “Filing”) with, any Governmental Authority or any other Person which has not been obtained or made by Seller or the Land Holding Companies is required to be obtained or made by Seller or the Land Holding Companies in connection with the execution and delivery of this Agreement and the other agreements and instruments to be delivered hereunder by Seller or the Land Holding Companies and the consummation by Seller and the Land Holding Companies of the transactions contemplated hereby and thereby.

 

10.4                                    Compliance with Laws and Permits.  To Seller’s Knowledge and except as otherwise specifically stated herein, (i) the Land Holding Companies are in compliance in all material respects with all Laws, (ii) the Land Holding Companies are not in violation of the terms of any material permits, certificates, licenses, franchises, writs, variances, exemptions, orders or other authorizations of any Governmental Authority (collectively, “Permits”) used in the operation of their businesses, and (iii) all such Permits are in full force and effect and are final and non-appealable, and no claim to revoke, suspend, limit or modify any of such Permits has been served upon Seller or the Land Holding Companies, nor to Seller’s Knowledge is any such claim pending or threatened.

 

10.5                                    Equity Interests.  Seller is the record and beneficial owner of, and holds good and valid title to, the Equity Interests of each Land Holding Company free and clear of all Liens, other than the restrictions on transfer that may be imposed by applicable securities Laws and any Liens created by or through Buyer.  The Equity Interests in each Land Holding Company constitute one hundred percent (100%) of the Ownership Interests in such Land Holding Company.  All of the Equity Interests in each Land Holding Company have been duly authorized and are validly issued in compliance with all applicable federal and state securities laws and are fully paid and non-assessable.  No Land Holding Company is subject to any Contracts, pledge or hypothecation agreements or other arrangements with respect to voting rights or transferability, and there are no outstanding options, warrants, rights (including conversion or preemptive rights) or Contracts for the purchase or acquisition of any portion of such Land Holding Company’s interests or securities convertible or exchangeable for any portion of such Land Holding Company, other than as provided in this Agreement or as may have been created by or through Buyer.  Neither Seller nor any of the Land Holding Companies is subject to any obligation (contingent or otherwise) to repurchase or otherwise acquire or retire any of its Ownership Interests.

 

10.6                                    Nature of Company’s Business.  To Seller’s Knowledge, since their formation the Land Holding Companies have not (i) engaged in any business other than its ownership of the Property, and ownership and administration of their respective interests thereunder, or (ii) owned any assets or entered into any Contracts, other than in connection with their business described in clause (i) above.  No Land Holding Company owns any securities or other debt or equity of any other Person.  To Seller’s Knowledge, there are no Contracts in effect to which the Land Holding Company is subject or bound except for those Contracts listed on Schedule III attached hereto.

 

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10.7                                    Properties.

 

10.7.1                                            Each Land Holding Company owns the Property set forth opposite such Land Holding Company’s name on Exhibit B attached hereto (which Property is defined and described on Exhibit C attached hereto).  To Seller’s Knowledge, each Property is free and clear of any Lien except the Permitted Exceptions with respect to such Property.

 

10.7.2                                      Buyer and Seller hereby acknowledge the following:

 

10.7.2.1                                        The Title Company insuring the Properties for the Astoria Site, the Garland Site, and the Garland A Site have disclosed to Seller that based on the Title Company’s review of the chain of title for such Properties that certain parcels were created by deed and not by an approved parcel map approved in compliance with the California Subdivision Map Act.  Such parcels, which are identified on Schedule I attached hereto, were created prior to the respective Land Holding Company’s acquisition of the Property, and as of the Execution Date, Seller is in the process of obtaining certificates of compliance from Kern County to verify that such parcels (the “Certificate of Compliance Parcels”) constitute legal parcels under the California Subdivision Map Act.

 

10.7.2.2                                  The applicable Title Company has issued endorsements to each respective Land Holding Company’s existing Owner’s Title Policy of Title Insurance insuring losses resulting from a violation of the California Subdivision Map Act on the terms and conditions set forth in such endorsements.  The applicable Title Company for each respective Certificate of Compliance Parcel has informed Seller that the sale of the Equity Interests of the Land Holding Companies to Buyer will not violate the California Subdivision Map Act, and that such Title Company will continue to issue a Subdivision Map Act endorsement to each respective Land Holding Company’s Owner’s Title Policy at Closing.

 

10.7.2.3                                  In connection with the matters set forth in Section 10.7.2, each of Seller and Buyer acknowledge, agree and covenant as follows:  (a) Seller has not made (whether in this Agreement or in any other written or oral statement) and will not make any representation or warranty as to the Properties’ compliance with the California Subdivision Map Act and Buyer will rely solely on the applicable Owner’s Title Policies issued at Closing with respect to such matters; (b) the sale of the Equity Interests of the Land Holding Companies to Buyer does not violate the California Subdivision Map Act, and Buyer waives any right to rescind its purchase of the Equity Interests of the Land Holding Companies under this Agreement on the basis of any such alleged violation; and (c) Seller, at its cost and expense, will apply for and pursue the issuance of certificates of compliance from Kern County for the Certificate of Compliance Parcels (the issuance of which may occur post-Closing).

 

10.8                                    Litigation.  To Seller’s Knowledge, (a) there are no actions, suits, investigations or proceedings pending or threatened in writing against Seller with respect to the ownership or operation of any Land Holding Company or any of the Land Holding Companies, and (b) there are no judgments, orders, awards or decrees currently in effect against Seller or any

 

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Land Holding Company with respect to the ownership or operation of any Land Holding Company.

 

10.9                                    Condemnation and Expropriation.  Neither Seller nor any Land Holding Company has received written notice of any currently pending proceedings to condemn or expropriate all or any portion of any Property by eminent domain or expropriation proceedings or otherwise.

 

10.10                             Employee Matters.

 

10.10.1       Since their formation, the Land Holding Companies have not and do not currently employ any employees.

 

10.10.2       No Company Plan exists and none have existed with respect to any Land Holding Company since its formation.  No Land Holding Company has sponsored, maintained or contributed to or been required to maintain or contribute to any benefit plan that is subject to Section 302 or 303 or Title IV of ERISA or Section 412 or 430 of the Internal Revenue Code of 1986, as amended, or is otherwise a defined benefit plan.  No Benefit Plan provides health, medical or other welfare benefits after retirement or other termination of employment to any person as a result of such person’s providing services or being compensated by any Land Holding Company.

 

10.11                             Tax Matters.

 

10.11.1       Tax Returns.  Each Land Holding Company has filed or will file all Tax Returns that are required to be filed on or before the applicable Closing Date (giving regard to valid extensions) and all such Tax Returns are correct and complete in all material respects.

 

10.11.2       Taxes Paid or Accrued.  All Taxes (whether or not shown on any Tax Return) due on or before the Closing Date by a Land Holding Company have been or will be timely paid in full on or before such Closing Date, and all Taxes that are required to be withheld or collected by such Land Holding Company have been duly withheld and collected and, to the extent required, have been timely paid to the appropriate Governmental Authority or properly deposited as required by applicable Law.

 

10.11.3       Assessments and Audits.  No Taxing Authority has, in writing, asserted or threatened to assert any deficiency or assessment, or proposed any adjustment, for any Taxes against any Land Holding Company that has not been fully resolved, and to Seller’s Knowledge there are no pending or threatened audits, investigations, disputes, claims or other actions for or relating to any liability for Taxes of any Land Holding Company.

 

10.11.4       Tax Sharing Agreements.  No Land Holding Company is a party to any Tax sharing, Tax indemnification or similar agreement currently in force (other than commercial agreements or contracts entered into in the ordinary course of business the primary purpose of which does not relate to Taxes).

 

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10.11.5       Tax Classification.  Each Land Holding Company has been since its formation and is currently treated as a disregarded entity for U.S. federal, state of California or local income tax purposes, and no election has been filed with respect to such entity so as to cause it to be treated as an association taxable as a corporation for U.S. federal income tax purposes.  Further each Land Holding Company was never a corporation that was a member of a consolidated group for Tax purposes at any time and each Land Holding Company is not a successor, and never was a successor, to any member of a consolidated group for Tax purposes.

 

10.11.6       Tax Liens. There are no Liens for Taxes (other than for current Taxes not yet due and payable).

 

10.11.7       Statute of Limitations. There are no agreements or waivers currently in effect with respect to a Land Holding Company that provide for an extension of any statute of limitations, any time with respect to the filing of any Tax Return or any time with respect to any Tax assessment, collection or deficiency.

 

10.11.8       Nexus. No claim has ever been made by a Governmental Authority in a jurisdiction in which no Tax Return is filed by a Land Holding Company that there may be liability in that jurisdiction in respect of Taxes that would be covered by or the subject of such entity’s Tax Return.

 

10.12                             Environmental Matters.

 

10.12.1       The Land Holding Companies are now, and to Seller’s Knowledge have always been in compliance with all applicable Environmental Laws and Environmental Permits.

 

10.12.2       There are no suits, claims or proceedings pending or threatened against the Land Holding Companies alleging any violation of, or liability under, any Environmental Law, Environmental Permits or any indemnity obligations to which the Land Holding Companies or its assets are subject relating to any Environmental Law or Environmental Permits.

 

10.12.3       The Land Holding Companies are not subject to any decree, order or judgment requiring the investigation or cleanup of any Hazardous Substance under any Environmental Law or Environmental Permits at the Properties.

 

10.12.4       Except to the extent disclosed to Buyer in the Data Room or in Diligence Documents otherwise made available by Seller to Buyer, there is not now and, to the Seller’s Knowledge of the Land Holding Companies, without undertaking any independent investigation, there has not been any Hazardous Substance (x) used, generated, treated, stored, transported, disposed of, released, handled on any owned, leased or easement property associated with the business of the Land Holding Companies (including, without limitation, the Properties or any portion thereof) except in full compliance with Environmental Law and Environmental Permits, or (y) otherwise existing on, under, about, or emanating from or to, the Properties except in full compliance with all applicable Environmental Laws and Environmental Permits.

 

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10.12.5       The Land Holding Companies do not hold any Environmental Permits in connection with the operation of their businesses.

 

10.13                             No Material Adverse Change.  As of the Closing Date only, between the expiration of the Due Diligence Period and the Closing Date, there has been no material adverse change in the condition of the Land Holding Companies, the Equity Interests and the Properties.

 

10.14                             Insurance .  The Land Holding Companies are the beneficiaries of the insurance policies described on Schedule 10.14 attached hereto (each an “Insurance Policy” and together the “Insurance Policies”).  The Insurance Policies are in full force and effect and all premiums due on such Insurance Policies have been paid.  No written notice of cancellation, non-renewal, disallowance or reduction in coverage or claim or termination, nor any written notice of breach or default under any Insurance Policy, has been received by Seller or the Land Holding Companies and no such action has been threatened.

 

10.15                             Financial Information.  Seller has provided to Buyer true, correct and complete copies of unaudited financial statements (including income statements and balance sheets) for:  (a) RE Astoria LandCo LLC for the past three (3) fiscal years, (b) RE Mustang LandCo LLC for the past two (2) fiscal years, and (c) RE Garland LandCo LLC and RE Garland A LandCo LLC for the past fiscal year (collectively, the “Historical Financial Statements”), and for each of the Land Holding Companies financial statements (including income statements and balance sheets) for the six months ended June, 2016 (collectively, the “Most Recent Financial Statements,” and together with the Historical Financial Statements, the “Financial Statements”).  The Financial Statements (A) have been prepared from and in accordance with the books and records of Seller and the Land Holding Companies in all material respects, (B) have been prepared in accordance with U.S. generally accepted accounting principles applied on a consistent basis during the periods involved and (iii) fairly present, in all material respects, as of the dates and for the periods referred to therein the financial position of each of the Land Holding Companies and there has been no material change in the financial condition of any Land Holding Company since the date of the Most Recent Financial Statements.  The books of account and other financial records relating to the Land Holding Companies have been kept accurately in the ordinary course of business, consistent with Law in all material respects.

 

10.16                             Patriot Act Compliance.  Neither Seller nor any person, group, entity or nation that Seller is acting, directly or indirectly for, or on behalf of, is named by any Executive Order (including the September 24, 2001, Executive Order Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism) or the United States Treasury Department is a terrorist, “Specially Designated National and Blocked Person,” or is otherwise a banned or blocked person, group, entity, or nation pursuant to any law that is enforced or administered by the Office of Foreign Assets Control, and Seller is not engaging in the transaction contemplated herein, directly or indirectly, on behalf of, or instigating or facilitating the transaction contemplated hereby, directly or indirectly, on behalf of, any such person, group, entity or nation.

 

10.17                             Seller’s Knowledge.  As used herein, the term “Seller’s Knowledge” shall mean the actual knowledge, without any investigation or inquiry, of Amanda Hamilton, Seth Israel and Brandon Wantland, who are the persons within Seller’s organization most likely

 

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to have knowledge of the matters set forth herein, provided that in no event shall the individual named in this Section 10.17 have any personal liability as a result of being designated a knowledge party hereunder.  Notwithstanding anything to the contrary as set forth herein, the term Seller’s Knowledge shall include that the knowledge of one of the foregoing persons shall be imputed to all of the foregoing persons.

 

10.18                             Survival and Limitation of Liability.  All of the representations, warranties and agreements of Seller set forth in this Agreement shall be true upon the Execution Date, shall be deemed to be repeated at and as of the Closing Date (except as otherwise set forth in writing to Buyer) and shall survive the Closing for a period of one (1) year, except (i) as expressly set forth in Section 13.6.7 and (ii) for the representations and warranties of Seller set forth in Sections 10.1, 10.2 and 10.5 (herein, the “Fundamental Representations”), which Fundamental Representations and warranties shall survive for the applicable statute of limitations period.  Buyer acknowledges and agrees that Seller shall not be liable for the payment of any losses or damages (collectively, “Buyer Losses”) suffered by Buyer as a result of any representation or warranty made by Seller under this Agreement being untrue, incomplete or incorrect in any material fashion, until the aggregate amount of all such Buyer Losses (as determined by a court of competent jurisdiction in a final and non-appealable order) is equal to or greater than $100,000, whereupon Seller shall be liable for all Buyer Losses in excess of $100,000 and up to a maximum liability amount equal to ten percent (10%) of the allocated Purchase Price for each Land Holding Company as set forth on Exhibit E as set forth herein (the “Cap”); provided, however, that the above $100,000 deductible and the “Cap” shall not apply to any Buyer Losses suffered by Buyer as a result of any of the Fundamental Representations made by Seller under this Agreement being untrue, incomplete or incorrect, and provided further, that in no event shall Seller’s aggregate liability under Sections 12.1 and 13.6 of this Agreement exceed the Purchase Price.  For the avoidance of doubt, Buyer hereby expressly acknowledges and agrees that Seller shall have no obligation or liability for any Buyer Losses in an amount in excess of the applicable Cap.  Notwithstanding the foregoing, to the extent that Buyer has actual knowledge that any such representation or warranty made by Seller hereunder is materially untrue, incomplete or incorrect as of the Closing Date, but nonetheless proceeds with the Closing, Buyer shall be deemed to have waived any claim against Seller for any Buyer Losses with respect to such materially untrue, incomplete or incorrect representation or warranty.  Notwithstanding anything to the contrary as set forth hereof, the Seller’s limitation on liability (including the “deductible” and the Cap) as set forth in this Section 10.18 shall not apply to terms and conditions as set forth in Section 12.1(iii) and Section 12.1(iv) hereof; provided, however, that in no event shall Seller’s aggregate liability under Sections 12.1 and 13.6 of this Agreement exceed the Purchase Price.

