Exhibit 10.2

 

MEMBERSHIP INTEREST PURCHASE AGREEMENT

 

by and among

KGH Corporation,

 

Victoria Place Apartments, Ltd.

 

and

Osprey Capital, Inc.

 

(“Sellers”),

 

P.A.C. Land Development Corporation

 

(“PAC”),

 

and

 

Bresler & Reiner, Inc (“Buyer”)

 

May 6, 2003

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Table of Contents

 

Description

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   Page

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Article 1

    

Recitals; Sale; Price; Definitions

   3

    1.1

  

Recitals

   3

    1.2

  

Purchase Price and Deposit

   3

    1.3

  

Definitions

   4

Article 2

    

Investigation; Title

   10

    2.1

  

Due Diligence Deliveries by Sellers

   10

    2.2

  

Buyer's Inspection

   11

    2.3

  

Title, Survey, Environmental Report, and Related Searches

   12

    2.4

  

Cooperation

   15

Article 3

    

Separate Representations and Warranties of KGH

   15

    3.1

  

Capacity and Authority

   15

    3.2

  

Execution and Delivery; Binding Effect

   16

    3.3

  

Organization

   16

    3.4

  

Ownership of KGH Membership Interest

   16

    3.5

  

Notice

   16

    3.6

  

Shareholders; Incumbency

   16

Article 4

    

Separate Representations and Warranties of Osprey

   16

    4.1

  

Osprey Capacity and Authority

   16

    4.2

  

Execution and Delivery; Binding Effect

   17

    4.3

  

Organization

   17

    4.4

  

Ownership of Osprey Membership Interest

   17

    4.5

  

Notice

   18

Article 5

    

Separate Representations and Warranties of Victoria

   18

    5.1

  

Victoria Capacity and Authority

   18

    5.2

  

Execution and Delivery; Binding Effect

   18

    5.3

  

Organization

   18

    5.4

  

Ownership of Victoria Membership Interest

   19

    5.5

  

Notice

   19

    5.6

  

Partners

   19

Article 6

    

Representations Concerning Company and Property

   19

    6.1

  

Organization

   19

    6.2

  

Capitalization

   19

    6.3

  

Purpose, Subsidiaries and Other Equity Investments

   20

    6.4

  

The Property; Other Properties; Inventory; Cash; Accounts Receivable

   20

 

(i)

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    6.5

  

Financial Statements

   21

    6.6

  

Absence of Certain Changes

   21

    6.7

  

No Liabilities or Obligations

   22

    6.8

  

Compliance with Laws; No Defaults

   23

    6.9

  

Rental and Income Standards

   23

    6.10

  

Litigation

   23

    6.11

  

Contracts and Bank Accounts

   23

    6.12

  

Other Contracts

   24

    6.13

  

No Employees

   24

    6.14

  

Permits and Access

   24

    6.15

  

Environmental

   24

    6.16

  

Insurance Coverage

   26

    6.17

  

Condemnation; Improvements; Special Assessments

   26

    6.18

  

Tenants

   26

    6.19

  

Defects

   27

    6.20

  

Soil Conditions

   27

    6.21

  

No Contributions or Dedications

   27

    6.22

  

Property Regulations

   28

    6.23

  

Certificates of Occupancy

   28

    6.24

  

InterCompany Arrangements

   28

    6.25

  

Tax Matters

   28

    6.26

  

Employee Benefit Plans

   29

    6.27

  

Securities Laws

   29

    6.28

  

Americans With Disabilities Act Compliance

   29

    6.29

  

Solvency

   29

    6.30

  

Licenses; Regulatory Approvals; Utilities

   29

    6.31

  

Intellectual Property

   30

    6.32

  

Brokerage

   30

    6.33

  

Other Information

   30

    6.34

  

Continuing Representations

   30

Article 6A

    

Separate Representations and Warranties of PAC

   31

    6A.1

  

PAC Capacity and Authority

   31

    6A.2

  

Execution and Delivery; Binding Effect

   31

    6A.3

  

Organization

   32

    6A.4

  

Financial Statements

   32

    6A.5

  

Shareholders; Incumbency

   32

Article 6B

    

As Is, Where Is Transaction, Release

   32

    6B.1

  

As Is, Where Is

   32

    6B.2

  

Release

   32

Article 7

    

Indemnity

   32

    7.1

  

Indemnification

   32

    7.2

  

Limitations on KGH and PAC Indemnity

   33

 

(ii)

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    7.3

  

Limitation on Seller Indemnity

   33

    7.4

  

Notice

   34

    7.5

  

Indemnification Procedure

   34

    7.6

  

Buyer Indemnity

   36

Article 8

    

KGH's and Sellers' Covenants

   36

    8.1

  

Affirmative Covenants of KGH

   36

    8.2

  

Affirmative Covenants of Sellers

   38

    8.3

  

Right of First Offer

   39

    8.4

  

Negative Covenants

   39

Article 9

    

Buyer's Representations and Warranties,

   40

    9.1

  

Buyer Capacity and Authority Relative to Agreement

   40

    9.2

  

Execution and Delivery; Binding Effect

   40

    9.3

  

Organization

   40

Article 10

    

Conditions Precedent

   41

    10.1

  

Buyer's Closing Conditions

   41

    10.2

  

Commercially Reasonable Efforts

   42

    10.3

  

Buyer's Termination Option

   42

Article 11

    

Closing

   42

    11.1

  

Closing and Closing Date

   42

Article 12

    

Closing Obligations of Parties

   43

    12.1

  

Sellers' and PAC's Closing Obligations

   43

    12.2

  

Buyer's Closing Obligations

   44

    12.3

  

Further Assurances, Assistance and Cooperation

   44

Article 13

    

Closing Adjustments and Payments

   45

    13.1

  

Post-Closing Adjustments and Payments

   45

    13.2

  

Holdbacks

   46

    13.3

  

Income and Expense Items

   46

    13.4

  

Buyer Credits

   47

    13.5

  

Costs

   47

Article 14

    

Casualty and Condemnation

   47

    14.1

  

Risk of Loss

   47

    14.2

  

Condemnation

   48

    14.3

  

Binding Effect

   48

Article 15

    

Brokerage

   48

    15.1

  

Broker

   48

 

(iii)

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Article 16

    

Defaults

   48

    16.1

  

Sellers' Default

   48

    16.2

  

Buyer's Default

   49

    16.3

  

EXCLUSIVE REMEDY FOR BUYER'S DEFAULT IN FAILING TO CLOSE

   49

Article 17

    

Miscellaneous

   49

    17.1

  

Survival

   49

    17.2

  

Business Days and Time Periods

   49

    17.3

  

Notices

   49

    17.4

  

Escrow Provisions

   51

    17.5

  

Entire Agreement

   51

    17.6

  

Governing Law

   51

    17.7

  

Successors and Assigns

   51

    17.8

  

Waiver

   51

    17.9

  

Counterparts

   52

    17.10

  

Attorneys' Fees, Costs

   52

    17.11

  

Headings; Word Meaning

   52

    17.12

  

Time of the Essence

   52

    17.13

  

Construction of Agreement

   52

    17.14

  

Severability

   52

    17.15

  

No Implied Agreement

   53

    17.16

  

Radon Gas Disclosure

   53

    17.17

  

Exchange

   53

    17.18

  

Facsimile

   53

    17.19

  

Restatement of Operating Agreement and Articles of Organization

   53

 

(iv)

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List of Disclosure Schedules

 

B.(1)(a)

  

Land

B.(1)(b)

  

Improvements

B.(3)

  

FF&E

B.(5)

  

Contracts

B.(6)

  

Permits

B.(7)

  

Trademarks

3.6

  

KGH Shareholders

4.1(d)

  

Osprey Encumbrances

5.1(d)

  

Victoria Encumbrances

5.6

  

Partners

6.4(e)

  

Company Encumbrances

6.7

  

Company Liabilities

6.9

  

Rental and Income Standards of Company

6.10

  

Litigation, Arbitration, and Administrative Proceedings

6.11

  

Bank Accounts

6.16

  

Insurance Policies and Fidelity Bonds

6.18(a)

  

Contract Rent Roll

6.18(b)

  

Leases

6.18(e)

  

Commissions

6.21

  

Contributions

6.24

  

Intercompany Arrangements

6.25

  

Tax Matters

6.30

  

Licenses

6.31 (a)

  

Intellectual Property

6.31(b)

  

Intellectual Property Liabilities

6.31(c)

  

Confidentiality Agreements

6.32

  

Brokerage Agreements

6A.1(d)

  

PAC encumbrances

6A.5

  

PAC Shareholders; Incumbency

8.3

  

Current Projects

13.1(b)

  

Bonds and Deposits

 

List of Exhibits

 

A

  

Disclosure Index

B

  

Due Diligence Index

C

  

Form of Assignment of Membership Interest (KGH)

D

  

Form of Assignment of Membership Interest (Osprey)

E

  

Form of Assignment of Membership Interest (Victoria)

F

  

Company Balance Sheet

G

  

Company Budget

H

  

Form of Leases

I

  

Escrow Agreements

 

 

(v)

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Membership Interest Purchase Agreement

 

This Membership Interest Purchase Agreement (“Agreement”) as further defined in
Section 1.3) is entered into this 10th day of July, 2003 by and among KGH
Corporation, a Florida corporation (“KGH”), Victoria Place Apartments, Ltd., a
Florida limited partnership (“Victoria”), Osprey Capital Inc., a Delaware
corporation (“Osprey”) (KGH, Victoria, and Osprey are sometimes referenced
separately as a “Seller” and collectively as “Sellers”), P.A.C. Land Development
Corporation, a Florida corporation (“PAC”), and Bresler & Reiner, Inc., a
Delaware corporation (“Buyer”).

 

Recitals:

 

A. Sellers constitute all of the members of Victoria Place Apartments, LLC, a
Florida limited liability company (“Company”). KGH owns a one percent (1%)
membership interest in Company (“KGH Membership, Interest”), Osprey owns a fifty
percent (50%) membership interest in Company (“Osprey Membership Interest”), and
Victoria owns a forty nine percent (49%) membership interest in Company
(“Victoria Membership Interest”). KGH is the sole manager of Company. The KGH
Membership Interest, the Osprey Membership Interest, and the Victoria Membership
Interest collectively are the “Membership Interests” and constitute all of the
membership interests in Company. PAC is an Affiliate of the KGH and Victoria.
PAC will benefit from the transaction described herein. The representations,
warranties and obligations of PAC in this Agreement have materially induced
Buyer to enter into this Agreement, and without such representations and
warranties, Buyer would not have entered into this Agreement.

 

B. Company is the owner of certain assets related to its development, ownership,
operation, leasing, and marketing of a three hundred and sixty-four (364) unit
luxury apartment unit property known as Victoria Place Apartments, which
includes the following property (“Property”):

 

(1) Land. Title in fee simple of that certain land located in Orange County,
Florida described on Disclosure Schedule B.(l)(a) (“Land”), together with all
buildings, structures, and other facilities located on the Land, including
one-bedroom, two-bedroom and three-bedroom apartment units in the number and
having the characteristics shown on Disclosure Schedule B.(l)(b), and a
clubhouse, other facilities, and parking as more completely described on
Disclosure Schedule B.(1) (collectively, “Improvements”).

