PURCHASE AND SALE AGREEMENT

Exhibit 10.36

 

PURCHASE AND SALE AGREEMENT

 

(Partnership Interests in Birchwood Acres Limited Partnership, LLLP)

 

by and among

 

Three E Corporation and AJG Financial Services, Inc., Sellers

 

and

 

SOF-Harmony Funding, L.L.C., Purchaser

 

Dated as of March 22, 2005

 

 

TABLE OF CONTENTS

 

 

Exhibits

 

 

- i -

 

Schedules

 

 

- ii -

PURCHASE AND SALE AGREEMENT

 

THIS PURCHASE AND SALE AGREEMENT (this “Agreement”) dated as of March 22, 2005, by and among Three E Corporation (“Three E”), a Florida corporation having offices at 3500 Harmony Square Drive West, Harmony, Florida 34773, AJG Financial Services, Inc. (“AJG”) a Delaware corporation having offices at The Gallagher Centre, Two Pierce Place, Itasca, Illinois 60143-3141 (Three E and AJG being herein collectively referred to as the “Seller” and being severally, and not jointly and severally liable for all obligations and liabilities of Seller hereunder) and SOF-HARMONY FUNDING, L.L.C., a Delaware limited liability company having offices c/o Starwood Capital Group Global, L.L.C., 591 W. Putnam Avenue, Greenwich, CT 06830 (“Purchaser”); at Closing, Purchaser shall cause an entity which is acceptable to Seller in its reasonable discretion and which is affiliated with SOF – VI U.S. Holdings II, L.L.C., a Delaware limited liability company, having offices at 591 W. Putnam Avenue, Greenwich, CT 06830 or, pursuant to Section 3A(e) hereof, shall cause another entity which is acceptable to Seller in its reasonable discretion (“Guarantor”) solely for the purposes specified in Sections 3A(e), 6 and 35 below, to execute this Agreement and the “Deferred Payment Agreements” referred to in such sections, in lieu of Purchaser’s providing the “Purchaser’s Letter of Credit” or other security at “Closing” (as such terms are hereinafter defined) in accordance with the terms hereof. The term “Purchaser” as used herein shall also refer to and include all “Purchaser Designees” (hereinafter defined).

 

Each “Company Subsidiary” and the “Three E Parent” (hereinafter defined) executes this Agreement to acknowledge its agreement to abide by those terms hereof and perform and cause the performance of those obligations of Seller set forth herein which relate to such person or entity and its assets and activities. The “Company” (hereinafter defined) executes this Agreement to acknowledge its agreement to abide by and perform its obligations set forth herein prior to Closing. Each of Seller, Purchaser and Guarantor are sometimes herein referred to as a “Party” and they are sometimes herein referred to collectively as the “Parties”.

 

W I T N E S S E T H:

 

WHEREAS, Sellers collectively own all of the partnership interests (the “Partnership Interests”) in Birchwood Acres Limited Partnership, LLLP, a Florida limited liability limited partnership (the “Company” having offices at 3500 Harmony Square Drive West, Harmony, Florida 34773, and

 

WHEREAS, AJG is the sole limited partner of the Company, and Three E is the sole general partner of the Company, and

 

WHEREAS, James Lentz, (“Lentz”) an individual is a majority and controlling shareholder of Three E, and Harmony Institute (“Harmony Institute”), an eleemosynary organization is a minority and non-controlling shareholder of Three E (Lentz is herein sometimes referred to as the “Three E Parent”); and

 

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WHEREAS, the Company owns and holds in its own name, record title to a tract which originally consisted of approximately 11,030 acres (excluding certain parcels which were sold and conveyed to parties unrelated to Seller on or prior to the Closing Date, which is more particularly described on Exhibit A hereto; and

 

WHEREAS, the Company owns all of the interests in, and controls each of, Harmony Development Co, LLC, a Florida limited liability company, Harmony Golf Facilities, LLC, a Florida limited liability company, Harmony Restaurant Facilities, LLC, a Florida limited liability company Harmony Ground Maintenance Co. LLC, a Florida limited liability company and Harmony Real Estate Co., LLC, a Florida limited liability company (each, a “Company Subsidiary” or “Subsidiary” and collectively, the “Company Subsidiaries” or “Subsidiaries”), each of which provides certain services and conducts certain operations at the Property and holds certain related permits, licenses, contract rights and other property; and

 

WHEREAS, the term “Property”, as used herein, includes, in addition to all other property and rights to be owned by the Company on the Closing Date as hereinafter set forth, the land described on Exhibit A together with all appurtenances and rights benefiting and running with same (the “Land”), together with the buildings and other improvements thereon (each a “Building” or “Improvement”, and collectively, the “Buildings and Improvements”), all personal property, equipment and other tangible property owned by the Company and the Company Subsidiaries on the date hereof, of which Seller shall provide a list designated as excluded property to Purchaser within five (5) Business Days after the date hereof, which list shall then be attached hereto as, and which is herein referred to as, Exhibit B hereto and such property is collectively herein referred to as the “Personal Property”) and all Leases but excluding any property of which Seller shall provide a list designated as excluded property to Purchaser within five (5) Business Days after the date hereof, which shall then be attached hereto as, and which list is herein referred to as, Exhibit C and which property is collectively herein referred to as “Excluded Property”, and

 

WHEREAS, each of Three E and AJG desires to sell that portion of the Partnership Interests owned by such party, and the Purchaser desires to purchase the Partnership Interests pursuant to the terms hereof.

 

NOW, THEREFORE, in consideration of the recitals, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree to the foregoing and the following:

 

1. Definitions . Those capitalized terms which are used in this Agreement but which are not defined in the body of this Agreement (including the recitals set forth above), shall have the meanings specified in Schedule 1 attached hereto.

 

2. Purchase and Sale . Each of Three E and AJG agrees to sell, assign and transfer that portion of the Partnership Interests owned by such party to Purchaser, and Purchaser agrees to purchase the same from each of Three E and AJG, respectively, for the price and subject to the terms of this Agreement.

 

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3. A. Purchase Price; Cash Portion; Deferred Portion; Downpayment; L/C; Guaranty .

