EXHIBIT L
FORM OF TRANSITION SERVICES AGREEMENT
Reference: Attached to and forming a part of that certain Purchase and Sale Agreement dated as of February 28, 2024 (the "Purchase Agreement"), by and between Greystone Meridian Partners Fund III, L.P., a Delaware limited partnership ("Seller"), and Fairwater Real Estate Investment Trust, a Maryland real estate investment trust ("Buyer").
TRANSITION SERVICES AGREEMENT
This TRANSITION SERVICES AGREEMENT (this "Agreement") is entered into as of June 6, 2024 (the "Effective Date"), by and between Argyle Property Services LLC, a Delaware limited liability company ("Service Provider"), with its principal office at 3300 Peachtree Road NE, Suite 2200, Atlanta, Georgia 30326, and Fairwater Property Management LLC, a Maryland limited liability company ("Recipient"), with its principal office at 7200 Chesapeake Parkway, Suite 1150, Columbia, Maryland 21044. Service Provider and Recipient are referred to herein individually as a "Party" and collectively as the "Parties."
RECITALS
WHEREAS, Seller, through its affiliate Service Provider, has been providing property management and related services for the Portfolio (as defined in the Purchase Agreement) consisting of fourteen (14) properties located in the States of Georgia, Texas, Florida, Tennessee, and North Carolina, comprising approximately 5,224,000 rentable square feet of logistics and office space (the "Portfolio");
WHEREAS, Buyer has designated Recipient as its property management affiliate to assume property management responsibilities for the Portfolio following the closing of the transactions contemplated by the Purchase Agreement (the "Closing"), and Recipient is prepared to undertake such responsibilities upon completion of an orderly transition;
WHEREAS, in connection with the Closing, Buyer desires that Service Provider continue to provide certain transitional property management, accounting, and operational services for a limited period to facilitate an orderly transition of management from Service Provider to Recipient, and Service Provider is willing to provide such services on the terms and conditions set forth herein;
WHEREAS, the Portfolio comprises ten (10) logistics properties and four (4) office properties across five (5) states, encumbered by eighty-seven (87) leases (the "Tenant Leases") and serviced by approximately sixty-three (63) service contracts, and the scope and complexity of the Portfolio necessitate a structured transition process;
WHEREAS, Sean Kilpatrick, Portfolio Manager of Service Provider, has been the primary point of contact for property-level management and operations with respect to the Portfolio and possesses institutional knowledge critical to the orderly transition of management responsibilities;
WHEREAS, Leah Torrance, SVP, Asset Management of Buyer and SVP Operations of Recipient, will serve as the primary point of contact for Recipient during the Transition Period (as defined below) and will be responsible for coordinating Recipient's assumption of property management responsibilities; and
NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement, the following terms shall have the meanings set forth below. Capitalized terms used but not defined herein shall have the meanings ascribed to such terms in the Purchase Agreement.
Section 1.1 "Closing Date" means June 6, 2024, being the date of the Closing under the Purchase Agreement.
Section 1.2 "Confidential Information" means all non-public information, data, documents, records, trade secrets, business plans, financial information, tenant information, and other proprietary information disclosed by one Party to the other Party in connection with or pursuant to this Agreement, whether disclosed orally, in writing, electronically, or by any other means.
Section 1.3 "Expiration Date" means September 4, 2024, being the date that is ninety (90) days following the Closing Date, unless the Transition Period is extended in accordance with Section 6.4 hereof.
Section 1.4 "Losses" means any and all losses, liabilities, damages, claims, costs, fees, and expenses (including, without limitation, reasonable attorneys' fees and expenses and costs of investigation and litigation).
Section 1.5 "Operating Accounts" means the bank accounts maintained by the Target Entities at Magnolia Commerce Bank, N.A., located at 225 Peachtree Street NE, Suite 100, Atlanta, Georgia 30303 (contact: Linda Prescott, VP, Commercial Banking), as more particularly described in Schedule B attached hereto.
Section 1.6 "Portfolio" means the fourteen (14) Properties described in the Purchase Agreement and the Target Entities owning such Properties, specifically: GMP Fairfield I LLC, GMP Fairfield II LLC, GMP Westlake LLC, GMP Katy LLC, GMP Alliance LLC, GMP Lakeland LLC, GMP Southport LLC, GMP Murfreesboro LLC, GMP Buckhead LLC, GMP SouthPark LLC, GMP Cool Springs LLC, GMP Brickell LLC, GMP Peachtree LLC, and GMP Mount Juliet LLC, each a Delaware limited liability company (collectively, the "Target Entities").
Section 1.7 "Properties" means the following fourteen (14) real properties:
(a) Fairfield Logistics Center I — 4200 Fairfield Industrial Blvd, Fairburn, Georgia 30213;
(b) Fairfield Logistics Center II — 4300 Fairfield Industrial Blvd, Fairburn, Georgia 30213;
(c) Westlake Distribution Hub — 11500 Westlake Parkway, Houston, Texas 77079;
(d) Katy Freeway Logistics Park — 22600 Katy Freeway, Katy, Texas 77450;
(e) Alliance Commerce Center — 2800 Alliance Gateway Blvd, Fort Worth, Texas 76177;
(f) Lakeland Crossings Industrial — 7100 Drane Field Road, Lakeland, Florida 33811;
(g) Southport Logistics Park — 3200 Southport Connector Road, Jacksonville, Florida 32218;
(h) Murfreesboro Distribution Center — 1600 Joe B. Jackson Parkway, Murfreesboro, Tennessee 37127;
(i) Buckhead Place Office Tower — 3380 Peachtree Road NE, Atlanta, Georgia 30326;
(j) SouthPark Corporate Center — 6200 Fairview Road, Charlotte, North Carolina 28210;
(k) Cool Springs Office Park — 5000 Virginia Way, Brentwood, Tennessee 37027;
(l) Brickell Bay Office Building — 1450 Brickell Avenue, Miami, Florida 33131;
(m) Peachtree Corners Logistics Center — 5900 Peachtree Industrial Blvd, Peachtree Corners, Georgia 30092; and
(n) Mount Juliet Commerce Park — 400 South Mount Juliet Road, Mount Juliet, Tennessee 37122.
