ESCROW AGREEMENT
Exhibit G to Purchase and Sale Agreement
This ESCROW AGREEMENT (this "Agreement") is made and entered into as of [__], 2024, by and among:
FAIRWATER REAL ESTATE INVESTMENT TRUST, a Maryland real estate investment trust ("Buyer"),
GREYSTONE MERIDIAN PARTNERS FUND III, L.P., a Delaware limited partnership ("Seller"),
and
COMMONWEALTH NATIONAL TITLE INSURANCE COMPANY, a Nebraska corporation authorized to do business in the State of Georgia ("Escrow Agent").
Buyer, Seller, and Escrow Agent are sometimes referred to herein individually as a "Party" and collectively as the "Parties."
RECITALS
A. The PSA. Buyer and Seller have entered into that certain Purchase and Sale Agreement dated as of February 28, 2024 (as the same may be amended, restated, supplemented, or otherwise modified from time to time, the "PSA"), pursuant to which Seller has agreed to sell to Buyer, and Buyer has agreed to purchase from Seller, one hundred percent (100%) of the membership interests (collectively, the "Interests") in fourteen (14) property-owning Delaware limited liability companies (collectively, the "Target Entities"), for a purchase price of One Billion One Hundred Million Dollars ($1,100,000,000) (the "Purchase Price"). The transaction contemplated by the PSA involves a fourteen-property Sun Belt logistics and office portfolio comprising approximately 5,224,000 rentable square feet located across the states of Georgia, Texas, Florida, Tennessee, and North Carolina. Capitalized terms used but not defined herein shall have the meanings ascribed to them in the PSA.
B. The Earnest Money Deposit. Pursuant to Section 3.1 of the PSA, Buyer is required to deposit with Escrow Agent the following amounts as earnest money: (i) an initial deposit in the amount of Twenty-Seven Million Five Hundred Thousand Dollars ($27,500,000) (the "Initial Deposit"), to be delivered by federal funds wire transfer within two (2) Business Days of the mutual execution and delivery of the PSA (such deposit being due on or before March 1, 2024); and (ii) an additional deposit in the amount of Twenty-Seven Million Five Hundred Thousand Dollars ($27,500,000) (the "Additional Deposit"), to be delivered by federal funds wire transfer upon the expiration of the Due Diligence Period (such deposit being due on or before April 16, 2024, i.e., the first Business Day following the expiration of the Due Diligence Period on April 15, 2024). Together, the Initial Deposit and the Additional Deposit constitute the "Earnest Money Deposit" in the aggregate amount of Fifty-Five Million Dollars ($55,000,000). The Additional Deposit shall become non-refundable (i.e., "hard") upon deposit, except as expressly set forth in the PSA with respect to certain Seller default and title cure scenarios.
C. The Indemnity Escrow. Pursuant to Section 12.5 of the PSA, at the Closing, Buyer shall deposit with Escrow Agent the sum of Sixteen Million Five Hundred Thousand Dollars ($16,500,000) (the "Indemnity Escrow Amount"), representing one and one-half percent (1.5%) of the Purchase Price. The Indemnity Escrow Amount shall be held by Escrow Agent to secure Seller's post-closing indemnification obligations under Article XII of the PSA. The Indemnity Escrow Amount shall be held for a period of eighteen (18) months from the Closing Date (the "Indemnity Escrow Period"), subject to extension solely with respect to amounts reserved for pending and unresolved claims as more particularly described herein.
D. Appointment of Escrow Agent. Buyer and Seller desire to appoint Commonwealth National Title Insurance Company as escrow agent to hold, invest, and disburse the Earnest Money Deposit and the Indemnity Escrow Amount in accordance with the terms and conditions of this Agreement. Escrow Agent has agreed to accept such appointment and to act as escrow agent upon the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing recitals (which are incorporated herein by this reference), 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 I
DEFINITIONS
Section 1.1 — Defined Terms. As used in this Agreement, the following terms shall have the meanings set forth below:
"Additional Deposit" means the sum of Twenty-Seven Million Five Hundred Thousand Dollars ($27,500,000), to be deposited by Buyer with Escrow Agent on or before April 16, 2024, the first Business Day following the expiration of the Due Diligence Period.
"Business Day" means any day other than a Saturday, a Sunday, or a day on which banks in New York, New York or Atlanta, Georgia are authorized or required by law to be closed for business, including any day designated as a federal holiday.
"Claim Notice" has the meaning set forth in Section 5.1.
"Claim Objection" has the meaning set forth in Section 5.2.
"Claims Reserve" has the meaning set forth in Section 5.4.
"Closing" and "Closing Date" have the meanings ascribed thereto in the PSA. The Closing is scheduled for May 31, 2024, subject to extension as provided in the PSA. As referenced in the PSA (as amended by that certain First Amendment to Purchase and Sale Agreement), the actual Closing Date is June 6, 2024.
"De Minimis Threshold" means Two Hundred Seventy-Five Thousand Dollars ($275,000), as set forth in Section 12.4(b) of the PSA.
"Due Diligence Period" means the period commencing on the date of the PSA and ending at 5:00 p.m. Eastern Time on April 15, 2024.