 

11.                               BUYER’S REPRESENTATIONS AND WARRANTIES.  Buyer represents and warrants to Seller, as of the Execution Date and as of the Closing Date, as follows:

 

11.1                                    Due Organization.  Buyer is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Delaware.

 

11.2                                    Buyer’s Authority; Validity of Agreements.  Buyer has full right, power and authority to purchase and acquire the Equity Interests from Seller as provided in this Agreement and to carry out its obligations hereunder and under all other instruments, documents

 

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and agreement to be executed and delivered by Buyer hereunder (“Buyer’s Transaction Documents”).  The individual(s) executing this Agreement and Buyer’s Transaction Documents on behalf of Buyer have the legal power, right and actual authority to bind Buyer to the terms hereof and thereof.  This Agreement and Buyer’s Transaction Documents shall be, duly authorized, executed and delivered by Buyer and shall be valid, binding and enforceable obligations of Buyer (except as enforcement may be limited by bankruptcy, insolvency or similar laws) and do not, and as of the Closing Date will not, violate any provision of any agreement or judicial order to which Buyer is a party or to which Buyer is subject.

 

11.3                                    Patriot Act Compliance.  Neither Buyer nor any person, group, entity or nation that Buyer is acting, directly or indirectly for, or on behalf of, is named by any Executive Order (including the September 24, 2001, Executive Order Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism) or the United States Treasury Department as a terrorist, “Specially Designated National and Blocked Person,” or is otherwise a banned or blocked person, group, entity, or nation pursuant to any law that is enforced or administered by the Office of Foreign Assets Control, and Buyer is not engaging in the transaction contemplated herein, directly or indirectly, on behalf of, or instigating or facilitating the transaction contemplated hereby, directly or indirectly, on behalf of, any such person, group, entity or nation.  Buyer is not engaging in the transaction contemplated hereby, directly or indirectly, in violation of any laws relating to drug trafficking, money laundering or predicate crimes to money laundering.  None of the funds of Buyer have been or will be derived from any unlawful activity with the result that the investment of direct or indirect equity owners in Buyer is prohibited by law or that the transaction contemplated hereby or this Agreement is or will be in violation of law.  Buyer has and will continue to implement procedures, and has consistently and will continue to consistently apply those procedures, to ensure the foregoing representations and warranties remain true and correct at all times prior to any Closing. Notwithstanding anything contained in the foregoing, the foregoing representations, warranties and covenants shall not apply to, include or cover any person, group, entity, nation or other governmental authority which is an owner of any direct or indirect ownership interest in Buyer or any entity affiliated with Buyer if such ownership interest exists by means of the ownership of stock or other securities which are publicly traded on a U.S. national stock exchange.

 

11.4                                    Survival.  All of the representations, warranties and agreements of Buyer set forth in this Agreement shall be true upon the Execution Date, shall be deemed to be repeated at and as of the Closing Date (except as otherwise set forth in writing to Seller) and shall survive the Closing for a period of one (1) year.

 

12.                               INDEMNIFICATION.

 

12.1                                    Indemnification by Seller.  Subject to the limitations set forth in Section 10.18, subsequent to the Closing Date, Seller shall indemnify, hold harmless and defend Buyer and its affiliates (including, after Closing, each Land Holding Company) and their respective officers, directors, managers and employees against any damages that any of the foregoing suffers as a result of (i) any breach or inaccuracy of Seller’s Warranties (other than the representations and warranties in Section 10.11, which shall instead be covered by the provisions of Section 13.6.6) as set forth in Section 10, (ii) any breach of any covenant or agreement of 

 

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Seller contained in this Agreement or in any certificate delivered pursuant to this Agreement, (iii) any Real Estate Taxes incurred by any Land Holding Company attributable to any full or partial Tax period ending prior to the Closing Date for which Seller is responsible under Section 9.4.1 or Section 13.6.2, and (iv) any damages arising in connection with the disposal of Hazardous Substance by Seller or any Land Holding Company on any of the Properties in violation of Law prior to the Closing Date.  Notwithstanding anything to the contrary which may be contained in this Agreement, the indemnity set forth in this Section 12.1 shall become effective only as of the Closing Date.

 

12.2                                    Indemnification by Buyer.  Subsequent to the Closing Date, Buyer shall indemnify, hold harmless and defend the Seller, its affiliates, and their respective officers, directors, managers and employees against any damages that any of the foregoing suffers as a result of (i) any breach or inaccuracy of the representations and warranties by Buyer set forth in Section 11, (ii) any breach of any covenant or agreement of Buyer contained in this Agreement or in any certificate delivered pursuant to this Agreement, and (iii) any Taxes of any Land Holding Company for taxable periods (or portions thereof) beginning after the Closing Date.  Notwithstanding anything to the contrary which may be contained in this Agreement, the indemnity set forth in this Section 12.2 shall become effective only as of the Closing Date.

 

12.3                                    Damages Disallowed.  Notwithstanding any provision in this Agreement to the contrary, in no event shall either party or its affiliates be liable hereunder at any time for consequential, indirect, special or punitive damages or losses of the other party, whether in contract, tort (including negligence), strict liability or otherwise.

 

13.                               OTHER COVENANTS AND AGREEMENTS.

 

13.1                                    Operations.  From the Execution Date until the Closing or earlier termination of this Agreement, Seller shall and shall cause each Land Holding Company to manage, operate, maintain and insure the Property in a manner substantially consistent with the manner in which Seller and each Land Holding Company has managed, operated, maintained and insured the Property prior to the Execution Date;

 

13.1.1              not encumber the Property with any monetary lien (other than mechanics liens incurred in the ordinary course of business);

 

13.1.2              not dispose of or permit the disposition of any Property;

 

13.1.3              pay and perform in a timely manner all of its obligations as and when due;

 

13.1.4              not enter into or assume or permit to be entered into or assumed any Contract related to any Land Holding Company or the Property; provided, however, notwithstanding the foregoing, (a) each Land Holding Company shall have the right to grant Future Easements/Licenses (as defined below) pursuant to the Ground Lease Easement/License Provisions (as defined below), and (b) RE Mustang LandCo LLC shall have the right, subject to the written approval of the tenant under the Ground Lease with respect to the Mustang Site, to enter into a non-binding letter of intent with First Solar Development, LLC, or its affiliate (“First Solar”), which will provide First Solar with an

 

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option for non-exclusive easements for access, transmission, and temporary construction upon, across and over a portion of the Mustang Site for purposes of interconnection to the existing Pacific Gas and Electric Company switching station located on the Mustang Site (the “First Solar LOI”); provided further ,that Seller shall promptly provide Buyer with (i) any drafts of the First Solar LOI as and when submitted by Seller to First Solar and/or received by Seller from First Solar, and (ii) the fully-executed First Solar LOI if executed.

 

13.1.5              with respect to any Land Holding Company or the assets thereof, make any new, change in or revocation of any Tax election; settle or compromise any claim, notice, audit report or assessment in respect of Taxes; change any annual Tax accounting period, adopt or change any method of Tax accounting; enter into any Tax allocation agreement, Tax sharing agreement, Tax indemnity agreement or closing agreement relating to any Tax; surrender any right to claim a Tax refund; or consent to any extension or waiver of the statute of limitations period applicable to any Tax claim or assessment.

 

13.2                                    Government Filings.  Following the Closing, Buyer shall file, or cause to be filed, with the California Board of Equalization a Form BOE-100-B in connection with the change of ownership and/or control of the Land Holding Companies resulting from the transactions contemplated herein as required under the applicable Laws.

 

13.3                                    Grant of Easements.

 

13.3.1              The parties acknowledge and agree that, pursuant to Section 3 of each Ground Lease with respect to a Property (such provisions of each such Ground Lease the “Ground Lease Easement/License Provisions”), from and after Closing each “Owner” under a Ground Lease may, or may hereinafter be required to, grant (a) to third parties (including local public utilities or service providers) non-exclusive easements over, across and upon portions of its Property for purposes of ingress and egress, roads, constructing a substation, overhead and underground utility lines, communication lines and other related facilities and utilities for interconnection, transmission and/or telecommunications purposes and/or (b) such other easements and/or licenses for access, utilities, transmission and/or telecom to other parties (including the tenant under a Ground Lease and to owners of projects that are owned by affiliates of such tenant and located within the near vicinity of such Property, utilities and certain others), in each case as more particularly described and provided for in, and subject to the terms of, the Ground Lease Easement/License Provisions (the “Future Easements/Licenses”).

 

13.3.2              Following the Closing, and for so long as Buyer is the owner of the Equity Interests in an “Owner” under a Ground Lease, Buyer shall cause such “Owner” to comply with its obligations under the Ground Lease Easement/License Provisions, without any additional compensation to such “Owner”, but subject to such “Owner’s” right to reimbursement for certain expenses as expressly provided for therein.

 

13.3.3              In addition, following the Closing, and for so long as Buyer is the owner of the Equity Interests of RE Mustang LandCo LLC, Buyer shall cause RE Mustang LandCo LLC to grant such easements (or an option therefor) to First Solar as are

 

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provided for in the First Solar LOI, subject (i) to the approval of the form and substance of such easements (or option therefor) by Buyer and RE Mustang LandCo LLC, which approval shall not be unreasonably withheld, and by the tenant under the Ground Lease with respect to the Mustang Site and (ii) Seller’s agreement to subordinate its Repurchase Option (as defined below) to such easements (or option therefor) with respect to such Property.

 

13.3.4              In connection with the Closing, Seller and Buyer as sole member of each Land Holding Company shall execute an agreement in the form of Exhibit J attached hereto (the “Agreement Regarding Easement Form”) in which each Land Holding Company and Seller (with each tenant under a Ground Lease as a third party beneficiary) agrees that:  (i) the Easement for Access and Transmission and Utility Facilities substantially in the form of Exhibit J (the “Lessee Easement Form”) is reasonable and acceptable for the purposes set forth therein; and (ii) for purposes of easements granted to public utilities or service providers, the standard forms utilized by such companies are reasonable and acceptable.

 

13.4                                    Option to Repurchase Properties.  Concurrently with the Closing, Seller and Buyer as sole member of each Land Holding Company shall execute (a) an Option Agreement for the Purchase and Sale of Real Property substantially in the form of Exhibit K attached hereto (the “Repurchase Option”), and (b) an applicable Memorandum of Option Agreement for the Purchase and Sale of Real Property substantially in the form of Exhibit G to Exhibit K attached hereto (the “Memorandum of Repurchase Option”) for recording following the Closing in the official records of Kern County, California, and Kings County, California.  Pursuant to, and as more particularly set forth in and subject to the terms of, the Repurchase Option, each Land Holding Company shall grant to Seller a one-time exclusive right, but not the obligation, to purchase any or all of the Properties (but not a portion of any Property) at the Repurchase Price for such Property as set forth on Exhibit E attached hereto.  Pursuant to, and as more particularly set forth in and subject to the terms of, the Repurchase Option, the Repurchase Option may only be exercised during a period commencing on the date that is two (2) years prior to the Repurchase Date for such Property as set forth on Exhibit E attached hereto and ending on the date that is one (1) year prior to the Repurchase Date.

 

13.5                                    Audit Cooperation by Seller .  For the period of time commencing on the Execution Date and continuing through the first (1st) anniversary of the Closing Date, Seller shall, from time to time, upon reasonable advance notice from Buyer, shall reasonably cooperate with Buyer’s accountants as provided in Exhibit L attached hereto.

 

13.6                                    Tax Matters.

 

13.6.1              Cooperation. Buyer and Seller agree to furnish or cause to be furnished to the other, upon request, as promptly as practicable, such information and assistance relating to the Land Holding Companies and the assets thereof, including, without limitation, access to books and records, as is reasonably necessary for the filing of all Tax Returns by Buyer or Seller, the making of any election relating to Taxes, the preparation for any audit by any Taxing Authority and the prosecution or defense of any claim, suit or proceeding relating to any Tax.  Each of Buyer and Seller shall retain all

 

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books and records with respect to Taxes pertaining to the Land Holding Companies for a period of at least seven (7) years following the Closing Date.  Buyer and Seller shall cooperate fully with each other in the conduct of any audit, litigation or other proceeding relating to Taxes involving the Land Holding Companies or the Tax Allocation.

 

13.6.2              Tax Returns. Seller shall prepare and timely file, or shall cause to be prepared and timely filed, all Tax Returns in respect of the Land Holding Companies and assets thereof that are required to be filed (taking into account any extension) on or before the Closing Date, and shall pay, or cause to be paid, all Taxes (other than Real Estate Taxes which shall be prorated as provided above) in respect of the Land Holding Companies and assets thereof that are due on or before the Closing Date.  Such Tax Returns shall be prepared by treating items on such Tax Returns in a manner consistent with past practices, except as required by Law. At least ten (10) days prior to filing any such Tax Return, the Seller shall submit a copy of such Tax Return to Buyer for Buyer’s review and approval, which approval shall not be unreasonably withheld. Buyer shall prepare and timely file, or shall cause to be prepared and timely filed, all Tax Returns in respect of the Land Holding Companies and assets thereof that relate to taxable periods ending on or before the Closing Date but that are required to be filed after the Closing Date, and Seller shall timely pay, or cause to be timely paid, all Taxes other than Real Estate Taxes which shall be prorated as provided above) due with respect to such Tax Returns.  Buyer shall deliver at least ten (10) days prior to the due date (taking into account any extension) for the filing of such Tax Returns to Seller for Seller’s review a draft of such Tax Returns.  Buyer shall make any reasonable revisions requested by Seller that Seller submits to Buyer no less than five (5) business days prior to the due date of such Tax Returns.  Buyer shall prepare and timely file, or cause to be prepared and timely filed, any Tax Return (a “Straddle Period Tax Return”) required to be filed by any Land Holding Company for a period that includes (but does not end on) the Closing Date (a “Straddle Period”).  Buyer shall deliver at least ten (10) days prior to the due date for the filing of such Straddle Period Tax Return to Seller for Seller’s review a draft of such Tax Return.  Buyer shall make any reasonable revisions requested by Seller that Seller submits to Buyer no less than five (5) business days prior to the due date of such Straddle Period Tax Return.  With respect to Taxes other than Real Estate Taxes (which shall be prorated as provided in Section 9.4.1) of the Land Holding Companies relating to a Straddle Period, Seller shall pay to Buyer the amount of such Taxes allocable to the portion of the Straddle Period that is deemed to end on the close of business on the Closing Date.  The portion of any Tax other than Real Estate Taxes (which shall be prorated as provided in Section 9.4.1) that is allocable to the taxable period that is deemed to end on the Closing Date will be determined as though the taxable year of the Land Holding Companies terminated at the close of business on the Closing Date based on an interim closing of the books of the Land Holding Companies.  Seller shall make such payment at least two (2) business days before payment of Taxes (including estimated Taxes, but excluding Real Estate Taxes, which shall be prorated as provided above) is due.  Any Tax refund (including interest thereon) with respect to the Land Holding Companies attributable to any period ending prior to the Closing Date or that portion of a

 

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Straddle Taxable Period ending on the Closing Date shall be the property of Seller.  If, after the Closing, Buyer or a Land Holding Company receives a refund or utilizes a credit of any Tax of a Land Holding Company attributable to a period ending prior to the Closing Date or that portion of a Straddle Taxable Period ending on the Closing Date, Buyer shall pay to Seller within ten (10) business days after such receipt or utilization an amount equal to such refund received or credit utilized, together with any interest received or credited thereon net of any costs associated therewith.  Buyer shall, and shall cause the Land Holding Companies to, use commercially reasonable efforts to obtain a refund or credit of any Tax of the Land Holding Companies attributable to a period ending prior to the Closing Date or that portion of a Straddle Taxable Period ending on the Closing Date or to mitigate, reduce or eliminate any such Tax that could be imposed for a period ending prior to the Closing Date or that portion of a Straddle Taxable Period ending on the Closing Date (including with respect to the transactions contemplated hereby).