 

(2) Easements. All of Company’s right, title, and interest in and to all
easements, rights of way, gores of land, streets, ways, alleys, passages, sewer
rights, waters, water courses, water rights and powers, and all estates, rights,
titles, interests, privileges, liberties, tenements, hereditaments, and
appurtenances whatsoever, in any way belonging, relating, or appertaining to the
Land including all necessary easements for utility and storm water drainage
purposes and such other easements as may be necessary for the Operation of the
Property (collectively, “Easements”). The Land, the Improvements, and the
Easements collectively are the “Real Property.”

 

(3) Furniture, Fixtures, and Equipment. All of Company’s right, title, and
interest in and to furniture, furnishings, fittings, equipment, machinery,
appliances, office equipment,

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printers, software, rent roll databases, supplies, computers, computer programs,
hardware, vehicles, laundry equipment, recreational equipment, pool equipment,
fitness center equipment, maintenance, cleaning, and repair equipment, supplies,
parts, tools, garage door openers for garages located on the Land, and other
articles of personal property now owned by Company and located in or, on, or
attached to, or used or intended to be used in connection with the operation of
the Property (collectively, “FF&E”), being the FF&E listed and described on
Disclosure Schedule B.(3). The information to be included on Disclosure Schedule
B.(3) lists the FF&E by item description, make, model, serial number (if
applicable), location, and whether the FF&E is leased or owned.

 

(4) Leases. Except as otherwise provided in this Agreement, all of Company’s
right, title, and interest in those leases, subleases, other occupancy
agreements, security deposit agreements, and all amendments thereto, whether
oral or written, together with prepaid rents and security or other deposits
related thereto (if applicable), whether or not of record, which provide for the
use or occupancy of space or facilities relating to all or a portion of the
Property (including apartment units, garages, and commercial space) that are
listed on the Contract Rent Roll (defined in Section 1.3) (collectively,
“Leases”).

 

(5) Contracts. Except as otherwise provided in this Agreement and excluding this
Agreement and, as applicable, the Ancillary Agreements (defined in section 1.3),
those contracts, agreements, contract rights (including warranties and
guaranties), license agreements, and all amendments thereto, to which Company is
a party or which are used in connection with the operation of the Property, and
any and all other agreements to which Company is a party, or which affects all
or a portion of the Property or Company, including all written contracts and
agreements relating to the reservation, availability or provision of water,
sewer, storm water drainage, electricity, natural gas, telephone, cable
television, satellite television, or other utility capacity or services
affecting or benefiting all or a portion of the Property, and all other written
contracts, leases, injunctions, orders, decrees, rulings, directives, agreement,
or understandings (and written summaries of all oral understandings or
agreements) burdening or benefiting all or a portion of the Property (including
Easements), granting rights with respect to the ownership or use of all or a
portion of the Property, all insurance policies insuring Company, all or any
portion of the Property since the formation of Company, and other agreements,
all of which agreements are listed on Disclosure Schedule B.(5), but excluding
the Leases (collectively, “Contracts”).

 

(6) Permits. All of Company’s right, title, and interest in all licenses,
permits, consents, authorizations, approvals, development rights, certificates
of occupancy, development agreements, governmental notices, and other
certificates of any Governmental Authority (defined in Section 1.3) used in the
operation of all or a portion of the Property, required to be issued by the
appropriate Governmental Authority for the development of the Property, the Use,
or the construction, occupancy, and use of the Improvements, or otherwise
concerning all or a portion of the Property, Company, or any Seller, all of
which are listed on Disclosure Schedule B.(6) attached to this Agreement
(collectively, “Permits”).

 

(7) Trademarks. All of Company’s right, title, and interest, if any, in all
trademarks, tradenames, names, service marks, symbols, and franchises used in
the operation of the Property, which Company has the right to use and which are
transferable, all of which are listed on Disclosure Schedule B. (7)
(collectively, “Trademarks”).

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(8) Plan, Reports, and Studies. All of Company’s right, title, and interest in
all blueprints, plans and specifications, architectural drawings or renderings,
surveys, engineering reports and studies, inspection results, architect’s
certificates, environmental reports and studies, architectural studies, soil
borings, wetlands and endangered species reports, title insurance policies,
title instruments, surveys, plats, drainage, infrastructure, engineering, and
other plans, appraisals, and other data concerning all or a portion of the
Property (collectively, “Plans Reports, and Studies”).

 

(9) Interests. Except as otherwise provided in this Agreement, all of Company’s
right, title, and interest in and to all other tangible or intangible personal
property relating to Property, including: (a) all tenant security deposits,
other deposits, prepaid rents, documents, contract rights, commitments
(excluding Company’s loan commitments or loan documents pursuant to which
Company is a borrower, obligor, or guarantor, if any), construction contracts,
guarantees, architectural agreements; (b) phone and fax numbers, all customer
lists and all information related to marketing operations, instruments, notes,
and chattel paper; (c) all records and files relating to or used in the
operation of the Property; (d) all proceeds arising from or by virtue of any
taking or condemnation of all or any part of the Property; and (e) all proceeds
of each policy of insurance relating to all or any part of the Property
(collectively, “Interests”).

 

C. Sellers desire to sell to Buyer, and Buyer desires to purchase from Sellers,
all of their interests in and to Company, in accordance with this Agreement.

 

In consideration of the mutual covenants, promises, and undertakings of the
parties in this Agreement, the receipt and sufficiency of which is acknowledged,
the parties agree as follows:

 

Article 1

Recitals; Sale; Price; Definitions.

 

1.1 Recitals. KGH, on behalf of Company, and PAC jointly and severally represent
and warrant that the above recitals are true and correct. The above recitals are
incorporated in this Agreement by reference.

 

1.2 Purchase Price and Deposit. On the terms and subject to the conditions of
this Agreement, Sellers agree to sell, transfer, and convey to Buyer and Buyer,
in reliance on the representations, warranties, covenants, and agreements of
Sellers in this Agreement, agrees to purchase from Sellers all of the Membership
Interests, for the price and on the terms stated in this Agreement.

 

(a) The purchase price (“Purchase Price”) for all of the Membership Interests is
thirty-nine million, five hundred thousand and no/l00 dollars ($39,500,000.00),
to be paid as follows:

 

(1) A deposit of two hundred and fifty thousand and no/100 dollars ($250.000.00)
on or before the second business day after the Effective Date (“Initial
Deposit”), to be deposited in escrow with the Escrow Agent pursuant to Section
17.4 and any additional instructions signed by Sellers, Buyer, and Escrow Agent,
and to be applied as directed pursuant to Section 1.1(c);

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(2) A deposit of two hundred and fifty thousand and no/100 dollars ($250,000.00)
within two (2) business days after the expiration of the Inspection Period
(defined in Section 1.3) (“Additional Deposit”), if Buyer has not previously
elected to terminate this Agreement, to be deposited in escrow with the Escrow
Agent pursuant to Section 17.4 and any additional instructions signed by
Sellers, Buyer, and Escrow Agent and to be applied as directed by Buyer pursuant
to Section 1.1(c). The Initial Deposit, the Additional Deposit (if and when
delivered by Buyer) and the Extension Deposit (if and when delivered by Buyer),
collectively are the “Deposit;” and,

 

(3) An amount equal to three hundred thousand dollars ($300,000.00) (the “Tax
Escrow”) shall be paid by Sellers from the Purchase Price into escrow with the
Escrow Agent pursuant to Section 13.2(a).

 

(4) An amount equal to one million, five hundred thousand dollars
($1,500,000.00) (the “Indemnification Escrow”) shall be paid by Sellers from the
Purchase Price into escrow with the Escrow Agent pursuant to Section 13.2(b).

 

(5) The Purchase Price (less the Deposit), in cash or by wire transfer in
Federal funds at Closing to the account of Escrow Agent, subject to closing
adjustments and prorations as set forth in this Agreement.

 

(b) The Deposit shall be non-refundable except on the occurrence of one or more
of the following events: (i) prior to expiration of the Inspection Period, Buyer
determines in its sole discretion that the Property (or the Membership
Interests) is or are unsatisfactory and terminates this Agreement as provided in
Section 2.2(d); (ii) Buyer terminates this Agreement following Sellers’ failure
to correct a Title Objection as provided in Section 2.3; (iii) Buyer terminates
this Agreement due to Buyer’s inability to obtain financing as provided in
Section 10.3; (iv) as otherwise set forth in this Agreement; (v) Sellers, or any
one of them, default or fail to perform any of their respective obligations
under this Agreement which have not been waived by Buyer and which have not been
cured within any applicable cure period.

 

(c) At Closing, Company will satisfy and discharge all Liens (defined in Section
1.3) on all or a portion of all of the following: (i) the Membership Interests,
and (ii) the Property.

 

(d) At Closing, Buyer may elect in writing to apply the Deposit to the Purchase
Price or to have that amount released to Buyer on tender of the full Purchase
Price.

 

1.3 Definitions. Unless the context otherwise indicates, the terms set forth
below are defined as follows:

 

“ADA” has the meaning set forth in Section 6.31.

 

“Additional Deposit” has the meaning set forth in Section 1.2.

 

“Affiliate” means with respect to any Person, any Person related by blood or
marriage to or directly or indirectly controlling, controlled by, or under
common control with such other Person.

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“Agreement” means this Membership Interest Purchase Agreement and all schedules
and exhibits attached to this Agreement, as the same may be amended and modified
as set forth in this Agreement.

 

“Ancillary Agreements” means any and all agreements, assignments, certificates
or other contracts, other than this Agreement, entered into or provided to
another party pursuant to this Agreement, between Buyer and one (1) or more
Seller, or certificates by one (1) or more party to this Agreement affecting one
(1) or more of the other parties, including documents delivered at Closing.

 

“Base Tax Amount” has the meaning set forth in Section 13.2.

 

“Buyer” has the meaning set forth in the Preamble.

 

“Closing” means the transaction contemplated by this Agreement.

 

“Closing Date” has the meaning set forth in Section 11.1.

 

“Closing Balance Sheets” means the balance sheets of Company dated as of the
close of business on the last day of the month immediately preceding the
Closing, prepared in accordance with GAAP consistently applied (except as
otherwise indicated in such statements and except that such statements do not
contain footnote disclosures required by GAAP and do not reflect normal year-end
adjustments).

 

“Closing Rent Roll” has the meaning set forth in 12.1(c).

 

“Code” has the meaning set forth in Section 12.1(g).

 

“Company” has the meaning set forth in the Preamble.

 

“Company Balance Sheet” has the meaning set forth in Section 6.6.

 

“Company Balance Sheet Date” has the meaning set forth in Section 6.6.

 

“Company Business” shall mean the development, ownership and operation of the
Real Property.