"Earnest Money Deposit" means the Initial Deposit and the Additional Deposit, collectively, together with all interest and earnings thereon, in the aggregate principal amount (exclusive of interest and earnings) of Fifty-Five Million Dollars ($55,000,000).
"EMD Escrow Account" has the meaning set forth in Section 2.1.
"Escrow Agent" means Commonwealth National Title Insurance Company, a Nebraska corporation, with its escrow office at 191 Peachtree Street NE, Suite 800, Atlanta, Georgia 30303.
"Escrow Agent Contact" means Kenneth Stanhope, Senior Vice President, at the Escrow Agent's office address set forth above.
"Indemnity Escrow Account" has the meaning set forth in Section 2.2.
"Indemnity Escrow Amount" means Sixteen Million Five Hundred Thousand Dollars ($16,500,000), together with all interest and earnings thereon.
"Indemnity Escrow Period" means the period commencing on the Closing Date and ending on the date that is eighteen (18) months from the Closing Date (i.e., December 6, 2025, based on the anticipated Closing Date of June 6, 2024), subject to extension solely as provided in Section 5.4 with respect to any Claims Reserve.
"Initial Deposit" means the sum of Twenty-Seven Million Five Hundred Thousand Dollars ($27,500,000), to be deposited by Buyer with Escrow Agent on or before March 1, 2024.
"Permitted Investments" has the meaning set forth in Section 3.3.
"PSA" means that certain Purchase and Sale Agreement, dated as of February 28, 2024, by and between Seller and Buyer, as the same may be amended, restated, supplemented, or otherwise modified from time to time.
"Tax Representation Survival Period" means thirty-six (36) months from the Closing Date (i.e., through June 6, 2027, based on the anticipated Closing Date of June 6, 2024). For the avoidance of doubt, the Indemnity Escrow is scheduled for release at the expiration of the eighteen (18)-month Indemnity Escrow Period. The Tax Representation Survival Period extends beyond the Indemnity Escrow Period; accordingly, claims related to tax representations made after the release of the Indemnity Escrow Amount are not covered by this escrow arrangement but remain subject to Seller's direct indemnification obligations under Article XII of the PSA. Any pending tax representation claims at the expiration of the Indemnity Escrow Period may be subject to the Claims Reserve mechanism set forth in Section 5.4.
"Tipping Basket" means Five Million Five Hundred Thousand Dollars ($5,500,000), representing one-half of one percent (0.5%) of the Purchase Price, as set forth in Section 12.4(b) of the PSA.
Section 1.2 — Construction. Unless the context otherwise requires: (a) references to "Sections," "Articles," and "Schedules" are to the Sections, Articles, and Schedules of this Agreement; (b) words importing the singular include the plural and vice versa; (c) references to "include," "includes," and "including" shall be deemed to be followed by the words "without limitation"; (d) references to any agreement, instrument, or document shall mean such agreement, instrument, or document as amended, restated, supplemented, or otherwise modified from time to time; and (e) all definitions set forth in the PSA and not otherwise defined herein are incorporated into this Agreement by this reference and shall have the same meanings when used herein as set forth in the PSA.
ARTICLE II
ESTABLISHMENT OF ESCROW FUNDS
Section 2.1 — Earnest Money Deposit Fund.
(a) Escrow Agent shall establish and maintain a segregated escrow account designated "Fairwater REIT / GMP Fund III — Earnest Money Deposit Escrow" (the "EMD Escrow Account") at a federally insured depository institution selected by Escrow Agent.
(b) Upon receipt, Escrow Agent shall deposit the following funds into the EMD Escrow Account:
(i) the Initial Deposit of Twenty-Seven Million Five Hundred Thousand Dollars ($27,500,000), to be wired by Buyer to Escrow Agent on or before March 1, 2024; and
(ii) the Additional Deposit of Twenty-Seven Million Five Hundred Thousand Dollars ($27,500,000), to be wired by Buyer to Escrow Agent on or before April 16, 2024.
(c) Escrow Agent shall confirm receipt of each deposit in writing (which may be by email) within one (1) Business Day after the date of receipt, to each of the following:
(i) Buyer: Fairwater Real Estate Investment Trust, 7200 Chesapeake Parkway, Suite 1100, Columbia, Maryland 21044, Attention: David Elgin Park, General Counsel;
(ii) Buyer's Counsel: Calderwood & Harkness LLP, 450 Park Avenue, 28th Floor, New York, New York 10022, Attention: Douglas Fairchild;
(iii) 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; and
(iv) Seller's Counsel: Blackridge Hayes LLP, 1285 Avenue of the Americas, 34th Floor, New York, New York 10019, Attention: Nathaniel Pryce.
(d) The confirmation shall specify the amount received, the date of receipt, the account into which the funds were deposited, and the accrual commencement date for purposes of interest calculation.
Section 2.2 — Indemnity Escrow Fund.
(a) Escrow Agent shall establish and maintain a segregated escrow account designated "Fairwater REIT / GMP Fund III — Indemnity Escrow" (the "Indemnity Escrow Account") at a federally insured depository institution selected by Escrow Agent.
