INDEMNITY ESCROW AGREEMENT

INDEMNITY ESCROW AGREEMENT
Execution Version
Dated as of June 6, 2024
This INDEMNITY ESCROW AGREEMENT (this "Agreement") is entered into as of June 6, 2024 (the "Effective Date"), by and among:
(1) FAIRWATER REAL ESTATE INVESTMENT TRUST, a Maryland real estate investment trust ("Buyer"), with its principal offices at 7200 Chesapeake Parkway, Suite 1100, Columbia, Maryland 21044;
(2) GREYSTONE MERIDIAN PARTNERS FUND III, L.P., a Delaware limited partnership ("Seller"), acting by and through its general partner, Greystone Meridian Capital LLC, a Delaware limited liability company, with its principal offices at 3300 Peachtree Road NE, Suite 2200, Atlanta, Georgia 30326; and
(3) COMMONWEALTH NATIONAL TITLE INSURANCE COMPANY, a Pennsylvania title insurance company ("Escrow Agent"), with offices at 191 Peachtree Street NE, Suite 800, Atlanta, Georgia 30303.
Buyer, Seller, and Escrow Agent are each referred to herein individually as a "Party" and collectively as the "Parties."
RECITALS
WHEREAS:
A. Buyer and Seller are parties to that certain Purchase and Sale Agreement, dated as of February 28, 2024 (as amended by the First Amendment to Purchase and Sale Agreement, dated as of April 12, 2024, and the Second Amendment to Purchase and Sale Agreement, dated as of May 28, 2024, collectively, the "PSA"), pursuant to which Buyer has agreed to acquire from Seller one hundred percent (100%) of the membership interests in fourteen (14) property-owning Delaware limited liability companies (the "Target Entities"), at a purchase price of One Billion One Hundred Million Dollars ($1,100,000,000) (the "Purchase Price"), subject to the terms and conditions set forth therein;
B. Pursuant to Section 2.5(c) of the PSA, Seller is required to deposit into escrow, or cause to be deposited into escrow, on the Closing Date an amount equal to one and one-half percent (1.5%) of the Purchase Price, being Sixteen Million Five Hundred Thousand Dollars ($16,500,000) (the "Escrow Amount" or "Indemnity Escrow Fund"), to secure Seller's indemnification obligations under Article XI of the PSA;
C. The Parties desire to set forth the terms and conditions under which the Escrow Agent shall hold, invest, and disburse the Escrow Amount in accordance with this Agreement;
D. The closing of the transactions contemplated by the PSA (the "Closing") is occurring simultaneously with the execution and delivery of this Agreement on the date hereof, being June 6, 2024;
E. The Parties acknowledge that the Escrow Agent also serves as the escrow agent under that certain Earnest Money Deposit Escrow Agreement, dated as of March 4, 2024, among Buyer, Seller, and Escrow Agent, pursuant to which Buyer deposited aggregate earnest money deposits of Fifty-Five Million Dollars ($55,000,000) (the "Earnest Money Deposit Escrow Agreement"), which is a separate agreement from this Indemnity Escrow Agreement, and the funds held under the Earnest Money Deposit Escrow Agreement are being applied toward the Purchase Price at Closing in accordance with the terms of the PSA; and
F. Capitalized terms used but not otherwise defined herein shall have the respective meanings ascribed to them in the PSA.
NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:
ARTICLE 1
DEFINITIONS
Section 1.1 Defined Terms. As used in this Agreement, the following terms shall have the meanings set forth below. Capitalized terms used but not defined in this Article 1 or elsewhere in this Agreement shall have the meanings ascribed to them in the PSA.
"Buyer" means Fairwater Real Estate Investment Trust, a Maryland real estate investment trust, and its successors and permitted assigns.
"Buyer's Counsel" means Calderwood & Harkness LLP, with offices at 450 Park Avenue, 28th Floor, New York, New York 10022, Attention: Douglas Fairchild, and 1700 K Street NW, Suite 900, Washington, DC 20006.
"Claim" means any claim for indemnification asserted by Buyer against Seller under Article XI of the PSA, whether arising from a breach of any representation, warranty, covenant, or agreement of Seller contained in the PSA, as further described therein.
"Claim Notice" means a written notice delivered by Buyer to Seller and Escrow Agent in accordance with Section 4.2 of this Agreement, specifying the details of a Claim.
"Claimed Amount" means the amount claimed by Buyer with respect to a particular Claim, or, if the amount is not yet determinable, Buyer's good-faith estimate thereof, as set forth in the applicable Claim Notice.
"Closing Date" means June 6, 2024.
"De Minimis Threshold" means Two Hundred Seventy-Five Thousand Dollars ($275,000) per individual Claim, as defined in Section 11.4(b) of the PSA, below which individual Claims shall not be counted toward the Tipping Basket or otherwise be recoverable.
"Escrow Account" means the segregated, interest-bearing escrow account established and maintained by Escrow Agent at a federally insured depository institution for the purpose of holding the Escrow Amount in accordance with Section 2.2 of this Agreement.
"Escrow Amount" or "Indemnity Escrow Fund" means Sixteen Million Five Hundred Thousand Dollars ($16,500,000), together with any Investment Earnings thereon, as adjusted from time to time by disbursements made in accordance with this Agreement.
"Escrow Termination Date" means the date that is eighteen (18) months after the Closing Date (i.e., December 6, 2025), subject to extension for Pending Claims as provided in Section 5.2 of this Agreement.
"Fundamental Representations" has the meaning ascribed to such term in the PSA, and includes, without limitation, the representations and warranties of Seller relating to due organization, authorization, title to membership interests, and absence of brokers. The survival period for Fundamental Representations is as set forth in the PSA, and the aggregate liability cap for Claims arising from breaches of Fundamental Representations (the "Fundamental Rep Cap") is One Hundred Ten Million Dollars ($110,000,000), being ten percent (10%) of the Purchase Price.
"General Rep Cap" means Fifty-Five Million Dollars ($55,000,000), being five percent (5%) of the Purchase Price, which is the maximum aggregate amount recoverable by Buyer from Seller for Claims arising from breaches of General Representations under the PSA.
"General Representations" means all representations and warranties of Seller contained in the PSA other than Fundamental Representations and Tax Representations.
"Holdback Amount" has the meaning ascribed to such term in Section 5.2 of this Agreement.
"Investment Earnings" means all interest, dividends, and other income earned on the Escrow Amount while held in the Escrow Account.
"Joint Written Direction" means a written instruction, substantially in the form attached hereto as Exhibit B, signed by authorized representatives of both Buyer and Seller, directing Escrow Agent to disburse funds from the Escrow Account in the manner specified therein.