 

“Consolidated Membership Interest” has the meaning set forth in Section 17.18.

 

“Contract Rent Roll” has the meaning set forth in Section 6.20.

 

“Contracts” has the meaning set forth in Recital B.

 

“Deposit” has the meaning set forth in Section 1.2.

 

“Disclosure Documents” means those documents described or otherwise referenced
on any Disclosure Schedule.

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“Disclosure Index” means that index, to be attached hereto as Exhibit A not less
than ten (10) days prior to Closing, listing all of the Disclosure Documents.

 

“Disclosure Schedule” shall mean those schedules attached hereto as Disclosure
Schedules.

 

“Due Diligence Documents” shall mean all documents responsive to the Due
Diligence Request and listed on the Due Diligence Index.

 

“Due Diligence Index” shall mean that index, to be attached hereto as Exhibit B
not less than ten (10) days prior to Closing, of all documents responsive to the
Due Diligence Request.

 

“Due Diligence Request” shall mean such due diligence request delivered to
Sellers’ counsel on March 21, 2003, and all supplemental requests thereto.

 

“Easements” has the meaning set forth in Recital B.

 

“Effective Date” means the date on which all parties shall have signed this
Agreement. The latest of the parties to sign shall confirm that date by notice
to all other parties.

 

“Environmental Laws” has the meaning set forth in Section 6.17.

 

“Escrow Agent” means Holland & Knight, LLP.

 

“Escrow Amount” shall mean the amount of the Tax Escrow plus the amount of the
Indemnification Escrow.

 

“Extension Deposit” shall have the meaning set forth in Section 11.1.

 

“FF&E” has the meaning set forth in Recital B.

 

“GAAP” means generally accepted accounting principles as in effect in the United
States on the Effective Date and consistently applied and maintained throughout
the period indicated.

 

“Governmental Authorities” means the municipal, county, state, and federal
governments, agencies, authorities, courts, and officers having, jurisdiction
over all or a portion of the Property.

 

“Hazardous Substance” means any toxic, regulated, caustic, or otherwise
hazardous substance, including petroleum, its derivatives, by-products, or other
hydrocarbons, whether or not regulated under Environmental Laws.

 

“Improvements” has the meaning set forth in Recital B.

 

“Indemnification Escrow” has the meaning set forth in Section 1.2(a)(4).

 

“Indemnified Parties” has the meaning set forth in Section 2.2.

 

“Initial Deposit” has the meaning set forth in Section 1.2.

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“Inspection Period” has the meaning set forth in Section 2.2(d).

 

“Interests” has the meaning set forth in Recital B.

 

“KGH” has the meaning set forth in the Preamble.

 

“KGH Membership Interest” has the meaning set forth in Recital A.

 

“Land” has the meaning set forth in Recital B.

 

“Leases” has the meaning set forth in Recital B.

 

“Lender” shall mean the financial institution providing mortgage financing to
Buyer in connection with the purchase of the Membership Interests or the
Property.

 

“Liens” means all mortgages, liens, pledges, claims, security interests,
conditional sales contracts, or encumbrances of any nature, including all
interest accrued on those debts and any prepayment or other penalties or other
charges of the holders of the Liens, other than taxes and assessments not then
due and payable.

 

“Management and Leasing Contract” has the meaning set forth in Section 12.1(i).

 

“Material Adverse Chance” means a material adverse change, or series of related
changes, in the business, assets, condition (financial or otherwise), results of
operations or prospects of Company which has resulted or could reasonably be
expected to result in any obligation or liability to, or diminution in the value
of, Company in an amount of at least $100,000 other than those which are the
result of: (a) the transactions contemplated by this Agreement, or (b) general
economic, financial, industry or market conditions affecting the apartment
rental industry in general (and not solely the Company in particular). The
cancellation or termination of any Lease, in the ordinary course of business,
shall not constitute a Material Adverse Change.

 

“Membership Interests” has the meaning set forth in Recital A.

 

“Operation of the Property” means operation of the Property as a luxury
apartment complex.

 

“Osprey” has the meaning set forth in the Preamble.

 

“Osprey Membership Interest” has the meaning set forth in Recital A.

 

“PAC” means PAC Land Development Corporation, a Florida Corporation.

 

“Permits” has the meaning set forth in Recital B.

 

“Permitted Encumbrances” has the meaning set forth in Section 2.3(a).

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“Person” means an individual, a corporation, a partnership, a limited liability
company, an association, a trust, or other entity or organization, including a
government or political subdivision or an agency or instrumentality thereof.

 

“Plans, Retorts, and Studies” has the meaning set forth in Recital B.

 

“Property” has the meaning set forth in Recital B.

 

“Property Manager” has the meaning set forth in Section 12.1(i).

 

“Purchase Price” has the meaning set forth in Section 1.2.

 

“Qualified Lease” means any Lease with a tenant of the Property for a
residential unit in the Property with a term of (a) no less than twelve (12)
months with no more than a one and one half (1½) month rent concession either
prorated over twelve (12) months or given at the beginning of the Lease, or (b)
thirteen (13) months with a rent concession by Company of no more than one
thousand five hundred dollars ($1,500.00), for which the tenant thereunder
otherwise meets the rental and income standards of Company as set forth in
Disclosure Schedule 6.99, and for which no more than one thousand five hundred
dollars ($1,500.00) of rent has been paid in advance by the tenant or from rent
concession thereunder; provided, however, that (i) up to twenty percent (20%) of
the residential units on the Real Property which otherwise comply with the
foregoing requirements may be leased for a term of at least seven (7) months and
constitute Qualified Leases, and (ii) up to five percent (5%) of all leases that
are designated as Qualified Leases which otherwise comply with the foregoing
requirements may be guaranteed by guarantors who independently meet the rental
and income standards set forth on Disclosure Schedule 6.9.

 

“Real Property” has the meaning set forth in Recital B.

 

“Rent” has the meaning set forth in Section 13.1(a).

 

“Security Deposits” means any and all security deposits paid to Company in
accordance with the terms of the Leases.

 

“Seller” and “Sellers” have the meaning set forth in the Preamble.

 

“Sellers’ Agent” means Thomas L. Cavanaugh whom Sellers hereby appoint as their
agent to perform certain functions as set forth in this Agreement.

 

“Survey” has the meaning set forth in Section 2.3(b).

 

“Survey Defect” means any matter disclosed by the Survey with respect to title
to the Real Property to which Buyer, in Buyer’s sole and absolute discretion,
may object, provided the same is not caused by Buyer or its agents or employees.

 

“Survival Period” shall mean a period of two (2) years following the Closing
Date, except as such period may be longer as set forth in Section 13.2(a) or
Section 6.25.

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“Tax or Taxes” means (i) any net income, alternative, or add-on minimum tax,
gross income, gross receipts, sales, use, ad valorem, value added, franchise,
profits, license, withholding on amounts paid to or by Company, any member,
officer or principal of any Seller, any officer, manager, member, partner, or
shareholder of any member of Company, or an Affiliate of Company, payroll,
employment, excise, severance, stamp, occupation, premium, property,
environmental or windfall profit tax, custom, duty or other tax, governmental
fee or other like assessment or charge of any kind whatsoever, together with any
interest or any penalty, addition to tax or additional amount imposed by any
Governmental Authority (“Taxing Authority”) responsible for the imposition of
any such tax (domestic or foreign), (ii) liability of Sellers, Company, or an
Affiliate of Company for the payment of any amounts of the type described in (i)
as a result of being a member of an affiliated, consolidated, combined, or
unitary group, and (iii) liability of a Seller, Company, or an Affiliate of
Company for the payment of any amounts of the type described in (i) as a result
of any express or implied obligation to indemnify any other Person.

 

“Tax Escrow” has the meaning given in Section l.2(a)(3).

 

“Tax Return” has the meaning given in Section 6.27.

 

“Taxing Authority” has the meaning set forth in the definition of “Tax.”

 

“Termination Notice” means a written notice of exercise of a Termination Option
given from one party to the other in accordance with this Agreement.

 

“Termination Option” means an option set forth in this Agreement by a party to
terminate this Agreement to be exercised by giving a Termination Notice to the
other party and Escrow Agent on and subject to the conditions set forth with
respect to the specific Termination Option, pursuant to which this Agreement
shall terminate, Sellers shall cause Escrow Agent immediately to return the
Deposit to Buyer (unless otherwise provided in this Agreement with respect to
that Termination Option), and neither party shall have any obligations of any
nature to the other under or by reason of this Agreement, except as otherwise
provided in this Agreement.

 

“Title Agent” means Holland & Knight, LLP, as issuing agent for Title Company.

 

“Title Commitment” has the meaning set forth in Section 2.3(a).

 

“Title Company” means Fidelity National Title Insurance Company or such other
nationally recognized title insurance company selected by Buyer and approved by
Lender.

 

“Title Defect” means any matter with respect to title to the Real Property to
which Buyer, in Buyer’s sole and absolute discretion, may object, provided the
same is not caused by Buyer or its agents or employees.

 

“Title Evidence” means the Title Commitment and other information delivered
pursuant to Section 2.3(a), and the Survey delivered by Sellers pursuant to
Section 2.3(b).

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“Title Objection” means Buyer’s request for action in respect of any Title
Defect or Survey Defect. All Liens shown on the Title Evidence automatically
shall be deemed to be Title Objections unless such Liens are created by Buyer or
its agents or employees.

 

“Title Policy” has the meaning set forth in Section 2.3(a).

 

“Trademarks” has the meaning set forth in Recital B.

 

“Use” means a 364-unit multi-family luxury apartment complex, together with the
related garages and parking areas and other site improvements on the Real
Property.

 

“Victoria” has the meaning set forth in the Preamble.

 

“Victoria Membership Interest” has the meaning set forth in Recital A.

 

Article 2

Investigation; Title.

 

2.1 Due Diligence Deliveries by Sellers. Within three (3) days after the
Effective Date, Sellers shall, at Sellers’ sole cost and expense, deliver to
Buyer, the documents and information set forth in the Due Diligence Request.
Buyer shall have the right to submit to Seller supplements to the Due Diligence
request from time to time. Within three (3) business days after submission of
such supplemental requests, Sellers shall, at Sellers’ sole cost and expense,
deliver to Buyer, the documents and information set forth in such supplemental
requests. Sellers represent and warrant to Buyer that the Due Diligence
Documents constitute all of the material records and documents (or copies of
such records and documents) within the control or custody of Sellers, or which
Sellers can obtain through reasonable efforts, concerning the Property, it being
understood that Sellers’ failure to list on Exhibit B items as Due Diligence
Documents or Sellers’ failure to deliver or make available to Buyer the
documents and information set forth in the Due Diligence Request, shall
constitute Sellers’, KGH’s and PAC’s representation and warranty to Buyer that
such item does not exist or is not within the custody or control of Sellers, KGH
or PAC, and neither Sellers, KGH nor PAC can obtain it though reasonable
efforts.