 

(a) The aggregate purchase price to be paid by Purchaser to Seller for the Partnership Interests (the “Purchase Price”), shall consist of the aggregate of the sums specified in Section 3(b) below which shall be payable in cash at Closing (the “Cash Portion”) and the sums specified in Section 3(c) below which shall be deferred and payable after Closing (the “Deferred Portion”). The Cash Portion payable to each of Three E and AJG (as set forth in Section 3(c) below) shall be paid to each of Three E and AJG, respectively, by bank wire transfer on the Closing Date (as hereinafter defined) in immediately available federal funds to the account of the respective receiving party specified by such party prior to the Closing Date. Simultaneously with the making of such payment, the Escrow Agent shall be directed by the Parties to return the “Downpayment” (hereinafter defined) to Purchaser. The portion of the Purchase Price which is tentatively allocated to each particular tract within the Property shall be specified in an amendment to Exhibit A which Seller and Purchaser shall reasonably agree to between the date hereof and the Closing Date. Subject to the following sentence, each of Seller and Purchaser shall utilize and apply such allocation for all purposes and shall not take a position to the contrary, including without limitation, in any documents or filings. Pursuant to § 1060 of the Code, within 30 days after the Closing Date, the Seller and Purchaser shall adjust such allocations if necessary to reflect any change between the date of such initial allocation and the Closing Date.

 

(b) The Cash Portion shall consist of the following sums:

 

(i) Three Million Seven Hundred Fifty Thousand Dollars ($3,750,000) which Purchaser shall pay to Three E or as directed by Three E; and

 

(ii) The sum, which Purchaser shall pay to AJG or as directed by AJG, of Seventy Five Million Dollars ($75,000,000), reduced by the aggregate unpaid principal amount of the following bank or institutional funded indebtedness of the Company outstanding immediately prior to the Closing on the Closing Date: (A) the $12,410,000 Birchwood Acres Limited Partnership Taxable Variable Rate Bonds (Birchwood Triple E Ranch Project), Series 2000, the entire indebtedness evidenced by such bonds being hereinafter referred to as the “Bond Indebtedness”; (B) the First National equipment credit line; (C) the Franklin Bank debt; and (D) the MuniMae debt; it is understood and agreed that the indebtedness of the Company to each of AJG and Harris Bank shall be paid in full by (Seller’s utilizing funds from the Purchase Price) at Closing immediately prior to Purchaser’s acquisition of the Partnership Interests and that Purchaser shall take subject to the other obligations of the Company which are set forth on the January Balance Sheet (as hereinafter defined), without a credit against the Purchase Price in respect of such other obligations which are set forth on the January Balance Sheet (and Purchaser shall bear without a credit against the Purchase Price therefore, any additional obligations of the Company which are shown on the Closing Date Balance Sheet (as hereinafter defined) which are not “Material Variances”, as hereinafter defined in Section 3B(a) ); the foregoing obligations

 

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which Purchaser shall take subject to are herein referred to as the “Assumed Indebtedness”; for the avoidance of doubt, the Purchaser shall not receive a credit against or a reduction of the Purchase Price in respect of the payment which the Company is obligated to make after May 1, 2005 pursuant to the special assessments required by Harmony CDD for payment of semi-annual principal and interest due on the $17,700,000 Harmony Community Development District Bonds (Series 2001); and

 

(iii) The aggregate amount of Six Hundred and Fifty Thousand Dollars ($650,000) for the acquisition of the Alligator Lakeside Inn assets, property or equity interests. The closing costs of such acquisition shall be borne by the Partnership. Any payment due under this Section 3A(b)(iii) shall be made solely to AJG to the extent that such acquisition shall have increased the Partnership’s indebtedness for which Purchaser shall receive a credit pursuant to clause (ii) above.

 

(c) The Deferred Portion shall consist of those sums, if any, payable by Purchaser to Three E or as directed by Three E pursuant to a “Deferred Payment Agreement” which Purchaser and Three E (and such other party or parties as may be set forth as signatories in such form) shall execute and deliver to each other at Closing, in the form attached hereto as Exhibit D (the “Deferred Payment Agreement”).

 

(d) (i) On the date hereof, Purchaser has delivered to First American Title Insurance Company, as escrow agent (the “Escrow Agent”) the cash in the amount of Two Million Dollars ($2,000,000) (which together with any interest earned thereon after the date hereof is defined as the “Downpayment”). The Escrow Agent shall invest the Downpayment in a money market fund or a demand deposit interest bearing bank account in the name of Escrow Agent at a financial institution. The Downpayment shall be held in escrow by the Escrow Agent and dealt with in accordance with the provisions hereof.

 

(ii) Anything to the contrary herein notwithstanding and subject to offset for any payment required to be made by Purchaser pursuant to Sections 20(a)(iv) and 20(d) below, (x) if Purchaser shall timely give a termination notice pursuant to the provisions of Section 20(c) , the Escrow Agent shall promptly remit $250,000 of the Downpayment to Seller and shall promptly remit the remainder of the Downpayment to Purchaser (subject to the other express provisions hereof); provided, however, that if Seller shall have breached its obligations hereunder during the Due Diligence Period, and Purchaser shall have given Seller written notice thereof (setting forth a detailed description of the alleged breach) at least three (3) Business Days prior to expiration of the Due Diligence Period and such breach shall not be cured by Seller or waived in writing by Purchaser within ten (10) Business Days after receipt of such notice, but not later than two (2) Business Days prior to the end of the Due Diligence Period, then the Escrow Agent shall promptly remit the entire Downpayment to Purchaser; and (y) if Purchaser shall not have timely given a termination notice pursuant to the provisions of Section 20(c) and if Closing shall not thereafter occur for any reason other than Seller’s breach hereunder, then Seller shall be entitled to receive the entire Downpayment and same shall not be refundable to Purchaser.