"Pending Claim" means a Claim for which a Claim Notice has been delivered in accordance with Section 4.2 prior to the Escrow Termination Date and which, as of the Escrow Termination Date, has not been finally resolved by (a) Joint Written Direction, (b) final, non-appealable court order, or (c) written agreement of Buyer and Seller.
"Permitted Investments" has the meaning ascribed to such term in Section 3.2 of this Agreement.
"PSA" means that certain Purchase and Sale Agreement, dated as of February 28, 2024, by and between Seller and Buyer, as amended by the First Amendment to Purchase and Sale Agreement, dated as of April 12, 2024, and the Second Amendment to Purchase and Sale Agreement, dated as of May 28, 2024, together with all exhibits and schedules thereto, as the same may be further amended, restated, supplemented, or otherwise modified from time to time in accordance with the terms thereof.
"Response Period" has the meaning ascribed to such term in Section 4.3 of this Agreement.
"Seller" means Greystone Meridian Partners Fund III, L.P., a Delaware limited partnership, acting by and through its general partner, Greystone Meridian Capital LLC, a Delaware limited liability company, and its successors and permitted assigns.
"Seller's Counsel" means Blackridge Hayes LLP, with offices at 1285 Avenue of the Americas, 34th Floor, New York, New York 10019, Attention: Nathaniel Pryce.
"Tax Representations" means the representations and warranties of Seller relating to tax matters set forth in Section 4.13 of the PSA, which shall survive the Closing for a period of thirty-six (36) months (i.e., through June 6, 2027), as provided in the PSA.
"Tipping Basket" means Five Million Five Hundred Thousand Dollars ($5,500,000), being one-half of one percent (0.5%) of the Purchase Price. As set forth in Section 11.4(a) of the PSA, once the aggregate amount of Losses (as defined in the PSA) incurred by Buyer exceeds the Tipping Basket, Buyer shall be entitled to recover from the first dollar of Losses (subject to the De Minimis Threshold and applicable cap).
ARTICLE 2
ESTABLISHMENT OF ESCROW
Section 2.1 Deposit of Escrow Amount.
(a) On the Closing Date, Seller shall cause the sum of Sixteen Million Five Hundred Thousand Dollars ($16,500,000) to be deposited into the Escrow Account by wire transfer of immediately available funds. The Parties acknowledge and agree that the Escrow Amount shall be funded from Seller's share of the closing proceeds payable to Seller at the Closing, and that Escrow Agent is authorized and directed to retain the Escrow Amount from the closing proceeds otherwise payable to Seller, in accordance with the funds flow memorandum and closing settlement statements executed by the Parties in connection with the Closing.
(b) The Parties confirm that the net cash proceeds payable to Seller at the Closing (before prorations and other adjustments) is Four Hundred Eighty-Six Million Nine Hundred Thirty Thousand Dollars ($486,930,000), reflecting the Purchase Price of One Billion One Hundred Million Dollars ($1,100,000,000), less the assumed indebtedness of Six Hundred Twelve Million Dollars ($612,000,000) encumbering the properties owned by the Target Entities, less the physical condition assessment credit of One Million Seventy Thousand Dollars ($1,070,000) as set forth in the Second Amendment, and that the Escrow Amount of Sixteen Million Five Hundred Thousand Dollars ($16,500,000) is being deducted from and funded out of Seller's share of such net proceeds at Closing.
(c) Escrow Agent hereby acknowledges receipt of the Escrow Amount on the date hereof, or shall acknowledge receipt thereof promptly upon receipt of same by wire transfer, and agrees to hold, invest, and disburse the Escrow Amount in accordance with the terms and conditions of this Agreement.
Section 2.2 Escrow Account.
(a) Escrow Agent shall hold the Escrow Amount in a segregated, interest-bearing escrow account at a federally insured depository institution. The Escrow Account shall be separate and distinct from any other accounts maintained by Escrow Agent, whether in its individual capacity or as escrow agent, trustee, or fiduciary in any other matter.
(b) The Escrow Account shall be titled as follows: "Commonwealth National Title Insurance Company, as Escrow Agent, for the benefit of Fairwater Real Estate Investment Trust and Greystone Meridian Partners Fund III, L.P. — Indemnity Escrow."
(c) For federal and state income tax reporting purposes, the Escrow Account shall be established under and associated with Seller's federal employer identification number (EIN: 83-1647205), unless the Parties otherwise jointly direct Escrow Agent in writing. Escrow Agent shall file or cause to be filed all required information returns, including IRS Forms 1099, with respect to the Investment Earnings, reflecting Seller as the recipient of such earnings.
Section 2.3 Nature of Escrow.
(a) The Escrow Amount is established to serve as security for Seller's indemnification obligations under Article XI of the PSA. The Escrow Amount is not the exclusive source of recovery available to Buyer for Claims under the PSA. Buyer's right to recover Losses from Seller for indemnifiable Claims is subject to the limitations, caps, and other provisions of Article XI of the PSA, including the General Rep Cap of Fifty-Five Million Dollars ($55,000,000) and the Fundamental Rep Cap of One Hundred Ten Million Dollars ($110,000,000). To the extent that Buyer's Losses for indemnifiable Claims exceed the then-available balance of the Escrow Account, Buyer shall have recourse directly against Seller, subject to the applicable caps and limitations set forth in the PSA.
(b) The existence of the Indemnity Escrow Fund does not limit, modify, or otherwise affect Buyer's rights under the buyer-side representations and warranties insurance policy (the "R&W Insurance Policy") issued by Sentinel Specialty Insurance Company (Policy No. SWP-2024-06287), with a policy limit of Fifty-Five Million Dollars ($55,000,000) and a retention of Eleven Million Dollars ($11,000,000) (which retention drops to Five Million Five Hundred Thousand Dollars ($5,500,000) at twelve (12) months following the Closing Date), the premium for which in the amount of One Million Four Hundred Two Thousand Five Hundred Dollars ($1,402,500) was paid by Buyer at Closing. Buyer's right to seek recovery from the Escrow Account is independent of, and may be pursued concurrently with, any claim under the R&W Insurance Policy.
(c) For the avoidance of doubt, the Tipping Basket of Five Million Five Hundred Thousand Dollars ($5,500,000) and the De Minimis Threshold of Two Hundred Seventy-Five Thousand Dollars ($275,000) per individual Claim, each as set forth in the PSA, shall apply to Claims asserted against the Escrow Amount in the same manner as they apply to direct indemnification claims under the PSA. Escrow Agent shall have no responsibility or obligation to independently verify whether the Tipping Basket or De Minimis Threshold has been satisfied.