 

Sellers, KGH and PAC shall supplement each delivery as required by this Section
during the term of this Agreement if additional items arise (or such records or
documents delivered are amended or modified) or come to the attention of
Sellers, KGH or PAC and are in Sellers’, KGH’s or PAC’s custody or control;
provided, however, that if such information is not within Sellers’ custody or
control, Sellers, KGH and PAC shall advise Buyer in writing of the existence of
such information and provide a written summary of such information. If Sellers,
KGH or PAC do not timely provide or make available to Buyer all information
required under this Section in accordance with this Section, then the expiration
date of the Inspection Period and, at Buyer’s option, the Closing, may be
extended by one (1) day for each day the provision of information is delayed,
for a total period not to exceed thirty (30) days, and if Buyer is not satisfied
with the information required under this Section, and in accordance with this
Section, as provided by Sellers, KGH or PAC at such time, Buyer may terminate
this Agreement prior to the expiration of the Inspection Period as may be
extended pursuant to this section, and except as otherwise provided in this
Agreement, all rights and obligations of the parties under this Agreement shall
be null and void, and Sellers, KGB and PAC shall ensure that Escrow Agent
immediately returns the Deposit to Buyer.

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2.2 Buyer’s Inspection.

 

(a) Subject to this Agreement, Buyer and its agents and representatives shall be
permitted to make a complete physical inspection of the Property, including soil
testing, testing for hazardous materials, an engineer’s inspection of the
Improvements, and to examine the Due Diligence Documents and the Disclosure
Documents. Buyer shall also have the right to interview those Persons
responsible for the management, operation and leasing of the Property, third
party contractors and suppliers. If any such Persons interviewed by Buyer are
employees of PAC, or Company’s property manager, Sellers’ Agent shall be invited
to such interview, which shall be scheduled during normal business hours. If
Buyer’s due diligence reveals any condition of the Property that in Buyer’s
judgment requires disclosure to any Governmental Authority, Buyer immediately
shall notify Sellers thereof. In such event, Sellers, and not Buyer or anyone
acting on Buyer’s behalf, shall make such disclosures as Sellers deem
appropriate. Notwithstanding the foregoing, Buyer may disclose matters
concerning the Property to a Governmental Authority if, (a) in the written
opinion of Buyer’s outside legal counsel, Buyer is required by law to make such
disclosure, and (b) Buyer gives Sellers not less than ten (10) days prior
written notice of the proposed disclosure, together with a copy of such legal
opinion.

 

(b) Buyer hereby agrees to indemnify, protect, defend, and hold Sellers and
Company (collectively, “Indemnified Parties”) harmless from and against any and
all liabilities, demands, actions, causes of action, suits, claims, losses,
damages, costs, and expenses (including reasonable attorneys’ fees, court costs,
and litigation expenses, including those incurred in all bankruptcy and probate
proceedings) suffered or incurred by any of the Indemnified Parties which was
caused by any entry onto the Property or any activities conducted thereon by
Buyer (including entry on or activities of any of Buyer’s employees,
consultants, contractors, or other agents), including construction liens, damage
to the Property, or injury to Persons or property resulting from such
activities. Any contractor retained by Buyer and entering the Property, at its
own expense, shall purchase and maintain commercial general liability insurance,
including contractual liability coverage to cover the indemnity described above,
insuring against injuries or damages to persons or property sustained in
connection with such contractor’s activities. Such insurance shall (i) be
primary to any insurance carried independently by the Company or Sellers; (ii)
be maintained with a company or companies reasonably satisfactory to Sellers’
Agent and licensed to do business in Florida; and (iii) have a minimum combined
single limit of $1,000,000 per occurrence. Prior to commencing any
investigations on the Property, Buyer shall submit to Sellers’ Agent a
certificate of insurance evidencing such coverage. If the Property is disturbed
or altered in any way as a result of such activities, Buyer promptly shall
restore the Property to its condition existing prior to the commencement of such
activities which disturb or alter the Property, Buyer shall, promptly on
receiving notice of any lien placed on the Property by reason of Buyer’s or
Buyer’s representatives’ tests or inspections, cause the lien to be bonded off
at Buyer’s expense. This Section 2.2(b) shall survive the termination of this
Agreement and Closing.

 

(c) Buyer shall obtain the consent of Sellers’ Agent prior to performing any
invasive testing at the Property, which consent shall not be unreasonably
withheld. Buyer shall repair any damage to the Property caused by such testing
and shall provide Sellers with copies of the test results if requested by
Sellers.

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(d) Buyer shall have a period commencing with the Effective Date and expiring
thirty (30) days thereafter (except as may be extended as otherwise provided in
this Agreement) (“Inspection Period”) in which to inspect and examine the
Property and the Due Diligence Documents and the Disclosure Documents, and
determine whether the Property and the Membership Interests are satisfactory to
Buyer in Buyer’s sole discretion. If Buyer elects to terminate this Agreement
prior to the termination of the Inspection Period, Buyer shall deliver written
notice to Sellers of its election to exercise a Termination Option and terminate
this Agreement prior to the expiration of the Inspection Period, at which point
Sellers shall cause Escrow Agent immediately to refund the Deposit to Buyer, and
the parties shall be relieved from any and all obligations under this Agreement
(except as otherwise provided in this Agreement).

 

2.3 Title, Survey, Environmental Report, and Related Searches.

 

(a) Title Commitment and Title Policy. Within fifteen (15) days after the
Effective Date, Sellers shall, at their sole cost (including all costs for title
searches, title examination, closing fees, and the like), obtain and deliver to
Buyer a commitment for title insurance (“Title Commitment”), issued on Title
Company by Title Agent, committing to issue to Buyer, at Sellers’ sole cost, a
1992 Revision ALTA Owner’s Title Insurance Policy (10-17-92) for the Real
Property in the amount of the Purchase Price on the Closing Date (“Title
Policy”), and, at Buyers expense, a mortgagee title insurance policy with
respect to the Real Property in an amount not to exceed the Purchase Price,
provided that the cost for same shall not exceed twenty-five dollars ($25),
which is the minimum promulgated rate for simultaneous issue policies. Fee
simple marketable title to the Real Property as reflected by the Title
Commitment and Title Policy shall be subject to ad valorem real estate and
tangible personal property taxes for the current year, encumbrances, exceptions,
and matters of record only as such are acceptable to Buyer and Lender in the
sole discretion of each (“Permitted Encumbrances”). The Title Commitment shall
include true, correct, and complete legible copies of all documents referenced
in the Title Commitment and shall agree to insure all easements benefiting the
Land, and to issue at Closing the Form 9.2 endorsement, the survey endorsement,
the environmental endorsement, and the contiguity endorsement, if applicable,
all at Sellers’ cost and expense, and, at Buyer’s cost and expense, such
endorsements as may be requested by Lender, provided that the cost for same
shall not exceed the minimum promulgated rate for such endorsements. The Title
Commitment shall provide that all “standard exceptions” (including standard
exceptions for taxes and assessments not shown in the public records, claims of
unrecorded easements, parties other than owner in possession, mechanic’s liens,
and matters disclosed on an accurate survey, but excluding current real estate
taxes not yet due and payable) shall be deleted from the Title Policy on receipt
of documents necessary to do so. Sellers shall ensure that Title Agent delivers
to Buyer and Lender an insured closing protection letter from Title Company to
Buyer and Lender up to the amount of the Purchase Price within the time set
forth above for the delivery of the Title Commitment.

 

(b) Survey. Sellers shall, at their sole cost, obtain an updated as-built survey
of the Real Property (“Survey”) from a duly licensed and qualified land surveyor
satisfactory to Buyer, Lender, and the Title Company in accordance with their
requirements, and furnish ten (10) certified copies of the same to Buyer, within
twenty (20) days after the Effective Date. The

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Survey shall be certified to Buyer, Title Agent, Title Company, and Lender and
its successors and assigns. The Survey shall be dated no later than ninety (90)
days prior to Closing, and must show the location, dimensions, and foundation
perimeters of all Improvements, and indicate the routes of ingress and egress
for public access to the Land, all walks, drives, recorded or visible easements
and rights-of-way on the Land, parking spaces and current zoning, and show that
there are no encroachments, improvements, projections, or easements (recorded or
unrecorded) on the property lines. The Survey shall certify the acreage of the
Land and shall indicate whether the Land is located within any flood hazard
area. The Survey must be prepared in accordance with the most recent standards
set forth by ALTA/ACSM and those of any and all surveyors’ bureaus or
associations of the jurisdiction in which the Land is located as well as any and
all applicable laws. The surveyor’s certificate placed on the Survey shall
include a statement that the Survey locates any and all such items set forth as
exceptions in the Title Policy as Buyer, Lender, or Title Company may require,
shall include a legal description of the Land and a count of the parking spaces,
and otherwise satisfy Buyer’s, Lender’s, and Title Company’s requirements.

 

(c) Title Objections. If the Title Commitment or Survey discloses any Title
Defect or Survey Defect, Buyer may give a Title Objection within fifteen (15)
days after the later of the Effective Date or Buyer’s receipt of the Title
Commitment or the Survey Buyer shall be deemed to have waived its right to
object to any exceptions, defects, state of facts, or other matters disclosed by
the Title Evidence but not objected to in accordance with the preceding
sentence. Sellers shall cure all Title Defects and shall satisfy all
requirements set forth on Schedule B-I of the Title Commitment other than those
pertaining to Buyer, and shall deliver the documents relating to title or title
insurance matters required by Section 10.1(c). Sellers shall notify Buyer within
ten (10) days after receipt of Buyer’s notice whether Sellers will be able to
satisfy the Title Objections If Sellers notify Buyer that they are not willing
or able to satisfy any Title Objection, or fail to give Buyer any notice
regarding whether Sellers will satisfy the Title Objection within such ten (10)
day period, then Buyer may exercise a Termination Option on account of that
matter within ten (10) days after the receipt of Sellers’ notice, or if Sellers
fail to give notice, within ten (10) days after the expiration of Sellers’ ten
(10) day notice period. If Buyer fails to exercise a Termination Option in
accordance with the preceding sentence, Buyer will have waived its Title
Objection and right to terminate this Agreement as a result thereof. If Sellers
notify Buyer within ten (10) days after receipt of Buyer’s Title Objection that
Sellers will attempt to satisfy the Title Objection, but fail to do so prior to
the Closing Date despite the use of commercially reasonable efforts, then Buyer
shall have the right to extend the Closing Date by up to ninety (90) days for
Sellers to continue their efforts, failing which Buyer’s sole remedy shall be to
exercise a Termination Option as of the Closing Date unless Sellers have
willfully breached their duty to act in a commercially reasonable manner, in
which event Buyer shall have the right of specific performance.