(b) At Closing, Buyer shall wire Sixteen Million Five Hundred Thousand Dollars ($16,500,000) to the Indemnity Escrow Account. The Indemnity Escrow Amount shall be deducted from the cash equity payable to Seller at Closing and treated as a credit to Buyer against the Purchase Price for purposes of the closing settlement statement. For reference purposes only, the cash equity payable at Closing before adjustments is approximately Four Hundred Eighty-Eight Million Dollars ($488,000,000), being the One Billion One Hundred Million Dollar ($1,100,000,000) Purchase Price less approximately Six Hundred Twelve Million Dollars ($612,000,000) of assumed mortgage debt.
(c) Escrow Agent shall confirm receipt of the Indemnity Escrow Amount in writing (which may be by email) within one (1) Business Day after the date of receipt to both Buyer and Seller and their respective counsel at the addresses set forth in Section 2.1(c) above. The confirmation shall specify the amount received, the date of receipt, the account into which the funds were deposited, and the commencement date of the Indemnity Escrow Period.
Section 2.3 — Account Segregation.
The EMD Escrow Account and the Indemnity Escrow Account shall at all times be maintained as separate and distinct accounts. Funds held in one account shall not be commingled with funds held in the other account or with any other funds held by or on behalf of Escrow Agent or any third party. Escrow Agent shall maintain separate records and accountings for each account and shall provide periodic account statements to Buyer and Seller as set forth in Section 3.2 below.
ARTICLE III
INVESTMENT OF ESCROW FUNDS
Section 3.1 — Investment Direction.
Escrow Agent shall invest and reinvest the funds held in the EMD Escrow Account and the Indemnity Escrow Account in Permitted Investments as jointly directed in writing by Buyer and Seller. In the absence of joint written direction from Buyer and Seller, Escrow Agent shall invest all funds in Permitted Investments described in Section 3.3(a) below. Escrow Agent shall have no obligation to seek or negotiate the best available rate of return on any investment and shall have no responsibility for the rate of return earned on any Permitted Investment.
Section 3.2 — Interest and Earnings.
(a) All interest and earnings on the EMD Escrow Account shall be deemed part of the Earnest Money Deposit for all purposes of this Agreement and shall be disbursed together with the principal of the Earnest Money Deposit in accordance with Article IV.
(b) All interest and earnings on the Indemnity Escrow Account shall be deemed part of the Indemnity Escrow Amount for all purposes of this Agreement and shall be disbursed together with the principal of the Indemnity Escrow Amount in accordance with Article V.
(c) Escrow Agent shall provide monthly statements to Buyer and Seller reflecting the balance of each account, including principal, accrued interest, and realized earnings.
(d) Interest and earnings shall be reported for federal income tax purposes under the taxpayer identification number of the Party ultimately entitled to receive the funds. For purposes of interim reporting, interest and earnings on the EMD Escrow Account shall be reported under the taxpayer identification number of Buyer (TIN: 52-2198437), and interest and earnings on the Indemnity Escrow Account shall be reported under the taxpayer identification number of Seller (TIN: 83-1647205), in each case subject to adjustment upon final disbursement if the funds are disbursed to a different Party. To the extent that any amounts held in escrow are ultimately disbursed to a Party other than the Party whose taxpayer identification number was used for interim reporting, Escrow Agent shall issue corrected tax forms as required by applicable law.
Section 3.3 — Permitted Investments.
As used herein, "Permitted Investments" means the following:
(a) Direct obligations of the United States of America, or obligations the timely payment of principal and interest on which are fully and unconditionally guaranteed by the United States of America;
(b) Certificates of deposit, time deposits, or money market deposit accounts at one or more federally insured depository institutions with combined capital and surplus of not less than Five Hundred Million Dollars ($500,000,000);
(c) Money market funds that invest exclusively in obligations described in clause (a) above and that are rated in the highest category by at least one nationally recognized statistical rating organization; and
(d) Such other investments as Buyer and Seller may jointly approve in writing and that are acceptable to Escrow Agent.
The maturity of any Permitted Investment shall not exceed the earlier of (i) the anticipated disbursement date of the applicable escrow funds (as reasonably determined by Escrow Agent based on instructions received or anticipated) or (ii) ninety (90) days from the date of investment. Escrow Agent shall not be liable for any loss of principal or interest resulting from any Permitted Investment made in accordance with this Agreement, including without limitation any loss resulting from the liquidation of any Permitted Investment prior to maturity.
Section 3.4 — Tax Reporting.
(a) Escrow Agent shall issue IRS Form 1099 (or any successor form) to the Party receiving disbursement of escrow funds, reflecting any interest income or other earnings allocable to such Party.
(b) Each Party shall provide Escrow Agent with a completed and duly executed IRS Form W-9 (or any successor form) upon execution of this Agreement. If any Party fails to provide a completed IRS Form W-9, Escrow Agent shall be entitled to withhold from any disbursement to such Party such amounts as may be required by applicable law.
(c) Escrow Agent shall have no responsibility for the tax consequences of any investment or disbursement made hereunder, and each Party shall be solely responsible for its own tax reporting obligations in connection with any amounts received from the escrow funds.