Section 1.8 "Purchase Agreement" 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 thereto dated April 12, 2024, and the Second Amendment thereto dated May 28, 2024, together with all exhibits, schedules, and ancillary documents attached thereto or delivered in connection therewith.
Section 1.9 "Recipient" means Fairwater Property Management LLC, a Maryland limited liability company.
Section 1.10 "Service Provider" means Argyle Property Services LLC, a Delaware limited liability company.
Section 1.11 "Service Provider Personnel" means the employees, contractors, agents, and other personnel of Service Provider assigned to or performing services with respect to the Portfolio, including, without limitation, Sean Kilpatrick, Portfolio Manager.
Section 1.12 "Target Entities" means the fourteen (14) single-purpose Delaware limited liability companies identified in Section 1.6 above, each of which holds title to a Property.
Section 1.13 "Tenant Leases" means the eighty-seven (87) leases encumbering the Properties as of the Closing Date, as more particularly described in Exhibit H to the Purchase Agreement.
Section 1.14 "Transition Period" means the period commencing on the Closing Date and ending on the Expiration Date, a period of ninety (90) days, unless the Transition Period is earlier terminated pursuant to Section 6.2 or Section 6.3, or extended pursuant to Section 6.4.
Section 1.15 "Transition Services" or "Services" means the services described in Article II hereof and in Schedule A attached hereto.
ARTICLE II
SCOPE OF TRANSITION SERVICES
Section 2.1 General Description of Services. Service Provider shall provide, or cause to be provided, to Recipient the Transition Services described in this Article II and in Schedule A attached hereto during the Transition Period, in each case on a transitional basis solely to facilitate the orderly transfer of property management operations from Service Provider to Recipient. The Parties acknowledge and agree that the purpose of this Agreement is to provide for a smooth and orderly transition of management and operational responsibilities, and that Service Provider's obligation to perform the Services is limited in duration to the Transition Period. Service Provider shall perform the Services diligently and in good faith, with the goal of enabling Recipient to independently manage and operate the Portfolio upon the expiration or termination of this Agreement.
Section 2.2 Property Management Services. During the Transition Period, Service Provider shall provide the following property management services with respect to all fourteen (14) Properties:
(a) Day-to-Day Operations. Service Provider shall continue to perform day-to-day property management and building operations for all Properties, including, without limitation, coordination of building engineering, cleaning and janitorial services, security operations, landscaping and grounds maintenance, elevator maintenance and inspections, HVAC system operations and maintenance, fire and life safety system monitoring and testing, parking facility management, loading dock operations (at logistics Properties), and general building maintenance and repair activities.
(b) Tenant Relations. Service Provider shall continue to manage tenant relations and process tenant requests and work orders for all eighty-seven (87) Tenant Leases, responding to tenant inquiries in a manner consistent with past practice and coordinating with Recipient as necessary to ensure continuity of tenant service during the transition.
(c) Vendor Management. Service Provider shall continue to oversee and manage the approximately sixty-three (63) existing service contracts relating to the Properties, including monitoring vendor performance, processing vendor invoices, and coordinating with vendors to ensure uninterrupted services. Service Provider shall provide Recipient with access to all vendor contact information, contracts, and performance records.
(d) Building Systems Maintenance. Service Provider shall coordinate routine and preventive maintenance activities for all building systems, including HVAC, electrical, plumbing, fire suppression, elevator, and security systems, in accordance with existing maintenance schedules and manufacturer recommendations.
(e) Security, Janitorial, Landscaping, and Elevator Oversight. Service Provider shall continue to oversee all security, janitorial, landscaping, and elevator maintenance operations at each Property, ensuring that service levels remain consistent with those maintained during the twelve (12) months preceding the Closing Date.
(f) Emergency Response. Service Provider shall maintain emergency response and after-hours operations capabilities for all Properties during the Transition Period, including maintaining on-call personnel and emergency contact protocols consistent with past practice. Service Provider shall promptly notify Recipient of any emergency or material incident at any Property.
(g) Capital Improvement Coordination. Service Provider shall coordinate with Recipient on any ongoing capital improvement work at the Properties, including, without limitation, the property condition assessment ("PCA") immediate repairs identified at the following Properties, with the estimated aggregate cost of Two Million One Hundred Forty Thousand Dollars ($2,140,000):
(i) Buckhead Place Office Tower: Eight Hundred Ninety Thousand Dollars ($890,000);
(ii) Cool Springs Office Park: Six Hundred Twenty Thousand Dollars ($620,000);
(iii) Lakeland Crossings Industrial: Three Hundred Eighty Thousand Dollars ($380,000); and
(iv) SouthPark Corporate Center: Two Hundred Fifty Thousand Dollars ($250,000).
Service Provider shall not commence any new capital improvement work or authorize any capital expenditure exceeding Twenty-Five Thousand Dollars ($25,000) per Property without the prior written consent of Recipient, except in the case of an emergency threatening the safety of persons or property, in which case Service Provider shall use commercially reasonable efforts to notify Recipient as promptly as practicable.
Section 2.3 Accounting and Financial Services. During the Transition Period, Service Provider shall provide the following accounting and financial services with respect to the Portfolio:
(a) Operating Account Management. Service Provider shall continue to maintain and manage the Target Entity operating accounts at Magnolia Commerce Bank, N.A. (contact: Linda Prescott, VP, Commercial Banking) during the Transition Period, subject to the bank account transition provisions of Section 4.4 hereof.