 

13.6.3              Tax Audits and Contests. Seller shall control any Tax audit or contest with respect to a Tax period ending on or before the Closing Date and Buyer shall control any other Tax audit or contest.  Neither Buyer nor Seller shall settle any Tax audit or contest in a way that would adversely affect the other Party without the other Party’s written consent, which the other Party shall not unreasonably withhold.  Seller shall promptly notify Buyer in writing upon receipt by Seller of notice of any pending or threatened Tax audits or assessments relating to the income, properties or operations of Seller that reasonably may be expected to relate to or give rise to a Lien on any Land Holding Company’s assets.  Each of Buyer and Seller shall promptly notify the other in writing upon receipt of notice of any pending or threatened Tax audit or assessment challenging the Tax Allocation.

 

13.6.4              Allocation. The Purchase Price, and any other amounts properly taken into account under the Code, shall be allocated among the assets of the Land Holding Companies in accordance with Section 1060 of the Code and the Treasury regulations promulgated thereunder (and any similar provision of state, local or foreign law, as appropriate) (the “Tax Allocation”).  The Tax Allocation shall be delivered by Buyer to Seller within thirty (30) days after the Closing Date and shall be consistent with the Purchase Price allocation set forth in Exhibit E.  If the Purchase Price is adjusted pursuant to the Agreement, the Tax Allocation shall be adjusted in a manner consistent with the procedures set forth in this Section 13.6.4.  Seller and Buyer agree that they will (a) report the federal, state and other income Tax consequences of the transactions contemplated hereby in a manner consistent with the Tax Allocation on all Tax Returns (including Form 8594), and (b) not take any position inconsistent therewith upon examination of any income Tax Return, in any refund claim, in any litigation, investigation or otherwise, unless required by applicable Law or with the consent of the other party, provided, however, that nothing contained herein shall prevent Buyer or Seller from settling any proposed deficiency or adjustment by any Governmental Authority based upon or arising out of the Tax Allocation, and neither Buyer nor Seller shall be required to litigate before any court any proposed deficiency or adjustment by any Governmental Authority challenging such Tax Allocation.

 

13.6.5              Tax Indemnity.  Subject to the limitations set forth in Section 13.6.6, Seller agrees to indemnify, save and hold harmless the Buyer and the Land Holding Companies (after Closing) from and against any and all losses or damages incurred in connection with, arising out of, resulting from or incident to (i) any Taxes

 

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(other than Real Estate Taxes which shall be prorated as provided above) of the Land Holding Companies allocable to any Pre-Closing Tax Period; (ii) Taxes of Seller (including, without limitation, capital gains Taxes arising as a result of the transactions contemplated by this Agreement) or any of their affiliates (excluding the Land Holding Companies) for any Tax period, other than Taxes described in Section 9.5.1; (iii) Taxes attributable to any breach or inaccuracy of any representation in of Seller relating to Tax matters set forth in this Agreement or any failure to comply with any covenant or agreement of the Seller (including any obligation to take or cause the Land Holding Companies to take, or refrain from taking, any action under this Agreement); (iv) Taxes for which any Land Holding Company (or any predecessor thereof) is held liable under Treasury regulations Section 1.1502-6 (or any similar provision of state, local or foreign Law) by reason of such entity being included in any consolidated, affiliated, combined or unitary group at any time before or on the Closing Date; and (v) Taxes of any Person imposed on Buyer or any Land Holding Company as a transferee or successor or otherwise by operation of Law, with respect to which any Land Holding Company has an obligation to indemnify such Person pursuant to a transaction consummated on or prior to the Closing.  Payment in full of any amount due from the Seller under this Section 13.6.5 shall be made to the Buyer in immediately available funds at least two (2) business days before the date payment of the Taxes to which such payment relates is due, or, if no Tax is payable, within fifteen (15) days after written demand is made for such payment.

 

13.6.6              Survival and Limitation of Tax Indemnity.  All of the representations, warranties and agreements of Seller pertaining to Taxes as set forth in Section 10.11 and Section 13.6 of this Agreement shall be true upon the Execution Date, shall be deemed to be repeated at and as of the Closing Date (except as otherwise set forth in writing to Buyer) and shall survive the Closing as provided in Section 13.6.7.  Buyer acknowledges and agrees that Seller shall not be liable for the payment of any losses or damages (collectively, “Buyer Tax Losses”) suffered by Buyer in connection with any of the provisions of Section 10.11 or Section 13.6 of this Agreement until the aggregate amount of all such Buyer Tax Losses is equal to or greater than $100,000, whereupon Seller shall be liable for all Buyer Tax Losses in excess of $100,000 and up to a maximum liability amount equal to ten percent (10%) of the total Purchase Price herein (the “Tax Cap”).  Buyer shall provide Seller with reasonable supporting documents, including the determination from the applicable taxing authority, detailing the calculation and amount of the Buyer Tax Losses.  For the avoidance of doubt, Buyer hereby expressly acknowledges and agrees that Seller shall have no obligation or liability for any Buyer Tax Losses in an amount in excess of the Tax Cap.  Notwithstanding the foregoing, to the extent that Buyer has actual knowledge that any such representation or warranty made by Seller hereunder is materially untrue, incomplete or incorrect as of the Closing Date, but nonetheless proceeds with the Closing, Buyer shall be deemed to have waived any claim against Seller for any Buyer Tax Losses with respect to such materially untrue, incomplete or incorrect representation or warranty.

 

13.6.7              Survival Period. Notwithstanding any other provision of this Agreement, the representations, warranties and agreements contained in Section 10.11 and this Section 13.6 shall survive the Closing and shall continue in full force and effect until

 

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ninety (90) days after the expiration of the applicable statute of limitations (including any applicable extensions).

 

13.6.8              Withholding. Buyer shall be entitled to deduct and withhold from the consideration otherwise payable pursuant to this Agreement to Seller or any other Person such amounts as Buyer is required to deduct and withhold under the Code, or any Tax Law, with respect to the making of such payment.  To the extent that amounts are so withheld, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the Person in respect of whom such deduction and withholding was made.

 

13.6.9              Tax Treatment of Indemnity Payments. Any payments made pursuant to Section 12.1 shall constitute an adjustment of the Purchase Price for Tax purposes and shall be treated as such by Buyer and Seller on their Tax Returns to the extent permitted by Law.

 

13.7                                                            Certificate of Compliance.  Notwithstanding anything to the contrary as set forth herein, and subject to the terms set forth in Section 10.7.2.3(c) hereof, Seller shall use commercially reasonable efforts to continue to pursue at its sole cost and expense, final approval of any and all pending certificates of compliance related to the Properties.

 

14.                               BROKERS.  Buyer and Seller each hereby represent, warrant to and agree with each other that it has not had, and shall not have, any dealings with any third party to whom the payment of any broker’s fee, finder’s fee, commission or other similar compensation (“Commission”) shall or may become due or payable in connection with the transaction contemplated hereby.  Seller shall indemnify, defend, protect and hold Buyer harmless from and against any and all claims incurred by Buyer by reason of any breach or inaccuracy of the representation, warranty and agreement of Seller contained in this Section 14.  Buyer shall indemnify, defend, protect and hold Seller harmless from and against any and all claims incurred by Seller by reason of any breach or inaccuracy of the representation, warranty and agreement of Buyer contained in this Section 14.  The provisions of this Section 14 shall survive the Closing or earlier termination of this Agreement.

 

15.                               MISCELLANEOUS PROVISIONS.

 

15.1                                    Governing Law.  This Agreement and the legal relations between the parties hereto shall be governed by and construed and enforced in accordance with the Laws of the State of California, without regard to its principles of conflicts of law.

 

15.2                                    Entire Agreement.  This Agreement, including the exhibits attached hereto, and the Transaction Documents constitutes the entire agreement between Buyer and Seller pertaining to the subject matter hereof and supersedes all prior agreements, understandings, letters of intent, negotiations and discussions, whether oral or written, of the parties, and there are no warranties, representations or other agreements, express or implied, made to either party by the other party in connection with the subject matter hereof except as specifically set forth herein or in the documents delivered pursuant hereto or in connection herewith.

 

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15.3                                    Modification; Waiver.  No supplement, modification, waiver or termination of this Agreement shall be binding unless executed in writing by the party to be bound thereby.  No waiver of any provision of this Agreement shall be deemed or shall constitute a waiver of any other provision hereof (whether or not similar), nor shall such waiver constitute a continuing waiver unless otherwise expressly provided.

 

15.4                                    Notices.  All notices, consents, requests, reports, demands or other communications hereunder (collectively, “Notices”) shall be in writing and may be given personally, by registered or certified mail, by facsimile or by Federal Express (or other reputable overnight delivery service) as follows:

 

To Buyer:                                                                                         Landmark Infrastructure Operating Company LLC
 c/o Landmark Dividend LLC
 2141 Rosecrans Avenue, Suite 2100
 El Segundo, CA 90245
 Attention:  Legal Department
 Telephone:  (424) 543-2061
 Facsimile:    (424) 543-2061

 

To Seller:                                                                                             Recurrent Energy LandCo LLC
 c/o Recurrent Energy, LLC

300 California Street, 7th Floor

San Francisco, CA 94104
 Attention: Office of the General Counsel
 Telephone:  (415) 675-1500
 Facsimile:   (415) 675-1501

 

or to such other address or such other person as the addressee party shall have last designated by notice to the other party.  All Notices shall be deemed to have been given when received.  All Notices given by facsimile shall be followed by the delivery of a hard copy of such Notice, provided that such Notice shall be deemed to have been given when received by facsimile.

 

15.5                                    Expenses.  Subject to the provision for payment of the Closing Costs in accordance with the terms of Section 9.5 hereof and any other provision of this Agreement, whether or not the transaction contemplated by this Agreement shall be consummated, all fees and expenses incurred by any party hereto in connection with this Agreement shall be borne by such party.

 

15.6                                    Assignment.  Neither all nor any portion of either party’s interest under this Agreement may be sold, assigned, encumbered, conveyed, or otherwise transferred, whether directly or indirectly, voluntarily or involuntarily, or by operation of law or otherwise (including, without limitation, by a transfer of interests in such party) (collectively, a “Transfer”), without the prior written consent of the other party hereto, which consent may be granted or denied in its sole and absolute discretion; provided, however, Buyer shall have the unconditional right, but with written notice to Seller, to assign its interest in this Agreement to Landmark Infrastructure Partners LP, a Delaware limited partnership (“Landmark LP”), or a subsidiary of Landmark LP.  Any attempted Transfer in violation of this paragraph and without the required consent shall be

 

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null and void.  No Transfer, whether with or without consent, shall operate to release the party making a Transfer or alter such party’s primary liability to perform its obligations under this Agreement.

 

15.7                                    Severability.  Any provision or part of this Agreement which is invalid or unenforceable in any situation in any jurisdiction shall, as to such situation and such jurisdiction, be ineffective only to the extent of such invalidity and shall not affect the enforceability of the remaining provisions hereof or the validity or enforceability of any such provision in any other situation or in any other jurisdiction.

 

15.8                                    Successors and Assigns; Third Parties.  Subject to and without waiver of the provisions of Section 15.6 hereof, all of the rights, duties, benefits, liabilities and obligations of the parties shall inure to the benefit of, and be binding upon, their respective successors and assigns.  Except as specifically set forth or referred to herein, nothing herein expressed or implied is intended or shall be construed to confer upon or give to any person or entity, other than the parties hereto and their successors or permitted assigns, any rights or remedies under or by reason of this Agreement.

 

15.9                                    Confidentiality.  Buyer acknowledges that all information provided to it in connection with this Agreement and the consummation of the transactions contemplated hereby, is subject to the terms of that certain Mutual Nondisclosure Agreement between Recurrent Energy, LLC, and Landmark Dividend LLC, dated June 4, 2016 (the “Confidentiality Agreement”), the terms of which are incorporated herein by reference.  In addition to the foregoing, each party agrees to maintain in confidence, and not to disclose to any third party without the other party’s prior consent, the terms and provisions of this Agreement; provided, however, that each party, its agents and representatives may disclose such information (i) to such party’s accountants, attorneys, lenders, partners, consultants and other advisors in connection with the transactions contemplated by this Agreement (collectively “Representatives”) to the extent that such Representatives reasonably need to know (in Seller’s or Buyer’s reasonable discretion) such information in order to assist, and perform services on behalf of, Seller or Buyer, but the disclosing party shall remain responsible for its Representatives’ compliance with the confidentiality provisions of this Agreement; (ii) to the extent required by any applicable statute, law, regulation, governmental authority or court order or as appropriate to meet disclosure obligations of such party under applicable securities laws or stock exchange rules; and (iii) in connection with any litigation that may arise between the parties in connection with the transactions contemplated by this Agreement.

 

15.10                             Public Statements.  Each of the parties hereto shall not (and shall cause its affiliates not to) issue any press release or any similar public statement regarding the transactions contemplated by this Agreement unless both parties consent to such public statement (such consent from either party shall not be unreasonably withheld, conditioned or delayed) and have approved the contents of any such public statement; provided, however, that Seller acknowledges that Buyer intends to and shall be entitled to disclose and file a copy of this Agreement with the Securities and Exchange Commission (the “SEC”) (but not the exhibits or schedules hereto, unless otherwise required under applicable securities laws or stock exchange rules or requested by the SEC) on Form 8-K or Form 10-K pursuant to the Securities Act of 1933, as amended, and the regulations thereunder; provided further, however, that following the Closing, Buyer shall also be entitled to disclose and file a copy of the Repurchase Option in the form executed by the parties at Closing with the SEC on Form 8-K or Form 10-K.

 

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15.11                             Drafts Not an Offer to Enter Into a Legally Binding Contract.  The parties hereto agree that the submission of a draft of this Agreement by one party to another is not intended by either party to be an offer to enter into a legally binding contract.  The parties shall be legally bound with respect to the purchase and sale of the Equity Interests in the Land Holding Companies pursuant to the terms of this Agreement only if and when the parties have been able to negotiate all of the terms and provisions of this Agreement in a manner acceptable to each of the parties in their respective sole discretion, including, without limitation, all of the Exhibits and Schedules hereto, and both Seller and Buyer have fully executed and delivered to each other a counterpart of this Agreement, including, without limitation, all Exhibits and Schedules hereto.

 

15.12                             Counterparts.  This Agreement may be executed in as many counterparts as may be deemed necessary and convenient, and by the different parties hereto on separate counterparts, each of which, when so executed, shall be deemed an original, but all such counterparts shall constitute one and the same instrument.

 

15.13                             Headings.  The Section headings of this Agreement are for convenience of reference only and shall not be deemed to modify, explain, restrict, alter or affect the meaning or interpretation of any provision hereof.