 

 

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(e) Purchaser shall at Closing cause Guarantor to do each of the items (i) through (iv) below or else shall provide the alternative guaranty or other security described in the sentence following this sentence: (i) to execute and deliver to Three E and Lentz the Deferred Payment Agreement; and (ii) to execute and deliver to AJG an agreement pursuant to which Purchaser shall pay to AJG one percent (1%) of the net cash flow of the Company on terms substantially identical to those contained in the Deferred Payment Agreement (except that such agreement shall not contain provisions similar to Sections 3.3 or 3.4 or Articles IV and V of the Deferred Payment Agreement); the agreements referred to in these clauses (i) and (ii) are herein collectively referred to as the “Deferred Payment Agreements”; and (iii) to execute and deliver a copy of this Agreement to AJG to evidence its obligation to AJG pursuant to Section 35 below; and (iv) to execute and deliver a copy of this Agreement to AJG and Three E to evidence its obligation to indemnify, defend and hold harmless each of the Seller Indemnified Parties (as hereinafter defined) from and against any and all Damages (as hereinafter defined) relating to, arising from or in connection with any breach of representation, warranty, covenant or agreement by Guarantor hereunder. In lieu of causing items (i) through (iv) above to occur, Purchaser may elect to provide at Closing: (x) an irrevocable and evergreen, clean standby letter of credit in the face amount of $12,600,000 (the “Purchaser’s Letter of Credit”) in form and substance reasonably acceptable to AJG and issued by an issuer which is reasonably acceptable to AJG, which Purchaser’s Letter of Credit shall be accepted by AJG as security in lieu of the obligations of Guarantor under Section 35(c) , (d) and (e) ; and (y) a guaranty or other security reasonably satisfactory to Three E and AJG, in lieu of the obligations of Guarantor pursuant to clauses (i), (ii) and (iv) of this subsection (e). If security in a form other than a guaranty is provided for all of the obligations referred to in items (i) through (iv) of the preceding sentence, then references to “Guarantor” in this Agreement shall be deemed deleted and of no force or effect and references to “Starwood” in the form of Deferred Payment Agreement attached hereto as Exhibit D shall be deemed deleted and of no force or effect except that in Article V thereof (entitled “Future Opportunities”), the term “Starwood” shall be deemed to mean “Purchaser”. In the event that Purchaser shall at Closing, initially provide the Purchaser’s Letter of Credit and any other form of security than the guaranty referred to in clauses (i) through (iv) above, it may nevertheless, at any time thereafter replace such security by the guaranty referred to in clauses (i) through (iv) above, whereupon the changes effected by the preceding sentence shall be deemed reversed.

 

B. Closing Adjustment . (f) The Purchase Price shall not be adjusted in any manner unless the Closing Date Balance Sheet reflects material and adverse variances in liabilities from the balance sheet of the Company as at January 31, 2005 (the “January Balance Sheet”) which variances are caused by transactions by the Company outside of the customary and usual course of business consistent with past practices (the “Material Variances”). Seller shall prepare a balance sheet of the Company as at the Closing Date (the “Closing Date Balance Sheet”) in the same format and utilizing the same methods, procedures and assumptions that were used in the preparation of the January Balance Sheet and shall deliver a copy of the Closing Date Balance Sheet to Purchaser within thirty (30) days after the Closing Date. A copy of the January Balance Sheet is attached hereto as Exhibit E .

 

 

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(g) In the event the Closing Date Balance Sheet shall reflect Material Variances then, within ten (10) Business Days after the last of AJG and Three E to receive notice thereof from Purchaser, Purchaser, AJG and Three E shall confer for purposes of determining the effect, if any, such Material Variances shall have upon the Purchase Price. In the event the Parties shall be unable to resolve any dispute regarding Material Variances within thirty (30) days after the first conference of the Parties with respect thereto, then such dispute shall be submitted by any party to any of the following firms selected by Purchaser (provided that Purchaser may not select any firm which has provided services to, or otherwise had a relationship with, Purchaser or any of its Affiliates within the prior twelve (12) month period): BDO Seidman, Price Waterhouse Coopers, KPMG or Moore Stephens Lovelace, P.A., certified public accountants which are located at 1201 S. Orlando Avenue, Suite 400, Winter Park, FL 32789-7192 (the “Arbitrator”), as soon as possible and the decision of the Arbitrator shall be final and binding upon the parties without further recourse. If Purchaser shall fail to select an arbitrator in a writing delivered to Seller within ten (10) Business Days after the expiration of the aforesaid thirty (30) day period, then the arbitrator shall be Moore Stephens Lovelace, PA. In the event the Arbitrator shall determine that the Purchase Price shall be reduced as a result of Material Variances at the Closing Date, such reduction shall not exceed the aggregate increase in the book value of the assets of the Company and the Company Subsidiaries between January 31, 2005 and the Closing Date. The fees and costs of the Arbitrator will be borne equally by Purchaser and Seller (one half each).

 

4. Closing Date . The consummation of the transactions contemplated by this Agreement (the “Closing”) shall take place at the offices of Baker & Hostetler, 200 South Orange Avenue, Orlando, Florida, or at such other location as may be agreed upon by the Parties, at 10:00AM E.S.T. on April 20, 2005, or on such earlier or later date pursuant to Section 17(a) below, or otherwise as Seller and Purchaser may hereafter mutually agree upon (the actual date on which the Closing occurs is herein sometimes referred to as the “Closing Date”).

 

5. Seller’s Representations and Warranties . Seller represents and warrants to Purchaser that the statements set forth in the recitals of this Agreement and the following are true, correct and accurate in all material respects:

 

(i) Except as set forth on Schedule 5(i) , there is no litigation, dispute or proceeding before any federal, state or municipal department, board, bureau, agency or instrumentality pending, or to Seller’s Knowledge, threatened, against or relating to (X) Seller, the Company, the Company Subsidiaries or the Property; or (Y) the Seller Parents, if in the case of this clause (Y), it is likely to have a material adverse effect on Seller’s ability to perform its obligations hereunder or upon the Company after the Closing.

 

(ii) Except as is set forth on Schedule 5(ii) or as is reflected in any report identified on Schedule 5(ii) Seller has no Knowledge that there are Hazardous Materials

 

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at the Property, or that Hazardous Materials from the Property have been placed on, or have migrated to adjoining property or, that except as set forth on Schedule 5(ii) , Seller has received any citations, summonses, directives or orders relating to Hazardous Materials in or about the Property which are pending or unresolved at the date hereof or which were resolved within the past three years.