ARTICLE IV
DISBURSEMENT OF EARNEST MONEY DEPOSIT
Section 4.1 — Disbursement at Closing.
(a) Upon the occurrence of the Closing, Escrow Agent shall disburse the entire Earnest Money Deposit (including all accrued and unpaid interest and earnings thereon) to Seller (or as otherwise directed in the closing settlement statement and funds flow memorandum executed by Buyer and Seller) as a credit against the Purchase Price.
(b) Disbursement shall be made by federal funds wire transfer to Seller's account in accordance with the wire transfer instructions set forth in Schedule 3, or such other account as Seller may designate in writing to Escrow Agent and Buyer not less than two (2) Business Days prior to the Closing Date.
(c) Escrow Agent shall disburse the Earnest Money Deposit upon receipt of either: (i) joint written instructions signed by both Buyer and Seller (or their respective counsel, each of whom is hereby authorized to provide such instructions on behalf of his or her client); or (ii) a closing settlement statement executed by both Buyer and Seller. Escrow Agent shall be entitled to rely on such instructions or closing settlement statement without further inquiry or investigation.
Section 4.2 — Disbursement to Buyer upon Termination.
(a) If the PSA is terminated by Buyer during the Due Diligence Period (i.e., on or before 5:00 p.m. Eastern Time on April 15, 2024) in accordance with Section 5.2 of the PSA, Escrow Agent shall disburse the Initial Deposit (and the Additional Deposit, if then held, though under the terms of the PSA the Additional Deposit would not yet have been deposited), together with all accrued and unpaid interest and earnings thereon, to Buyer within two (2) Business Days of Escrow Agent's receipt of written notice of termination from Buyer (with a copy delivered simultaneously to Seller).
(b) For the avoidance of doubt, the Initial Deposit is refundable to Buyer during the Due Diligence Period. The Additional Deposit is not due until the first Business Day following the expiration of the Due Diligence Period (April 16, 2024) and, upon deposit, becomes non-refundable ("hard") to Buyer, except to the extent expressly provided in the PSA in connection with certain Seller default and title cure failure scenarios.
(c) If Buyer delivers a termination notice during the Due Diligence Period, Escrow Agent shall not require the consent or joinder of Seller to make such disbursement, provided that Escrow Agent receives a copy of the termination notice delivered to Seller and a certification from Buyer that such termination is being effected in accordance with Section 5.2 of the PSA during the Due Diligence Period.
Section 4.3 — Disbursement to Seller upon Buyer Default.
(a) If Seller delivers written notice to Escrow Agent and Buyer certifying that: (i) Buyer has defaulted under the PSA; (ii) Seller has provided Buyer with all notices and cure periods required under the PSA (if any); and (iii) Seller is entitled to retain the Earnest Money Deposit as liquidated damages pursuant to Section 14.1 of the PSA (a "Seller Claim Notice"), and Buyer does not deliver a written objection to Escrow Agent and Seller within ten (10) Business Days following Buyer's receipt of such Seller Claim Notice, then Escrow Agent shall disburse the entire Earnest Money Deposit (including all accrued and unpaid interest and earnings thereon) to Seller within five (5) Business Days following the expiration of such ten (10) Business Day objection period.
(b) If Buyer delivers a timely written objection to Escrow Agent and Seller within the ten (10) Business Day objection period (a "Buyer Objection"), disputing Seller's entitlement to the Earnest Money Deposit, Escrow Agent shall continue to hold the Earnest Money Deposit pending resolution of the dispute in accordance with Article VII of this Agreement. During the pendency of any such dispute, Escrow Agent shall continue to invest the Earnest Money Deposit in Permitted Investments.
Section 4.4 — Disbursement to Buyer upon Seller Default.
(a) If Buyer delivers written notice to Escrow Agent and Seller certifying that: (i) Seller has defaulted under the PSA; (ii) Buyer has provided Seller with all notices and cure periods required under the PSA (if any); and (iii) Buyer is entitled to the return of the Earnest Money Deposit pursuant to Section 14.2 of the PSA (a "Buyer Claim Notice"), and Seller does not deliver a written objection to Escrow Agent and Buyer within ten (10) Business Days following Seller's receipt of such Buyer Claim Notice, then Escrow Agent shall disburse the entire Earnest Money Deposit (including all accrued and unpaid interest and earnings thereon) to Buyer within five (5) Business Days following the expiration of such ten (10) Business Day objection period.
(b) If Seller delivers a timely written objection to Escrow Agent and Buyer within the ten (10) Business Day objection period (a "Seller Objection"), disputing Buyer's entitlement to the Earnest Money Deposit, Escrow Agent shall continue to hold the Earnest Money Deposit pending resolution of the dispute in accordance with Article VII of this Agreement.
Section 4.5 — Liquidated Damages Acknowledgment.