ARTICLE 3
INVESTMENT OF ESCROW FUNDS
Section 3.1 Investment Direction.
Escrow Agent shall invest and reinvest the Escrow Amount, including any Investment Earnings, solely in Permitted Investments. Buyer and Seller may jointly direct Escrow Agent in writing to invest the Escrow Amount in any specific Permitted Investment described in Section 3.2. In the absence of any such joint written direction from Buyer and Seller, Escrow Agent shall invest the Escrow Amount in the default investment described in Section 3.2(a). Escrow Agent shall have no obligation to invest or reinvest the Escrow Amount in any investment other than a Permitted Investment, regardless of any direction from either Party acting alone.
Section 3.2 Permitted Investments.
As used in this Agreement, "Permitted Investments" means any of the following:
(a) Default Investment. Money market deposit accounts at a federally insured depository institution or money market mutual funds that are invested exclusively in direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, the United States of America;
(b) Direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, the United States of America, in each case having maturities not exceeding ninety (90) days from the date of acquisition;
(c) Certificates of deposit issued by any commercial bank that is a member of the Federal Deposit Insurance Corporation and has combined capital and surplus of not less than Five Hundred Million Dollars ($500,000,000), in each case having maturities not exceeding ninety (90) days from the date of acquisition; and
(d) Such other investments as Buyer and Seller may jointly direct in writing, provided that such investments are of a type and quality that Escrow Agent, in its reasonable discretion, is willing and able to hold and administer.
Section 3.3 Investment Earnings.
(a) All interest, dividends, and other income earned on the Escrow Amount ("Investment Earnings") shall become part of the Escrow Amount and shall be held in the Escrow Account and disbursed in accordance with the terms of this Agreement. Any reference in this Agreement to the "Escrow Amount" shall be deemed to include Investment Earnings, unless the context otherwise requires.
(b) Tax Reporting. For federal and state income tax purposes, all Investment Earnings shall be treated as income of Seller (EIN: 83-1647205) in the taxable year in which such earnings are received or accrued, as applicable, regardless of whether such earnings are disbursed to Seller during such taxable year. Escrow Agent shall report all Investment Earnings to the Internal Revenue Service and applicable state taxing authorities on IRS Forms 1099 (or successor forms) issued in the name and taxpayer identification number of Seller. Seller shall be solely responsible for the payment of all taxes on Investment Earnings. Escrow Agent shall withhold any taxes required to be withheld by applicable law and shall remit such withholdings to the appropriate governmental authority.
(c) No Liability for Investment Losses. No Party shall be liable for any loss on Permitted Investments, including any decline in value or loss of principal, other than losses arising as a direct result of Escrow Agent's gross negligence, willful misconduct, or fraud. The Parties acknowledge that the Escrow Agent is not providing investment advice and that investments in Permitted Investments may result in a loss of principal. The Parties further acknowledge that the Escrow Agent shall not be liable for any failure to maximize investment returns.
Section 3.4 Tax Identification.
The Parties' federal employer identification numbers are as follows:
Seller (Greystone Meridian Partners Fund III, L.P.): 83-1647205
Buyer (Fairwater Real Estate Investment Trust): 52-2198437
Each Party shall promptly provide to Escrow Agent such completed IRS Forms W-9 or W-8, as applicable, and such other tax forms and documentation as Escrow Agent may reasonably request in connection with the establishment and maintenance of the Escrow Account.
ARTICLE 4
CLAIMS AND DISBURSEMENT PROCEDURES
Section 4.1 Claims Generally.
(a) The Escrow Amount shall be available to satisfy Seller's indemnification obligations for any Claim arising under the PSA, subject in all respects to the indemnification provisions of the PSA, including without limitation the Tipping Basket of Five Million Five Hundred Thousand Dollars ($5,500,000), the De Minimis Threshold of Two Hundred Seventy-Five Thousand Dollars ($275,000) per individual Claim, the General Rep Cap of Fifty-Five Million Dollars ($55,000,000), and the Fundamental Rep Cap of One Hundred Ten Million Dollars ($110,000,000).
(b) No disbursement shall be made from the Escrow Account except in accordance with the provisions of this Article 4 and Article 5. Escrow Agent shall not disburse any portion of the Escrow Amount except upon receipt of (i) a Joint Written Direction executed by authorized representatives of both Buyer and Seller, or (ii) a final, non-appealable order of a court of competent jurisdiction directing such disbursement, accompanied by an opinion of counsel reasonably satisfactory to Escrow Agent that such order is final and non-appealable. Escrow Agent shall have no duty or obligation to determine the merits of any Claim or the applicability of any provision of the PSA.
Section 4.2 Claim Notice.
(a) To assert a Claim against the Escrow Amount, Buyer shall deliver a written Claim Notice, substantially in the form attached hereto as Exhibit C, simultaneously to (i) Seller, at Seller's address set forth in Section 7.1 or to Seller's Counsel, Blackridge Hayes LLP, 1285 Avenue of the Americas, 34th Floor, New York, New York 10019, Attention: Nathaniel Pryce, and (ii) Escrow Agent, at Escrow Agent's address set forth in Section 7.1, Attention: Kenneth Stanhope, Senior Vice President.
(b) Each Claim Notice shall include the following:
(i) a reasonably detailed description of the facts and circumstances giving rise to the Claim, including identification of the relevant Target Entity or Target Entities and any properties affected;
(ii) the specific representations, warranties, covenants, or agreements of Seller contained in the PSA that are alleged to have been breached or with respect to which indemnification is sought;
(iii) the amount claimed by Buyer or, if the amount is not yet determinable with reasonable certainty, a good-faith estimate thereof (the "Claimed Amount"), together with a reasonably detailed calculation of such Claimed Amount to the extent practicable; and
(iv) copies of any supporting documentation then available to Buyer, including without limitation correspondence, reports, assessments, third-party claims, or other materials substantiating the Claim.
(c) A Claim Notice relating to General Representations must be delivered prior to the Escrow Termination Date (December 6, 2025) in order to constitute a valid Claim against the Escrow Amount. Tax Representation claims may be asserted through June 6, 2027 (the thirty-six (36) month survival period for Tax Representations), provided, however, that the Indemnity Escrow shall extend beyond the Escrow Termination Date only with respect to Pending Claims for which a Claim Notice was delivered prior to December 6, 2025, as further provided in Section 5.2. For the avoidance of doubt, Buyer's recourse for Tax Representation breaches discovered after the Escrow Termination Date (unless a Claim Notice with respect thereto was delivered before December 6, 2025) shall be directly against Seller and/or under the R&W Insurance Policy.