 

15.14                             Time of Essence.  Time shall be of the essence with respect to all matters contemplated by this Agreement.

 

15.15                             Further Assurances.  In addition to the actions recited herein and contemplated to be performed, executed, and/or delivered by Seller and Buyer, Seller and Buyer agree to perform, execute and/or deliver or cause to be performed, executed and/or delivered at Closing or after Closing any and all such further acts, instruments, deeds and assurances as may be reasonably required to consummate the transaction contemplated hereby.

 

15.16                             Number and Gender.  Whenever the singular number is used, and when required by the context, the same includes the plural, and the masculine gender includes the feminine and neuter genders.

 

15.17                             Construction.  This Agreement shall not be construed more strictly against one party hereto than against any other party hereto merely by virtue of the fact that it may have been prepared by counsel for one of the parties.

 

15.18                             Exhibits.  All exhibits attached hereto are hereby incorporated by reference as though set out in full herein.

 

15.19                             Attorneys’ Fees.  In the event that either party hereto brings an action or proceeding against the other party to enforce or interpret any of the covenants, conditions, terms or provisions of this Agreement, the prevailing party in such action or proceeding shall be entitled to recover all costs and expenses of such action or proceeding, including, without limitation, attorneys’ fees, charges, disbursements and the fees and costs of expert witnesses.

 

15.20                             Business Days.  As used herein, the term “business day” shall mean a day that is not a Saturday, Sunday or legal holiday in the State of California.  In the event that the 

 

29

 

date for the performance of any covenant or obligation under this Agreement shall fall on a Saturday, Sunday or legal holiday, the date for performance thereof shall be extended to the next business day.

 

15.21                             Waiver of Known Defaults.  Notwithstanding anything to the contrary contained herein, in the event that either party hereto has actual knowledge of the default of the other party (a “Known Default”), but nonetheless elects to consummate the transaction contemplated hereby and proceeds to Closing, then the rights and remedies of the non-defaulting party shall be waived with respect to any such Known Default upon the Closing and the defaulting party shall have no liability with respect thereto.

 

15.22                             No Course of Dealing. Seller has entered into this Agreement on the express understanding with Buyer that in entering into this Agreement Seller is not establishing any course of dealing with Buyer and, for the avoidance of doubt, except as expressly set forth herein, no action shall be deemed to create a binding future obligation of Seller or course of dealing pursuant to this Agreement.

 

15.23                             Currency.  All reference to currency in this Agreement shall be deemed to be reference to United States dollars.

 

15.24                             No Registration of Agreement.  The Buyer shall not register this Agreement or any notice of this Agreement on title to any Property.

 

[Remainder of Page Left Blank Intentionally]

 

30

 

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.

 

	
 
    	
BUYER:
    
	
 
    	
 
    
	
 
    	
LANDMARK INFRASTRUCTURE   OPERATING
   COMPANY LLC, a Delaware limited liability company
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ George Doyle
    
	
 
    	
 
    	
Name: George Doyle
    
	
 
    	
 
    	
Title:Authorized Signatory
    

 

[Additional Signature Page Follows]

 

 

	
 
    	
SELLER:
    
	
 
    	
 
    
	
 
    	
RECURRENT   ENERGY LANDCO LLC,
    
	
 
    	
a Delaware limited   liability company
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ Helen Kang Shin
    
	
 
    	
 
    	
Name: Helen Kang Shin
    
	
 
    	
 
    	
Title: Vice PresidentExhibit 10.1

 

 

SETTLEMENT AGREEMENT

This Settlement Agreement (“Agreement”) is made by and between DeVry University (OPE ID Number 01072700) (“DVU”), 3005 Highland Parkway, Downers Grove, Illinois 60515, and the United States Department of Education (the “Department”) acting through the Chief Enforcement Officer at Federal Student Aid (collectively “the Parties”), and is effective the latest date opposite the signatures below (“Effective Date”).

RECITALS

            WHEREAS, DVU is a school participating in the Federal student aid programs authorized pursuant to Title IV of the Higher Education Act of 1965, as amended, 20 U.S.C. § 1070 et seq. (“Title IV, HEA programs”); and

WHEREAS, DVU received a request for documents and information on August 28, 2015 from the Department’s Multi-Regional and Foreign School Participation Division of the Federal Student Aid Office; and

WHEREAS, the Department issued a Notice of Intent to Limit to DVU on January 27, 2016 (the “Notice”); and

WHEREAS, DVU timely filed a written request for a hearing contesting the Notice on February 12, 2016, and the Notice is now the subject of a Federal Student Aid proceeding entitled In the Matter of DeVry University, Docket No. 16-07-O (the “Limitation Action”); and

WHEREAS, the Parties have endeavored to resolve this matter and have engaged in good faith negotiations for that purpose; and

WHEREAS, the Parties now desire to settle this matter.

 NOW, THEREFORE, in consideration of the mutual promises and the performance of the actions described herein and other good and valuable consideration, the receipt and sufficiency of which the Parties hereby acknowledge, the Parties agree as follows:

	
1.

	
DVU agrees to the following:

	
a.

	
To the extent DVU has not already done so, DVU will immediately cease publishing or otherwise using the Since 1975 Representation and will not resume publishing or otherwise using the Since 1975 Representation.  As used in this Agreement, “Since 1975 Representation” means any representation, regardless of manner, form or means of utterance or publication by DVU to a student, prospective student, accrediting agency, state agency, the Secretary of Education (“Secretary”), or any member of the public stating or suggesting the graduate employment outcomes for DVU graduates since 1975.  Without limitation, the phrase “Since 1975 Representation” shall include representations that state that (1) since 1975, 90% (or some close variation thereof) of DVU graduates system-wide in the active job market were employed in career-related positions within 6 months of graduation; or (2) since 1975, 90% (or some close variation thereof) of DVU graduates system-wide in the active job market held positions in their fields of study within 6 months of graduation.  The phrase “Since 1975 Representation” shall exclude any representation of graduate employment outcomes for DVU graduates that does not cumulatively include DVU graduates since 1975.

 

1

 

	
b.

	
DVU will not make any representations to a student, prospective student, accrediting agency, state agency, the Secretary, or any member of the public that are based, in whole or in part, on the post-graduation employment outcomes of any student who graduated from DVU between 1975 and October 1980.

	
c.

	
DVU certifies that it has taken or will take steps, as identified in Exhibit A, to remove certain past uses or publications by DVU and third parties of the Since 1975 Representation.

	
d.

	
To the extent DVU makes any representations to any student, prospective student, accrediting agency, state agency, the Secretary, or member of the public that are based, in whole or in part, on graduate employment rates, DVU will possess and maintain graduate-specific data to substantiate such representations and will make such graduate-specific data available to the Department upon request.  As used herein, “graduate-specific data” shall mean all information about individual graduates, individually and in the aggregate, necessary to support such a representation  and includes graduate names, social security numbers, student ID numbers, graduation dates, degrees earned (e.g., bachelors, associates, masters), programs or majors (e.g., business administration, technical management), specializations or other concentrations (if applicable), and information regarding both pre- and post-graduation employment, including employer name, occupation, position title, hours worked, salary, start date, full or part time status, and whether the position is funded by DVU, and any other information necessary to substantiate the truthfulness of the representation.  Without limitation, “graduate-specific data” shall include:

	
i.    

	
To the extent necessary to substantiate the truthfulness of the representation, all student files relating to students or graduates whose graduate employment information serves as a basis for the representation, including student files relating to students or graduates who are part of a cohort of students as to which the representation pertains, but whose information is nonetheless excluded from the calculation for any reason;

	
ii.   

	
All documentation collected or maintained by DVU necessary to substantiate the truthfulness of the representation, including its employees, contractors, and agents, relating to the employment of any such student before, during, and after the student's graduation from DVU and maintained in DVU’s Registrar or Career Services files;

2

	
iii.   

	
All communications or documents necessary to substantiate the truthfulness of the representation reflecting communications between DVU, including its employees, contractors, and agents, with any student or graduate regarding post-graduation employment;

	
iv.  

	
All documents obtained by DVU relating to any audit, survey, analysis, or other review contracted for or by DVU, relating to any representations that are based, in whole or in part, on graduate employment outcomes;

	
v.   

	
All other evidence on which DVU relies to substantiate the facts underlying any representation about the employability of DVU graduates, including, without limitation, representations about the employment rates of DVU graduates.

	
e.

	
DVU will maintain information sufficient to establish the methodology it used to formulate any representations regarding post-graduation employment outcomes of DVU students and make such information available to the Department upon request.  As used herein “information sufficient to establish the methodology” shall include, without limitation, detailed information about the methodology used to categorize students for purposes of any representations including, as appropriate, the methodology used to determine whether a graduate was employed in his or her field of study, the methodology used to assess the differences, if any, between pre-enrollment or pre-graduation employment, on the one hand, and post-graduation employment, on the other, and the methodology used to determine the veracity of any information compiled by DVU employees or agents responsible for compiling information and making such determinations.  Without limitation, “information sufficient to establish the methodology” shall also include:

	
i.

	
All internal or external publications, including, without limitation, Career Services Manuals, training materials, guidelines, and instructions, that describe, detail, or relate to the methodology used by DVU to calculate or create such representation based, in whole or in part, on graduate employment rates; and

	
ii.

	
All other evidence on which DVU relies to substantiate the methodology underlying any representation about the employability of DVU graduates, including, without limitation, representations about the employment rates of DVU graduates.

	
f.

	
With respect to the records and information required to be maintained pursuant to Paragraphs 1(d) and 1(e) of this Agreement, DVU shall maintain such records for a period not less than six (6) years following the last making of the representation triggering an obligation in those Paragraphs.

3

	
g.

	
For a period of six years from the Effective Date, DVU will engage a qualified, independent, third-party (“Third Party”) to review the records and information relating to DVU graduates from January 2017 and beyond required to be maintained pursuant to Paragraphs 1(d) and 1(e) of this Agreement and DVU’s plans to maintain such records for the period required by Paragraph 1(f) of this Agreement.  The Third Party shall issue a Report, on no less than an annual basis, that confirms DVU has satisfied, in all material respects, its responsibilities under Paragraphs 1(d) and 1(e) of this Agreement relating to DVU graduates from January 2017 and beyond, and has implemented policies designed to achieve and maintain compliance with Paragraph 1(f) of this Agreement.  This Report: (A) shall identify the information that DVU has provided to the Third Party, including a listing and brief description of all representations  DVU has made (since the most recent report provided pursuant to this Paragraph) to any student, prospective student, accrediting agency, state agency, the Secretary, or member of the public that are based, in whole or in part, on graduate employment rates, and the steps that the Third Party has taken to confirm DVU’s compliance with Paragraphs 1(d) and 1(e), and its policies to comply with Paragraph 1(f), of this Agreement; (B) is provided to the Director of Enforcement at Federal Student Aid or his or her designee; and (C) is accompanied by a statement by the Third Party affirming that, to the knowledge of the Third Party, the Report does not contain any false, fictitious, or fraudulent information, or omit any material fact.  In the event DVU is unable to secure the engagement of a Third Party to provide the Report prescribed under this Paragraph 1(g) after exhausting all reasonable good faith efforts to do so, the Parties agree to work cooperatively to amend this Paragraph to accomplish their shared objective of obtaining a third-party report.  In such event, DVU will provide the Department with a written report describing the steps taken to secure such an engagement, the reasons for DVU’s inability to secure such an engagement, and the names of any Third Party actually retained for the purpose of providing the Report required by this Paragraph.

	
h.

	
For a period of six years from the Effective Date, and on no less than an annual basis, DVU will provide the Department a certification attesting to DVU’s compliance with Paragraphs 1(d) and 1(e) of this Agreement, and its policies for complying with Paragraph 1(f) of this Agreement.  Such certification shall: (A) identify and briefly describe to the Department all representations DVU has made  (since the most recently provided certification pursuant to this Paragraph) to any student, prospective student, accrediting agency, state agency, the Secretary, or member of the public that are based, in whole or in part, on graduate employment rates; (B) affirm that DVU has not knowingly excluded from the graduate-specific data required to be maintained pursuant to Paragraph 1(d) any other information created or maintained by DVU that could reasonably be used to substantiate a representation subject to Paragraph 1(d); (C) be provided to the Director of Enforcement at Federal Student Aid or his or her designee; and (D) acknowledge that the provision of any false, fictitious, or fraudulent information, or the omission of any material fact, may subject DVU to criminal, civil or administrative penalties for fraud, false statements, false claims, or other violations of law.

4

	
i.

	
Within thirty days of the Effective Date, DVU will prominently post on the home page of its website in a simple and meaningful manner, the following language (“Disclosure Language”), to be maintained for two years:

DeVry University previously advertised that “Since 1975, 90% of DeVry graduates system-wide in the active job market held positions in their fields of study within 6 months of graduation.”  The U.S. Department of Education has asserted that the records maintained by DeVry University for the period 1975-1983 were not sufficient to substantiate the Since 1975 Representation, and thus that DeVry University could not substantiate this representation to the extent required by law.  Accordingly, the University agreed to cease making the Since 1975 Representation and post this notification on its website.

	
j.

	
Within thirty days of the Effective Date, and for five years following the Effective Date, DVU must include the Disclosure Language in any and all enrollment agreements or other such documents memorializing the enrollment of a student at DVU.

	
k.

	
For a period of five years following the Effective Date, DVU will submit to the Department, to the attention of the Director of Enforcement, no later than ten days after the event described below, written notice of the occurrence of any of the following:

	
i.    

	
Any adverse action whatsoever, including, without limitation, written warnings, adverse factual determinations, show cause orders, lawsuits filed, probation and similar actions, taken against DVU by an accrediting agency, State authorizing agency, Federal or State agency, or any other civil or criminal law enforcement agency, or any civil case (including an arbitration) filed by a private party relating to representations made by DVU regarding the employability of its graduates (including representations that are based, in whole or in part, on graduate employment rates), and any judgments rendered in such case; or

	
ii.   

	
DVU's receipt of a subpoena, civil investigative demand, or other inquiry by an accrediting agency, State authorizing agency, Federal or State agency, or any other civil or criminal law enforcement agency relating to representations made by DVU regarding the employability of its graduates (including representations that are based, in whole or in part, on graduate employment rates).

	
2.

	
Within 30 days of the Effective Date of this agreement, DVU shall post a letter of credit (“LOC”) for the benefit of the Department in the amount of $68,435,908, which is approximately equal to ten percent of the Title IV, HEA program funds disbursed by DVU in the 2014-2015 award year.

5

	
a.

	
The LOC will be adjusted annually to remain at a level equal to ten percent of DVU’s Title IV, HEA program disbursements in the preceding fiscal year, but in no event shall the LOC be less than $68,435,908.  The LOC shall expire on the fifth anniversary of its issuance.  Pursuant to lender requirements, the LOC may contain an annual expiration date and allow for automatic renewal.  Should DVU fail to renew or replace the LOC within ten (10) days prior to any interim expiration with a new LOC that becomes effective immediately upon the expiration of the extant LOC (so as not to create any lapse in an LOC), the Department may call the extant LOC and place the funds in an escrow account at the Department pending a determination of the extent to which those funds will be used in accordance with Paragraph 2(b) of this Agreement.

	
b.

	
The LOC posted pursuant to this Agreement will be deemed to satisfy any and all requirements for DVU to post an LOC triggered by the past performance requirement of financial responsibility under 34 C.F.R. § 668.174(a)(1) based on the settlement of the Notice.

	
c.