The Parties acknowledge and agree that the Earnest Money Deposit, in the aggregate amount of Fifty-Five Million Dollars ($55,000,000), constitutes Seller's sole and exclusive remedy as liquidated damages in the event of Buyer's default under the PSA, and that such amount represents a reasonable estimate of Seller's damages in such event, taking into account, among other factors, the complexity of the transaction, the removal of the portfolio from the market during the pendency of the PSA, and the difficulty of ascertaining actual damages. The Parties have agreed upon this liquidated damages provision because the actual damages to Seller resulting from Buyer's default would be difficult, if not impossible, to ascertain with certainty. By initialing below, each of Buyer and Seller acknowledges that this Section has been specifically negotiated by the Parties.
Buyer's Initials: __ Seller's Initials: __
ARTICLE V
DISBURSEMENT OF INDEMNITY ESCROW
Section 5.1 — Claims Against the Indemnity Escrow.
(a) During the Indemnity Escrow Period (i.e., the eighteen (18)-month period from the Closing Date through December 6, 2025), Buyer may submit written claims against the Indemnity Escrow Amount by delivering a notice of claim (a "Claim Notice") to Escrow Agent and Seller simultaneously.
(b) Each Claim Notice shall specify, with reasonable detail:
(i) the nature and factual basis of the claim;
(ii) the specific representation, warranty, covenant, or agreement of Seller under the PSA that Buyer alleges has been breached or is the basis for the claim;
(iii) the amount claimed (the "Claimed Amount"), including a reasonably detailed calculation or estimate of the damages or losses sustained or expected to be sustained by Buyer; and
(iv) copies of any supporting documentation then available to Buyer, including correspondence, reports, third-party claims, or other materials relevant to the claim.
(c) No individual Claim Notice shall be submitted with respect to any claim where the Claimed Amount is less than the De Minimis Threshold of Two Hundred Seventy-Five Thousand Dollars ($275,000). Claims that fall below the De Minimis Threshold shall not be counted toward the Tipping Basket or any applicable cap.
(d) Claims against the Indemnity Escrow Amount are subject to the Tipping Basket of Five Million Five Hundred Thousand Dollars ($5,500,000), representing one-half of one percent (0.5%) of the Purchase Price. Once aggregate qualifying claims (i.e., claims individually exceeding the De Minimis Threshold) exceed the Tipping Basket amount of Five Million Five Hundred Thousand Dollars ($5,500,000), Buyer shall be entitled to recovery from the first dollar of all such qualifying claims (and not merely the excess over the Tipping Basket).
(e) Seller's aggregate liability for claims under the general representations and warranties contained in Article X of the PSA (other than fundamental representations) shall not exceed Fifty-Five Million Dollars ($55,000,000), representing five percent (5%) of the Purchase Price (the "General Rep Cap"). Seller's aggregate liability for claims under the fundamental representations contained in Section 10.1 of the PSA shall not exceed One Hundred Ten Million Dollars ($110,000,000), representing ten percent (10%) of the Purchase Price (the "Fundamental Rep Cap"). The Indemnity Escrow Amount is not the exclusive source of recovery for indemnification claims; Buyer may pursue recovery directly against Seller (subject to applicable caps and limitations) for claims in excess of the Indemnity Escrow Amount.
Section 5.2 — Objection to Claims.
(a) Within fifteen (15) Business Days after Seller's receipt of a Claim Notice, Seller may deliver a written objection (a "Claim Objection") to Escrow Agent and Buyer. Each Claim Objection shall specify in reasonable detail the grounds for Seller's objection, including any factual or legal basis for Seller's position that the claim is not a valid claim under the PSA, that the Claimed Amount is excessive, or that the claim is otherwise not properly payable from the Indemnity Escrow Amount.
(b) If Seller does not deliver a timely Claim Objection within the fifteen (15) Business Day objection period, the Claimed Amount set forth in the Claim Notice shall be deemed accepted by Seller, and Escrow Agent shall disburse the Claimed Amount (or such lesser amount as is then available in the Indemnity Escrow Account) to Buyer within five (5) Business Days following the expiration of the objection period by federal funds wire transfer to Buyer's account in accordance with the wire transfer instructions set forth in Schedule 2.
(c) If Seller delivers a timely Claim Objection, the portion of the Claimed Amount that is disputed (the "Disputed Amount") shall be resolved in accordance with Article VII (Dispute Resolution). Escrow Agent shall continue to hold the Disputed Amount in the Indemnity Escrow Account pending final resolution of the dispute. To the extent that Seller's Claim Objection disputes only a portion of the Claimed Amount and expressly acknowledges that the remainder is owed, Escrow Agent shall disburse the undisputed portion to Buyer within five (5) Business Days following receipt of the Claim Objection and shall hold only the Disputed Amount pending resolution.
Section 5.3 — Partial Disbursements.
Escrow Agent is authorized and directed to make partial disbursements from the Indemnity Escrow Account as individual claims are submitted, resolved, and determined to be payable, in each case reducing the remaining balance of the Indemnity Escrow Account accordingly. Escrow Agent shall maintain a running ledger of all disbursements from the Indemnity Escrow Account and shall provide updated account statements to Buyer and Seller promptly following each disbursement.
Section 5.4 — Release of Indemnity Escrow at Expiration.