Section 4.3 Response Period.
(a) Seller shall have thirty (30) calendar days from the date of Seller's receipt of a Claim Notice (the "Response Period") to deliver a written response (the "Seller's Response") to Buyer (at Buyer's address set forth in Section 7.1 or to Buyer's Counsel) and to Escrow Agent.
(b) Seller's Response shall state whether Seller:
(i) accepts the Claim in whole and agrees that the full Claimed Amount is payable to Buyer from the Escrow Account;
(ii) accepts the Claim in part, specifying the dollar amount that Seller agrees is payable to Buyer from the Escrow Account (the "Accepted Amount") and disputing the remainder, with reasonably detailed grounds for the dispute; or
(iii) disputes the Claim in its entirety, together with a reasonably detailed statement of the grounds for such dispute, including Seller's position as to the factual and legal bases for the dispute and any countervailing facts or circumstances.
(c) If Seller fails to deliver a timely Seller's Response within the thirty (30) calendar day Response Period, Seller shall be deemed to have disputed the Claim in its entirety. The deemed dispute shall not constitute a waiver of any of Seller's rights or defenses with respect to such Claim, and Seller shall be entitled to contest such Claim in accordance with Section 4.5.
Section 4.4 Agreed Claims — Disbursement to Buyer.
(a) If Seller accepts a Claim in whole (pursuant to Section 4.3(b)(i)), or if Seller and Buyer otherwise reach agreement with respect to the resolution of a Claim, Seller and Buyer shall execute and deliver a Joint Written Direction to Escrow Agent within five (5) business days of the date of Seller's acceptance or the Parties' written agreement, as applicable, directing Escrow Agent to disburse the accepted or agreed amount to Buyer by wire transfer of immediately available funds.
(b) If Seller accepts a Claim in part (pursuant to Section 4.3(b)(ii)), Seller and Buyer shall execute and deliver a Joint Written Direction to Escrow Agent within five (5) business days of the date of Seller's acceptance, directing Escrow Agent to disburse the Accepted Amount to Buyer by wire transfer of immediately available funds. The remaining disputed portion of the Claimed Amount shall be retained in the Escrow Account and treated as a Pending Claim, subject to resolution in accordance with Section 4.5.
(c) Disbursement to Buyer shall be made to the account designated in the Joint Written Direction, or, if no account is specified therein, to the account set forth in the wire transfer instructions for Buyer in Exhibit A attached hereto. Escrow Agent shall effect the disbursement within two (2) business days of Escrow Agent's receipt of a properly executed Joint Written Direction.
Section 4.5 Disputed Claims — Resolution Procedures.
(a) If Seller disputes a Claim in whole or in part (whether by timely delivery of a Seller's Response pursuant to Section 4.3(b)(iii) or by deemed dispute pursuant to Section 4.3(c)), the disputed Claimed Amount (or the disputed portion thereof) shall be retained in the Escrow Account pending final resolution of the dispute, and shall not be disbursed except as provided in this Section 4.5.
(b) Following expiration of the Response Period, Buyer and Seller shall negotiate in good faith for a period of thirty (30) calendar days (the "Negotiation Period") to attempt to resolve the dispute. During the Negotiation Period, each Party shall make available to the other Party such information and documentation as may be reasonably requested in connection with the resolution of the dispute.
(c) If the dispute is not resolved by mutual agreement within the Negotiation Period, either Party may pursue the dispute resolution mechanisms set forth in the PSA, including the institution of litigation in the courts of the State of New York, New York County, or the United States District Court for the Southern District of New York, as provided in Section 13.8 of the PSA. Nothing in this Agreement shall be construed to require either Party to submit any dispute to arbitration, mediation, or any other alternative dispute resolution proceeding unless otherwise agreed by the Parties in writing.
(d) Upon final resolution of a disputed Claim, whether by mutual written agreement of Buyer and Seller, final non-appealable order of a court of competent jurisdiction, or final arbitral award (if the Parties agree to arbitration), the Parties shall act as follows:
(i) If the dispute is resolved by mutual agreement, Buyer and Seller shall promptly (and in any event within five (5) business days of such resolution) execute and deliver a Joint Written Direction to Escrow Agent, directing Escrow Agent to disburse the resolved amount to the appropriate Party (or Parties) in accordance with the terms of such resolution.
(ii) If the dispute is resolved by final, non-appealable order of a court of competent jurisdiction or final arbitral award, the prevailing Party shall deliver to Escrow Agent a certified copy of such final order or award, together with an opinion of counsel reasonably acceptable to Escrow Agent confirming that such order or award is final and non-appealable, and Escrow Agent shall disburse the funds in accordance with such order or award.
(e) Escrow Agent shall effect any disbursement directed pursuant to this Section 4.5 within two (2) business days of Escrow Agent's receipt of a properly executed Joint Written Direction or a certified copy of a final, non-appealable court order or arbitral award (together with the accompanying opinion of counsel, if applicable).
Section 4.6 Partial Disbursements.
(a) Multiple Claims may be outstanding simultaneously, and disbursements from the Escrow Account shall be made on a Claim-by-Claim basis as each Claim is resolved in accordance with this Article 4. The resolution and disbursement of one Claim shall not affect the treatment of any other Claim that remains pending.
(b) If at any time the aggregate of all Claimed Amounts with respect to all outstanding and unresolved Claims exceeds the then-available balance of the Escrow Account (after giving effect to all prior disbursements), the Escrow Agent shall not disburse more than the available balance of the Escrow Account. In such event, disbursements shall be made in the order in which the applicable Joint Written Directions or final court orders are received by Escrow Agent, until the Escrow Account is exhausted. Buyer's remaining recourse for any excess amounts shall be directly against Seller (subject to the caps and limitations set forth in the PSA) and/or under the R&W Insurance Policy. Escrow Agent shall promptly notify Buyer and Seller in writing if a requested disbursement exceeds the available balance of the Escrow Account.
ARTICLE 5
TERM AND RELEASE OF ESCROW
Section 5.1 Escrow Term.
This Agreement and the Escrow Account shall remain in effect from the Closing Date (June 6, 2024) until the Escrow Termination Date (December 6, 2025, being eighteen (18) months after the Closing Date), subject to extension as provided in Section 5.2. The Parties acknowledge that the eighteen (18) month escrow term corresponds to the survival period for General Representations under the PSA.
Section 5.2 Extension for Pending Claims.