 

(iii) The execution, delivery and performance of this Agreement by Three E (as to itself) and AJG (as to itself) has been duly authorized by all requisite action of such party and this Agreement is the valid and binding obligation of Three E (as to itself) and AJG (as to itself) enforceable against such party in accordance with its terms except to the extent that enforcement may be affected by laws relating to bankruptcy, reorganization, insolvency and creditors rights and by the availability of injunctive relief, specific performance and other equitable remedies.

 

(iv) Each of the Company and Three E (as to itself) and AJG (as to itself) is a valid and existing entity of the type specified elsewhere herein, organized under the laws of the jurisdiction specified elsewhere herein and has the requisite power and authority to enter into and to perform the terms of this Agreement; Three E (as to itself) and AJG (as to itself) is the lawful owner, both beneficially and of record, of all of the partnership interests in the Company reflected on the books and records of the Company as owned by such party (each of Three E and AJG represents that such partnership interests together constitute all of the partnership interests in the Company, the “Partnership Interests”) free and clear of liens and encumbrances, the delivery to Purchaser of the Assignment of Partnership Interests by Three E (as to itself) and AJG (as to itself) pursuant to this Agreement will transfer to Purchaser good, valid and marketable title to the portion of the Partnership Interests owned by Three E and AJG respectively, free and clear of all liens, encumbrances and claims of others. The Company owns no equity interest or other ownership interest in any entity other than the Company Subsidiaries.

 

(v) No consents, approvals, orders or authorizations of any federal, state or local governmental commission, board, agency, authority or other regulatory body are required for Three E’s (as to itself) or AJG’s (as to itself) execution, delivery and performance of this Agreement except as set forth on Schedule 5(v) .

 

(vi) Except as set forth on Schedule 5(vi), no consent of any mortgagee, Underlying Obligee or any other third party is required for or in connection with the execution, delivery or performance by the Seller and the Company of this Agreement or for or in connection with its consummation of the transactions contemplated hereby.

 

(vii) There are no employees (including without limitation, employees of Seller, the Company or the Company Subsidiaries) except for those set forth on Schedule 5(vii) who have written employment agreements with the Company or any Company Subsidiary providing for employment beyond the Closing Date.

 

(viii) Schedule 5(viii) (referred to in this Section 5(viii) as the “Schedule”) lists all existing material (A) leases and amendments, renewals and guaranties thereof which

 

 

 

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are in effect for the lease of space in or at the Buildings and Improvements or otherwise at the Property (whether or not the terms thereof have commenced) under which the Company is the landlord (collectively, together with any “New Leases”, hereinafter defined, the “Leases”); tenants under Leases are herein referred to as “Tenants” and (B) contracts (and all deposits thereunder and guarantees thereof) (“Pending Unit/Site Contracts”) under which title closing has not as of the date hereof, occurred, for the sale of homes and/or home sites by Seller to purchasers (the “Pending Unit/Site Purchasers). The Pending Unit/Site Contracts are together with any “New Contracts”, hereinafter defined, referred to as the “Sale Contracts”. Except as set forth on the Schedule, there are no Sale Contracts (or other contracts for sale of lots at or about the Property) at or for the Property to which Company Affiliates or Seller Affiliates (as distinct from the Company itself are a party). No person or entity has or to Seller’s Knowledge claims any right pursuant to any written agreement with the Company (or to which the Company is bound) to purchase, occupy or otherwise utilize the Property or any part thereof (other than access rights for ingress, egress and utilities which are set forth of record in plats filed in the appropriate land records office or in recorded deeds except as shown on the Schedule, and the Company has made available to Purchaser true and complete copies of all of the existing Leases and Sale Contracts. Seller has also set forth on the Schedule all of the subleases under any of the Leases and all assignments of the Sale Contracts by contract vendees, to which the Company has consented or of which Seller has Knowledge. Other than the Leases and Sale Contracts listed on the Schedule (and the rights referred to in the parenthetical clause in the preceding sentence), there are no agreements in force or effect for the use, lease or occupancy of space at the Property or the purchase of homes, home sites or other property to which the Company is a party or by which the Company is bound as landlord or of which Seller or the Company has Knowledge.

 

(ix) Except to the extent set forth in Schedule 5(ix) (or in other schedules referred to in particular sub-subsections below in this Section 5(ix)):

 

(1) each of the Leases and Pending Unit/Site Contracts is in full force and effect; the Company is not in material default of any of its obligations under any Lease or any Sale Contract; no Tenant or Pending Unit/Site Purchaser is in arrears or in default (after any applicable notice and/or grace period) in the payment of fixed rent or “Additional Rents” (defined below) or the contract deposit or purchase price, as applicable or to the Knowledge of Seller is in material default of its non-monetary obligations after any applicable notice or grace period under its Lease or Sale Contract.

 

(2) except as may be set forth in the Leases or Pending Unit/Site Contracts, in this Agreement or in any exhibit or schedule hereto or as is otherwise granted by the Company in the ordinary course of business, no Tenant or Pending Unit/Site Purchaser is entitled to and to the Knowledge of Seller none has asserted any right to any rent concession or purchase price concession, rebate, abatement, improvement allowance, work or other benefits;

 

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(3) except as set forth on Schedule 5(ix)(3), neither Seller nor the Company has received written notice from a Tenant or a Pending Unit/Site Purchaser claiming or asserting any defenses, counterclaims, set-offs or offsets against the rents specified in its Lease or against its obligations under its Sale Contract;

 

(4) except as provided in the Leases or Pending Unit/Site Contracts, no renewal, extension, expansion or purchase rights or options have been granted and remain outstanding in favor of any Tenant or any Pending Unit/Site Purchaser;

 

(5) except as set forth in Schedule 5(ix)(5), no action or proceeding is pending, or to Seller’s or the Company’s knowledge, threatened, against Seller or the Company by any Tenant or any Pending Unit/Site Purchaser;

 

(6) except as set forth in Schedule 5(ix)(6), there are no security deposits under the Leases or Sale Contracts; and

 

(7) no Tenant has prepaid any fixed rent or Additional Rents for more than one month in advance.

 

(x) Except as set forth on Schedule 5(x), neither the Company nor Seller has received written notice of any pending real property tax reduction proceedings with respect to the Property.