(b) Rent Collection. Service Provider shall continue to collect rent and other amounts due under the eighty-seven (87) Tenant Leases, process deposits, and manage accounts receivable. As of the Closing Date, the aggregate annual in-place base rent under the Tenant Leases is approximately Seventy-Four Million Eight Hundred Thousand Dollars ($74,800,000). Service Provider shall deposit all rent and other collections into the appropriate Target Entity operating accounts and shall promptly notify Recipient of any material delinquencies or collection issues.
(c) Accounts Payable. Service Provider shall continue to process accounts payable and make vendor payments in the ordinary course of business, consistent with past practice and subject to the limitations set forth in Section 2.10 hereof.
(d) Monthly Financial Reporting. Service Provider shall prepare and deliver to Recipient monthly financial reports for each Target Entity, including income statements, balance sheets, and variance reports, in a format consistent with the financial reporting format used by Service Provider during the twelve (12) months preceding the Closing Date. Such reports shall be delivered within twenty (20) days following the end of each calendar month during the Transition Period.
(e) CAM and Operating Expense Reconciliation. Service Provider shall continue to track and reconcile common area maintenance ("CAM") charges and operating expenses allocable to tenants under the Tenant Leases, and shall assist Recipient in the preparation of annual tenant reconciliation statements. The Parties acknowledge that a CAM/operating expense reconciliation reserve in the amount of One Million Eight Hundred Fifty Thousand Dollars ($1,850,000) was established at Closing in accordance with the Purchase Agreement.
(f) Real Property Tax Processing. Service Provider shall continue to process real property tax payments for the Properties during the Transition Period. The estimated annual real property taxes for the Portfolio are Fourteen Million Seven Hundred Sixty Thousand Dollars ($14,760,000) for calendar year 2024. Service Provider shall promptly notify Recipient of any tax assessment notices, supplemental tax bills, or tax appeals pending or contemplated with respect to any Property.
(g) Security Deposit Administration. Service Provider shall continue to administer tenant security deposits held in Target Entity bank accounts, which as of the Closing Date aggregate Four Million Two Hundred Eighty-Three Thousand Dollars ($4,283,000). Service Provider shall maintain accurate records of all security deposits and shall cooperate with Recipient in transitioning security deposit administration to Recipient.
(h) Proration True-Up Support. Service Provider shall cooperate fully with Recipient and Buyer's accountants, Ashford Prewitt LLP (engagement partner: Martin Ashford, CPA; tax partner: Naomi Ikeda, CPA), in connection with the post-closing proration true-up process contemplated by Exhibit U and Exhibit V to the Purchase Agreement. The final proration true-up is due within ninety (90) days of the Closing Date (i.e., on or before September 4, 2024). Service Provider shall assemble and provide to Recipient and Buyer's accountants all data, invoices, receipts, tax bills, utility bills, CAM reconciliation data, and other documentation necessary for the preparation of the final proration statement. Service Provider acknowledges the critical importance of timely completion of the proration true-up and agrees to prioritize such cooperation.
(i) Tax Advisor Cooperation. Service Provider shall cooperate with Buyer's tax advisors, Ashford Prewitt LLP (Martin Ashford, CPA, and Naomi Ikeda, CPA), as reasonably requested in connection with any tax-related matters arising from the Closing or relating to the Portfolio, including, without limitation, the preparation of short-period tax returns for the Target Entities and any transfer tax filings.
Section 2.4 Lease Administration Services. During the Transition Period, Service Provider shall provide the following lease administration services:
(a) Lease File Maintenance and Handover. Service Provider shall maintain all lease files for the eighty-seven (87) Tenant Leases and shall assemble, organize, and deliver complete copies of all lease files to Recipient in both physical and electronic format, including all original lease agreements, amendments, side letters, commencement date agreements, estoppel certificates, subordination and non-disturbance agreements ("SNDAs"), tenant correspondence, and related documentation.
(b) Rent Escalation and Critical Date Tracking. Service Provider shall continue to track rent escalation dates, lease renewal option exercise dates, purchase option dates, right of first refusal dates, expansion option dates, and all other critical lease dates, and shall provide Recipient with a comprehensive critical date report for all Tenant Leases.
(c) Tenant Insurance Compliance. Service Provider shall continue to track and monitor tenant insurance certificate compliance for all tenants under the Tenant Leases, and shall notify Recipient of any tenants that are not in compliance with insurance requirements as of the date of such tracking.
(d) SNDA Coordination. Service Provider shall cooperate with Recipient in coordinating the delivery of the four (4) remaining Major Tenant SNDAs to be delivered post-Closing within thirty (30) days of the Closing Date pursuant to the side letter between Buyer and Seller, and shall use commercially reasonable efforts to facilitate the execution and delivery of such SNDAs.
(e) Tenant Communications. Service Provider shall coordinate with Recipient on all tenant communications during the Transition Period, including the distribution of tenant notification letters advising tenants of the change in ownership and property management. No tenant communications relating to the change in ownership or management shall be sent without the prior review and approval of Recipient.
Section 2.5 Service Contract Transition. During the Transition Period, Service Provider shall provide the following services with respect to the transition of service contracts:
(a) Contract Inventory and Cataloguing. Service Provider shall prepare and deliver to Recipient a complete inventory and catalogue of all existing service contracts for the Properties, including the approximately sixty-three (63) contracts in effect as of the Closing Date, identifying for each contract the vendor name, scope of services, contract term, renewal provisions, termination provisions, annual cost, and current status.