(a) If, as of the Escrow Termination Date, one or more Claim Notices have been delivered in accordance with Section 4.2 prior to the Escrow Termination Date and the Claims described therein remain unresolved (each, a "Pending Claim"), Escrow Agent shall continue to hold in the Escrow Account an amount equal to the aggregate Claimed Amounts (or good-faith estimates thereof) of all Pending Claims then outstanding (the "Holdback Amount"). The balance of the Escrow Account in excess of the Holdback Amount (if any) shall be released to Seller in accordance with Section 5.3.
(b) The Escrow Account shall remain in effect with respect to the Holdback Amount until all Pending Claims are finally resolved and the corresponding disbursements are made in accordance with Article 4. Upon final resolution of each Pending Claim, the applicable portion of the Holdback Amount shall be disbursed to the appropriate Party in accordance with Article 4, and any remaining portion of the Holdback Amount attributable to such Pending Claim that is not payable to Buyer shall be promptly released to Seller.
(c) For the avoidance of doubt, Tax Representation claims may be asserted through June 6, 2027 (the thirty-six (36) month survival period for Tax Representations), but such claims are not secured by the Indemnity Escrow Fund after the Escrow Termination Date unless a Claim Notice with respect to such Tax Representation claim was delivered to Seller and Escrow Agent prior to December 6, 2025. Buyer's recourse for Tax Representation breaches discovered after the Escrow Termination Date (absent a timely Claim Notice) shall be directly against Seller and/or under the R&W Insurance Policy, and Escrow Agent shall have no obligation to retain any funds in the Escrow Account with respect to such claims.
Section 5.3 Release to Seller at Escrow Termination Date.
(a) On the Escrow Termination Date (December 6, 2025), provided that no Pending Claims exist as of such date, Buyer and Seller shall execute and deliver a Joint Written Direction to Escrow Agent within five (5) business days following the Escrow Termination Date, directing Escrow Agent to release the entire remaining balance of the Escrow Account, including all Investment Earnings, to Seller by wire transfer of immediately available funds.
(b) If one or more Pending Claims exist as of the Escrow Termination Date, Buyer and Seller shall execute and deliver a Joint Written Direction to Escrow Agent within five (5) business days following the Escrow Termination Date, directing Escrow Agent to (i) release to Seller the portion of the Escrow Account balance that exceeds the Holdback Amount, and (ii) retain in the Escrow Account the Holdback Amount pending final resolution of all Pending Claims.
(c) Unless Seller provides alternative wire transfer instructions in writing to Buyer and Escrow Agent at least five (5) business days prior to the applicable release date, all releases to Seller under this Section 5.3 shall be made by wire transfer of immediately available funds to the following account:
Greystone Meridian Partners Fund III, L.P. Magnolia Commerce Bank, N.A. 225 Peachtree Street NE, Suite 100 Atlanta, Georgia 30303 Account Name: Greystone Meridian Partners Fund III, L.P. (Routing and account numbers as set forth in Exhibit A) Reference: Indemnity Escrow Release — GMP Fund III
(d) Escrow Agent shall effect any release directed pursuant to this Section 5.3 within two (2) business days of Escrow Agent's receipt of a properly executed Joint Written Direction.
Section 5.4 Buyer's Obligation to Join in Release.
(a) Buyer shall not unreasonably withhold, condition, or delay its execution of a Joint Written Direction for release of the Escrow Amount (or any portion thereof) at the Escrow Termination Date or at any other time when release to Seller is required under this Agreement, provided that no Pending Claims exist with respect to the amounts to be released.
(b) If Buyer fails to execute a Joint Written Direction for release within ten (10) business days after the Escrow Termination Date (or, in the case of a partial release, within ten (10) business days after the applicable release date), and no Pending Claims exist with respect to the amounts to be released, Seller may deliver a written demand (the "Release Demand") to Escrow Agent (with a simultaneous copy to Buyer and Buyer's Counsel) setting forth the amounts requested to be released and certifying that no Pending Claims exist with respect to such amounts. If Buyer does not deliver a written objection to Escrow Agent within ten (10) business days of Buyer's receipt of the Release Demand, specifying the basis for Buyer's objection (including identification of any Pending Claims), Escrow Agent shall release the requested amounts to Seller within two (2) business days following the expiration of such ten (10) business day objection period. If Buyer delivers a timely written objection, Escrow Agent shall continue to hold the disputed amounts in the Escrow Account pending resolution in accordance with Article 4 or Article 6, as applicable.
ARTICLE 6
ESCROW AGENT PROVISIONS
Section 6.1 Duties and Responsibilities.
(a) Escrow Agent's duties and obligations under this Agreement are purely ministerial in nature and shall be determined solely by the express provisions of this Agreement. Escrow Agent shall not be deemed to be a fiduciary of any Party and shall have no implied duties or obligations.
(b) Escrow Agent shall not be required to take any action that, in its reasonable judgment, would be contrary to any applicable law, rule, regulation, or judicial or governmental order, or would expose Escrow Agent to liability not indemnified hereunder.
(c) Escrow Agent shall act upon and comply with Joint Written Directions and final, non-appealable court orders delivered in accordance with this Agreement. Escrow Agent shall not be required to determine the merits of any Claim, the validity or sufficiency of any Claim Notice or Seller's Response, the applicability of any provision of the PSA, or the satisfaction of any condition precedent to indemnification under the PSA.
(d) Escrow Agent shall not be under any obligation to institute or defend any legal proceeding relating to this Agreement, the PSA, or any Claim, unless Escrow Agent has been indemnified to its reasonable satisfaction by Buyer and Seller against any and all costs, expenses, and liabilities that may be incurred in connection therewith.
Section 6.2 Limitation of Liability.
(a) Escrow Agent shall not be liable for any act taken, or any omission to act, under this Agreement, except to the extent that a court of competent jurisdiction determines by final, non-appealable judgment that such act or omission constituted Escrow Agent's own gross negligence, willful misconduct, or fraud.
(b) Escrow Agent shall not be liable for any losses, diminution in value, or other damages arising from the investment or reinvestment of the Escrow Amount in Permitted Investments in accordance with this Agreement, including without limitation any loss of principal or decline in market value of any Permitted Investment.
(c) Escrow Agent shall not be responsible for, and shall have no duty to inquire into, the genuineness, validity, sufficiency, or authenticity of any document, notice, instruction, certificate, signature, or communication delivered to it in connection with this Agreement, and Escrow Agent shall be entitled to rely conclusively on any such document, notice, instruction, certificate, signature, or communication believed by it in good faith to be genuine.