 

(d) Additional Title Evidence and Title Objections. Sellers shall submit all
documents intended to be recorded or filed in the public records after the
effective date of the Title Commitment to Buyer for approval prior to execution
and recording, provided if Buyer does not respond within ten (10) business days
after delivery of a proposed document, Buyer shall be deemed to have approved
such document. If any subsequent title examination or additional survey,
including the Survey, shall disclose any exceptions, defects, state of facts, or
other matter other than those described in the preceding sentence, then Buyer
may deliver a Title Objection within ten (10) business days after receipt of
such examination or survey, and the notice, cure, and termination provisions in
Section 2.3(c) with respect to Title Defects disclosed by the initial Title
Evidence shall apply with respect to such subsequent Title Evidence.

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(e) Environmental Report. Sellers shall, at their sole cost, provide to Buyer
within twenty (20) days after the Effective Date a Phase I environmental
inspection report performed within such time period with respect to the Property
by a duly qualified and licensed environmental inspector satisfactory to Buyer
and Lender. The report shall certified to Buyer and Lender and its successors or
assigns. Such report shall confirm (to the extent relevant, in Buyer’s or
Lender’s reasonable discretion):

 

(1) The absence of Hazardous Substances on, under, or affecting all or a portion
of the Property, except for commercially reasonable amounts thereof commonly
found at residential properties in the immediate vicinity of the Land, and that
there are no known or suspected Hazardous Substances located at, used or stored
on, or transported to or from the Land or in such proximity thereto as to create
a material risk of contamination, except for commercially reasonable amounts
thereof commonly found at residential properties in the immediate vicinity of
the Land;

 

(2) That the environmental inspector has obtained, reviewed, and included within
its report a CERCLIS printout from the Environmental Protection Agency,
statements from the Environmental Protection Agency and other applicable
Governmental Authorities, and such other information as Buyer or Lender
reasonably may require;

 

(3) The absence of radon gas at the Real Property, or, if radon gas is found to
be present in the Real Property, that such presence is of a nature or magnitude
so as to be fully in compliance with applicable standards under the
Environmental Laws and all other applicable laws or standards; and

 

(4) The absence of friable asbestos within the Improvements, or elsewhere on the
Real Property or, if asbestos is found to be present in the Real Property, that
such presence is of a nature or magnitude that is able to be removed by a
licensed removal contractor for a guaranteed maximum sum satisfactory to Buyer
and Lender.

 

(f) UCC Searches. Sellers, at their sole cost, shall provide to Buyer within
fifteen (15) days after the Effective Date and then again within ten (10) days
prior to the Closing, then-current searches, together with true, correct,
complete, and legible copies of all documents revealed by such searches, of all
the Uniform Commercial Code Financing Statements filed with the Secretary of
State (or other appropriate filing officer) of the State of Florida and any
other state where each of Company’s and Sellers’ chief executive offices are
located which Sellers hereby represents to Buyer are located in Florida and New
York. If such searches reveal claims or liens against Company, any Seller, or
encumbering all or a portion of the Membership Interests or the Property, then
it shall be a condition precedent to Closing in favor of Buyer that such
financing statements be terminated, released, and discharged at or prior to
Closing.

 

(g) Tax, Judgment Lien, Bankruptcy and Litigation Searches. Sellers, at their
sole cost, shall provide to Buyer within fifteen (15) days after the Effective
Date and then again within ten (10) days prior to the Closing, then-current
searches, together with true, correct,

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complete, and legible copies of all documents revealed by such searches, of all
tax liens, judgment liens, bankruptcies and pending litigation filed in Orange
County, Florida, with the Secretary of State (or other appropriate fling
officer) of the State of Florida, and with any other state and county where each
of Company’s and Sellers’ chief executive offices are located. If such searches
reveal liens or claims against Company, any Seller, or encumbering all or a
portion of the Membership Interests, or the Property, then it shall be a
condition precedent to Closing in favor of Buyer that such liens or claims be
terminated, released, and discharged at or prior to Closing.

 

(h) Americans With Disabilities Act Compliance Report. Sellers shall, at their
sole cost, provide to Buyer within twenty (20) days after the Effective Date a
report of Company’s compliance with the Americans With Disabilities Act.

 

2.4 Cooperation. Sellers shall cooperate with and assist Buyer in the making of
the foregoing investigations, but shall not be obligated to incur any expense in
connection with the investigations, except as provided in this Agreement.

 

Article 3

Separate Representations and Warranties of KGH.

 

KGH represents and warrants to Buyer the accuracy of the following statements as
of the Effective Date and as of the Closing Date, as set forth in Section 6.34
hereof:

 

3.1 Capacity and Authority. KGH has full legal right and all requisite corporate
power and authority to execute, deliver, and perform this Agreement and every
Ancillary Agreement to which it is a party. The execution, delivery, and
performance by KGH of this Agreement and the Ancillary Agreements to which it is
a party have been duly authorized by all requisite corporate action of KGH and
will not:

 

(a) violate any law, regulation, injunction, decree, or order of any court or
Governmental Authority;

 

(b) conflict with the articles of incorporation or by-laws of KGH or the
articles of organization or operating agreement of Company or any other charter
agreement of either KGH or Company;

 

(c) require any notice to, filing or registration with, or consent, license,
approval, or authorization of, any Governmental Authority or other Person other
than Osprey or Victoria; or

 

(d) result in a breach or default, the imposition of a penalty, the creation or
attachment of a Lien on the KGH Membership Interest, a suspension, cancellation,
modification, or termination (or create any right of suspension, cancellation,
or termination), or the acceleration of the maturity of any liability,
obligation, or indebtedness of KGH under or pursuant to any order, decree,
lease, contract, mortgage, indenture, judgment, promissory note, security
agreement, or other agreement or instrument to which KGH is a party or against
which its assets are bound.

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3.2 Execution and Delivery; Binding Effect. This Agreement has been duly and
validly executed and delivered by KGH, and KGB will have duly and validly
executed each of the Ancillary Agreements to which it is a party before that
Ancillary Agreement is delivered to the other parties to this Agreement at the
Closing. This Agreement is, and (when executed and delivered to the other,
parties at the Closing) each Ancillary Agreement to which KGH is a party will
be, valid, effective, and enforceable by the other parties to this Agreement
against KGB in accordance with its terms.

 

3.3 Organization. Company is a limited liability company formed under the laws
of the State of Florida and has all requisite power and authority to own its
property and to conduct its business, as now conducted. KGH is a corporation
formed under the laws of the State of Florida and has all requisite power and
authority to own its property and to conduct its business, as now conducted. KGH
is the duly elected Manager of Company. Osprey, Victoria, and KGH constitute all
of the legal and beneficial owners and holders of all membership interests in
Company.

 

3.4 Ownership of KGH Membership Interest. KGH has good and valid record and
equitable title to the KGH Membership Interest, free and clear of any Lien,
contract for sale, option to purchase, right of first offer or refusal, or other
restriction of any kind whatsoever, except for transfer restrictions imposed by
state and federal securities laws and its operating agreement. On its execution
of the Assignment of Membership Interest in the form of Exhibit C, KGH will
transfer to Buyer or its designee good and merchantable title to the KGH
Membership Interest, free and clear of any Liens. Other than as set forth in
Company’s Operating Agreement, KGH is not a party to any right, option, warrant,
agreement, or commitment providing for the acquisition or disposition of (a) any
of its Membership Interest, (b) any securities convertible into, or exchangeable
for, any of its interest in Company, or (c) any right, option, or warrant to
purchase any membership interests or other securities of Company. KGH possesses
all voting power and rights attendant to the KGH Membership Interest and is not
party to any voting trust, proxy, or other agreement or understanding of any
kind with respect to the voting of any interest in Company.

 

3.5 Notice. KGH has not received any notice from any Governmental Authority, or
any authority in any foreign jurisdiction, with respect to the use of the
Property.

 

3.6 Shareholders; Incumbency. Disclosure Schedule 3.6 lists KGH’s shareholders
(including names, addresses and number of shares owned), officers and directors.

 

Article 4

Separate Representations and Warranties of Osprey.

 

Osprey represents and warrants to Buyer the accuracy of the following statements
as of the Effective Date and as of the Closing Date, as set forth in Section
6.34 hereof:

 

4.1 Osprey Capacity and Authority. Osprey has full legal right and all requisite
power and authority to execute, deliver, and perform this Agreement and every
Ancillary Agreement to which it is a party. The execution, delivery, and
performance by Osprey of this Agreement and the Ancillary Agreements to which it
is a party have been duly authorized by all requisite corporate action of Osprey
and will not:

 

(a) violate any law, regulation, injunction, decree, or order of any court or
Governmental Authority;

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(b) conflict with the articles of incorporation or by-laws of Osprey or the
articles of organization or limited liability company agreement of Company or
any other charter agreement of either Osprey or Company;

 

(c) require any notice to, filing or registration with, or consent, license,
approval, or authorization of, any Governmental Authority or other Person other
than KGH or Victoria; or

 

(d) result in a breach or default, the imposition of a penalty, the creation or
attachment of a Lien on the Osprey Membership Interest, a suspension,
cancellation, modification, or termination (or create any right of suspension,
cancellation, or termination), or the acceleration of the maturity of any
liability, obligation, or indebtedness of Osprey under or pursuant to any order,
decree, lease, contract, mortgage, indenture, judgment, promissory note,
security agreement, or other agreement or instrument to which Osprey is a party
or against which its assets are bound other than as set forth on Disclosure
Schedule 4.1(d).

 

4.2 Execution and Delivery; Binding Effect. This Agreement has been duly and
validly executed and delivered by Osprey, and Osprey will have duly and validly
executed each of the Ancillary Agreements to which it is a party before that
Ancillary Agreement is delivered to the other parties to this Agreement at the
Closing. This Agreement is, and (when executed and delivered to the other
parties at the Closing) each Ancillary Agreement to which Osprey is a party will
be, valid, effective, and enforceable by the other parties to this Agreement
against Osprey in accordance with its terms.

 

4.3 Organization. Company is a limited liability company formed under the laws
of the State of Florida and has all requisite power and authority to own its
property and to conduct its business, as now conducted. Osprey is a corporation
formed under the laws of the State of Delaware and has all requisite power and
authority to own its property and to conduct its business, as now conducted. KGH
is the duly elected Manager of Company and Osprey is one of the legal and
beneficial owners and holders of the membership interests in Company.

 

4.4 Ownership of Osprey Membership Interest. Osprey has good and valid record
and equitable title to the Osprey Membership Interest, free and clear of any
Lien, contract for sale, option to purchase, right of first offer or refusal, or
other restriction of any kind whatsoever, except for transfer restrictions
imposed by state and federal securities laws and the Operating Agreement. On its
execution of the Assignment of Membership Interest in the form of Exhibit D,
Osprey will transfer to Buyer or its designee good and merchantable title to the
Osprey Membership Interest, free and clear of any Liens. Other than as set forth
in Company’s Operating Agreement, Osprey is not a party to any right, option,
warrant, agreement, or commitment providing for the acquisition or disposition
of (a) any of its Membership Interest, (b) any securities convertible into, or
exchangeable for, any of its interest in Company, or (c) any right, option, or
warrant to purchase any membership interests or other securities of Company
Osprey

--------------------------------------------------------------------------------

possesses all voting power and rights attendant to the Osprey Membership
Interest and is not party to any voting trust, proxy, or other agreement or
understanding of any kind with respect to the voting of any interest in Company.