	
The LOC will permit the Department to draw against the letter of credit only under the following circumstances, and in any case only after such action has been finally determined to be justified under a process in which DVU is afforded all the rights and protections to which it is entitled:

	
i.    

	
To pay refunds of institutional or non-institutional charges owed to or on behalf of current or former students of DVU, whether DVU remains open or has closed;

	
ii.   

	
To provide for the "teach-out" of students enrolled at DVU at the time of the closure of DVU, including with respect to activities conducted pursuant to a “teach out agreement,” as that term is defined in 34 C.F.R. § 602.3, and/or other services reasonably designed to facilitate the transition of such students to another educational program, such as funding transfer fees, transcript costs, and similar expenses; and

	
iii.  

	
To pay any fines, penalties, or liabilities whatsoever owing to the Secretary arising from acts or omissions by DVU in violation of Title IV, HEA program requirements, including the violation of any agreement entered into by DVU with the Secretary regarding the administration of Title IV, HEA programs. Without limitation, this shall include any liability owed to the Secretary pursuant to Section 455(h) of the HEA, 20 U.S.C. §1087e(h), or any regulation promulgated thereunder.

	
d.

	
As used in this Agreement, “Covered Conduct” shall mean conduct regarding DeVry’s substantiation, or lack thereof, for the Since 1975 Representation. “Covered Conduct” shall exclude any conduct other than that regarding DVU’s substantiation for the Since 1975 Representation and shall also exclude conduct relating to DVU’s use of any other representation, including other representations related to post-graduation  outcomes of DVU students, irrespective of whether such representation was made as part of the We Major in Careers campaign.  Covered conduct shall also exclude any conduct that may form a basis for a determination by the Secretary that DVU has engaged in substantial misrepresentation pursuant to 34 C.F.R. Part 668 Subpart F or 20 U.S.C. § 1094(c)(3).

6

	
3.

	
The Parties agree that the settlement of the Notice constitutes a condition of past performance as set forth in 34 C.F.R. § 668.174(a)(1).  DVU will therefore participate in the Title IV, HEA programs under provisional certification through April 1, 2018, provided that:

	
a.

	
The Department retains the right to revoke DVU’s provisional certification for cause, consistent with the procedural requirements set out in 34 C.F.R. § 668.13(d) and the provisional program participation agreement attached hereto as Exhibit B.  The provisions set forth in Paragraph 3(b) below shall not apply to any revocation action taken by the Department.

	
b.

	
Before taking any action regarding DVU’s eligibility under or participation in the Title IV, HEA programs other than a revocation pursuant to 34 C.F.R. § 668.13(d), or before imposing any fine, penalty, or liability against DVU, irrespective of whether such fine, penalty, or liability is imposed using the processes afforded in 34 C.F.R. Part 668 Subpart G or following a Final Program Review Determination or Final Audit Determination (and subject to appeal rights under 34 C.F.R. Part 668 Subpart H), the Department will:

	
i.    

	
Provide DVU written notice specifying the Department’s basis for such action; and

	
ii.   

	
Afford DVU an opportunity to challenge the action through a proceeding pursuant to 34 C.F.R. Part 668, Subparts G or H, as applicable, with all attendant rights;

	
iii.  

	
Written notice, as that phrase is used in Paragraph 3(b)(i) of this Agreement may be satisfied by the Department’s issuance of a Final Program Review Determination or Final Audit Determination.

	
c.

	
DVU will have until six-months after the last day of DVU’s fiscal year to submit its audited financial statements and an independent compliance audit, consistent with 34 C.F.R. § 668.23.

	
d.

	
The Department shall process all applications for programs and locations as it would in the ordinary course and without undue delay.

7

	
e.

	
Other than as expressly set forth herein, the Department shall not impose growth or other conditions or restrictions on DVU’s participation in the Title IV, HEA programs due to the Covered Conduct, or arising from the Notice or the settlement of the Notice. Except as otherwise provided by law, the Department is not otherwise limited in its authority to impose such conditions or restrictions.

	
f.

	
Except as otherwise provided herein, no person or entity exercising substantial control over DVU as determined under 34 C.F.R. § 668.174 shall be required to submit a financial guarantee to the Department as a condition of initial provisional certification, or due to the Covered Conduct, or arising from the Notice or the settlement of the Notice.

	
4.

	
DVU accepts and acknowledges that for five years after the effective date of this Agreement and following the expiration of the Provisional Program Participation Agreement executed pursuant to Paragraph 3 of, and concurrently with, this Agreement, the condition of past performance resulting from the settlement of the Notice may result in DVU’s certification to participate in Title IV, HEA programs only under an alternative standard set forth in 34 C.F.R. § 668.175.

	
5.

	
Notwithstanding any other provision of this Agreement, nothing in this Agreement shall restrict the Department from considering the Covered Conduct when devising or implementing a remedy for any conduct by DVU (which is not within the Covered Conduct) that violates Title IV of the HEA or any regulation promulgated thereunder.

	
6.

	
The Department will not impose conditions on the timing of disbursement of aid or documentation requirements due to the Covered Conduct, other than requiring DVU, at the Department’s sole discretion, to participate in the Title IV, HEA programs under a method of payment no more restrictive or burdensome than Heightened Cash Monitoring 1 status, set forth at 34 C.F.R.  § 668.162(d)(1).  Except as so stated, the Department retains the sole discretion to determine the method under which the Secretary provides Title IV, HEA program funds pursuant to 34 C.F.R. § 668.162.

	
7.

	
The Department agrees to accept the commitments made by DVU in this Agreement in full and final resolution of all matters, present or future, based on the Covered Conduct, or arising out of the Notice or the Settlement of the Notice.  The Department agrees that it shall not institute, direct, maintain, continue or join any action of any nature, including but not limited to any civil or administrative monetary claim against DVU, or any DVU entities and related parties, arising from or based on the Covered Conduct, the act of settlement, or this Agreement.

	
8.

	
DVU releases the Department (together with its agents and employees) from any claims, known and unknown, suspected and unsuspected, including claims for attorneys’ fees, costs, and expenses of every kind and however denominated, that DVU has asserted or could assert against the Department (together with its agents and employees) concerning the Covered Conduct, the Department’s investigation into the Covered Conduct, the Department’s bringing of the Limitation Action, or the Department’s actions in prosecuting the Limitation Action.

8

	
9.

	
Within five days of the Effective Date, the Parties agree that they shall jointly enter a motion to dismiss the Limitation Action with prejudice.

	
10.

	
This Agreement does not waive, compromise, restrict, or settle any past, present, or future actions by the Department pursuant to 34 C.F.R. Part 668, Subparts G and H that are not arising from or based on the Covered Conduct or this Agreement.

	
11.

	
This Agreement does not waive, compromise, restrict, or settle any past, present, or future violations by DVU, its Trustees, Officers, or employees of the criminal laws of the United States or any action initiated against DVU, its Trustees, Officers, agents, or employees for civil fraud against the United States.

	
12.

	
DVU neither admits nor denies any wrongdoing regarding the Covered Conduct.

	
13.

	
The Parties will each bear their own costs in connection with this action and this Agreement.

	
14.

	
All signatories to this Agreement acknowledge that they have read this Agreement and have freely and voluntarily executed it after having consulted with counsel and received the advice of counsel as to its effect.

	
15.

	
Each individual signing this Agreement warrants that he or she has full authority to do so.  This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original and all of which shall constitute one and the same agreement.

	
16.

	
Neither Party will contest the enforceability of this Agreement in a future proceeding.

	
17.

	
A breach of this Agreement by DVU shall constitute a breach of DVU’s standard of care and diligence in administering Title IV programs, a breach of any Program Participation Agreement in effect at the time of the breach, and cause for revocation pursuant to a provisional Program Participation Agreement.

	
18.

	
This Agreement, including the Exhibits attached hereto, sets forth the entire agreement and understanding of the Parties relating to the subject matter herein and supersedes all prior or contemporaneous discussions, understandings, and agreements, whether oral or written, between them relating to the subject matter hereof.

9

	
 

	
 

	
 

	
 

	
Robert Paul

	
 

	
Date

	
 

	
President

	
 

	
 

	
 

	
DeVry University

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	 	 	 	 
	 	 	 	 
	
Robert S. Kaye

	
 

	
Date

	
 

	Chief Enforcement Officer 	 	 	 
	Federal Student Aid 	 	 	 
	U.S. Department of Education 	 	 	 

 

[Signature Page to Settlement Agreement]

10

 

EXHIBIT A

DVU certifies that it has undertaken, and will continue to undertake, efforts to remove instances of the Since 1975 Representation from electronic sources that may be viewed by members of the public as more particularly set forth in this Exhibit A.  The Parties agree that that the steps DVU certifies to have taken and agrees to undertake, as described in this Exhibit A, satisfy DVU’s obligations pursuant to Section 1(c) of the Settlement Agreement (“Agreement”) by and between DVU and the U.S. Department of Education. Capitalized terms not defined in this Exhibit A shall have the meaning ascribed to them in the Agreement. As used herein, the term “Affiliate” shall mean DeVry Education Group Inc. (“DVG”) and any entity, other than DVU, owned directly or indirectly or controlled by DVG.

	
1.

	
Websites Owned or Controlled by DeVry Education Group.

	
a.

	
DVU certifies that it has taken in reasonable, good faith efforts to locate and remove from the devry.edu website and all other websites owned or controlled by DVU or an Affiliate, each instance of the Since 1975 Representation visible to an ordinary user, except as set forth in section 1.d, below.

	
b.

	
DVU certifies that it has engaged in reasonable, good faith efforts to locate and remove from all social media accounts owned or controlled by DVU or an Affiliate, each instance of the Since 1975 Representation visible to an ordinary user.

	
c.

	
The reasonable, good faith efforts referenced in sections 1.a and 1.b include the following:

	
i.  

	
DVU convened a task force, consisting of internal business leaders and the external advisors listed below, to search for and review instances of the Since 1975 Representation, and to ensure the deletion of each instance of the Representation located during such search, except as described in section 1.d.  The task force consisted of: (i) DVG’s Senior Vice President of External Relations and Regulatory Affairs; (ii) DVU’s Chief Operating Officer; (iii) DVU’s Chief Marketing Officer; (iv) DVU’s Vice President of Workforce Solutions; (v) DVG’s Vice President of Regulatory Affairs; and (vi) DVG’s Director of Regulatory Compliance. The task force worked with outside advisors from Omniangle Technologies, LLC (“Omniangle Technologies”) and Barnes & Thornburg LLP. The task force also obtained the assistance of additional DVG employees with subject matter expertise as necessary, such as personnel responsible for managing the main DVU website and other DVG owned or controlled websites, local campus websites, and DVG social media channels.

	
ii. 

	
At the task force’s instruction, Omniangle Technologies employed its cyber-intelligence tools to monitor this work by conducting searches for any additional instances of the Since 1975 Representation in websites or social media accounts owned or controlled by DVU or an Affiliate.

	
d.

	
The Parties acknowledge that the Since 1975 Representation appears in certain historical press releases, academic annual reports, and investor disclosures (collectively, “Historical References”) contained on sites owned or controlled by DVU or an Affiliate. The Parties agree that DVU shall not be required to remove or seek removal of the Since 1975 Representation to the extent it appears in Historical References.

11

 

	
2.

	
Third Party Websites, Government Websites and Social Media.

	
a.

	DVU certifies that it has engaged in reasonable, good faith efforts to locate instances of the Since 1975 Representation appearing on third-party websites (including social media platforms).

	
b.

	The reasonable, good faith efforts referenced in sections 2.a and include the following:

 

	
i.  

	
The task force described above directed Omniangle Technologies to utilize its cyber-intelligence tools to search for instances of the Since 1975 Representation on third-party websites and in social media accounts owned or controlled by third parties. The task force then issued letters to each of the third parties identified by Omniangle (except for government agencies as described in section 2.d), requesting that the third-parties remove the Representation from their sites or social media accounts.

	
ii.

	Each third party with which DVU had some form of contractual relationship agreed to comply with DVU’s request to remove instances of the Representation identified by the task force.

	
c.

	
An example of a letter DVU sent to third parties prior to the date hereof is attached as Attachment 1. Any request sent to a third party on or after the date hereof shall be in a substantially similar form to Attachment 1 or, in the case of individual users, Attachment 2.

	
d.

	
DVU will retain Omniangle Technologies or a similar vendor to continue to monitor for additional appearances of the Representation through December 31, 2017. Should DVU discover additional appearances of the Representation, regardless of the means or source of that discovery, DVU will contact (using letters akin to those attached hereto as Attachment 1 and Attachment 2, as appropriate) any necessary third parties to request removal of such new appearances. A copy of the retainer agreement between DVU and Omniangle Technologies is attached hereto as Attachment 3.

	
e.

	
The Parties acknowledge that the Since 1975 Representation appears on certain government-maintained websites, media websites or social media platforms not under DVU’s or an Affiliate’s ownership or control. The Parties understand that DVU will not ask any government agency to remove a reference to the Since 1975 Representation from its website or social media platform. The Parties also understand that DVU may be unable to obtain removal of the Since 1975 Representation from websites, media websites or social media platforms not owned or controlled by DVU or an Affiliate. Any such failure to obtain removal of the Since 1975 Representation shall not constitute a breach of the Agreement. Nothing in this paragraph modifies the duty that DVU has to make reasonable, good faith efforts (as described in paragraph 2(c) above) to continue to monitor additional appearances of the Since 1975 Representation and to take necessary corrective action (as described in paragraph 2(b) and 2(c) above.

12

 

The Parties agree that the efforts described above constitute reasonable, good faith efforts to remove the Since 1975 Representation from the public domain and that no breach of section 1(c) of the Settlement Agreement shall occur if DVU continues to make these efforts through December 31, 2017.

1

October 13, 2016

Robert S. Kaye

Chief Enforcement Officer

Federal Student Aid

U.S. Department of Education

400 Maryland Avenue SW

Washington, D.C. 20202

Re: Exhibit A to Settlement Agreement

Dear Mr. Kaye:

By this letter, DeVry Education Group, Inc. (“DVG”) acknowledges the Settlement Agreement, dated as of October 13, 2016 (the “Settlement Agreement”), by and between the United States Department of Education and DeVry University (“DVU”).

Pursuant to the Settlement Agreement, DVU agreed to conduct certain activities set forth with specificity in Exhibit A to the Settlement Agreement (“Exhibit A”).  Certain of the activities set forth in Exhibit A relate to DVG and any entity, other than DVU, owned directly or indirectly or controlled by DVG (referred to here and in the Settlement Agreement as “Affiliates”).  DVG hereby represents that it shall take, and shall cause Affiliates to take, as applicable, such steps as may be required to permit DVU to fulfill its obligations under Exhibit A.  In addition, DVG confirms that DVG and Affiliates, together with their respective personnel, as applicable, have performed the tasks attributed to DVG and Affiliates in Exhibit A.

	 	
Sincerely,

	 
	 	 	 
	 	DEVRY EDUCATION GROUP INC.	 
	 	 	 	 