(d) Escrow Agent is not a party to, and has no duties, obligations, or liabilities under, the PSA, the R&W Insurance Policy, or any other agreement between Buyer and Seller. Escrow Agent's obligations are limited solely to those set forth in this Agreement, and no implied covenants or obligations shall be read into this Agreement against Escrow Agent.
(e) In no event shall Escrow Agent be liable for any indirect, consequential, special, incidental, or punitive damages of any kind whatsoever, regardless of the form of action and whether or not any such damages are foreseeable.
Section 6.3 Indemnification of Escrow Agent.
(a) Buyer and Seller, jointly and severally, shall indemnify, defend, and hold harmless Escrow Agent and its directors, officers, employees, agents, and affiliates (each, an "Escrow Agent Indemnified Party") from and against any and all claims, demands, actions, suits, proceedings, losses, liabilities, damages, judgments, penalties, fines, costs, and expenses (including reasonable attorneys' fees and disbursements) (collectively, "Escrow Agent Losses") arising out of or in connection with Escrow Agent's performance of its duties under this Agreement, the execution and delivery of this Agreement, or any act or omission of Escrow Agent hereunder, except to the extent that such Escrow Agent Losses are caused by Escrow Agent's gross negligence, willful misconduct, or fraud.
(b) As between Buyer and Seller, the obligation to indemnify Escrow Agent pursuant to this Section 6.3 shall be shared equally (fifty percent (50%) each), unless such Escrow Agent Losses arise primarily from the conduct of one Party, in which case the responsible Party shall bear such Escrow Agent Losses in full. Nothing in this Section 6.3 shall limit the joint and several nature of Buyer's and Seller's obligations to Escrow Agent.
(c) The indemnification obligations set forth in this Section 6.3 shall survive the termination of this Agreement and the resignation or removal of Escrow Agent.
Section 6.4 Compensation of Escrow Agent.
(a) Escrow Agent shall be entitled to receive compensation for its services hereunder in accordance with the fee schedule agreed upon by the Parties, consisting of an annual escrow administration fee of Seven Thousand Five Hundred Dollars ($7,500) (prorated for any partial year), payable upon execution of this Agreement and annually thereafter on each anniversary of the Effective Date for so long as the Escrow Account remains in effect.
(b) The annual escrow administration fee shall be paid fifty percent (50%) by Buyer and fifty percent (50%) by Seller. The initial annual fee shall be paid upon execution of this Agreement, with each Party remitting its share directly to Escrow Agent.
(c) In addition to the annual fee, Escrow Agent shall be entitled to reimbursement for all reasonable and documented out-of-pocket expenses incurred by Escrow Agent in connection with its duties under this Agreement, including without limitation postage, courier fees, wire transfer charges, and similar items. Such expenses shall be shared equally by Buyer and Seller unless otherwise agreed.
Section 6.5 Resignation and Removal.
(a) Escrow Agent may resign and be discharged of its duties and obligations hereunder by giving thirty (30) days' prior written notice of its resignation to Buyer and Seller. Such resignation shall take effect upon the appointment of a successor escrow agent or upon the date specified in such notice, whichever is later.
(b) Buyer and Seller may jointly remove Escrow Agent at any time by giving thirty (30) days' prior written notice to Escrow Agent. Such removal shall take effect upon the appointment of a successor escrow agent.
(c) Upon the effective date of Escrow Agent's resignation or removal, Buyer and Seller shall appoint a successor escrow agent within thirty (30) days. The successor escrow agent shall be a nationally recognized title insurance company, commercial bank, or financial institution reasonably acceptable to both Buyer and Seller. Upon appointment of a successor escrow agent, Escrow Agent shall transfer and deliver the Escrow Amount and all related records and documentation to the successor escrow agent, and Escrow Agent shall thereupon be discharged and released from all further duties and obligations under this Agreement (other than Escrow Agent's obligations under Section 6.2 and Section 6.3 with respect to acts or omissions occurring prior to such discharge).
(d) If Buyer and Seller are unable to agree upon a successor escrow agent within thirty (30) days following Escrow Agent's resignation or removal, Escrow Agent may deposit the Escrow Amount with a court of competent jurisdiction in the State of New York, County of New York, and shall thereupon be discharged of all duties and obligations under this Agreement (other than as described in Section 6.5(c) above). The costs of such deposit shall be borne equally by Buyer and Seller.
Section 6.6 Conflicting Instructions / Interpleader.
(a) If at any time Escrow Agent receives conflicting instructions, notices, or demands from Buyer and Seller with respect to the Escrow Amount or any portion thereof, Escrow Agent may, in its sole discretion, (i) refrain from taking any action with respect to the disputed amounts until it receives a Joint Written Direction or a final, non-appealable order of a court of competent jurisdiction directing the disposition of such amounts, during which time Escrow Agent shall continue to hold the Escrow Amount (or the disputed portion thereof) in the Escrow Account; or (ii) deposit the Escrow Amount (or the disputed portion thereof) with a court of competent jurisdiction in the State of New York, County of New York, by way of an action in interpleader, and shall thereupon be discharged of all further duties and obligations under this Agreement with respect to the amounts so deposited.
(b) Escrow Agent shall be entitled to recover from the Escrow Amount all reasonable costs and expenses (including reasonable attorneys' fees) incurred by Escrow Agent in connection with any interpleader action, and the remaining costs and expenses of such interpleader action shall be borne equally by Buyer and Seller.
Section 6.7 Reliance.
(a) Escrow Agent may rely upon, and shall be fully protected in acting or refraining from acting in accordance with, any notice, instruction, communication, direction, certificate, or other document or instrument believed by it in good faith to be genuine and to have been signed, sent, or presented by the proper person or persons. Escrow Agent shall have no duty to make any independent investigation or inquiry as to the truth, accuracy, or completeness of any such document or instrument.
(b) Escrow Agent may consult with legal counsel of its choosing (which counsel may also serve as counsel to Escrow Agent in its individual capacity) with respect to any question arising under or in connection with this Agreement, and Escrow Agent shall not be liable for any action taken, suffered, or omitted by it in good faith in accordance with the opinion or advice of such counsel.
ARTICLE 7
NOTICES
Section 7.1 Form and Delivery.