 

(xi) Schedule 5(xi) (which shall be prepared by Seller and delivered to Purchaser within five (5) Business Days after the date hereof and shall then be attached hereto) is a true and complete list of all material (other than brokerage agreements, which are addressed in Section 5(xiv) below) service, maintenance, utilities, supply and other contracts relating to the Property, or by which the Company is bound, or affecting the Property or the use thereof, together, in each case, with all amendments and modifications thereof to which the Company is a party (collectively, the “Service Contracts”); a true and complete copy of each Service Contract has been made available to Purchaser.

 

(xii) Neither the Company nor Seller is a “foreign person” within the meaning of Section 1445 of the Internal Revenue Code 1986, as amended, or any regulations promulgated thereunder (collectively, the “Code”).

 

(xiii) Except for Permitted Exceptions, there are no court (or other governmental entity) judgments, orders, or decrees of any kind against the Company or Seller which are unpaid or unsatisfied of record, nor any actions, suits or other legal or governmental administrative proceedings pending or, to the best of the Company’s or Seller’s knowledge, threatened against the Company or Seller, which is likely to have any material adverse effect on the Company or the ability of the Company or Seller to consummate the transactions contemplated by this Agreement.

 

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(xiv) Except as set forth on Schedule 5(xiv) (brokerage commissions set forth thereon, if any, are referred to herein as the “Payable Commissions”) there are no brokerage commissions (or unpaid installments thereof) with respect to any Leases or Sale Contracts which are now due and payable or which will become due and payable hereafter (including after the Closing), other than with respect to transactions consummated on or subsequent to December 31, 2004 for which proceeds have either remained with the Company, reduced indebtedness of the Company or otherwise have been utilized in connection with the conduct of the Company’s business in the ordinary course of business. Schedule 5(xiv) lists all of the leasing and/or sales brokerage agreements (the “Leasing/Sales Brokerage Agreements”) which are presently in effect relating to the Property and binding on the Company, any Company Subsidiary, Seller or any Affiliate of Seller; true and complete copies thereof have been made available to Purchaser.

 

(xv) Except as set forth on Schedule 5(xv) and except for any improvement work or allowance or reimbursement in respect thereof to which a Tenant or a Pending Unit/Site Purchaser may be entitled in accordance with the terms of any presently unexercised renewal, extension, expansion or other options expressly set forth in any Leases or Pending Unit/Site Contracts and except for developer liability imposed by Florida law (Seller hereby represents that it has received no written notices of any such claims) and warranty obligations incurred in the ordinary course of the Company’s business, there is no improvement work required to be performed by the Company under any Lease or Sale Contract or for which the Company is required under any Lease or Sale Contract to reimburse any Tenant or Pending Unit/Site Purchaser or grant any allowance in favor of any Tenant or Pending Unit/Site Purchaser, in excess of Two Hundred Thousand Dollars ($200,000) in the aggregate as to all such required work which has not already been completed and/or the costs of which (the “Inducement Costs”) have not already been paid or allowed as a credit to the Tenant or the Pending Unit/Site Purchaser.

 

(xvi) Neither Seller, the Company, any Company Subsidiary nor, to Seller’s Knowledge, any Tenant or Pending Unit/Site Purchaser is presently the subject of any of the following: a petition under any federal or state bankruptcy or insolvency laws, the appointment of a receiver to take possession of all or substantially all of its assets, the attachment or other judicial seizure of all or substantially all of its assets, an admission in writing of its inability to pay its debts as they come due, or an offer of settlement, extension or composition made to its creditors generally.

 

(xvii) Attached hereto as Schedule 5(xvii) is a list of all property casualty insurance coverages, including fire and extended coverage, maintained by the Company with respect to the Property (“Company’s Casualty Insurance”). The Company’s Casualty Insurance is in full force and effect.

 

(xviii) Seller has made available to Purchaser a true, correct and complete copy of each of the agreements and documents which constitute the Underlying Obligations, all of which Underlying Obligations are generally described on Schedule 5(xviii) . The Underlying Obligations have not been amended. All payments due and payable by the

 

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Company under the Underlying Obligations to and including the date of this Agreement have been made. The Company has not given or received written notice of any default under any of the Underlying Obligations which is outstanding and not remedied.

 

(xix) Schedule 5(xix) contains a complete list of each Benefit Plan. The Company has made available to Purchaser true and complete copies of each Benefit Plan and with respect to any Benefit Plan that is sponsored or maintained by the Company or any Company Subsidiary (a “Company Sponsored Benefit Plan”) all contracts relating thereto, or to the funding thereof, including, without limitation, all trust agreements, insurance contracts, administration contracts, investment management agreements, subscription and participation agreements and recordkeeping agreements. In the case of any Company Sponsored Benefit Plan that is not in written form, the Purchaser has been supplied with an accurate written description of such Company Sponsored Benefit plan. A true and correct copy of the most recent annual report, actuarial report, accountant’s opinion of the plan’s financial statements, summary plan description and Internal Revenue Service determination letter with respect to each Company Sponsored Benefit Plan, to the extent applicable, has been made available to the Purchaser, and there have been no materially adverse changes in the financial condition in the respective plans from that stated in the annual reports and actuarial reports supplied.

 

Except as disclosed on Schedule 5(xix)(1):

 

(a) All Benefit Plans have been maintained and administered in form and in operation in all material respects in accordance with their terms and with all applicable requirements of law (including, in the case of any Benefit Plan which is an employee pension benefit plan, the requirements of sections 401(a) and 501(a) of the Code), except for any instances of failure to so maintain or administer that would not, individually or in the aggregate, result in a material liability of the Company or any Company Subsidiary and no notice issued by any governmental authority questioning or challenging such compliance has been received by the Company or any Company Subsidiary.

 

(b) None of the assets of any Benefit Plan are invested in employer securities or employer real property.

 

(c) There have been no “prohibited transactions” (as described in section 406 of ERISA or section 4975 of the Code) with respect to any Benefit Plan and neither the Company nor any Company Subsidiary has engaged in any prohibited transaction.

 

(d) There are no audits, examinations, investigations, actions, suits or claims (other than routine claims for benefits) pending with respect to which Seller or the Company has been served with process or received written notice of the pendency thereof or, to Sellers’ Knowledge, threatened involving any Benefit Plan or the assets thereof.