 

4.5 Notice. Osprey has not received any notice from any Governmental Authority,
or any authority in any foreign .jurisdiction, with respect to any violation or
alleged violation of any law or regulation governing the use of the Property.

 

Article 5

Separate Representations and Warranties of Victoria.

 

Victoria represents and warrants to Buyer the accuracy of the following
statements as of the Effective Date and as of the Closing Date, as set forth in
Section 5.34 hereof:

 

5.1 Victoria Capacity and Authority. Victoria has full legal right and all
requisite power and authority to execute, deliver, and perform this Agreement
and every Ancillary Agreement to which it is a party. The execution, delivery,
and performance by Victoria of this Agreement and the Ancillary Agreements to
which it is a party have been duly authorized by all requisite limited
partnership action of Victoria and will not:

 

(a) violate any law, regulation, injunction, decree, or order of any court or
Governmental Authority;

 

(b) conflict with the certificate of limited partnership or limited partnership
agreement of Victoria or the articles of organization or limited liability
company agreement of Company or any other charter agreement of either Victoria
or Company;

 

(c) require any notice to, filing or registration with, or consent, license,
approval, or authorization of, any Governmental Authority or other Person other
than KGH or Osprey; or

 

(d) result in a breach or default, the imposition of a penalty, the creation or
attachment of a Lien on the Victoria Membership Interest, a suspension,
cancellation, modification, or termination (or create any right of suspension,
cancellation, or termination), or the acceleration of the maturity of any
liability, obligation, or indebtedness of Victoria under or pursuant to any
order, decree, lease, contract, mortgage, indenture, judgment, promissory note,
security agreement, or other agreement or instrument to which Victoria is a
party or against which its assets are bound other than as set forth on
Disclosure Schedule 5.1(d).

 

5.2 Execution and Delivery; Binding Effect. This Agreement has been duly and
validly executed and delivered by Victoria, and Victoria will have duly and
validly executed each of the Ancillary Agreements to which it is a party before
that Ancillary Agreement is delivered to the other parties to this Agreement at
the Closing. This Agreement is, and (when executed and delivered to the other
parties at the Closing) each Ancillary Agreement to which Victoria is a party
will be, valid, effective, and enforceable by the other parties to this
Agreement against Victoria in accordance with its terms.

 

5.3 Organization. Company is a limited liability company formed under the laws
of the State of Florida and has all requisite power and authority to own its
property and to conduct its

--------------------------------------------------------------------------------

business, as now conducted. Victoria is a limited partnership formed under the
laws of the State of Florida and has all requisite power and authority to own
its property and to conduct its business, as now conducted. KGH is the duly
elected Manager of Company. Osprey, Victoria, and KGH constitute all of the
legal and beneficial owners and holders of all membership interests in Company.

 

5.4 Ownership of Victoria Membership Interest. Victoria has good and valid
record and equitable title to the Victoria Membership Interest, free and clear
of any Lien, contract for sale, option to purchase, right of first offer or
refusal, or other restriction of any kind whatsoever, except for transfer
restrictions imposed by state and federal securities laws and the Operating
Agreement. On its execution of the Assignment of Membership Interest in the form
of Exhibit E, Victoria will transfer to Buyer or its designee good and
merchantable title to the Victoria Membership Interest, free and clear of any
Liens. Other than as set forth in Company’s Operating Agreement, Victoria is not
a party to any right, option, warrant, agreement, or commitment providing for
the acquisition or disposition of (a) any of its Membership Interest, (b) any
securities convertible into, or exchangeable for, any of its interest in
Company, or (c) any right, option, or warrant to purchase any membership
interests or other securities of Company. Victoria possesses all voting power
and rights attendant to the Victoria Membership Interest and is not party to any
voting trust, proxy, or other agreement or understanding of any kind with
respect to the voting of any interest in Company.

 

5.5 Notice. Victoria has not received any notice from any Governmental
Authority, or any authority in any foreign, jurisdiction, with respect to the
use of the Property.

 

5.6 Partners. Disclosure Schedule 5.6 lists each partner of Victoria (including
names, addresses, partnership interest and whether such partnership interest is
general or limited).

 

Article 6

Representations Concerning Company and Property.

 

KGH, on behalf of Company, and PAC, jointly and severally, represent and warrant
to, and agree and covenant with Buyer that:

 

6.1 Organization. Company is a Florida limited liability company duly organized
and validly existing and in good standing under or by virtue of the laws of the
state of its creation, has duly authorized the execution and performance of this
Agreement, and the execution and performance of this Agreement will not violate
any term of its articles of organization, operating agreement, or any other
agreement, judicial decree, statute or regulation to which it is a party or by
which it may be bound or affected. Company is not a party to or bound by any
right, option, warrant, agreement, or commitment of any character providing for
the acquisition or disposition of, or that requires or authorizes the issuance
of, any membership interests in Company or any securities convertible into
membership interests in Company.

 

6.2 Capitalization. Sellers constitute all of the legal and beneficial owners
and holders of all Membership Interests. The authorized Membership Interests
consist solely of (i) a 50% membership interest held by Osprey; (ii) a 49%
membership interest held by Victoria; and (iii) a 1% membership interest held by
KGH. Each such Membership Interest has been duly authorized

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and validly issued and fully paid and non-assessable, none of such Membership
Interests were issued in violation of any preemptive or other right and all of
such Membership Interests were issued in conformity with all applicable state
and federal securities laws. The Membership Interests have the rights,
preferences and privileges set forth in Company’s operating agreement. There are
no obligations of Company to issue, sell or transfer any membership interests,
voting securities, or securities convertible into or exercisable or exchangeable
for membership interests or voting securities of Company, or obligating Company
to grant, extend or enter into any such obligation or obligations of Company to
issue or deliver or to repurchase. redeem, or otherwise acquire any securities
of Company.

 

6.3 Purpose, Subsidiaries and Other Equity Investments. Company was formed to
develop and own the Property, and at no time has it owned any assets or operated
in furtherance of any other purpose. Company has not sold or disposed of any
assets outside of the ordinary course of business. Company does not own,
directly or indirectly, any shares of capital stock of any corporation or any
equity investment in any partnership, limited liability company, association, or
other business organization, and Company does not have any obligation to make
any such investment.

 

6.4 The Property; Other Properties; Inventory; Cash; Accounts Receivable.

 

(a) Company has good and marketable title to, or in the case of leased property
has valid leasehold interests in, all property and assets (whether real or
personal, tangible or intangible) that it purports to own, including those
reflected on the applicable Company Balance Sheet or acquired after Company
Balance Sheet Date. None of such properties or assets is subject to any Liens,
except Liens for taxes not yet due.

 

(b) To the best knowledge of KGH, the facilities, machinery, computers,
furniture, office, and other equipment of Company that are used in its business
are in good operating condition and repair, subject only to the ordinary wear
and tear of the business, and neither Company nor any property or asset owned or
leased by Company is in violation of any applicable ordinance, regulation or
building, zoning, environmental, or other law in respect thereof.

 

(c) Company has delivered to Buyer, or will deliver within ten (10) days of the
Effective Date, all Disclosure Schedules and Disclosure Documents, all of which
documents are true and complete copies of the originals thereof. The Disclosure
Schedules are true and complete in all material respects.

 

(d) Company has delivered to Buyer, or will deliver within ten (10) days of the
Effective Date, all Due Diligence Documents, all of which documents are true and
complete copies of the originals thereof. Neither Company nor KGH has received
any notice from any Governmental Authority, or any authority in any foreign
jurisdiction, with respect to the use of the Property. Each lease pursuant to
which Company leases any personal property is in full force and effect and is
valid and enforceable in accordance with its terms. There is not under any such
lease any default by Company or any other party thereto, or, to the best of
Sellers’ knowledge with respect to parties other than Sellers, any event that
with notice or lapse of time or both would constitute such a default.

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(e) Except as set forth in Disclosure Schedule 6.4(e), there is no easement,
right-of-way agreement, license, lease, sublease, occupancy agreement, or like
instrument with respect to the Property other than the Leases or the Easements
accepted by Buyer as Permitted Encumbrances, and Company owns or has the right,
in accordance with enforceable agreements, all of which have been provided to
Buyer as Disclosure Documents in accordance with this Agreement, to use all
property, assets, and rights that it currently uses and that are necessary for
the operation of the business of Company.

 

(f) The Rents due Company as reflected in the applicable Company Balance Sheet
and Closing Balance Sheet, to the extent uncollected on the Effective Date, and
the Rents due reflected on the books of Company, and all Rents arising since the
date of the Closing Balance Sheet, are: (i) valid and existing and represent
monies due; and (ii) subject to no refunds or other adjustments and to no
defenses, rights of setoff, assignments, restrictions, Liens, or conditions
enforceable by third parties on or affecting any thereof.

 

(g) No construction or other work that has not been paid for in full at Closing
has been or will be conducted on all or a portion of the Property during the
period which is ninety (90) days prior to the Effective Date or Closing.

 

6.5 Financial Statements. The balance sheet of Company (“Company Balance Sheet”)
as of March 31, 2003 (“Company Balance Sheet Date”) (attached hereto as Exhibit
F), to be delivered within twenty five (25) days of the Effective Date,
certified by the manager of Company, and the income and interim financial
information to be delivered to Buyer, fairly present, in conformity with GAAP
applied on a consistent basis (except as otherwise indicated in such statements
and except that such statements do not contain footnote disclosures required by
GAAP and do not reflect normal year-end adjustments), the financial position of
Company as of the dates thereof and the results of operations and cash flows for
the periods then ended (subject to normal recurring year-end adjustments in the
case of the interim financial statements). Company makes and keeps accurate
books and records reflecting its assets and maintains internal accounting
controls that provide reasonable assurance that (i) transactions are executed
with management’s authorization, (ii) transactions are recorded as necessary to
permit preparation of Company’s financial statements and to maintain
accountability for the assets of Company, (iii) access to the assets of Company
is permitted only in accordance with management’s authorization, and (iv) the
reported accountability of the assets of Company is compared with existing
assets at reasonable intervals.