All notices, requests, demands, consents, waivers, Claim Notices, Joint Written Directions, and other communications required or permitted under this Agreement (collectively, "Notices") shall be in writing and shall be delivered by (a) personal delivery, (b) a nationally recognized overnight courier service (such as Severin Partners LLC, Halcyon Partners LLC, or Tarrant & Co.), (c) certified mail, return receipt requested, postage prepaid, or (d) email transmission with a PDF attachment, provided that (x) the sender receives electronic confirmation of receipt from the recipient and (y) a confirming copy is sent by overnight courier within one (1) business day thereafter. All Notices shall be addressed as follows:
If to Buyer:
Fairwater Real Estate Investment Trust 7200 Chesapeake Parkway, Suite 1100 Columbia, Maryland 21044
Attention: David Elgin Park, General Counsel
Email: depark@fairwaterreit.com
with a copy (which shall not constitute notice) to:
Marcus Devereaux, EVP, Acquisitions
Email: mdevereaux@fairwaterreit.com
with a copy (which shall not constitute notice) to Buyer's Counsel:
Calderwood & Harkness LLP 450 Park Avenue, 28th Floor New York, New York 10022
Attention: Douglas Fairchild
Email: dfairchild@calderwoodharkness.com
If to Seller:
Greystone Meridian Partners Fund III, L.P. c/o Greystone Meridian Capital LLC 3300 Peachtree Road NE, Suite 2200 Atlanta, Georgia 30326
Attention: Victor Lansdell, Managing Partner
Email: vlansdell@greystonemeridian.com
with a copy (which shall not constitute notice) to Seller's Counsel:
Blackridge Hayes LLP 1285 Avenue of the Americas, 34th Floor New York, New York 10019
Attention: Nathaniel Pryce
Email: npryce@blackridgehayes.com
If to Escrow Agent:
Commonwealth National Title Insurance Company 191 Peachtree Street NE, Suite 800 Atlanta, Georgia 30303
Attention: Kenneth Stanhope, Senior Vice President
Email: kstanhope@commonwealthnational.com
Section 7.2 Effectiveness of Notices.
Notices shall be deemed effective and received as follows: (a) if delivered by personal delivery, upon actual receipt by the addressee or an authorized representative of the addressee; (b) if sent by nationally recognized overnight courier service, on the next business day following deposit with such courier service; (c) if sent by certified mail, return receipt requested, on the third (3rd) business day following the date of mailing; and (d) if sent by email with PDF attachment, upon receipt by the sender of electronic confirmation of receipt from the recipient (provided that a confirming copy is sent by overnight courier within one (1) business day thereafter). If the date of receipt is not a business day, the Notice shall be deemed received on the next succeeding business day.
Section 7.3 Change of Address.
Any Party may change its address, email address, or designated contact for purposes of Notices under this Agreement by giving written notice of such change to each of the other Parties in accordance with this Article 7. Such change shall be effective upon receipt of such notice by the other Parties.
ARTICLE 8
AUTHORIZED SIGNATORIES
Section 8.1 Buyer's Authorized Signatories.
The following individuals are hereby authorized to execute Joint Written Directions, Claim Notices, and other instructions on behalf of Buyer under this Agreement:
(a) Marcus Devereaux, EVP, Acquisitions
(b) David Elgin Park, General Counsel
(c) Patricia Sung-Calloway, Chief Financial Officer
Any two (2) of the foregoing individuals, acting together, shall have authority to execute Joint Written Directions on behalf of Buyer. Claim Notices may be executed by any one (1) of the foregoing individuals. Buyer may amend this list of authorized signatories by written notice delivered to Seller and Escrow Agent in accordance with Article 7, signed by at least two (2) of Buyer's then-current authorized signatories.
Section 8.2 Seller's Authorized Signatories.
The following individuals are hereby authorized to execute Joint Written Directions and other instructions on behalf of Seller under this Agreement, each acting in his or her capacity as an authorized representative of Greystone Meridian Capital LLC, the general partner of Seller:
(a) Victor Lansdell, Co-Founder & Managing Partner
(b) Elise Rathborne, Co-Founder & Managing Partner
Either of the foregoing individuals, acting individually, shall have full authority to execute Joint Written Directions and other instructions on behalf of Seller. Seller may amend this list of authorized signatories by written notice delivered to Buyer and Escrow Agent in accordance with Article 7, signed by at least one (1) of Seller's then-current authorized signatories.
Section 8.3 Escrow Agent's Authorized Signatories.
The following individuals are hereby authorized to execute documents and take actions on behalf of Escrow Agent under this Agreement:
(a) Kenneth Stanhope, Senior Vice President
(b) Virginia Moorehead, AVP, National Counsel
Escrow Agent may amend this list of authorized signatories by written notice delivered to Buyer and Seller in accordance with Article 7.
ARTICLE 9
GENERAL PROVISIONS
Section 9.1 Governing Law.
This Agreement shall be governed by, and construed and interpreted in accordance with, the laws of the State of New York, without giving effect to any choice-of-law or conflict-of-laws rules or provisions (whether of the State of New York or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of New York. The choice of New York law is consistent with the governing law provision set forth in the PSA.
Section 9.2 Jurisdiction and Venue.
Each of the Parties hereby irrevocably and unconditionally submits to the exclusive jurisdiction of the courts of the State of New York sitting in New York County and the United States District Court for the Southern District of New York for the purposes of any action, suit, or proceeding arising out of or relating to this Agreement or the transactions contemplated hereby, and each Party agrees not to commence any such action, suit, or proceeding except in such courts. Each Party hereby irrevocably waives, and agrees not to assert, by way of motion, as a defense, counterclaim, or otherwise, in any such action, suit, or proceeding, any claim that it is not personally subject to the jurisdiction of such courts, that its property is exempt or immune from attachment or execution, that such action, suit, or proceeding is brought in an inconvenient forum, that the venue of such action, suit, or proceeding is improper, or that this Agreement or the subject matter hereof may not be enforced in or by such courts.
Section 9.3 Entire Agreement.
This Agreement, together with the PSA (as amended) and the exhibits and schedules attached hereto and thereto, constitutes the entire agreement among the Parties with respect to the subject matter hereof and supersedes all prior negotiations, representations, warranties, commitments, offers, and agreements (whether oral or written) relating to the subject matter hereof. The Parties acknowledge and agree that this Indemnity Escrow Agreement is separate and distinct from the Earnest Money Deposit Escrow Agreement, dated as of March 4, 2024, covering the aggregate earnest money deposits of Fifty-Five Million Dollars ($55,000,000), which was previously executed and the funds under which have been released and applied toward the Purchase Price at Closing.
Section 9.4 Amendments and Waivers.
No amendment, modification, supplement, or waiver of any provision of this Agreement shall be effective unless it is in writing and signed by each of Buyer, Seller, and Escrow Agent. No waiver of any right or remedy under this Agreement shall operate as a waiver of any other right or remedy, and no single or partial exercise of any right or remedy shall preclude any other or further exercise thereof or the exercise of any other right or remedy. No course of dealing between or among the Parties shall be deemed to modify, amend, or discharge any provision of this Agreement.