(b) Novation and Assignment Coordination. Service Provider shall coordinate with vendors and Recipient to facilitate the novation or assignment of service contracts to Recipient or to the Target Entities under new ownership, as directed by Recipient. Service Provider shall execute such documents and take such actions as may be reasonably necessary to effectuate such novations or assignments.
(c) Contract Terminations. Service Provider shall assist Recipient with the termination of any service contracts identified for termination by Recipient, including providing notice of termination to the applicable vendors in accordance with the terms of such contracts, as directed in writing by Recipient. Certain contracts have been recommended for termination based on Buyer's due diligence, and Service Provider shall cooperate with Recipient in executing such terminations in an orderly manner.
(d) Vendor Information Handover. Service Provider shall provide Recipient with all vendor contact information, performance histories, warranty documentation, and contract files for all service contracts relating to the Properties.
Section 2.6 Insurance Transition. During the Transition Period, Service Provider shall provide the following services with respect to the transition of insurance coverage:
(a) Policy Transition Cooperation. Service Provider shall cooperate with Recipient and Buyer in transitioning property and casualty insurance coverage from existing policies maintained by or on behalf of the Target Entities to Buyer's new insurance policies with Ironclad Indemnity Insurance Company, including providing all information, documentation, and loss history data reasonably requested by Buyer or its insurance advisors.
(b) Broker Coordination. Service Provider shall coordinate with Buyer's insurance broker, Hartwick Gunderson & Associates, Inc. (account executive: Peter Langford), on claims run-off matters under existing policies, new policy setup, and any other insurance transition matters as reasonably requested.
(c) Claims and Loss Run Data. Service Provider shall maintain and transfer to Recipient all claim files, loss run data, incident reports, and related insurance documentation for the Properties, including any open or pending claims as of the Closing Date.
Section 2.7 Information Technology and Systems. During the Transition Period, Service Provider shall provide the following information technology and systems services:
(a) System Access. Service Provider shall provide Recipient and its designated personnel with reasonable access to Service Provider's property management software, accounting systems, work order management systems, and tenant portals currently used in connection with the management and operation of the Portfolio. Such access shall be provided at no additional charge during the Transition Period.
(b) Data Migration. Service Provider shall cooperate with Recipient in the extraction and transfer of all property-level, tenant-level, lease-level, and financial data from Service Provider's systems to Recipient's systems. Service Provider shall provide data in commercially standard formats reasonably acceptable to Recipient and shall make its IT personnel available to assist with data migration as reasonably requested.
(c) Training. Service Provider shall provide training to Recipient's staff on the existing property management systems, accounting systems, and tenant portals to the extent reasonably necessary to facilitate the transition. Such training shall be provided at mutually agreed upon times during normal business hours.
Section 2.8 Personnel Transition Support. During the Transition Period, Service Provider shall provide the following personnel transition support:
(a) Key Personnel Availability. Key Service Provider Personnel, including Sean Kilpatrick, Portfolio Manager, shall remain available during the Transition Period for knowledge transfer, consultation, and coordination with Recipient. Service Provider shall ensure that Mr. Kilpatrick and other key personnel are reasonably available during normal business hours and, upon reasonable request by Recipient, for meetings, calls, and site visits as necessary to facilitate the transition.
(b) Hiring Cooperation. Service Provider shall cooperate with Recipient's efforts to hire or interview on-site property management staff, maintenance personnel, and other employees currently employed by Service Provider at the Properties, if applicable and to the extent permitted by law. For the avoidance of doubt, nothing in this Agreement shall require Service Provider to terminate or release any of its employees, and any hiring of Service Provider Personnel by Recipient shall be subject to the mutual agreement of the applicable employee.
(c) Physical Handover. Service Provider shall facilitate the orderly handover of all keys, access cards, security codes, gate codes, elevator keys, mechanical room access credentials, and all other physical property management materials to Recipient upon the expiration or earlier termination of this Agreement, or at such earlier time as mutually agreed by the Parties.
Section 2.9 Regulatory and Compliance Support. During the Transition Period, Service Provider shall provide the following regulatory and compliance support:
(a) Permit and License Transfers. Service Provider shall assist Recipient in the transfer of permits, licenses, registrations, and governmental approvals relating to the Properties to Recipient or to the Target Entities under new ownership, including, without limitation, business licenses, elevator permits, fire inspection certificates, environmental permits, and any other governmental authorizations.
(b) Foreign Qualification and Manager Change Filings. Service Provider shall cooperate with Recipient in the preparation and filing of foreign qualification filings, manager change filings, and other required state filings for the Target Entities in the States of Georgia, Texas, Florida, Tennessee, and North Carolina, as applicable, to reflect the change in management resulting from the Closing.
Section 2.10 Limitations on Services. The following limitations shall apply to Service Provider's provision of the Services:
(a) Standard Consistent with Past Practice. Service Provider shall provide the Services at a level of quality and care consistent with its performance in managing and operating the Portfolio during the twelve (12) month period prior to the Closing Date. Nothing in this Agreement shall require Service Provider to provide services at a level that exceeds such standard.
(b) Scope Limitations. Service Provider is not obligated to provide services beyond the scope described in this Article II and Schedule A, or to hire additional personnel, acquire new equipment or software, or maintain any particular staffing level, except as expressly set forth herein. In the event that Recipient requests services beyond the scope of this Agreement, the Parties may negotiate in good faith to agree upon the provision of such additional services, the terms of which shall be documented in a written amendment to this Agreement.
(c) Consent Requirements. Service Provider shall not, without the prior written consent of Recipient:
(i) enter into any new service contract or materially amend any existing service contract with respect to any Property;
(ii) amend, modify, terminate, or accept the surrender of any Tenant Lease;
(iii) make any capital expenditure exceeding Twenty-Five Thousand Dollars ($25,000) per Property; or
(iv) take any action that would materially alter the character or operations of any Property.