 

(e) Neither the Company nor any Company Subsidiary has any liability or contingent liability for providing, under any Benefit Plan or otherwise, any post-retirement medical or life insurance benefits, other than statutory liability for providing group health plan continuation coverage under Part 6 of Title I of ERISA and section 4980B of the Code or applicable state law.

 

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(f) There has been no act or omission that would impair the ability of the Company (or any successor thereto) or any Company Subsidiary (or any successor thereto) to unilaterally amend or terminate any Benefit Plan.

 

(g) Neither the Company nor any Company Subsidiary, nor any employer (whether or not incorporated) that would be treated together with the Company, any Company Subsidiary and/or the Seller, as a single employer within the meaning of Section 414 of the Code, sponsors, maintains or contributes to, has sponsored, maintained or contributed to, or has any liability, contingent or otherwise, with respect to a plan covered by Title IV or Section 302 of ERISA or Section 412 of the Code or a “multiemployer plan”, as such term is defined in Section 3(37) of ERISA.

 

(h) The execution of this Agreement and the consummation of the transactions contemplated hereby do not constitute a triggering event under any Benefit Plan, policy, arrangement, statement, commitment or agreement, which (either alone or upon the occurrence of any additional or subsequent event) will or may result in any payment, “parachute payment” (as such term is defined in Section 280G of the Code), severance, bonus, retirement or job security or similar-type benefit, or increase any benefits or accelerate the payment or vesting of any benefits to any employee or former employee or director of the Company or any Company Subsidiary.

 

(xx) neither Three E (as to itself and its Affiliates), AJG (as to itself and its Affiliates), the Company, any Company Subsidiary nor any of their respective Affiliates, nor any of their respective members, and none of their respective officers or directors is, nor prior to Closing or the earlier termination of this Agreement, will they become, a person or entity with whom U.S. persons or entities are restricted from doing business under regulations of the Office of Foreign Asset Control (“OFAC”) of the Department of the Treasury (including those named on OFAC’s Specially Designated Blocked Persons List) or under any U.S. statute, executive order (including the September 24, 2001, Executive Order Blocking Property and Prohibiting Transactions with Persons Who Commit, Threaten to Commit or Support Terrorism) or other governmental action and, with respect to the Company, any Company Subsidiary or any of their Affiliates, is not and prior to Closing for the earlier termination of this Agreement will not engage in any dealings or transactions with or be otherwise associated with such persons or entities.

 

(xxi) for purposes of this Agreement, “Environmental Law” shall mean any law, order or other requirement of law, including any principle of common law, relating to the protection of human health or the environment, or to the manufacture, use, transport, treatment, storage, disposal, release or threatened release of Hazardous Materials. Except as set forth on Schedule 5(xxi) or in any of the reports identified on Schedule 5(xxi) Seller has no Knowledge that (i) the Company or any of the Company Subsidiaries (x) is not in material compliance with all applicable Environmental Laws, or (y) has failed to obtain, or is not in material compliance with, any Permits required of them under

 

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applicable Environmental Laws; (ii) there are any claims, proceedings, investigations or actions by any Governmental or Regulatory Authority or other Person or entity pending or threatened against the Company or any of the Company Subsidiaries under any Environmental Law; (iii) Hazardous Materials are, or have been, located on (except in small amounts used in the ordinary course for the operation or maintenance of the Property by the Company or its predecessor in accordance with all applicable Environmental Laws), in or under the Property or have been released into the environment, or discharged, placed or disposed of at, on or under the Property; (iv) underground storage tanks are, or have been, located at the Property; or (v) the Property has been used to store, treat or dispose of Hazardous Materials.

 

(xxii) Each of the Company and the Company Subsidiaries (each is referred to as a “Tax Entity” in Sections 5(xxii), (xxiii) and (xxiv ) ) has timely filed or caused to be timely filed with the appropriate taxing authorities all material tax returns, statements, forms and reports (including, elections, declarations, disclosures, schedules, estimates and informational tax returns) for Taxes (“Returns”) that are required to be filed by, or with respect to, such Tax Entity on or prior to the Closing Date. The Returns have accurately reflected and will accurately reflect all material liability for Taxes of, or with respect to, such Tax Entity for the periods covered thereby.

 

All material Taxes and Tax liabilities of each Tax Entity for all taxable years or period that end on or before the Closing Date (“Pre-Closing Periods”) have been or will be timely paid in full within the period (or any extension thereof) prescribed under applicable laws and regulations other than Taxes and Tax liabilities that are being contested in good faith.

 

(xxiii)

 

A. Except as set forth on Schedule 5(xxiii)A , no Tax Entity has been the subject of an audit or other examination of Taxes by the tax authorities of any nation, state or locality (and no such audit is pending or, to the Knowledge of Seller, contemplated) nor has any Tax Entity received any notices from any taxing authority relating to any issue which could reasonably be expected to materially and adversely affect the Tax liability of the Company or any of its Subsidiaries.

 

B. Except as set forth on Schedule 5(xxiii)B , neither the Company nor any of the Company Subsidiaries has, as of the Closing Date, (A) entered into an agreement or waiver or requested to enter into an agreement or waiver extending any statute of limitations relating to the payment or collection of Taxes of such Tax Entity or (B) is presently contesting the Tax liability of such Tax Entity before any court, tribunal or agency.

 

C. Except as set forth on Schedule 5(xxiii)C , no Tax Entity has been included in any “consolidated,” “unitary” or “combined” Return provided for under the law of the United States, any non-U.S. jurisdiction or any state, province, prefect or locality with respect to Taxes for any taxable period for which the statute of limitations has not expired.

 

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D. All Taxes which the Company or any of the Subsidiaries is (or was) required by law to withhold or collect in connection with amounts paid or owing to any employee, independent contractor, creditor, stockholder or other third party have been duly withheld or collected, and have been timely paid over to the proper authorities to the extent due and payable.

 

E. Except as set forth on Schedule 5(xiii)E , no written claim has ever been received by a Tax Entity from any taxing authority in a jurisdiction where the Company or any of the Company Subsidiaries does not file Returns that the Company or any of its Company Subsidiaries is or may by subject to taxation by that jurisdiction.