 

6.6 Absence of Certain Changes. Since Company Balance Sheet Date, Company has
conducted its business in the ordinary course consistent with past practices,
and there has not been:

 

(a) any Material Adverse Change or any event, occurrence, development, or state
of circumstances or facts which reasonably could be expected to result in a
Material Adverse Change;

 

(b) any declaration, setting aside or payment of any dividend or other
distribution with respect to any membership interests in Company, any issuance
by Company of membership interests or securities of, or other ownership
interests in, Company or any repurchase, redemption or other acquisition by
Company of any outstanding membership interests in Company, or other securities
of, or other membership interests or ownership interests in, Company;

--------------------------------------------------------------------------------

(c) any amendment of any term of any membership interest in Company or any other
outstanding security or ownership interest in Company;

 

(d) any incurrence, assumption, or guarantee by Company of any indebtedness for
borrowed money or any other obligation;

 

(e) any creation or assumption by Company of any Lien on any membership interest
or any asset of Company;

 

(f) any making of any loan, advance or capital contributions to or investment
in, any Person;

 

(g) any personal property or real property damage, destruction, or casualty loss
or personal injury loss (whether or not covered by insurance) affecting the
business or assets of Company;

 

(h) any transaction or commitment made, or any contract or agreement entered
into, by Company relating to its assets or business (including the acquisition
or disposition of any assets) or any relinquishment or modification by Company
of any contract or other right, other than transactions, commitments,
relinquishments or modifications in the ordinary course of business consistent
with past practices and those contemplated by this Agreement;

 

(i) any change in any method of accounting or accounting practice by Company,
except for any such change after the Effective Date required by reason of a
concurrent change in GAAP;

 

(j) any (i) grant of any severance or termination pay to any manager of Company,
(ii) hiring of any employees or entering into of any employment, deferred
compensation, or other similar agreement (or any amendment to any such existing
agreement) with any manager, officer or employee of Company, (iii) increase in
benefits payable under an existing severance or termination pay policies or
employment agreements, or (iv) increase in compensation, bonus, or other
benefits payable to members or manager of Company;

 

(k) any amendment to or termination of any material contract, agreement, or
license, except for the termination of any Lease in accordance with this
Agreement, to which Company is a party; or

 

(l) any commitment or agreement to do any of the foregoing.

 

6.7 No Liabilities or Obligations. Except as set forth on Disclosure Schedule
6.7, as of the Effective Date there are, and as of the Closing Date there will
be, no liabilities or obligations of Company of any kind or nature whatsoever,
whether accrued, contingent, absolute, determined, determinable, or otherwise,
and there is no existing condition, situation or set of circumstances which
could reasonably be expected to result in such a liability or obligation, other
than:

 

(a) the liabilities shown on the Company Balance Sheet, all of which will be
either fully satisfied at Closing, or for which Buyer receives a credit at
Closing, or which will be paid as part of the post-Closing adjustments as set
forth in this Agreement;

--------------------------------------------------------------------------------

(b) the liabilities which arise in the ordinary course of business after the
Company Balance Sheet Date, all of which will be either fully satisfied at
Closing, or for which Buyer receives a credit at Closing, or which Will be paid
as part of the post-Closing adjustments as set forth in this Agreement;

 

(c) the return of any Security Deposits as set forth in the Leases or in
separate security deposit agreements, provided to Buyer as part of the
Disclosure Documents or Due Diligence Documents;

 

(d) post-Closing liabilities and obligations under the Leases; and

 

(e) post-Closing liabilities and obligations under the Contracts.

 

6.8 Compliance with Laws; No Defaults.

 

(a) Company is not in violation of, and, to the best of Sellers’ knowledge, has
not since its respective formation violated, any applicable laws, statutes,
ordinances, or regulations.

 

(b) Neither Company nor any member, manager, officer, director, agent, employee,
or other Person associated with or acting on behalf of Company has (i) used any
funds of Company for any unlawful contribution, gift, entertainment, or other
expense relating to political activity; (ii) made any direct or indirect
unlawful payment to any United States or foreign government official or employee
from funds of Company; (iii) violated or is in violation of any provision of the
Foreign Corrupt Practices Act of 1977, as amended; or (iv) paid or made any
bribe, rebate, payoff, influence payment, kickback, or other unlawful payment.

 

(c) Company is not in default under, and no condition exists that with notice or
lapse of time or both would constitute a default under, (i) any mortgage,
agreement, indenture, or evidence of indebtedness for borrowed money to which
Company is a party or by which it or its assets are bound, or (ii) any judgment,
order, or injunction of any court, arbitrator, or Governmental Authority.

 

6.9 Rental and Income Standards. The rental and income standards for the
Property are set forth in Disclosure Schedule 6.9. All Leases have been entered
into in conformance with such rental and income standards.

 

6.10 Litigation. There is no litigation, arbitration, or administrative
proceeding pending nor, to the best knowledge of KGH, threatened with respect to
Company, or with respect to any Seller which may affect Company, all or a
portion of the Property, or this Agreement, except as set forth in Disclosure
Schedule 6. 10.

 

6.11 Contracts and Bank Accounts. All Contracts as of the Effective Date with
consideration of $10,000 or more are identified on Disclosure Schedule B.(5);
Company is not in default in any of those Contracts; Company will not enter into
any other service contract affecting all or a

--------------------------------------------------------------------------------

portion of the Property which is not terminable on sixty (60) days’ notice,
without penalty or charge, or is not on commercially reasonable terms, without
the prior written consent of Buyer. At or before Closing, Sellers will
terminate, or tender notice of termination of, those Contracts identified on
Disclosure Schedule B.(5) that Company contractually is entitled to terminate
without cost and that Buyer designates in writing to Sellers’ Agent prior to
Closing. Disclosure Schedule 6.11 sets forth an accurate and complete list
showing the name and address of each bank, securities broker, mutual fund,
investment company, investment adviser or other financial institution or similar
person with which Company has an account, including the account or box number
and name and the names of all persons and entities authorized to draw thereon or
have access thereto, including authorized signatures.

 

6.12 Other Contracts.

 

(a) Except for the Contracts disclosed in Disclosure Schedule B.(5), the Leases,
and the Permitted Title Encumbrances, Company is neither a party to nor subject
to any contract, agreement, or understanding, whether written or oral.

 

(b) Each agreement, contract, arrangement, and commitment disclosed in any
Disclosure Schedule to this Agreement or required to be disclosed pursuant to
Section 2.1(b) is a valid and binding agreement of Company, enforceable in
accordance with its terms, and is in full force and effect, and neither Company
nor any other party thereto is in default under the terms of any such agreement,
contract, arrangement, or commitment.

 

(c) In the event any agreement, contract, lease, or arrangement to which Company
is a party and which Buyer desires to continue in full force and effect
following the Closing requires an assignment or a third party consent or
approval, Sellers shall in good faith use their best efforts to obtain such
assignment or consent prior to or on the Closing.

 

6.13 No Employees. The Company does not now have, and since its formation has
never had, any employees and Company has no ongoing or future obligation or
commitment to hire any employees in the future or pay any employee any
compensation of any kind.

 

6.14 Permits and Access. The Land has legal and physical access to adjacent
roads, through curb cuts approved by all Governmental Authorities; the Real
Property has operating water supply and sewage disposal systems with sufficient
capacity to serve the Real Property; Company has obtained all necessary permits
and licenses and paid all fees in connection therewith for access to the public
water supply and sewage disposal systems; and the Real Property is served by
public utilities providing electrical and telephone service.

 

6.15 Environmental.

 

(a) “Environmental Laws” means all federal, state and local laws, statutes,
regulations, permits, orders, ordinances, codes, rules and other governmental
restrictions, requirements, and duties, including common law, relating to the
treatment, storage, disposal, transportation, or release of any Hazardous
Substances or otherwise relating to human health, the environment or hazardous
substances, including the Federal Solid Waste Disposal Act; the Federal Clean
Air Act (including the Clean Air Act Amendments of 1990); the Federal Water
Pollution Control Act; the Hazardous Materials Transportation Act; the Federal
Toxic

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Substances Control Act; the Federal Resource Conservation and Recovery Act of
1976; the National Environmental Policy Act; the Federal Comprehensive
Environmental Response, Compensation and Liability Act of 1980; and similar
state laws, all amendments to any of the foregoing statutes, and all regulations
promulgated by any federal or state agencies, including the Environmental
Protection Agency, regulations of the Nuclear Regulatory Agency, and regulations
of any state department of natural resources or state environmental protection
agency now or at any time hereinafter in effect.

 

(b) Neither Company nor Sellers has received notice of any pending or threatened
litigation or administrative proceeding which in any instance (i) asserts or
alleges any violation of applicable Environmental Laws on the part of Company or
in connection with all or a portion of the Property, (ii) asserts or alleges
that Company or any party relative to all or a portion of the Property is
required to clean up, remove, or otherwise take remedial or other response
action due to the disposal, depositing, discharge, leaking or other release of
any Hazardous Substances, or (iii) asserts or alleges that Company or any party
relative to all or a portion of the Property is required to pay all or any
portion of the costs of any past, present or future cleanup, removal, or
remedial or other response action which arises out of or is related to the
disposal, depositing, discharge, leaking or other release of any Hazardous
Substances by Company or any party relative to the Property. Neither Company nor
any other party relative to all or a portion of the Property is subject to any
judgment, decree, order, or citation related to or arising out of any
Environmental Laws. Company has not been named or listed as a potentially
responsible party by any governmental body or agency in any matter arising under
any Environmental Laws, Company is not a participant in, nor does Company or KGH
have knowledge of, any governmental investigation involving all or a portion of
the Property.

 

(c) Neither Company nor, to the best knowledge of KGH, any other Person has
caused or permitted any Hazardous Substances to be stored, deposited, treated,
recycled, or disposed of on, under or at all or a portion of the Property, which
materials, if known to be present, reasonably may be expected to require or
authorize cleanup, removal, or other remedial action under any applicable
Environmental Laws.

 

(d) Except as disclosed in the environmental report delivered by Sellers to
Buyer pursuant to Section 23, there are not now nor have there ever been, any
tanks or other storage facilities on, under, or at all or portion of the
Property or any other real property now or heretofore owned or leased by Company
which contain or contained Hazardous Substances which, if known to be present in
soils or ground water, may reasonably be expected to require or authorize
cleanup, removal, or other remedial action or reporting under any Environmental
Laws.

 

(e) Company has in full force and effect all material permits, licenses, and
approvals required to be maintained under any Environmental Laws applicable to
Company or all or a portion of the Property.

 

(f) Neither Company nor Sellers are aware of any monitoring and testing
equipment and records which are legally required to assess environmental
compliance in accordance with Environmental Laws at the Real Property, and there
are no conditions presently existing at the Real Property which would subject
Company to any damages, penalties, cleanup costs, or other

--------------------------------------------------------------------------------

liability under any applicable Environmental Laws, or which reasonably may be
expected to require cleanup, removal, remedial action, or other response under
any applicable Environmental Laws.

 

6.16 Insurance Coverage. KGH has furnished to Buyer true and complete copies of
all insurance policies and fidelity bonds pertaining to the Property in its
possession or control, or if the policies are not available, insurance
certificates or binders evidencing such policies, covering the assets, business,
equipment, properties, operations, and managers of Company, a list of which is
attached as Disclosure Schedule 6.16. There is no claim pending under any of
such policies or bonds as to which coverage has been questioned, denied, or
disputed by the underwriters of such policies or bonds. All premiums payable
under all such policies and bonds have been paid, and Company is otherwise in
full compliance with the teams and conditions of all such policies and bonds.
Such policies of insurance and bonds (or other policies and bonds providing
substantially similar insurance coverage) have been in effect since the
formation of Company, as applicable, remain in full force and effect, and such
insurance coverage, as it relates to the Property, has been maintained on a “per
occurrence basis.” Such policies of insurance and bonds are of the type and in
amounts customarily carried by Persons conducting businesses similar to those
of` Company. Company knows of no threatened termination of, or premium increase
with respect to, any of such policies or bonds.