ARTICLE III
COMPENSATION
Section 3.1 Monthly Fee. In consideration of Service Provider's provision of the Transition Services hereunder, Recipient shall pay Service Provider a monthly transition services fee of Three Hundred Seventy-Five Thousand Dollars ($375,000) per month during the Transition Period (the "Monthly Fee"). The total aggregate fee for the full ninety (90) day Transition Period shall be One Million One Hundred Twenty-Five Thousand Dollars ($1,125,000), calculated as Three Hundred Seventy-Five Thousand Dollars ($375,000) multiplied by three (3) months. The Monthly Fee is inclusive of all internal costs of Service Provider, including salaries, benefits, overhead, and other internal expenses, but excludes reimbursable expenses as provided in Section 3.3 below.
Section 3.2 Payment Terms. The Monthly Fee shall be payable monthly in arrears, due within ten (10) business days following the end of each calendar month (or partial calendar month) during the Transition Period. The first payment shall be due within ten (10) business days following the end of June 2024, prorated for the period from June 6, 2024 through June 30, 2024. The final payment shall be due within ten (10) business days following the Expiration Date (or the earlier effective date of termination, as applicable), prorated for any partial month. Service Provider shall submit an invoice to Recipient for each Monthly Fee payment, which invoice shall include a summary of the Services performed during the applicable period.
Section 3.3 Reimbursable Expenses. In addition to the Monthly Fee, Recipient shall reimburse Service Provider for reasonable, documented out-of-pocket third-party expenses actually incurred by Service Provider in performing the Services hereunder (the "Reimbursable Expenses"); provided, however, that any single Reimbursable Expense exceeding Five Thousand Dollars ($5,000) shall require the prior written approval of Recipient before being incurred. Reimbursable Expenses shall be invoiced by Service Provider on a monthly basis, accompanied by reasonable supporting documentation (including receipts, invoices, and descriptions of the services or goods obtained), and shall be payable by Recipient within fifteen (15) business days of receipt of such invoice. Reimbursable Expenses shall not include any salaries, wages, benefits, or overhead costs of Service Provider or Service Provider Personnel.
Section 3.4 Payment Method. All payments due under this Agreement shall be made by wire transfer of immediately available funds to a bank account designated by Service Provider in writing. Service Provider shall provide Recipient with wire transfer instructions within five (5) business days of the Effective Date.
Section 3.5 No Offset. Fees and other amounts payable by Recipient under this Agreement shall not be subject to offset, reduction, or deduction, except for amounts expressly agreed in writing by both Parties, amounts resulting from the resolution of a bona fide dispute between the Parties, or as otherwise determined by a court of competent jurisdiction. The foregoing shall not limit Recipient's right to assert any claims or counterclaims it may have against Service Provider.
ARTICLE IV
COOPERATION AND ACCESS
Section 4.1 Access to Properties and Records. During the Transition Period, Service Provider shall provide Recipient and its representatives, agents, employees, contractors, accountants, and legal advisors with reasonable access to all Properties, offices, files, records, books, and data relating to the Portfolio during normal business hours upon reasonable advance notice. Without limiting the generality of the foregoing, Service Provider shall make available to Recipient complete copies of all books and records, tenant files, lease files, vendor contracts, service contract files, insurance files and policies, tax records and assessment notices, financial records and reports, bank statements, operating budgets, capital plans, environmental reports, engineering reports, and all other documentation relating to the ownership, management, and operation of the Portfolio. Service Provider shall cooperate with Recipient's reasonable requests for additional information and documentation as may be necessary to facilitate the transition.
Section 4.2 Cooperation with Proration True-Up. Service Provider shall cooperate fully and in good faith with Buyer and Recipient in connection with the post-closing proration true-up contemplated by Exhibit U and Exhibit V to the Purchase Agreement. Without limiting the foregoing, Service Provider shall provide all financial data, invoices, receipts, tax bills, utility bills, insurance premium statements, CAM and operating expense data, and other documentation necessary to prepare the final proration statement in accordance with the terms of the Purchase Agreement. The Parties acknowledge and agree that the deadline for the post-closing proration true-up is September 4, 2024, being ninety (90) days after the Closing Date, and Service Provider shall prioritize its cooperation with the proration true-up process to ensure timely completion.
Section 4.3 Cooperation with Lender Requirements. Service Provider shall cooperate with Recipient in satisfying any requirements of the lenders under the assumed mortgage loans in connection with the transition of property management, including:
(a) Pinnacle Federal Bank, N.A., as lender under the loan(s) in the aggregate original principal amount of Four Hundred Twenty-One Million Six Hundred Thousand Dollars ($421,600,000);
(b) Veltrano Capital Lending Corp., as lender under the loan(s) in the aggregate original principal amount of One Hundred Forty-Two Million Three Hundred Thousand Dollars ($142,300,000); and
(c) Sycamore Life Insurance Company, as lender under the loan(s) in the aggregate original principal amount of Forty-Eight Million One Hundred Thousand Dollars ($48,100,000).
Such cooperation shall include, without limitation, providing information, documentation, financial statements, and certifications as may be required by such lenders in connection with the approval of the change in property management, and executing such documents as may be reasonably required to effect the transition.
Section 4.4 Cooperation with Bank Account Transition. Service Provider shall cooperate with Recipient in transitioning signatory authority and access for all Target Entity operating accounts at Magnolia Commerce Bank, N.A. (contact: Linda Prescott, VP, Commercial Banking) to Recipient's designated representatives within thirty (30) days of the Closing Date. Such cooperation shall include executing bank resolutions, signature cards, and other documentation required by Magnolia Commerce Bank, N.A. to effect the change of signatory authority, and providing Recipient with all account documentation, statements, and reconciliation records. Until such transition is complete, Service Provider shall continue to manage the Operating Accounts in accordance with the terms of this Agreement and shall not make any withdrawals or disbursements from such accounts except in the ordinary course of operating the Properties or as directed by Recipient.