 

F. There are no tax sharing, allocation, indemnification or similar agreements in effect as between the Company or any predecessor or Affiliate thereof and any other party (including Seller and any predecessors or Affiliates thereof) under which Purchaser or the Company could be liable for any Taxes or other claims of any party.

 

G. Neither the Company nor any of the Company Subsidiaries has applied for, been granted, or agreed to any accounting method change for which it will be required to take into account any adjustment under Section 481 of the Code or any similar provision of the Code or the corresponding tax laws of any nation, state, province, prefect or locality.

 

H. Neither the Company nor any of the Subsidiaries is a party to any agreement that would require it to make any payment that would constitute an “excess parachute payment” for purposes of Sections 280G and 4999 of the Code.

 

For purposes of this Agreement, “Taxes” shall mean all taxes, assessments, charges, duties, fees, levies or other governmental charges, including all U.S. and non-U.S. federal, state, local and other income, franchise, profits, capital gains, capital stock, transfer, sales, use, occupation, property, excise, severance, windfall profits, stamp, license, payroll, withholding and other taxes, assessments, charges, duties, fees, levies or other governmental charges of any kind whatsoever (whether payable directly or by withholding and whether or not requiring the filing of a Return (as defined below)), all estimated taxes, deficiency assessments, additions to tax, penalties and interest and shall include any liability for such amounts as a result either of being a member of a combined, consolidated, unitary or affiliated group or of a contractual obligation to indemnify any Person or other entity.

 

(xxiv) The Company has no liabilities of any nature, matured or unmatured, fixed or contingent, known or unknown, (x) which are required to be disclosed on the 2004 Balance Sheet, in accordance with GAAP, which have not been so disclosed, and (y) other than liabilities incurred or arising in the normal course of business, consistent with past practices, since December 31, 2004.

 

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(xxv) Except for personal property listed in Schedule 5(xxv) (which shall be prepared by Seller and delivered to Purchaser within five (5) Business Days after the date hereof and shall be attached hereto) leased by the Company or any of the Company Subsidiaries the Company and the Company Subsidiaries own all rights and personal property which are necessary for the continued use of the Property after the Closing Date in a manner which is consistent with the use of the Property immediately prior to the date hereof.

 

6. Representations and Warranties of Purchaser and Guarantor . Each of Purchaser and Guarantor, as to itself, represents and warrants to Three E and AJG as follows:

 

(a) The execution, delivery and performance of this Agreement and all other agreements, instruments, certificates and documents, if any, to be executed and delivered to Three E, James Lentz or AJG, as the case may be, pursuant to the terms hereof (the “Additional Documents”) by Purchaser or Guarantor, as the case may be, have been duly authorized by all requisite action of Purchaser or Guarantor, as the case may be, and this Agreement and the Additional Documents are valid and binding obligations of Purchaser or Guarantor, as the case may be, enforceable against Purchaser or Guarantor, as the case may be, in accordance with their respective terms except to the extent that enforcement may be affected by laws relating to bankruptcy, reorganization, insolvency and creditors rights and by the availability of injunctive relief, specific performance and other equitable remedies.

 

(b) There is no litigation, dispute or proceeding pending, or to Purchaser’s or Guarantor’s knowledge, threatened, against or relating to Purchaser or Guarantor and which would have a material adverse effect on Purchaser’s or Guarantor’s ability to perform its obligations hereunder (including without limitation in each such case, any proceeding before any federal, state or municipal department, board, bureau, agency or instrumentality).

 

(c) Each of Purchaser and Guarantor is a valid and existing entity of the type specified elsewhere herein, organized under the laws of the jurisdiction specified elsewhere herein and has the requisite power and authority to enter into and to perform the terms of this Agreement and each of the Additional Documents.

 

(d) Except for any consent or waiver listed in Schedule 6(d), no consents, approvals, orders or authorizations of any federal, state or local governmental commission, board, agency, authority or other regulatory body, or any nongovernmental third party, are required for Purchaser’s or Guarantor’s execution, delivery and performance of this Agreement or any of the Additional Documents.

 

(e) There are no court (or other governmental entity) judgments, orders, or decrees of any kind against Purchaser or Guarantor which are unpaid or unsatisfied of record, nor any actions, suits or other legal or governmental administrative proceedings pending or, to the best of Purchaser’s or Guarantor’s knowledge, threatened against Purchaser or Guarantor, as the case may be, which is likely to have a material adverse effect on Purchaser or Guarantor or the ability of Purchaser or Guarantor to consummate the transactions contemplated by this Agreement and each of the Additional Documents.

 

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(f) The Partnership Interests to be acquired by Purchaser pursuant to this Agreement are and shall be acquired for Purchaser’s own account, for investment purposes only and not with a present view to or intention of, distribution or resale thereof in violation of any federal or state securities laws and that, irrespective of any other provisions of this Agreement, the Partnership Interests shall be transferred only in compliance with all applicable federal and state securities laws.

 

(g) If the Due Diligence Period expires without a termination of this Agreement by Purchaser pursuant to Section 20(c) below, then each of Purchaser and Guarantor represents and warrants that it (i) has had the opportunity to ask questions and receive answers concerning the terms and conditions of the sale of the Partnership Interests hereunder; and (ii) has had full access to such information and materials concerning the Company, the Company Subsidiaries and the Property as Purchaser or Guarantor, as the case may be, has requested. Each of the Company, Three E, Lentz and AJG, respectively, has answered all inquiries that Purchaser or Guarantor, as the case may be, has made to the Company, Three E, Lentz and AJG, respectively relating to the Company, the Company Subsidiaries, the Property and the sale of the Partnership Interests hereunder.

 

(h) The execution, delivery and performance of this Agreement or any of the Additional Documents by Purchaser or Guarantor, as the case may be, does not and shall not conflict with, violate or cause a breach of its organizational documents or bylaws or any agreement, contract or instrument to which Purchaser or Guarantor, as the case may be, is a party or by which it is bound, or any judgment, order of decree to which Purchaser or Guarantor, as the case may be, is subject.