	 	 	 	 
	 	By: 	 	 
	 	Name: Lisa W. Wardell	 
	 	Title:   President & CEO	 
	 	 	 	 

 

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UNITED STATES DEPARTMENT OF EDUCATION

FEDERAL STUDENT AID

SCHOOL ELIGIBILITY CHANNEL

 

	
PROGRAM PARTICIPATION AGREEMENT

	
[PROVISIONAL APPROVAL]

 

	
Effective Date of Approval:

	
The date on which this Agreement is signed on behalf of the Secretary of Education

	
Approval Expiration Date:

	
April 01, 2018

	
Reapplication Date:

	
December 31, 2017

 

	
Name of Institution:

	
DeVry University

	
dba:

	
DeVry College of New York

	
Address of Institution:

	
3300 North Campbell

 Chicago, IL 60618-5994

	
OPE ID Number:

	
01072700

	
DUNS Number:

	
782924005

	
Taxpayer Identification Number (TIN):

	
362781982

 

	
The execution of this Agreement by the Institution and the Secretary is a prerequisite to the Institution's initial or continued participation in any Title IV, HEA Program.

 

	
The postsecondary educational institution listed above, referred to hereafter as the "Institution," and the United States Secretary of Education, referred to hereafter as the "Secretary," agree that the Institution may participate in those student financial assistance programs authorized by Title IV of the Higher Education Act of 1965, as amended (Title IV, HEA Programs) indicated under this Agreement and further agrees that such participation is subject to the terms and conditions set forth in this Agreement. As used in this Agreement, the term "Department" refers to the U.S. Department of Education.

 

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 SCOPE OF COVERAGE

	

 This Agreement applies to all locations of the Institution as stated on the most current ELIGIBILITY AND CERTIFICATION APPROVAL REPORT issued by the Department. This Agreement covers the Institution's eligibility to participate in each of the following listed Title IV, HEA programs, and incorporates by reference the regulations cited.

 

		·	
FEDERAL PELL GRANT PROGRAM, 20 U.S.C. §§ 1070a et seq.; 34 C.F.R. Part 690.

 

		·	
FEDERAL FAMILY EDUCATION LOAN PROGRAM, 20 U.S.C. §§ 1071 et seq.; 34 C.F.R. Part 682.

 

		·	
FEDERAL DIRECT STUDENT LOAN PROGRAM, 20 U.S.C. §§ 1087a et seq.; 34 C.F.R. Part 685.

 

		·	
FEDERAL PERKINS LOAN PROGRAM, 20 U.S.C. §§ 1087aa et seq.; 34 C.F.R. Part 674.

 

		·	
FEDERAL SUPPLEMENTAL EDUCATIONAL OPPORTUNITY GRANT PROGRAM, 20 U.S.C. §§ 1070b et seq.; 34 C.F.R. Part 676.

 

		·	
FEDERAL WORK-STUDY PROGRAM, 42 U.S.C. §§ 2751 et seq.; 34 C.F.R. Part 675.

 

		·	
ACADEMIC COMPETITIVENESS GRANT AND NATIONAL SCIENCE AND MATHEMATICS ACCESS TO RETAIN TALENT GRANT PROGRAMS, 20 U.S.C. §§ 1070a-1 et seq.; 34 C.F.R. Part 691.

 

		·	
IRAQ AND AFGHANISTAN SERVICE GRANT, 20 U.S.C. §§ 1070d et seq.

 

	
PROVISIONAL CERTIFICATION

	

 This provisional certification is granted for a limited period to permit the Institution to participate in the Title IV, HEA programs referenced in this Agreement. During the period of provisional certification, the participation of the Institution will be subject to revocation for cause. Cause for revocation includes, without limitation, a failure to comply with any provision set forth in this Agreement, a violation of Department regulations deemed material by the Department, or a material misrepresentation in the material submitted to the Department as part of the Institution's application process for this certification. The Department in its sole discretion may provide the Institution with an opportunity to cure any such failure, may place the Institution on reimbursement funding pending a decision regarding revocation of this Agreement by a designated Department official, or may suspend the participation of the Institution pending a decision by the Department regarding revocation of this Agreement. In the event the Department chooses to revoke this Agreement and the Institution's participation in the Title IV, HEA programs, the Institution will have the right to show cause why this Agreement should not be revoked by presenting its objections to the designated Department official in writing. The Institution agrees that this opportunity to show cause, and not the procedures in 34 C.F.R. 668 subpart G, shall be the sole administrative appeal regarding such revocation. The decision by the designated Department official will constitute the final agency action.

 

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Special Requirements for Substantial Changes Made During Term of Provisional Certification

	

Any institution provisionally certified must apply for and receive approval by the Secretary for expansion or of any substantial change (as hereinafter identified) before it may award, disburse or distribute Title IV, HEA funds based on the substantial change. Substantial changes generally include, but are not limited to: (a) establishment of an additional location; (b) increase in the level of academic offering beyond those listed in the Institution's Eligibility and Certification Approval Report (ECAR); or (c) addition of any educational program (including degree, nondegree, or short-term training programs).

 If the Institution applies for the Secretary's approval of a substantial change, the Institution must demonstrate that it has the financial and administrative resources necessary to assure the Institution's continued compliance with the standards of financial responsibility (34 C.F.R. 668.15) and administrative capability (34 C.F.R. 668.16).

	

Reasons and Special Conditions of Provisional Certification

	

Requirement for Heightened Cash Monitoring and Surety, Due to Settlement of Limitation Action

 

Pursuant to 34 C.F.R. §§ 668.171(d)(2) and 668.174(a)(1), an institution is not financially responsible if it has entered into a settlement agreement to resolve a limitation action initiated by the Secretary within the preceding five years. Accordingly, pursuant to 34 C.F.R. § 668.175(f), and as a condition of entering into this Program Participation Agreement under Provisional Certification, the Institution agrees to: (a) participate in the Title IV, HEA programs under the Department's heightened cash monitoring payment method set forth at 34 C.F.R. § 668.162(d)(1); (b) comply with the provisions of the Zone alternative set forth at 34 C.F.R. § 668.175(d)(2) and (d)(3); and (c) post surety (in the form of an irrevocable Letter of Credit), for a five year period. Each of these conditions is made in accordance with and subject to the terms and conditions of the Settlement Agreement between the Department and the Institution entered into in order to resolve the Federal Student Aid proceeding entitled In the Matter of DeVry University, Docket No. 16-07-O that commenced following the Federal Student Aid's issuance to the Institution, on January 27, 2016, of a notice of intent to limit the Institution's participation in Title IV, HEA programs. That Settlement Agreement is fully incorporated herein. To the extent permitted by law and to the extent not expressly limited in the Settlement Agreement, the Secretary retains the right to increase or decrease the amount of the Letter of Credit during the five-year period.

 

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Document Retention Provisions

	

 To ensure the Institution can meet its obligations to retain records, the Institution shall, within 60 days of the effective date of this Provisional Program Participation Agreement, submit to the Department a records retention plan detailing the Institution's structure for retaining, at a minimum, the following documents: (1) all documents required to be preserved by any applicable regulations, including, without limitation, 34 C.F.R. §§ 668.16(d), 668.23(e), 668.24, and 668.26(b)(3); (2) all documents relating or pertaining to the Institution's administration of Title IV, HEA program funds; (3) all documents constituting student admissions, financial aid, and educational files including student transcripts; (4) all documents relating to the Institution's marketing and recruiting practices and representations, including documents constituting or relating to representations concerning post-graduation outcomes of the Institution's students and the factual and methodological basis for those representations; and (5) all documents constituting submissions the institution has made to its accreditor and any state authorizing agencies. As part of its plan, the Institution must designate a specific individual who may act as a point of contact for records retention matters in the event of a closure of the Institution. In addition, within 90 days of the effective date of this Provisional Program Participation Agreement, the Institution must submit to the Department for its approval a signed engagement letter with a State or other entity detailing an agreement for record retention in the event of a closure of the Institution. Such engagement letter must include a process by which students and graduates can access their educational and financial records following any closure of the Institution.

	

Application for Recertification

	

 Upon completion of the period of provisional certification, if the Institution wishes to apply for recertification to participate in the Title IV, HEA programs, the Institution must submit a completed Application for Approval to Participate in Federal Student Financial Aid Programs, together with all required supporting documentation, no later than December 31, 2017.

	

Grant or Denial of Full Certification

	

 Notwithstanding any paragraph above, the provisional certification ends upon the Department's notification to the Institution of the Department's decision to grant or deny a six year certification to participate in the Title IV, HEA programs.

 

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GENERAL TERMS AND CONDITIONS

	
1.

	
The Institution understands and agrees that it is subject to and will comply with the program statutes and implementing regulations for institutional eligibility as set forth in 34 C.F.R. Part 600 and for each Title IV, HEA program in which it participates, as well as the general provisions set forth in Part F and Part G of Title IV of the HEA, and the Student Assistance General Provisions regulations set forth in 34 C.F.R. Part 668.

The recitation of any portion of the statute or regulations in this Agreement does not limit the Institution's obligation to comply with other applicable statutes and regulations.

	
2.

	
a.    The Institution certifies that on the date it signs this Agreement, it has a drug abuse prevention program in operation that it has determined is accessible to any officer, employee, or student at the Institution.

b.    The Institution certifies that on the date it signs this Agreement, it is in compliance with the disclosure requirements of Section 485(f) of the HEA (Campus Security Policy and Campus Crime Statistics).

	
3.

	
The Institution agrees to comply with --

	 	
a.    Title VI of the Civil Rights Act of 1964, as amended, and the implementing regulations, 34 C.F.R. Parts 100 and 101 (barring discrimination on the basis of race, color or national origin);

b.    Title IX of the Education Amendments of 1972 and the implementing regulations, 34 C.F.R. Part 106 (barring discrimination on the basis of sex);

c.    The Family Educational Rights and Privacy Act of 1974 and the implementing regulations, 34 C.F.R. Part 99;

d.    Section 504 of the Rehabilitation Act of 1973 and the implementing regulations, 34 C.F.R. Part 104 (barring discrimination on the basis of physical handicap); and

e.    The Age Discrimination Act of 1975 and the implementing regulations, 34 C.F.R. Part 110.

f.    The Standards for Safeguarding Customer Information, 16 C.F.R. Part 314, issued by the Federal Trade Commission (FTC), as required by the Gramm-Leach-Bliley (GLB) Act, P.L. 106-102. These Standards are intended to ensure the security and confidentiality of customer records and information. The Secretary considers any breach to the security of student records and information as a demonstration of a potential lack of administrative capability as stated in 34 C.F.R. 668.16(c). Institutions are strongly encouraged to inform its students and the Department of any such breaches.

	
4.

	
The Institution acknowledges that 34 C.F.R. Parts 602 and 667 require accrediting agencies, State regulatory bodies, and the Secretary to share information about institutions. The Institution agrees that the Secretary, any accrediting agency recognized by the Secretary, and any State regulatory body may share or report information to one another about the Institution without limitation.

	
5.

	
The Institution acknowledges that the HEA prohibits the Secretary from recognizing the accreditation of any institution of higher education unless that institution agrees to submit any dispute involving the final denial, withdrawal, or termination of accreditation to initial arbitration prior to any other legal action.

 

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SELECTED PROVISIONS FROM

GENERAL PROVISIONS REGULATIONS, 34 C.F.R. PART 668.14

	

 An institution's program participation agreement applies to each branch campus and other location of the institution that meets the applicable requirements of this part unless otherwise specified by the Secretary.

	
(b) By entering into a program participation agreement, an institution agrees that--

	
(1) It will comply with all statutory provisions of or applicable to Title IV of the HEA, all applicable regulatory provisions prescribed under that statutory authority, and all applicable special arrangements, agreements, and limitations entered into under the authority of statutes applicable to Title IV of the HEA, including the requirement that the institution will use funds it receives under any Title IV, HEA program and any interest or other earnings thereon, solely for the purposes specified in and in accordance with that program;

	
(2) As a fiduciary responsible for administering Federal funds, if the institution is permitted to request funds under a Title IV, HEA program advance payment method, the institution will time its requests for funds under the program to meet the institution's immediate Title IV, HEA program needs;

	
(3) It will not request from or charge any student a fee for processing or handling any application, form, or data required to determine a student's eligibility for, and amount of, Title IV, HEA program assistance;

	
(4) It will establish and maintain such administrative and fiscal procedures and records as may be necessary to ensure proper and efficient administration of funds received from the Secretary or from students under the Title IV, HEA programs, together with assurances that the institution will provide, upon request and in a timely manner, information relating to the administrative capability and financial responsibility of the institution to--

	
(i) The Secretary;

	
(ii) A guaranty agency, as defined in 34 CFR part 682, that guarantees loans made under the Federal Stafford Loan and Federal PLUS programs for attendance at the institution or any of the institution's branch campuses or other locations;

	
(iii) The nationally recognized accrediting agency that accredits or preaccredits the institution or any of the institution's branch campuses, other locations, or educational programs;

	
(iv) The State agency that legally authorizes the institution and any branch campus or other location of the institution to provide postsecondary education; and

 

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(v) In the case of a public postsecondary vocational educational institution that is approved by a State agency recognized for the approval of public postsecondary vocational education, that State agency;

	
(5) It will comply with the provisions of § 668.15 relating to factors of financial responsibility;

	
(6) It will comply with the provisions of § 668.16 relating to standards of administrative capability;

	
(7) It will submit reports to the Secretary and, in the case of an institution participating in the Federal Stafford Loan, Federal PLUS, or the Federal Perkins Loan Program, to holders of loans made to the institution's students under that program at such times and containing such information as the Secretary may reasonably require to carry out the purpose of the Title IV, HEA programs;

	
(8) It will not provide any statement to any student or certification to any lender in the case of an FFEL Program loan, or origination record to the Secretary in the case of a Direct Loan Program loan that qualifies the student or parent for a loan or loans in excess of the amount that the student or parent is eligible to borrow in accordance with sections 425(a), 428(a)(2), 428(b)(1)(A) and (B), 428B, 428H and 455(a) of the HEA;

	
(9) It will comply with the requirements of Subpart D of this part concerning institutional and financial assistance information for students and prospective students;

	
(10) In the case of an institution that advertises job placement rates as a means of attracting students to enroll in the institution, it will make available to prospective students, at or before the time that those students apply for enrollment--

	
(i) The most recent available data concerning employment statistics, graduation statistics, and any other information necessary to substantiate the truthfulness of the advertisements; and

	
(ii) Relevant State licensing requirements of the State in which the institution is located for any job for which an educational program offered by the institution is designed to prepare those prospective students;

	
(11) In the case of an institution participating in the FFEL Program, the institution will inform all eligible borrowers, as defined in 34 CFR part 682, enrolled in the institution about the availability and eligibility of those borrowers for State grant assistance from the State in which the institution is located, and will inform borrowers from another State of the source for further information concerning State grant assistance from that State;

	
(12) It will provide the certifications described in paragraph (c) of this section;

	
(13) In the case of an institution whose students receive financial assistance pursuant to section 484(d) of the HEA, the institution will make available to those students a program proven successful in assisting students in obtaining the recognized equivalent of a high school diploma;

	
(14) It will not deny any form of Federal financial aid to any eligible student solely on the grounds that the student is participating in a program of study abroad approved for credit by the institution;

 

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(15) (i) Except as provided under paragraph (b)(15)(ii) of this section, the institution will use a default management plan approved by the Secretary with regard to its administration of the FFEL or Direct Loan programs, or both for at least the first two years of its participation in those programs, if the institution --

	
(A) Is participating in the FFEL or Direct Loan programs for the first time; or

	
(B) Is an institution that has undergone a change of ownership that results in a change in control and is participating in the FFEL or Direct Loan programs.