(a) Upon the expiration of the Indemnity Escrow Period (December 6, 2025), Escrow Agent shall release to Seller the balance of the Indemnity Escrow Amount then held in the Indemnity Escrow Account, less any amounts that are the subject of then-pending and unresolved Claim Notices for which the applicable objection period has not expired or for which disputes remain pending (the aggregate of such reserved amounts, the "Claims Reserve").
(b) The Claims Reserve shall continue to be held by Escrow Agent in the Indemnity Escrow Account until final resolution of all pending claims giving rise to the Claims Reserve. Upon final resolution of each such pending claim:
(i) if the claim is resolved in Buyer's favor (in whole or in part), Escrow Agent shall disburse the amount determined to be payable to Buyer to Buyer's account in accordance with Schedule 2 within five (5) Business Days following receipt of joint written instructions from Buyer and Seller (or a final, non-appealable court order or arbitral award) confirming the amount payable; and
(ii) any remaining portion of the Claims Reserve attributable to such resolved claim that is not payable to Buyer shall be promptly released and disbursed to Seller.
(c) Tax Representations. The Parties acknowledge that the survival period for the tax-related representations set forth in Section 10.1(k) of the PSA (the "Tax Representations") extends for thirty-six (36) months following the Closing Date (i.e., through June 6, 2027), which period is eighteen (18) months beyond the expiration of the Indemnity Escrow Period. Claims related to Tax Representations that are first asserted after the release of the Indemnity Escrow Amount (or after full disbursement of the Indemnity Escrow Amount in satisfaction of prior claims) are not covered by this escrow arrangement. Notwithstanding the foregoing, any Tax Representation claims that are timely submitted as Claim Notices prior to the expiration of the Indemnity Escrow Period and that remain pending and unresolved as of such date shall be included in the Claims Reserve and shall remain subject to this Agreement until finally resolved. Tax Representation claims first arising after the Indemnity Escrow Period remain subject to Seller's direct indemnification obligations under the PSA, independent of this Agreement.
Section 5.5 — Interaction with R&W Insurance.
(a) The Parties acknowledge that Buyer has obtained a buyer-side representations and warranties insurance policy (the "R&W Policy") issued by Sentinel Specialty Insurance Company, Policy No. SSI-CRE-2024-04819, with a policy limit of Fifty-Five Million Dollars ($55,000,000) and a self-insured retention of Eleven Million Dollars ($11,000,000) (dropping to Five Million Five Hundred Thousand Dollars ($5,500,000) at twelve (12) months following the Closing Date), on terms and conditions as described in the PSA.
(b) Nothing in this Agreement shall limit, restrict, or otherwise impair Buyer's right to make claims under the R&W Policy, whether before, after, or concurrent with any Claim Notice submitted under this Article V. However, Buyer shall not recover duplicative amounts from both the Indemnity Escrow and the R&W Policy for the same loss, damage, liability, or expense. If Buyer recovers amounts from both the Indemnity Escrow and the R&W Policy with respect to the same claim, Buyer shall promptly refund to the Indemnity Escrow Account (for the benefit of Seller) any amount that, together with any recovery under the R&W Policy, would result in Buyer recovering in excess of its actual losses with respect to such claim.
(c) For the avoidance of doubt, the Indemnity Escrow Amount constitutes the first source of recovery for indemnification claims that are within the scope of Seller's post-closing indemnification obligations under the PSA, and claims under the R&W Policy are not contingent upon or subordinate to the exhaustion of the Indemnity Escrow Amount, except to the extent otherwise provided in the R&W Policy itself.
ARTICLE VI
DUTIES, LIABILITY, AND INDEMNIFICATION OF ESCROW AGENT
Section 6.1 — Duties of Escrow Agent.
(a) Escrow Agent undertakes to perform only the duties expressly set forth in this Agreement and shall have no implied duties, obligations, or responsibilities. No provision of this Agreement shall be construed to impose upon Escrow Agent any duty to exercise discretion or independent judgment with respect to any matter, except as expressly set forth herein.
(b) Escrow Agent shall act upon written instructions signed by the appropriate Party or Parties as required by the applicable provisions of this Agreement. Escrow Agent shall be under no duty to act upon any instruction unless and until such instruction has been received in compliance with the notice and delivery requirements set forth herein.
(c) Escrow Agent may rely upon any written notice, instruction, certificate, request, direction, or other document believed by it in good faith to be genuine and to be signed or sent by the appropriate Party or Parties. Escrow Agent shall not be required to make any investigation as to the genuineness, validity, or sufficiency of any such document or the authority of any person executing or delivering the same, and may assume that any person purporting to give any instruction or direction permitted under this Agreement has been duly authorized to do so.
Section 6.2 — Limitation of Liability.
(a) Escrow Agent shall not be liable for any action taken or omitted to be taken by it in good faith and in accordance with the terms of this Agreement, except to the extent that such action or omission constitutes gross negligence or willful misconduct on the part of Escrow Agent.
(b) Escrow Agent shall not be liable for any loss of principal or interest arising from the investment of escrow funds in Permitted Investments made in accordance with Section 3.3, including any loss resulting from the default of any depository institution or the decline in market value of any investment.