Section 4.5 Monthly Status Reports. Service Provider shall deliver to Recipient a written status report at least once per calendar month during the Transition Period, with the first such report due on or before July 15, 2024. Each status report shall summarize, in reasonable detail, the status of the transition of each category of Services, outstanding items remaining to be completed, anticipated completion dates, any issues or impediments requiring attention, and any other matters material to the transition. Status reports shall be delivered to:
(a) Leah Torrance, SVP, Asset Management, Fairwater Property Management LLC, 7200 Chesapeake Parkway, Suite 1150, Columbia, Maryland 21044, Email: ltorrance@fairwaterpm.com; and
(b) with a copy to: David Elgin Park, General Counsel, Fairwater Real Estate Investment Trust, 7200 Chesapeake Parkway, Suite 1100, Columbia, Maryland 21044, Email: depark@fairwaterreit.com.
In addition to monthly status reports, Service Provider shall promptly notify Recipient of any material developments, emergencies, or issues arising in connection with the Properties or the Services that require immediate attention.
ARTICLE V
STANDARD OF CARE; INDEMNIFICATION
Section 5.1 Standard of Care. Service Provider shall perform the Transition Services in a commercially reasonable manner, consistent with the standard of care employed by Service Provider in managing and operating the Portfolio during the twelve (12) months preceding the Closing Date, and in compliance with all applicable federal, state, and local laws, rules, regulations, ordinances, and governmental requirements. Service Provider shall use commercially reasonable efforts to preserve and protect the Properties and the business operations conducted thereon during the Transition Period.
Section 5.2 Indemnification by Service Provider. Service Provider shall indemnify, defend, and hold harmless Buyer, Recipient, each Target Entity, and their respective officers, directors, trustees, members, managers, employees, agents, successors, and assigns (collectively, the "Recipient Indemnified Parties") from and against any and all Losses arising out of, resulting from, or relating to (a) the gross negligence or willful misconduct of Service Provider or any Service Provider Personnel in performing or failing to perform the Services under this Agreement, or (b) any material breach by Service Provider of any of its representations, warranties, covenants, or obligations under this Agreement. The indemnification obligations of Service Provider under this Section 5.2 shall survive the expiration or termination of this Agreement for a period of twelve (12) months.
Section 5.3 Indemnification by Recipient. Recipient shall indemnify, defend, and hold harmless Seller, Service Provider, and their respective officers, directors, members, managers, employees, agents, successors, and assigns (collectively, the "Service Provider Indemnified Parties") from and against any and all Losses arising out of, resulting from, or relating to (a) the gross negligence or willful misconduct of Recipient or any of its officers, employees, agents, or contractors in connection with this Agreement, or (b) any material breach by Recipient of any of its representations, warranties, covenants, or obligations under this Agreement. The indemnification obligations of Recipient under this Section 5.3 shall survive the expiration or termination of this Agreement for a period of twelve (12) months.
Section 5.4 Limitation of Liability.
(a) Aggregate Cap. Except in the case of gross negligence, willful misconduct, or fraud, in no event shall either Party's aggregate liability under this Agreement exceed the total fees payable hereunder, which amount is One Million One Hundred Twenty-Five Thousand Dollars ($1,125,000).
(b) No Consequential Damages. In no event shall either Party be liable to the other Party for any consequential, incidental, indirect, special, exemplary, or punitive damages arising out of or in connection with this Agreement, regardless of whether such damages are based on contract, tort, strict liability, or any other theory, and regardless of whether such Party has been advised of the possibility of such damages. The foregoing limitation shall not apply to a Party's indemnification obligations for third-party claims to the extent such damages are awarded to a third party.
ARTICLE VI
TERM; TERMINATION; EXTENSION
Section 6.1 Term. This Agreement shall commence on the Closing Date (June 6, 2024) and shall expire on the Expiration Date (September 4, 2024), unless earlier terminated or extended as provided in this Article VI.
Section 6.2 Early Termination by Recipient. Recipient may terminate this Agreement in whole or in part (on a service-by-service basis or a property-by-property basis) at any time upon not less than thirty (30) days' prior written notice to Service Provider, specifying the Services or Properties to be terminated and the effective date of such termination. Upon any early termination by Recipient, whether in whole or in part:
(a) Recipient shall pay the Monthly Fee prorated through the effective date of termination for the Services or Properties so terminated, plus any accrued and unpaid Reimbursable Expenses;
(b) Service Provider shall cooperate in the orderly transition of the terminated Services or Properties to Recipient in accordance with Section 6.5; and
(c) to the extent that this Agreement is terminated only in part, the remaining terms and provisions of this Agreement shall continue in full force and effect with respect to the Services and Properties not terminated.
Section 6.3 Termination for Cause. Either Party may terminate this Agreement immediately upon written notice to the other Party if:
(a) the other Party materially breaches this Agreement and fails to cure such breach within fifteen (15) days after receipt of written notice from the non-breaching Party specifying the nature of the breach in reasonable detail; or
(b) the other Party (i) becomes insolvent or is generally unable to pay its debts as they become due, (ii) files or has filed against it a petition in bankruptcy or for reorganization under any bankruptcy or insolvency law, (iii) makes an assignment for the benefit of creditors, or (iv) has a receiver, trustee, or liquidator appointed for all or a substantial portion of its assets.