	
(ii) The institution does not have to use an approved default management plan if --

	
(A) The institution, including its main campus and any branch campus, does not have a cohort default rate in excess of 10 percent; and

	
(B) The owner of the institution does not own and has not owned any other institution that had a cohort default rate in excess of 10 percent while that owner owned the institution.

	
(16) For a proprietary institution, the institution will derive at least 10 percent of its revenues for each fiscal year from sources other than Title IV, HEA program funds, as provided in § 668.28(a) and (b), or be subject to sanctions described in § 668.28(c);

	
(17) The Secretary, guaranty agencies and lenders as defined in 34 CFR part 682, nationally recognized accrediting agencies, the Secretary of Veterans Affairs, State agencies recognized under 34 CFR part 603 for the approval of public postsecondary vocational education, and State agencies that legally authorize institutions and branch campuses or other locations of institutions to provide postsecondary education, have the authority to share with each other any information pertaining to the institution's eligibility for or participation in the Title IV, HEA programs or any information on fraud and abuse;

	
(18) It will not knowingly --

	
(i) Employ in a capacity that involves the administration of the Title IV, HEA programs or the receipt of funds under those programs, an individual who has been convicted of, or has pled nolo contendere or guilty to, a crime involving the acquisition, use, or expenditure of Federal, State, or local government funds, or has been administratively or judicially determined to have committed fraud or any other material violation of law involving Federal, State, or local government funds;

	
(ii) Contract with an institution or third-party servicer that has been terminated under section 432 of the HEA for a reason involving the acquisition, use, or expenditure of Federal, State, or local government funds, or that has been administratively or judicially determined to have committed fraud or any other material violation of law involving Federal, State, or local government funds; or

	
(iii) Contract with or employ any individual, agency, or organization that has been, or whose officers or employees have been--

	
(A) Convicted of, or pled nolo contendere or guilty to, a crime involving the acquisition, use, or expenditure of Federal, State, or local government funds; or

	
(B) Administratively or judicially determined to have committed fraud or any other material violation of law involving Federal, State, or local government funds;

 

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(19) It will complete, in a timely manner and to the satisfaction of the Secretary, surveys conducted as a part of the Integrated Postsecondary Education Data System (IPEDS) or any other Federal collection effort, as designated by the Secretary, regarding data on postsecondary institutions;

	
(20) In the case of an institution that is co-educational and has an intercollegiate athletic program, it will comply with the provisions of § 668.48;

	
(21) It will not impose any penalty, including, but not limited to, the assessment of late fees, the denial of access to classes, libraries, or other institutional facilities, or the requirement that the student borrow additional funds for which interest or other charges are assessed, on any student because of the student's inability to meet his or her financial obligations to the institution as a result of the delayed disbursement of the proceeds of a Title IV, HEA program loan due to compliance with statutory and regulatory requirements of or applicable to the Title IV, HEA programs, or delays attributable to the institution;

	
(22)(i) It will not provide any commission, bonus, or other incentive payment based in any part, directly or indirectly, upon success in securing enrollments or the award of financial aid, to any person or entity who is engaged in any student recruitment or admission activity, or in making decisions regarding the award of title IV, HEA program funds.

	
(A) The restrictions in paragraph (b)(22) of this section do not apply to the recruitment of foreign students residing in foreign countries who are not eligible to receive Federal student assistance.

	
(B) For the purpose of paragraph (b)(22) of this section, an employee who receives multiple adjustments to compensation in a calendar year and is engaged in any student enrollment or admission activity or in making decisions regarding the award of title IV, HEA program funds is considered to have received such adjustments based upon success in securing enrollments or the award of financial aid if those adjustments create compensation that is based in any part, directly or indirectly, upon success in securing enrollments or the award of financial aid.

	
(ii) Notwithstanding paragraph (b)(22)(i) of this section, eligible institutions, organizations that are contractors to eligible institutions, and other entities may make--

	
(A) Merit-based adjustments to employee compensation provided that such adjustments are not based in any part, directly or indirectly, upon success in securing enrollments or the award of financial aid; and

	
(B) Profit-sharing payments so long as such payments are not provided to any person or entity engaged in student recruitment or admission activity or in making decisions regarding the award of title IV, HEA program funds.

	
(iii) As used in paragraph (b)(22) of this section,

	
(A) Commission, bonus, or other incentive payment means a sum of money or something of value, other than a fixed salary or wages, paid to or given to a person or an entity for services rendered.

	
(B) Securing enrollments or the award of financial aid means activities that a person or entity engages in at any point in time through completion of an educational program for the purpose of the admission or matriculation of students for any period of time or the award of financial aid to students.

 

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(1) These activities include contact in any form with a prospective student, such as, but not limited to--contact through preadmission or advising activities, scheduling an appointment to visit the enrollment office or any other office of the institution, attendance at such an appointment, or involvement in a prospective student's signing of an enrollment agreement or financial aid application.

	
(2) These activities do not include making a payment to a third party for the provision of student contact information for prospective students provided that such payment is not based on--

	
(i) Any additional conduct or action by the third party or the prospective students, such as participation in preadmission or advising activities, scheduling an appointment to visit the enrollment office or any other office of the institution or attendance at such an appointment, or the signing, or being involved in the signing, of a prospective student's enrollment agreement or financial aid application; or

	
(ii) The number of students (calculated at any point in time of an educational program) who apply for enrollment, are awarded financial aid, or are enrolled for any period of time, including through completion of an educational program.

	
(C) Entity or person engaged in any student recruitment or admission activity or in making decisions about the award of financial aid means--

	
(1) With respect to an entity engaged in any student recruitment or admission activity or in making decisions about the award of financial aid, any institution or organization that undertakes the recruiting or the admitting of students or that makes decisions about and awards title IV, HEA program funds; and

	
(2) With respect to a person engaged in any student recruitment or admission activity or in making decisions about the award of financial aid, any employee who undertakes recruiting or admitting of students or who makes decisions about and awards title IV, HEA program funds, and any higher level employee with responsibility for recruitment or admission of students, or making decisions about awarding title IV, HEA program funds.

	
(D) Enrollment means the admission or matriculation of a student into an eligible institution.

	
(23) It will meet the requirements established pursuant to Part H of Title IV of the HEA by the Secretary and nationally recognized accrediting agencies;

	
(24) It will comply with the requirements of § 668.22;

	
(25) It is liable for all--

	
(i) Improperly spent or unspent funds received under the Title IV, HEA programs, including any funds administered by a third-party servicer; and

	
(ii) Returns any title IV, HEA program funds that the institution or its servicer may be required to make;

 

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(26) If an educational program offered by the institution is required to prepare a student for gainful employment in a recognized occupation, the institution must--

	
(i) Demonstrate a reasonable relationship between the length of the program and entry level requirements for the recognized occupation for which the program prepares the student. The Secretary considers the relationship to be reasonable if the number of clock hours provided in the program does not exceed by more than 50 percent the minimum number of clock hours required for training in the recognized occupation for which the program prepares the student, as established by the State in which the institution is located, if the State has established such a requirement, or as established by any Federal agency;

	
(ii) Establish the need for the training for the student to obtain employment in the recognized occupation for which the program prepares the student; and

	
(iii) Provide for that program the certification required in § 668.414.

	
(27) In the case of an institution participating in a Title IV, HEA loan program, the institution --

	
(i) Will develop, publish, administer, and enforce a code of conduct with respect to loans made, insured or guaranteed under the Title IV, HEA loan programs in accordance with 34 CFR 601.21; and

	
(ii) Must inform its officers, employees, and agents with responsibilities with respect to loans made, insured or guaranteed under the Title IV, HEA loan programs annually of the provisions of the code required under paragraph (b)(27) of this section;

	
(28) For any year in which the institution has a preferred lender arrangement (as defined in 34 CFR 601.2(b)), it will at least annually compile, maintain, and make available for students attending the institution, and the families of such students, a list in print or other medium, of the specific lenders for loans made, insured, or guaranteed under Title IV, of the HEA or private education loans that the institution recommends, promotes, or endorses in accordance with such preferred lender arrangement. In making such a list, the institution must comply with the requirements in 34 CFR 682.212(h) and 34 CFR 601.10;

	
(29) (i) It will, upon the request of an enrolled or admitted student who is an applicant for a private education loan (as defined in 34 CFR part 601.2(b)), provide to the applicant the self-certification form required under 34 CFR 601.11(d) and the information required to complete the form, to the extent the institution possesses such information, including --

	
(A) The applicant's cost of attendance at the institution, as determined by the institution under part F of Title IV, of the HEA;

	
(B) The applicant's estimated financial assistance, including amounts of financial assistance used to replace the expected family contribution as determined by the institution in accordance with Title IV, for students who have completed the Free Application for Federal Student Aid; and

	
(C) The difference between the amounts under paragraphs (b)(29)(i)(A) and (29)(i)(B) of this section, as applicable.

	
(ii) It will, upon the request of the applicant, discuss with the applicant the availability of Federal, State, and institutional student financial aid;

 

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(30) The institution --

	
(i) Has developed and implemented written plans to effectively combat the unauthorized distribution of copyrighted material by users of the institution's network, without unduly interfering with educational and research use of the network, that include --

	
(A) The use of one or more technology-based deterrents;

	
(B) Mechanisms for educating and informing its community about appropriate versus inappropriate use of copyrighted material, including that described in § 668.43(a)(10);

	
(C) Procedures for handling unauthorized distribution of copyrighted material, including disciplinary procedures; and

	
(D) Procedures for periodically reviewing the effectiveness of the plans to combat the unauthorized distribution of copyrighted materials by users of the institution's network using relevant assessment criteria. No particular technology measures are favored or required for inclusion in an institution's plans, and each institution retains the authority to determine what its particular plans for compliance with paragraph (b)(30) of this section will be, including those that prohibit content monitoring; and

	
(ii) Will, in consultation with the chief technology officer or other designated officer of the institution--

	
(A) Periodically review the legal alternatives for downloading or otherwise acquiring copyrighted material;

	
(B) Make available the results of the review in paragraph (b)(30)(ii)(A) of this section to its students through a Web site or other means; and

	
(C) To the extent practicable, offer legal alternatives for downloading or otherwise acquiring copyrighted material, as determined by the institution; and

	
(31) The institution will submit a teach-out plan to its accrediting agency in compliance with 34 CFR 602.24(c), and the standards of the institution's accrediting agency upon the occurrence of any of the following events:

	
(i) The Secretary initiates the limitation, suspension, or termination of the participation of an institution in any Title IV, HEA program under 34 CFR 600.41 or subpart G of this part or initiates an emergency action under § 668.83.

	
(ii) The institution's accrediting agency acts to withdraw, terminate, or suspend the accreditation or preaccreditation of the institution.

	
(iii) The institution's State licensing or authorizing agency revokes the institution's license or legal authorization to provide an educational program.

	
(iv) The institution intends to close a location that provides 100 percent of at least one program.

	
(v) The institution otherwise intends to cease operations.

	
(c) In order to participate in any Title IV, HEA program (other than the LEAP and NEISP programs), the institution must certify that it--

	
(1) Has in operation a drug abuse prevention program that the institution has determined to be accessible to any officer, employee, or student at the institution; and

	
(2)(i) Has established a campus security policy in accordance with section 485(f) of the HEA; and

 

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(ii) Has complied with the disclosure requirements of § 668.47 as required by section 485(f) of the HEA.

	
(d)(1) The institution, if located in a State to which section 4(b) of the National Voter Registration Act (42 U.S.C. 1973gg-2(b)) does not apply, will make a good faith effort to distribute a mail voter registration form, requested and received from the State, to each student enrolled in a degree or certificate program and physically in attendance at the institution, and to make those forms widely available to students at the institution.

	
(2) The institution must request the forms from the State 120 days prior to the deadline for registering to vote within the State. If an institution has not received a sufficient quantity of forms to fulfill this section from the State within 60 days prior to the deadline for registering to vote in the State, the institution is not liable for not meeting the requirements of this section during that election year.

	
(3) This paragraph applies to elections as defined in Section 301(1) of the Federal Election Campaign Act of 1971 (2 U.S.C. 431(1)), and includes the election for Governor or other chief executive within such State.

	
(e)(1) A program participation agreement becomes effective on the date that the Secretary signs the agreement.

	
(2) A new program participation agreement supersedes any prior program participation agreement between the Secretary and the institution.

	
(f)(1) Except as provided in paragraphs (g) and (h) of this section, the Secretary terminates a program participation agreement through the proceedings in subpart G of this part.

	
(2) An institution may terminate a program participation agreement.

	
(3) If the Secretary or the institution terminates a program participation agreement under paragraph (f) of this section, the Secretary establishes the termination date.

	
(g) An institution's program participation agreement automatically expires on the date that--

	
(l) The institution changes ownership that results in a change in control as determined by the Secretary under 34 CFR part 600; or

	
(2) The institution's participation ends under the provisions of § 668.26(a)(1), (2), (4), or (7).

	
(h) An institution's program participation agreement no longer applies to or covers a location of the institution as of the date on which that location ceases to be a part of the participating institution.

 

13

	

WILLIAM D. FORD FEDERAL DIRECT LOAN PROGRAM

	

If an institution participates in the William D. Ford Federal Direct Loan (Direct Loan) Program, the institution and its representatives shall comply with the statute, guidelines, and regulations governing the Title IV, Part D, William D. Ford Federal Direct Loan Program as required by 20 U.S.C. §§ 1087a et seq. (Part C) and 34 C.F.R. Part 685.

	

 The institution will:

	

 1.

	

 Provide for the establishment and maintenance of a Direct Loan Program at the Institution that will:

	 	 	

 Identify eligible students who seek student financial assistance in accordance with Section 484 of the Higher Education Act of 1965, as amended (the HEA).

	 	 	

 Estimate the need of students as required under Title IV, Part F of the HEA.

	 	 	

 Provide a certification statement of eligibility for students to receive loans that will not exceed the annual or aggregate limits, except the Institution may exercise its authority, under exceptional circumstances identified by the Secretary, to refuse to certify a statement that permits a student to receive a loan, or certify a loan amount that is less than the student's determination of need, if the reason for such action is documented and provided in written form to a student.

	 	 	

 Establish a schedule for disbursement of loan proceeds to meet the requirements of Section 428G of the HEA.

	 	 	

 Provide timely and accurate information to the Secretary concerning 1) the status of borrowers while students are in attendance, any new information pertaining to the status of student borrowers of which the Institution becomes aware after the student leaves the Institution, and 2) the utilization of Federal funds under Title IV, Part D of the HEA at such times and in such manner as prescribed by the Secretary.

	

 2.

	

 Comply with requirements established by the Secretary relating to student loan information with respect to the Direct Loan Program.

	

 3.

	

 Provide that students at the Institution and their parents (with respect to such students) will be eligible to participate in the programs under Title IV, Part B of the HEA, Federal Family Education Loan programs, at the discretion of the Secretary for the period during which such Institution participates in the Direct Loan Program, except that a student or parent may not receive loans under both Title IV, Part B and Part D of the HEA for the same period of enrollment.

	

 4.

	

 Provide for the implementation of a quality assurance system, as established by the Secretary and developed in consultation with Institutions of higher education, to ensure that the Institution is complying with program requirements and meeting program objectives.

 

14

	

 5.

	

 Provide that the Institution will not charge any fees of any kind, regardless of how they are described, to student or parent borrowers for loan application, or origination activities (if applicable), or the provision and processing of any information necessary for a student or parent to receive a loan under Title IV, Part D of the HEA.