(c) Escrow Agent shall not be responsible for the sufficiency, correctness, genuineness, accuracy, or validity of any document, instrument, certificate, or notice deposited with it, or for the identity or authority of any person executing or delivering the same.
(d) In no event shall Escrow Agent be liable for any consequential, indirect, special, incidental, or punitive damages, regardless of whether such damages are foreseeable or whether Escrow Agent has been advised of the possibility thereof.
Section 6.3 — Indemnification of Escrow Agent.
(a) Buyer and Seller, jointly and severally, shall indemnify, defend, and hold harmless Escrow Agent from and against any and all losses, costs, claims, damages, liabilities, and expenses (including reasonable attorneys' fees and disbursements) (collectively, "Escrow Agent Losses") arising out of or in connection with this Agreement or Escrow Agent's performance of its duties hereunder, except to the extent that such Escrow Agent Losses are directly caused by Escrow Agent's gross negligence or willful misconduct.
(b) As between Buyer and Seller (and not affecting the joint and several nature of the obligation to Escrow Agent), the indemnification obligations set forth in this Section 6.3 shall be borne equally by Buyer and Seller (fifty percent (50%) each), unless otherwise agreed in writing by Buyer and Seller or unless a court of competent jurisdiction determines by final, non-appealable judgment that one Party's conduct was the sole cause of the Escrow Agent Loss, in which case such Party shall bear the entire indemnification obligation.
(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 — Right to Resign.
(a) Escrow Agent may resign and be discharged from its duties hereunder at any time by giving not less than thirty (30) days' prior written notice of resignation to Buyer and Seller.
(b) Upon such resignation, Escrow Agent shall deliver all escrow funds then held by it to a successor escrow agent designated by the joint written instruction of Buyer and Seller. If Buyer and Seller fail to designate a successor escrow agent within thirty (30) days after Escrow Agent's delivery of its resignation notice, Escrow Agent may deposit all escrow funds then held by it with a court of competent jurisdiction in the State of New York, County of New York, and upon such deposit Escrow Agent shall be discharged of all further obligations and liabilities under this Agreement.
(c) Upon delivery of the escrow funds to a successor escrow agent or deposit with a court, as applicable, Escrow Agent shall be released from all obligations, duties, and liabilities arising under this Agreement, except for Escrow Agent's obligation to account for the escrow funds during the period of its service.
Section 6.5 — Compensation of Escrow Agent.
(a) Escrow Agent shall be entitled to compensation for its services hereunder in accordance with the fee schedule set forth in Schedule 1 attached hereto and incorporated herein by this reference, as such schedule may be modified from time to time by agreement of the Parties.
(b) All fees and expenses payable to Escrow Agent shall be borne equally by Buyer and Seller (fifty percent (50%) each), unless otherwise agreed in writing by Buyer and Seller. Escrow Agent shall be entitled to deduct its accrued and unpaid fees and expenses from the escrow funds prior to any disbursement upon termination or resignation; provided, however, that Escrow Agent shall provide Buyer and Seller with not less than five (5) Business Days' prior written notice before making any such deduction, together with a detailed invoice of the fees and expenses to be deducted.
Section 6.6 — Right to Counsel.
Escrow Agent may, at any time and from time to time, consult with its in-house counsel, including Virginia Moorehead, AVP, National Counsel, or with outside legal counsel of its selection, and shall be fully protected in acting or refraining from acting in accordance with the advice of such counsel. The reasonable fees and expenses of such counsel (to the extent incurred in connection with the performance of Escrow Agent's duties under this Agreement or any dispute arising hereunder) shall be borne equally by Buyer and Seller (fifty percent (50%) each) and shall constitute Escrow Agent Losses for purposes of Section 6.3.
ARTICLE VII
DISPUTE RESOLUTION
Section 7.1 — Interpleader.
(a) In the event of any dispute, uncertainty, or disagreement between Buyer and Seller regarding entitlement to any portion of the escrow funds held hereunder, or in the event that Escrow Agent receives conflicting instructions from Buyer and Seller with respect to the disbursement of any escrow funds, Escrow Agent may, at its sole option and discretion (but shall not be required to), deposit the disputed funds (or all funds then held, if the dispute encompasses the entirety of the escrow) with a court of competent jurisdiction in the State of New York, County of New York, and commence an action in interpleader naming Buyer and Seller as defendants. Upon the deposit of such funds with the court, Escrow Agent shall be fully released and discharged from all further obligations, duties, and liabilities under this Agreement with respect to the interpleaded funds.
(b) Escrow Agent shall be entitled to recover its reasonable costs, expenses, and attorneys' fees incurred in connection with any interpleader action from the escrow funds prior to deposit with the court, and such costs, expenses, and fees shall be treated as Escrow Agent Losses subject to indemnification under Section 6.3.
Section 7.2 — Litigation Hold.
Pending the resolution of any dispute between Buyer and Seller regarding entitlement to any portion of the escrow funds, whether by interpleader, litigation, settlement, or otherwise, Escrow Agent shall continue to hold the disputed funds in the applicable escrow account and shall continue to invest such funds in Permitted Investments in accordance with Article III. Escrow Agent shall not disburse any disputed funds except pursuant to: (a) joint written instructions signed by both Buyer and Seller; (b) a final, non-appealable order or judgment of a court of competent jurisdiction; or (c) as otherwise expressly permitted under this Agreement.