Section 9.5 Assignment.
No Party may assign, transfer, or delegate its rights, interests, or obligations under this Agreement without the prior written consent of each of the other Parties, except that Buyer may assign its rights (but not its obligations) under this Agreement to any wholly owned, direct or indirect subsidiary of Buyer without the consent of Seller or Escrow Agent, provided that (a) Buyer provides prompt written notice of such assignment to Seller and Escrow Agent, (b) the assignee assumes in writing all of Buyer's obligations under this Agreement, and (c) Buyer remains primarily liable for all of its obligations hereunder, jointly and severally with such assignee. Any purported assignment in violation of this Section 9.5 shall be null and void and of no force or effect.
Section 9.6 Successors and Assigns.
This Agreement shall be binding upon and shall inure to the benefit of the Parties and their respective successors and permitted assigns. Nothing in this Section 9.6 shall be construed to permit any assignment not otherwise authorized by Section 9.5.
Section 9.7 Severability.
If any provision of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, or unenforceable in any respect, such invalidity, illegality, or unenforceability shall not affect any other provision of this Agreement, and this Agreement shall be construed as if such invalid, illegal, or unenforceable provision had never been contained herein, provided that the remaining provisions of this Agreement shall continue in full force and effect and shall be interpreted to give effect to the intent of the Parties to the greatest extent permitted by applicable law.
Section 9.8 Counterparts.
This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, and all of which together shall constitute one and the same instrument. Delivery of an executed counterpart of this Agreement by facsimile, portable document format (PDF), or other electronic transmission shall be equally effective as delivery of a manually executed counterpart, and any Party delivering an executed counterpart by such electronic means shall thereafter also deliver a manually executed counterpart, provided that the failure to deliver such manually executed counterpart shall not affect the validity, enforceability, or binding effect of this Agreement.
Section 9.9 Headings.
The article and section headings contained in this Agreement are inserted for convenience of reference only and shall not affect, and shall not be used in connection with, the interpretation or construction of this Agreement.
Section 9.10 No Third-Party Beneficiaries.
This Agreement is solely for the benefit of the Parties hereto and their respective successors and permitted assigns. Nothing in this Agreement, express or implied, is intended to or shall confer upon any person or entity other than the Parties and their respective successors and permitted assigns any right, benefit, or remedy of any nature whatsoever under or by reason of this Agreement. For the avoidance of doubt, neither Calderwood & Harkness LLP (Buyer's Counsel) nor Blackridge Hayes LLP (Seller's Counsel) is a party to, intended beneficiary of, or entitled to enforce any provision of this Agreement, notwithstanding any references herein to such firms for notice purposes.
Section 9.11 Waiver of Jury Trial.
EACH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT, PROCEEDING, CLAIM, OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (A) NO REPRESENTATIVE OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (B) EACH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (C) EACH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (D) EACH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS CONTAINED IN THIS SECTION 9.11.
ARTICLE 10
RELATIONSHIP TO PSA AND R&W INSURANCE
Section 10.1 PSA Controls.
(a) In the event of any conflict or inconsistency between the terms and provisions of this Agreement and the terms and provisions of the PSA, the terms and provisions of the PSA shall control and govern in all respects; provided, however, that the duties, obligations, rights, protections, immunities, and exculpation of Escrow Agent shall be governed exclusively by this Agreement, and no provision of the PSA shall be deemed to impose any duty or obligation upon, or remove any protection or immunity from, Escrow Agent.
(b) All capitalized terms used but not defined in this Agreement shall have the respective meanings ascribed to them in the PSA. In the event of any conflict between the definition of a term in this Agreement and the definition of the same term in the PSA, the definition in the PSA shall control, except with respect to terms relating specifically to the duties, rights, and obligations of Escrow Agent hereunder.
Section 10.2 R&W Insurance.
(a) The Parties acknowledge and agree that Buyer has obtained a buyer-side representations and warranties insurance policy from Sentinel Specialty Insurance Company (Policy No. SWP-2024-06287) (the "R&W Insurance Policy"), with the following material terms:
(i) Policy limit: Fifty-Five Million Dollars ($55,000,000);
(ii) Retention: Eleven Million Dollars ($11,000,000), which retention drops to Five Million Five Hundred Thousand Dollars ($5,500,000) on the date that is twelve (12) months after the Closing Date (June 6, 2025);
(iii) Premium: One Million Four Hundred Two Thousand Five Hundred Dollars ($1,402,500), paid by Buyer at Closing; and
(iv) Policy period: as set forth in the R&W Insurance Policy.
(b) Disbursements from the Escrow Amount to Buyer in satisfaction of Claims shall reduce, dollar-for-dollar, the retention under the R&W Insurance Policy, to the extent applicable and as provided in the R&W Insurance Policy. The Parties shall cooperate in good faith to coordinate any claims under this Agreement with claims under the R&W Insurance Policy to avoid duplicative recoveries.
(c) Nothing in this Agreement shall limit, restrict, or otherwise affect Buyer's right to make claims under the R&W Insurance Policy independent of, and without regard to, any claims against the Escrow Amount. The R&W Insurance Policy is a separate contract between Buyer and Sentinel Specialty Insurance Company, and Seller and Escrow Agent are not parties to, beneficiaries of, or bound by the R&W Insurance Policy.
Section 10.3 Indemnity Caps and Limitations.
(a) The Parties acknowledge and confirm that all Claims against the Escrow Amount are subject to, and limited by, the indemnification framework set forth in Article XI of the PSA, including without limitation the following provisions:
(i) Tipping Basket: Five Million Five Hundred Thousand Dollars ($5,500,000) (being one-half of one percent (0.5%) of the Purchase Price). Until the aggregate amount of Losses incurred by Buyer exceeds the Tipping Basket, Buyer shall have no right to recovery from Seller or the Escrow Amount. Once the aggregate amount of Losses exceeds the Tipping Basket, Buyer shall be entitled to recover from the first dollar of Losses (i.e., from dollar one, and not merely the excess over the Tipping Basket).
(ii) De Minimis Threshold: Two Hundred Seventy-Five Thousand Dollars ($275,000) per individual Claim. Individual Claims with Losses below the De Minimis Threshold shall not be counted toward the Tipping Basket or otherwise be recoverable.
(iii) General Rep Cap: Fifty-Five Million Dollars ($55,000,000) (being five percent (5%) of the Purchase Price), which is the maximum aggregate amount recoverable by Buy