	

 6.

	

 Provide that the Institution will originate loans to eligible students and parents in accordance with the requirements of Title IV, Part D of the HEA and use funds advanced to it solely for that purpose (Option 2 only).

	

 7.

	

 Provide that the note or evidence of obligation of the loan shall be the property of the Secretary (Options 2 and 1 only).

	

 8.

	

 Comply with other provisions as the Secretary determines are necessary to protect the interest of the United States and to promote the purposes of Title IV, Part D of the HEA.

	

 9.

	

 Accept responsibility and financial liability stemming from its failure to perform its functions under this Program Participation Agreement.

 

	

CERTIFICATIONS REQUIRED FROM INSTITUTIONS

	

 The Institution should refer to the regulations cited below. Signature on this Agreement provides for compliance with the certification requirements under 34 C.F.R. Part 82, "New Restrictions on Lobbying," 34 C.F.R Part 84, "Governmentwide Requirements for Drug-Free Workplace (Financial Assistance)," 34 C.F.R. Part 85, "Governmentwide Debarment and Suspension (Nonprocurement)," and 34 C.F.R. Part 86, "Drug and Alcohol Abuse Prevention." Breach of any of these certifications constitutes a breach of this Agreement.

 

15

	
PART 1

	
CERTIFICATION REGARDING LOBBYING; DRUG-FREE WORKPLACE; DEBARMENT, SUSPENSION AND OTHER RESPONSIBILITY MATTERS; AND DRUG AND ALCOHOL ABUSE PREVENTION

	

1. Lobbying

	

 As required by Section 1352, Title 31 of the U.S. Code, and implemented at 34 C.F.R. Part 82, for persons entering into a Federal contract, grant or cooperative agreement over $100,000, as defined at 34 C.F.R. Part 82, Sections 82.105, and 82.110, the undersigned certifies, to the best of his or her knowledge and belief, that:

 

	
(1)

	
No Federal appropriated funds have been paid or will be paid, by or on behalf of the undersigned, to any person for influencing or attempting to influence an officer or employee of any agency, a Member of Congress, an officer or employee of Congress, or an employee of a Member of Congress in connection with the awarding of any Federal contract, the making of any Federal grant, the making of any Federal loan, the entering into of any cooperative agreement, and the extension, continuation, renewal, amendment, or modification of any Federal contract, grant, loan or cooperative agreement.

	
(2)

	
If any funds other than Federal appropriated funds have been paid or will be paid to any person for influencing or attempting to influence an officer or employee of any agency, a Member of Congress, an officer or employee of Congress, or an employee of a Member of Congress in connection with this Federal contract, grant, loan or cooperative agreement, the undersigned shall complete and submit Standard Form - LLL, "Disclosure Form to Report Lobbying," in accordance with its instructions.

	
(3)

	
The Institution shall require that the language of this certification be included in the award documents for all subawards at all tiers (including subcontracts, subgrants and contracts under grants, loans and cooperative agreements) and that all subrecipients shall certify and disclose accordingly.

	

2a. Drug-Free Workplace (Grantees Other Than Individuals)

	

 As required by the Drug-Free Workplace Act of 1988, and implemented at 34 C.F.R. Part 84, Subpart B, for grantees, as defined at 34 C.F.R. Part 84, Sections 84.200 through 84.230 -

	
The Institution certifies that it will or will continue to provide a drug-free workplace by:

	
(a)

	
Publishing a drug-free workplace statement notifying employees that the unlawful manufacture, distribution, dispensing, possession, or use of a controlled substance is prohibited in the grantee's workplace and specifying the actions that will be taken against employees for violation of such prohibition;

	
(b)

	
Establishing an on-going drug-free awareness program to inform employees about-

	 	
(1)

	
The dangers of drug abuse in the workplace;

	 	
(2)

	
The Institution's policy of maintaining a drug-free workplace;

	 	
(3)

	
Any available drug counseling, rehabilitation, and employee assistance programs; and

	 	
(4)

	
The penalties that may be imposed upon employees for drug abuse violations occurring in the workplace;

	
(c)

	
Making it a requirement that each employee to be engaged in the performance of the grant be given a copy of the statement required by paragraph (a);

 

16

	
(d)

	
Notifying the employee in the statement required by paragraph (a) that, as a condition of employment under the grant, the employee will -

	 	
(1)

	
Abide by the terms of the statement, and

	 	
(2)

	
Notify the employer in writing if he or she is convicted for a violation of a criminal drug statute occurring in the workplace no more than five calendar days after such conviction;

	
(e)

	
Notifying the agency, in writing, within 10 calendar days after receiving notice under this subparagraph (d)(2) from an employee or otherwise receiving actual notice of such conviction. Employers of convicted employees must provide notice, including position title, to: Director, Grants and Contracts Service, U.S. Department of Education, 400 Maryland Avenue, S.W., Washington, DC 20202. Notice shall include the identification number(s) of each affected grant;

	
(f)

	
Taking one of the following actions, within 30 calendar days of receiving notice under subparagraph (d)(2), with respect to any employee who is so convicted -

	 	
(1)

	
Taking appropriate personnel action against such an employee, up to and including termination, consistent with the requirements of the Rehabilitation Act of 1972, as amended; or

	 	
(2)

	
Requiring such employee to participate satisfactorily in a drug abuse assistance or rehabilitation program approved for such purposes by a Federal, State, or local health, law enforcement, or other appropriate agency;

	
(g)

	
Making a good faith effort to continue to maintain a drug-free workplace through implementation of paragraphs (a), (b), (c), (d), (e), and (f).

	

2b. Drug-Free Workplace (Grantees Who Are Individuals)

	

 As required by the Drug-Free Workplace Act of 1988, and implemented at 34 C.F.R. Part 84, Subpart C, for recipients who are individuals, as defined at 34 C.F.R. Part 84, Section 84.300 -

	
1.

	
As a condition of the grant, the Institution certifies that it will not engage in the unlawful manufacture, distribution, dispensing, possession, or use of a controlled substance in conducting any activity related to the award; and

	
2.

	
If any officer or owner of the Institution is convicted of a criminal drug offense resulting from a violation occurring during the conduct of any award activity, the Institution will report the conviction, in writing, within 10 calendar days of the conviction, to: Director, Grants and Contracts Service, U.S. Department of Education, 400 Maryland Avenue, S.W., Washington, DC 20202. Notice shall include the identification number(s) of each affected grant.

 

17

	

3. Debarment, Suspension, and Other Responsibility Matters

	

 As required by Executive Order 12549, Debarment and Suspension, and implemented at 34 C.F.R. Part 85, for prospective participants in primary covered transactions as defined at 34 C.F.R. Part 85, Sections 85.105 and 85.110, the Institution certifies that it and its principals:

	
(a)

	
Are not presently debarred, suspended, proposed for debarment, declared ineligible, or voluntarily excluded from covered transactions by any Federal department or agency;

	
(b)

	
Have not within a three-year period preceding this application been convicted of or had a civil judgment rendered against them for commission of fraud or a criminal offense in connection with obtaining, attempting to obtain, or performing a public or private agreement or transaction; violation of Federal or State antitrust statutes; commission of embezzlement, theft, forgery, bribery, falsification or destruction of records, making false statements, tax evasion, receiving stolen property, making false claims, or obstruction of justice; or commission of any other offense indicating a lack of business integrity or business honesty that seriously and directly affects their present responsibility.

	
(c)

	
Are not presently indicted for or otherwise criminally or civilly charged by a governmental entity (Federal, State, or local) with commission of any of the offenses enumerated in paragraph (b) of this certification; and

	
(d)

	
Have not within a three-year period preceding this application had one or more public transactions (Federal, State, or local) terminated for cause or default.

 

	

4. Drug and Alcohol Abuse Prevention

	

 As required by the Drug-Free Schools and Communities Act Amendments of 1989, which added section 1213 to the Higher Education Act, and implemented at 34 C.F.R. Part 86, the undersigned Institution certifies that it has adopted and implemented a drug prevention program for its students and employees that, at a minimum, includes--

 

	
1.

	
The annual distribution in writing to each employee, and to each student who is taking one or more classes for any kind of academic credit except for continuing education units, regardless of the length of the student's program of study, of:

	 	
·    Standards of conduct that clearly prohibit, at a minimum, the unlawful possession, use, or distribution of illicit drugs and alcohol by students and employees on its property or as part of any of its activities.

·    A description of the applicable legal sanctions under local, State or Federal law for the unlawful possession or distribution of illicit drugs and alcohol.

·    A description of the health risks associated with the use of illicit drugs and the abuse of alcohol.

·    A description of any drug or alcohol counseling, treatment, or rehabilitation or re-entry programs that are available to employees or students.

·    A clear statement that the Institution will impose disciplinary sanctions on students and employees (consistent with local, State and Federal law), and a description of those sanctions, up to and including expulsion or termination of employment and referral for prosecution, for violation of the standards of conduct. A disciplinary sanction may include the completion of an appropriate rehabilitation program.

 

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2.

	
A biennial review by the Institution of its program to:

	 	
·    Determine its effectiveness and implement changes to the program if they are needed.

·    Ensure that its disciplinary sanctions are consistently enforced.

 

	
PART 2

	
CERTIFICATION REGARDING DEBARMENT, SUSPENSION, INELIGIBILITY, AND VOLUNTARY EXCLUSION -- LOWER TIER COVERED TRANSACTIONS

	
The Institution is to obtain the signatures of Lower Tier Contractors on reproduced copies of the certification below, and retain the signed certification(s) in the Institution's files.

 

19

CERTIFICATION BY LOWER TIER CONTRACTOR

(Before Completing Certification, Read Instructions for This Part 3, below)

 

	
(1)

	
The prospective lower tier participant certifies by submission of this proposal, that neither it nor its principals are presently debarred, suspended, proposed for debarment, declared ineligible, or voluntarily excluded from participation in this transaction by any Federal Department or Agency.

	
(2)

	
Where the prospective lower tier participant is unable to certify to any of the statements in this certification, such prospective participant shall attach an explanation to this proposal.

	 	
_____________________________________________

	
____________________________

	 	
Name of Lower Tier Organization

	
PR/Award Number or Project Name

	 	
_____________________________________________

	
____________________________

	 	
Name of Authorized Representative

	
Title of Authorized Representative

	 	
_____________________________________________

	
____________________________

	 	
Signature of Authorized Representative

	
Date

20

	
1.

	
By signing and submitting this proposal, the prospective lower tier participant is providing the certification set out below.

	
2.

	
The certification in this clause is a material representation of fact upon which reliance was placed when this transaction was entered into. If it is later determined that the prospective lower tier participant knowingly rendered an erroneous certification, in addition to other remedies available to the Federal Government, the department or agency with which this transaction originated may pursue available remedies, including suspension and/or debarment.

	
3.

	
The prospective lower tier participant shall provide immediate written notice to the person to which this proposal is submitted if at any time the prospective lower tier participant learns that its certification was erroneous when submitted or has become erroneous by reason of changed circumstances.

	
4.

	
The terms "covered transaction," "debarred," "suspended," "ineligible," "lower tier covered transaction," "participant," "person," "primary covered transaction," "principal," "proposal," "voluntarily excluded," as used in this clause, have the meanings set out in the Definitions and Coverage sections of rules implementing Executive Order 12549. You may contact the person to whom this proposal is submitted for assistance in obtaining a copy of those regulations.

	
5.

	
The prospective lower tier participant agrees by submitting this proposal that, should the proposed covered transaction be entered into, it shall not knowingly enter into any lower tier covered transaction with a person who is debarred, suspended, declared ineligible, or voluntarily excluded from participation in this covered transaction, unless authorized by the department or agency with which this transaction originated.

	
6.

	
The prospective lower tier participant further agrees by submitting this proposal that it will include the clause titled "Certification Regarding Debarment, Suspension, Ineligibility, and Voluntary Exclusion--Lower Tier Covered Transactions," without modification, in all lower tier covered transactions and in all solicitations for lower tier covered transactions.

	
7.

	
A participant in a covered transaction may rely upon a certification of a prospective participant in a lower tier covered transaction that is not debarred, suspended, ineligible, or voluntarily excluded from the covered transaction, unless it knows that the certification is erroneous. A participant may decide the method and frequency by which it determines the eligibility of its principals. Each participant may, but is not required to, check the Nonprocurement List.

	
8.

	
Nothing contained in the foregoing shall be construed to require establishment of a system of records in order to render in good faith the certification required by this clause. The knowledge and information of a participant is not required to exceed that which is normally possessed by a prudent person in the ordinary course of business dealings.

	
9.

	
Except for transactions authorized under paragraph 5 of these instructions, if a participant in a covered transaction knowingly enters into a lower tier covered transaction with a person who is suspended, debarred, ineligible, or voluntarily excluded from participation in this transaction, in addition to other remedies available to the Federal Government, the department or agency with which this transaction originated may pursue available remedies, including suspension and/or debarment.

 

	
NOTE:

	
A completed copy of the "Certification Regarding Debarment, Suspension, Ineligibility and Voluntary Exclusion--Lower Tier Covered Transactions" form must be retained by the Institution. The original blank certification must be returned with the PPA.

 

21

 

	
PART 3

	
CERTIFICATION REGARDING GAINFUL EMPLOYMENT PROGRAMS

	
A list of the reported Title IV eligible educational programs that the institution offers that are required to prepare students for gainful employment in a recognized occupation ("gainful employment programs") is included as part of the Eligibility and Certification Approval Report (ECAR) that is a part of this Program Participation Agreement. By signing this Program Participation Agreement, the institution certifies that:

22

 

	
1.

	
the list of gainful employment programs it offers is accurate and complete;

	
2.

	
each of the gainful employment programs is approved by a recognized accrediting agency or is otherwise included in the institution's accreditation by its recognized accrediting agency;

	
3.

	
each of the gainful employment programs it offers is programmatically accredited, if such accreditation is required by a Federal governmental entity or a State where the institution or one of its additional locations is required to obtain State approval pursuant to 34 C.F.R. §600.9;

	
4.

	
each gainful employment program in a State where the institution or one of its additional locations is located satisfies the licensure or certification requirements that are needed for a student who completes the gainful employment program to qualify to take any licensure or certification exam in that State that is needed for the student to practice or find employment in an occupation that the gainful employment program prepares the student to enter; and

	
5.

	
for a gainful employment program for which the institution is establishing initial eligibility for Title IV, HEA program funds, the program is not substantially similar to a program offered by the institution that in the prior three years, became ineligible for Title IV, HEA program funds under the debt-to-earnings rates measure or was failing, or in the zone with respect to, the debt-to-earnings rates measure and was voluntarily discontinued by the institution.

 

23

 

	
IN WITNESS WHEREOF

	
the parties hereto have caused this Agreement to be executed by their duly authorized representatives.

	
Signature of Institution's

Chief Executive Officer:

	
_______________________________________________

	
Date:

	
______________

	
Print Name and Title:

	
_______________________________________________

	 	 
	 	
_______________________________________________

	 	 
	
The owners of the institution agree to be jointly and severally liable for the performance by the institution of its obligations under this agreement.

	
Signature of

Institution's Owner:

	
_______________________________________________

	
Date:

	
______________

	
Print Name and Title:

	
_______________________________________________

	 	 
	 	
_______________________________________________

	 	 
	
For the Secretary:

	
_______________________________________________

	
Date:

	
______________

	
U.S. Department of Education

	 	 

 

 

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