Section 7.3 — Governing Law and Jurisdiction.
(a) This Agreement shall be governed by and construed in accordance with the laws of the State of New York, without regard to principles of conflicts of law that would require the application of the laws of another jurisdiction.
(b) Each Party irrevocably and unconditionally agrees that any action, suit, or proceeding arising out of or relating to this Agreement or the transactions contemplated hereby may be brought in the state courts of the State of New York sitting in the County of New York, or in the United States District Court for the Southern District of New York, and each Party irrevocably and unconditionally submits to the exclusive jurisdiction of such courts for purposes of any such action, suit, or proceeding.
(c) Each Party irrevocably and unconditionally waives, to the fullest extent permitted by applicable law, any objection that it may now or hereafter have to the laying of venue of any action, suit, or proceeding arising out of or relating to this Agreement in the courts referred to in Section 7.3(b) above, and any claim that any such action, suit, or proceeding brought in any such court has been brought in an inconvenient forum.
(d) Each Party agrees that a final judgment in any such action, suit, or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by applicable law.
ARTICLE VIII
NOTICES
Section 8.1 — Notice Addresses.
All notices, requests, demands, claims, consents, waivers, approvals, instructions, and other communications required or permitted under this Agreement shall be directed to the Parties at the following addresses (or at such other address as any Party may designate from time to time in accordance with Section 8.3):
If to Buyer:
Fairwater Real Estate Investment Trust 7200 Chesapeake Parkway, Suite 1100 Columbia, Maryland 21044
Attention: David Elgin Park, General Counsel
Email: dpark@fairwaterreit.com
With a copy to (which shall not constitute notice):
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
Email: vlansdell@greystonemeridian.com
With a copy to (which shall not constitute notice):
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@commonwealthntl.com
Section 8.2 — Method of Notice.
All notices and other communications under this Agreement shall be in writing and shall be deemed duly given and received: (a) upon personal delivery to the Party to be notified; (b) on the first (1st) Business Day after deposit with a nationally recognized overnight courier service (such as Sundial Data Systems, Halcyon Partners LLC, or Tarrant & Co.), with all charges prepaid and addressed as set forth in Section 8.1, with confirmation of delivery obtained; or (c) upon confirmed delivery by electronic mail (with a PDF attachment of the signed notice) to the email address set forth in Section 8.1, provided that a copy of such notice is also sent by nationally recognized overnight courier within one (1) Business Day after the date of such electronic mail delivery. Notices sent solely by electronic mail without a courier follow-up within one (1) Business Day shall not be deemed effective notice.
Section 8.3 — Change of Address.
Any Party may change its address or email address for purposes of notices under this Agreement by giving written notice of such change to each of the other Parties in accordance with the provisions of Section 8.2 above. Any such change shall be effective upon receipt of such notice.
ARTICLE IX
WIRE TRANSFER INSTRUCTIONS
Section 9.1 — Buyer's Wire Instructions.
The wire transfer instructions for Buyer are set forth in Schedule 2 attached hereto. Buyer anticipates that disbursements to Buyer shall be directed to its operating account at Aldgate National Bank, N.A., 383 Madison Avenue, New York, New York 10179, or such other account as Buyer may designate in writing to Escrow Agent and Seller. Buyer may change its wire transfer instructions by delivering updated wire instructions signed by an authorized representative of Buyer to Escrow Agent and Seller not less than two (2) Business Days prior to any anticipated disbursement.
Section 9.2 — Seller's Wire Instructions.
The wire transfer instructions for Seller are set forth in Schedule 3 attached hereto. Disbursements to Seller shall be directed to Seller's account at Magnolia Commerce Bank, N.A., 225 Peachtree Street NE, Suite 100, Atlanta, Georgia 30303, or such other account as Seller may designate in writing to Escrow Agent and Buyer. The bank contact for Seller's account is Linda Prescott, Vice President, Commercial Banking. Seller may change its wire transfer instructions by delivering updated wire instructions signed by an authorized representative of Seller to Escrow Agent and Buyer not less than two (2) Business Days prior to any anticipated disbursement.
Section 9.3 — Escrow Agent's Wire Instructions.
The wire transfer instructions for deposits into the EMD Escrow Account and the Indemnity Escrow Account are set forth in Schedule 4 attached hereto. Such instructions shall reflect the designated escrow bank account of Commonwealth National Title Insurance Company. Escrow Agent may update its wire transfer instructions from time to time by written notice to Buyer and Seller.
Section 9.4 — Verification Procedures.
(a) Escrow Agent shall verify all outgoing wire transfer instructions by telephone callback to an authorized representative of the Party designated to receive the disbursement prior to any disbursement exceeding One Hundred Thousand Dollars ($100,000). Escrow Agent shall not be obligated to execute any wire transfer until such telephone verification has been satisfactorily completed.
(b) The following individuals are designated as authorized representatives for purposes of telephone callback verification:
Buyer: David Elgin Park (General Counsel) or Camille Oduya (Vice President, Treasury)