Section 6.4 Extension. The Transition Period may be extended for up to two (2) additional periods of thirty (30) days each (each an "Extension Period") upon the mutual written agreement of Service Provider and Recipient. During any Extension Period, the Monthly Fee shall remain Three Hundred Seventy-Five Thousand Dollars ($375,000) per month (prorated for any partial month), and all other terms and conditions of this Agreement shall continue to apply. Any request by Recipient for an Extension Period must be delivered in writing to Service Provider at least fifteen (15) days prior to the then-current Expiration Date. Service Provider shall not be obligated to agree to any Extension Period, and the decision to extend shall be in each Party's sole discretion.
Section 6.5 Effect of Termination or Expiration. Upon the termination or expiration of this Agreement (whether in whole or in part), Service Provider shall:
(a) deliver to Recipient all books, records, files, data, keys, access cards, security codes, tenant files, lease files, vendor contracts, financial records, bank records, insurance files, and all other materials and property relating to the Portfolio (or the applicable terminated Properties or Services) within ten (10) business days following the effective date of such termination or expiration;
(b) immediately cease holding itself out as property manager, authorized agent, or representative of the Portfolio, the Target Entities, Buyer, or Recipient;
(c) cooperate in good faith in the final transition of all remaining responsibilities, obligations, and operations to Recipient, including making Service Provider Personnel reasonably available for a period of not less than ten (10) business days following the effective date of termination or expiration to answer questions and provide information;
(d) deliver to Recipient a final accounting of all funds received and disbursed on behalf of each Target Entity during the Transition Period, including a final reconciliation of all Operating Accounts, within twenty (20) business days following the effective date of termination or expiration; and
(e) remit to Recipient or the applicable Target Entity any funds, deposits, prepayments, or other amounts held by Service Provider on behalf of any Target Entity.
The provisions of this Agreement relating to indemnification (Article V), confidentiality (Article VII), limitation of liability (Section 5.4), payment obligations (Article III, to the extent of accrued and unpaid amounts), and all other provisions that by their nature are intended to survive, shall survive the termination or expiration of this Agreement.
ARTICLE VII
CONFIDENTIALITY
Section 7.1 Confidential Information. Each Party shall maintain the confidentiality of all Confidential Information received from the other Party in connection with or pursuant to this Agreement and shall not disclose such Confidential Information to any third party without the prior written consent of the disclosing Party, except (a) to the receiving Party's officers, directors, employees, agents, accountants, attorneys, and other representatives who have a need to know such information in connection with the transactions contemplated by this Agreement and who are bound by obligations of confidentiality, (b) as required by applicable law, regulation, or legal process (provided that the receiving Party provides the disclosing Party with prompt notice thereof to the extent legally permissible), or (c) to the extent such information is or becomes publicly available through no fault of the receiving Party. The obligations of this Section 7.1 shall be consistent with, and in addition to, the obligations of the Parties under the Confidentiality Agreement dated October 10, 2023, between Buyer and Seller, to the extent applicable and not in conflict herewith.
Section 7.2 Return of Information. Upon the expiration or termination of the Transition Period, Service Provider shall promptly return to Recipient or destroy (at Recipient's election) all Confidential Information of Buyer and Recipient in Service Provider's possession or control, and shall certify in writing to Recipient that such return or destruction has been completed; provided, however, that Service Provider may retain copies of Confidential Information to the extent required by applicable law, regulation, or professional standards, or for tax record-keeping purposes, subject to the continuing confidentiality obligations of this Article VII.
ARTICLE VIII
INDEPENDENT CONTRACTOR
Section 8.1 Relationship of Parties. The relationship between Service Provider and Recipient under this Agreement is that of independent contractor and client. Service Provider is not, and shall not be deemed to be, an employee, agent, partner, or joint venturer of Recipient, Buyer, or any Target Entity by virtue of this Agreement. Nothing in this Agreement shall be construed to create an employer-employee relationship between the Parties, and neither Party shall have the authority to bind the other Party or create any obligation on behalf of the other Party, except as expressly provided herein. All Service Provider Personnel shall remain employees or contractors of Service Provider (or its affiliates) during the Transition Period, and Service Provider shall be solely responsible for the compensation, benefits, payroll taxes, and workers' compensation coverage of all Service Provider Personnel.
ARTICLE IX
REPRESENTATIONS AND WARRANTIES
Section 9.1 Mutual Representations. Each Party hereby represents and warrants to the other Party as of the Effective Date as follows:
(a) Organization. Such Party is duly organized, validly existing, and in good standing under the laws of its jurisdiction of formation and is duly qualified to do business in each jurisdiction in which the nature of its business or the ownership of its properties requires such qualification.
(b) Authority. Such Party has the requisite limited liability company or other organizational power and authority to enter into and perform its obligations under this Agreement. The execution, delivery, and performance of this Agreement by such Party have been duly authorized by all necessary limited liability company or other organizational action.
(c) Binding Obligation. This Agreement has been duly executed and delivered by such Party and constitutes the legal, valid, and binding obligation of such Party, enforceable against such Party in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium, and similar laws affecting creditors' rights generally and to general principles of equity.
(d) No Conflicts. The execution, delivery, and performance of this Agreement by such Party do not and will not (i) violate or conflict with the organizational documents of such Party, (ii) violate any applicable law, regulation, or governmental order, or (iii) conflict with, result in a breach of, or constitute a default under any material agreement or instrument to which such Party is a party or by which it is bound.
Section 9.2 Service Provider Representations. Service Provider hereby additionally represents and warrants to Recipient as of the Effective Date as follows:
(a) Licenses and Permits. Service Provider currently possesses all licenses, permits, certifications, and authorizations necessary to perform the Services in each of the States of Georgia, Texas, Florida, Tennessee, and North Carolina, and will maintain the same in full force and effect throughout the Transition Period.
(b) No Pending Actions. There are no pending or, to Service Provider's knowledge, threatened actions, suits, proceedings, or investigations against Service Provider that would materially impair Service Provider's ability to perform the Services hereunder.