 

Filings Under the Hart Scott Rodino Act . Within ten (10) Business Days after the execution of this Agreement, Purchaser shall file with the Federal Trade Commission (“FTC”) and the United States Department of Justice, Antitrust Division (“Justice”), all required filings by Purchaser under the Hart Scott Rodino Antitrust Improvement Act of 1976, as amended, with respect to the transactions contemplated by this Agreement and shall pay the applicable filing fee for such filing. The Company and Seller shall take whatever steps shall be reasonably required to make any filing required of the Company or Seller under the HSR Act within the aforesaid ten (10) Business Day period. Each of the Company, Seller and Purchaser, each at its respective expense, shall diligently take and pursue such steps and provide such additional information or responses as shall be required to satisfy any request for additional information received from the FTC or Justice.

 

Indemnification, Limitations and Survival .

 

(a) (i) Subject to the limitations set forth in this Agreement, Three E, AJG and Lentz shall jointly and severally indemnify, defend and hold harmless Purchaser, its Affiliates, and each of their respective partners, officers, directors,

 

 

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shareholders, members, employees and agents, and each of their successors, heirs, and assigns, jointly and severally, from and against any and all loss, cost, liability and claims whatsoever, including reasonable attorneys’ fees actually incurred by Purchaser herein with respect to “Claims” resulting from any misrepresentation or breach of any warranty or non-fulfillment of any covenant or agreement made by Seller in this Agreement, (including without limitation a representation or warranty becoming inaccurate, untrue or incorrect as a result of Seller’s breach of any of its obligations under this Agreement) and which is not waived or otherwise accepted by Purchaser. Purchaser acknowledges and agrees that (i) Three E and Lentz (and not AJG) shall be jointly and severally liable for any misrepresentation or breach of warranty which is made by Three E solely as to itself and set forth in Sections 5(i), (iii), (iv), (v) and (xx) hereof; and (ii) AJG (and not Lentz or Three E) shall be solely liable for any misrepresentation or breach of warranty which is made by AJG solely as to itself and set forth in Sections 5(i), (iii), (iv), (v) and (xx) hereof; and (iii) in the event of any claim for indemnification relating to, arising from or in connection with title to the Property, Purchaser shall first seek recovery from the title insurance company or companies which has or have issued a title insurance policy to the Company with respect to the Property and shall not make a claim against Three E, Lentz or AJG with respect thereto to the extent same is a matter which is insurable against by a title insurance company

 

(ii) The aggregate liability of each of Three E and Lentz under all indemnification provisions of this Agreement shall, if Closing occurs hereunder, be limited to the sum of (i) One Million Dollars ($1,000,000) under the second sentence following this sentence, or Two Million Dollars ($2,000,000) in the aggregate under the second and third sentences following this sentence, or such lesser sum as shall be payable pursuant to the Deferred Payment Agreement (subject to the provisions of Section 8(g) below, Purchaser and the Company shall only be entitled to offset against sums payable to Three E by the Company or the Purchaser, pursuant to the Deferred Payment Agreement, the amounts of all obligations and liabilities of Three E and Lentz hereunder) and (ii) Claims resulting from Exclusion Items (as that term is defined below). Neither Three E, Lentz nor AJG shall have any liability for breach of representation or warranty under this Agreement unless the aggregate Damages for all such breaches shall exceed Five Hundred Thousand Dollars ($500,000) (the “Threshold”) in which event they each, subject to the liability limitations and other provisions set forth below, shall be liable for Damages from the first dollar of Damages; provided, however, that any representation or warranty of Seller which, to the Knowledge of Lentz or the Knowledge of Three E or AJG, was untrue when made, and claims resulting from Exclusion Items (as that term is defined below) shall not be subject to the Threshold. Purchaser agrees that the first One Million Dollars ($1,000,000) of indemnification liability of Seller hereunder shall be payable solely by Three E and Lentz (solely from any sums otherwise payable to Three E pursuant to the Deferred Payment Agreement) and, anything in this Agreement to the contrary notwithstanding, AJG shall have no responsibility therefor. Thereafter any

 

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indemnification liability of Seller hereunder shall, to the extent not exceeding an additional Five Million dollars ($5,000,000), be payable pro rata 80% by AJG currently and 20% by Three E and Lentz from any sums otherwise payable to Three E pursuant to the Deferred Payment Agreement and AJG shall bear 100% of aggregate indemnification obligations of Seller in excess of Six Million Dollars ($6,000,000), subject to the provisions for maximum indemnification liability set forth in this Agreement. “Exclusion Items,” as such term is used herein, shall mean any and all of the following: (i) claims of and liabilities to taxing authorities for taxes, interest and penalties; (ii) gross negligence; (iii) willful or wanton misconduct; (iv) knowing and material misrepresentations or breach of warranties or covenants; (v) violations of law; (vi) actions which subject the Company to liability to a third party under any “bad boy” covenants from nonrecourse provisions of loan documents or other agreements; (vii) liability relating to employee matters; and (viii) liability relating to environmental matters with respect to which the representations and warranties of Sections 5(ii) or (xxi) have been breached. Anything to the contrary herein notwithstanding, but subject to the provisions of Section 8(b) below, Claims resulting from Exclusion Items shall not be subject to any limitation on the extent of liability for indemnification under this Agreement.

 

(b) Anything in this Agreement to the contrary notwithstanding, the aggregate liability of AJG under all indemnification provisions of this Agreement shall, if Closing occurs hereunder, be limited to the sum of Eight Million Dollars ($8,000,000) plus Damages relating to the Exclusion Items described in (i), (ii), (iii) and (iv) of the definition of Exclusion Items above, but solely as it relates to the conduct of AJG and no other person.

 

(c) The representations, warranties, covenants and indemnities of Three E, Lentz and AJG, respectively, herein shall survive the Closing for a period of eighteen (18) months except that the survival period for subparagraph (i) of the Exclusion Items shall be the expiration of the statute of limitations respecting the particular tax liability at issue, and the survival period for the remaining Exclusion Items shall be three (3) years from the Closing Date (as applicable, the “Survival Period”). Any claim thereunder must be made by notice to Seller given prior to the expiration of the Survival Period. Except with respect to breaches that are known to Purchaser at the time of Closing (which breaches shall be deemed waived for all purposes upon