ARTICLE X
INSURANCE
Section 10.1 Service Provider Insurance. During the Transition Period, Service Provider shall maintain, at its sole cost and expense, the following insurance coverages:
(a) Commercial General Liability Insurance. Commercial general liability insurance with a combined single limit of not less than Two Million Dollars ($2,000,000) per occurrence and Four Million Dollars ($4,000,000) in the aggregate, covering bodily injury, property damage, personal injury, and advertising injury arising from or related to Service Provider's performance of the Services.
(b) Workers' Compensation Insurance. Workers' compensation insurance in amounts as required by the applicable laws of each state in which the Properties are located (Georgia, Texas, Florida, Tennessee, and North Carolina), and employer's liability insurance with limits of not less than One Million Dollars ($1,000,000) per accident, One Million Dollars ($1,000,000) per employee for disease, and One Million Dollars ($1,000,000) policy limit for disease.
(c) Professional Liability / Errors and Omissions Insurance. Professional liability (errors and omissions) insurance with limits of not less than One Million Dollars ($1,000,000) per claim and Two Million Dollars ($2,000,000) in the aggregate, covering claims arising from errors, omissions, or negligent acts in the performance of the Services.
Service Provider shall provide certificates of insurance to Recipient within ten (10) days of the Effective Date, and thereafter upon request, evidencing the coverages required by this Section 10.1. All policies required under clauses (a) and (c) above shall name Buyer, Recipient, and each Target Entity as additional insureds. Workers' compensation policies shall include a waiver of subrogation in favor of Buyer, Recipient, and each Target Entity. All policies shall provide for at least thirty (30) days' prior written notice to Recipient of cancellation, material modification, or non-renewal.
ARTICLE XI
MISCELLANEOUS PROVISIONS
Section 11.1 Notices. All notices, demands, requests, consents, approvals, and other communications required or permitted under this Agreement shall be in writing and shall be deemed duly given when (a) delivered personally, (b) sent by overnight courier service (such as Severin Partners LLC or Halcyon Partners LLC) with confirmation of receipt, (c) sent by certified or registered mail, return receipt requested, postage prepaid, or (d) sent by electronic mail (with confirmation of receipt and followed by delivery of a hard copy by one of the other permitted means within two (2) business days), addressed to the applicable Party at the address set forth below, or at such other address as such Party may designate by notice to the other Party:
To Service Provider:
Argyle Property Services LLC 3300 Peachtree Road NE, Suite 2200 Atlanta, Georgia 30326
Attention: Sean Kilpatrick, Portfolio Manager
With a copy (which shall not constitute notice) to:
Blackridge Hayes LLP 1285 Avenue of the Americas, 34th Floor New York, New York 10019
Attention: Nathaniel Pryce
To Recipient:
Fairwater Property Management LLC 7200 Chesapeake Parkway, Suite 1150 Columbia, Maryland 21044
Attention: Leah Torrance, SVP Operations
With a copy (which shall not constitute notice) to:
Fairwater Real Estate Investment Trust 7200 Chesapeake Parkway, Suite 1100 Columbia, Maryland 21044
Attention: David Elgin Park, General Counsel
With a copy (which shall not constitute notice) to:
Calderwood & Harkness LLP 450 Park Avenue, 28th Floor New York, New York 10022
Attention: Douglas Fairchild
Section 11.2 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 law provisions thereof that would cause the application of the laws of any other jurisdiction, consistent with the governing law provisions of the Purchase Agreement.
Section 11.3 Dispute Resolution. Any dispute, controversy, or claim arising out of, relating to, or in connection with this Agreement, including any dispute regarding the breach, termination, or validity thereof, shall be resolved in accordance with the dispute resolution provisions set forth in the Purchase Agreement, which provisions are incorporated herein by reference, mutatis mutandis.
Section 11.4 Assignment. Neither Party may assign, delegate, or transfer this Agreement or any of its rights or obligations hereunder, in whole or in part, without the prior written consent of the other Party, which consent shall not be unreasonably withheld, conditioned, or delayed; provided, however, that Recipient may, without the consent of Service Provider, assign this Agreement to any affiliate of Buyer, including any entity controlled by, controlling, or under common control with Buyer. Any purported assignment in violation of this Section 11.4 shall be null and void. No assignment shall relieve the assigning Party of its obligations hereunder unless the other Party has agreed in writing to such release.
Section 11.5 Entire Agreement. This Agreement, together with the Purchase Agreement and the other transaction documents delivered in connection therewith (including the Schedules and Exhibits attached hereto and thereto), constitutes the entire agreement between the Parties with respect to the subject matter hereof and supersedes all prior and contemporaneous negotiations, discussions, representations, warranties, understandings, and agreements, whether written or oral, relating to the Transition Services. In the event of any conflict between the terms of this Agreement and the Purchase Agreement, the terms of the Purchase Agreement shall control, unless this Agreement expressly provides otherwise.
Section 11.6 Amendment; Waiver. This Agreement may not be amended, modified, or supplemented except by a written instrument duly executed by both Parties. No waiver of any provision of this Agreement, or of any breach or default hereunder, shall be effective unless in writing and signed by the Party against whom such waiver is to be enforced. No waiver of any provision shall be construed as a waiver of any other provision, and no waiver of any breach shall be construed as a waiver of any subsequent breach of the same or any other provision.
Section 11.7 Severability. If any provision of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, or unenforceable in any respect, the validity, legality, and enforceability of the remaining provisions shall not in any way be affected or impaired thereby, and the Parties shall negotiate in good faith to replace such invalid, illegal, or unenforceable provision with a valid, legal, and enforceable provision that, to the extent possible, achieves the Parties' original intent.