 

6.17 Condemnation; Improvements; Special Assessments.

 

(a) There is no condemnation or eminent domain proceeding affecting all or a
portion of the Property now pending or threatened.

 

(b) Except as disclosed on the Survey, to the best of the KGH’s knowledge, the
Improvements are located within the boundary lines of the Land and are not in
violation of applicable setback requirements, local comprehensive plan
provisions, zoning laws and ordinances (and no such portion or parcel or
buildings or improvements located thereon are subject to “permitted
non-conforming use” or “permitted non-conforming structure” classifications),
building code requirements, permits, licenses, or other forms of approval,
regulation, or restrictions by any Governmental Authority, do not encroach on
any easement which may burden the Land; and all Improvements have received all
approvals and certificates of occupancy of Governmental Authorities (including
licenses and permits) required in connection with the ownership, operation, or
use thereof and have been operated and maintained in accordance with applicable
laws, ordinances, rules, and regulations.

 

(c) No special assessment or benefit assessment has been levied or, to the best
of the KGH’s knowledge, authorized for levy on all or a portion of the Property
on account of any public improvement in the vicinity and no such public
improvement has been commenced or authorized by any Governmental Authority that
could result in any special assessment or benefit assessment on all or a portion
of the Property.

 

6.18 Tenants.

 

(a) Disclosure Schedule 6.18(a) (“Contract Rent Roll”) lists the Leases as of
the Effective Date and accurately sets forth for each tenant: (i) the name of
the tenant; (ii) the

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apartment unit or garage; (iii) the initial date of the Lease and each amendment
thereto; (iv) the expiration date of the current term; (v) the monthly fixed
rent applicable during the current term; (vi) any and all guarantors of the
Lease; (vii) the amount of the security deposit actually paid by the tenant; and
(viii) any amount of any security deposit returned as applied due to tenant
default.

 

(b) Except as set forth in Disclosure Schedule 6.18(b), all of the Leases are in
full force and effect and no party thereto is in default or breach under any
such Lease. Neither Sellers nor Company has received notice of any claim by the
tenant under any Lease that the landlord thereunder is in default, that any
Lease is terminated, or that the tenant’s obligations thereunder are limited in
any way. To the best of Sellers’ knowledge, no tenant under any Lease has a
claim that the landlord thereunder is in default under the Lease, any Lease is
terminated, or that the tenant’s obligations thereunder are limited in any way.
No tenant under any Lease has been in default in the payment of rent beyond any
applicable grace period.

 

(c) Except as set forth in the Contract Rent Roll, to the best of Sellers’
knowledge, all tenants under Leases are in occupancy of the apartment unit or
garage set forth opposite their respective names and no tenant has subleased
their apartment or garage or assigned their Lease, and Sellers have not given
their consent to any such sublease or assignment.

 

(d) All of the Leases are in full force and effect; and, except as may be
provided by law and except as set forth in the Contract Rent Roll, no Lease or
other instrument in writing, signed by Sellers, gives any tenant the right to
renew or extend the existing Lease.

 

(e) Other than those commissions listed on Disclosure Schedule 6.18(e), there
are no brokerage or other leasing commissions payable with respect to any of the
existing Leases or renewals of same or expansions or other changes in all or a
portion of the Property, other than those commissions that will be paid by
Sellers.

 

6.19 Defects. To the best of KGH’s knowledge, there are no structural defects in
the Improvements or any defect in the FF&E, HVAC, plumbing, drainage, electrical
and major mechanical systems on the Real Property or any non-conformance thereof
with any applicable building codes or other laws, ordinances, rules, or
regulations.

 

6.20 Soil Conditions. To the best of KGH’s knowledge, there are no adverse
geological or soil conditions affecting all or a portion of the Property. Except
as may be disclosed in the Due Diligence Documents, Sellers have no knowledge of
the presence of Hazardous Substances in, under, or near the Property.

 

6.21 No Contributions or Dedications. Except as set forth on Disclosure Schedule
6.21, no written commitments have been or will be made by or on behalf of
Sellers to any Governmental Authority, utility company, school board, church or
other religious body, any owners’ association, or to any other Person in
connection with any rezoning proceeding or other matter relating to all or a
portion of the Property which would impose any obligation on Company, Buyer, or
their respective successors or assigns to make any contribution or dedication of
money or land, or to construct or maintain any improvements of a public or
private nature on or off the Property.

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6.22 Property Regulations. There are no violations or alleged violations of any
fire, zoning, building, or health rules, regulations, or rulings, whether
federal, state, or local, or any other alleged violations of law which affect
all or a portion of the Property.

 

6.23 Certificates of Occupancy. All certificates of occupancy required have been
issued for the Property have been paid for, and are in full force and effect.

 

6.24 InterCompany Arrangements. Company does not own any note, bond, debenture,
or other indebtedness, nor is it otherwise a creditor or debtor, of any Seller,
any member or manager of Company, or any of their respective Affiliates, other
than as set forth in Company’s Operating Agreement. Other than as set forth in
Disclosure Schedule 6.24, since the Company Balance Sheet Date there has not
been any payment by Company to any such Person, charge by any such Person to
Company, or other transaction between Company and any such Person.

 

6.25 Tax Matters. Except as disclosed in Disclosure Schedule 6.25, and where
applicable, (i) Company has timely filed (or has had timely filed on its behalf)
with the appropriate Taxing Authorities all tax returns (“Tax Returns”) required
to be filed with such Taxing Authorities and such Tax Returns are complete and
accurate in all respects; (ii) Company has paid on a timely basis all, or where
payment is not yet due, has established (or has had established on its behalf
and for its sole benefit and recourse) an adequate accrual in accordance with
GAAP for the payment of, all Taxes far all periods ending through the Closing
Date; (iii) no audits, investigations. or claims presently are pending with
regard to any Taxes or Tax Returns of Company and to the best knowledge of KGH,
no such audit, investigation or claim is threatened; (iv) as to any Tax Returns
of Company that has been examined by the applicable Taxing Authority, no
material adjustments were asserted as a result of such examination which have
not been resolved and fully paid, and no issue has been raised by any Taxing
Authority in any audit, investigation or claim of Company that, if raised with
respect to any other period not so audited, investigated or claimed could be
expected to result in a proposed deficiency for any such period not so audited,
investigated or claimed; (v) Company has not made any election to be treated as
a corporation or association taxable as a corporation for federal tax purposes;
and (vi) Company does not have any past due Taxes owed to any governmental
authority. KGH shall be the Tax Matters Partner, as that term is used in the
Code, with respect to any federal and state income tax returns which include the
Closing Date, and Sellers at their full cost and expense shall have full control
on behalf of the Company over any administrative or judicial proceeding
involving (a) any tax imposed on the Company for all tax periods through the
Closing Date or for which Sellers bear any liability under, this Agreement or
(b) any tax return filed by the Company for any tax period prior to or including
the Closing Date.

 

Sellers, at Sellers’ expense, shall cause the Company’s Form 1065 U.S.
Partnership Return of Income and any state or local income tax report (“Report
of Income”), to be prepared and timely filed for the Company’s tax year ending
on the Closing Date. All items of income, gain, deduction, loss and credit for
such period ending on the Closing Date shall be allocated to Sellers, Buyer, at
Buyer’s expense, shall cause Company’s Return of Income to be prepared and
timely filed for all tax years commencing after the Closing Date and no items of
income, gain, deduction, loss or credit thereon shall be allocated to Sellers.
Each of the parties and the Company will cooperate with each other, including
the signing of Returns and other documents as reasonably requested and providing
others access to the books and records of the Company, to the extent under their
control, at reasonable times and places for purposes of preparing any
governmental Return of Income or filing same in a timely and correct manner.

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Sellers acknowledge and agree that the Company will terminate its existence as a
“partnership” for federal tax purposes as of the Closing Date.

 

Notwithstanding any other provision of this Agreement, this Section 6.25 shall
survive Closing indefinitely.

 

6.26 Employee Benefit Plans. Company does not maintain and has never maintained
any “employee benefit plan”, as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended, or otherwise.

 

6.27 Securities Laws. Company has not (a) issued any securities in violation of
the requirements of Section 5 of the 1933 Act or any other law: (b) violated any
rule, regulation or requirement under the 1933 Act or the 1934 Act; or (c)
redeemed any securities in violation of any applicable state or federal
securities law or any agreement or contract governing the redemption of such
securities.

 

6.28 Americans With Disabilities Act Compliance. Except as set forth in the ADA
Certificate, and to the best knowledge of KGH, the Real Property is in
compliance with applicable laws, rules and regulations under the Americans with
Disabilities Act (“ADA”), the Fair Housing Act, Title VIII of the Federal Civil
Rights Act of 1968, 42 U.S.C. §3601 et seq., and all similar applicable state
and local laws and the Real Property, and has not been the subject of any
complaints or citations pursuant to the ADA or Fair Housing Act as a result of
actual or alleged violations of the ADA, or Fair Housing Act.

 

6.29 Solvency. Company has not: (a) made a general assignment for the benefit of
creditors; (b) filed any voluntary petition in bankruptcy or suffered the filing
of any involuntary petition by its creditors; (c) suffered the appointment of a
receiver to take possession of all, or substantially all, of its assets; (d)
suffered the attachment or other, judicial seizure of all, or substantially all,
of its assets; (e) admitted in writing its inability to pay its debts as they
come due; or (f) made an offer of settlement, extension or composition to its
creditors generally.

 

6.30 Licenses; Regulatory Approvals; Utilities. Except as set forth on
Disclosure Schedule 6.30, Company holds all material licenses, permits,
certificates of occupancy and other regulatory approvals required or necessary
to be applied for or obtained in connection with the Company Business except for
such of the foregoing which, if not held, would not result in a Material Adverse
Chance. All such licenses, permits, certificates of occupancy and other
approvals are listed on Disclosure Schedule 6.30. Except as set forth on
Disclosure Schedule 6.30, all such licenses, permits, certificates of occupancy
and other regulatory approvals relating to the business, operations, facilities
and properties of Company are in full force and effect. Except as set forth on
Disclosure Schedule 6.30, any and all past litigation concerning such licenses,
certificates and regulatory approvals, and all claims and causes of action
raised therein, have been finally adjudicated, and, in the case of such
litigation finally adjudicated since March 31, 2003, such adjudication has not
resulted in a Material Adverse Change. Except as set forth on Disclosure
Schedule 6.30, no such license, permit or regulatory approval has been revoked,

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conditioned (except as may be customary) or restricted, and no action
(equitable, legal or administrative), arbitration or other process is pending,
or threatened, which in any way challenges the validity of, or seeks to revoke,
condition or restrict any such license, permit or regulatory approval.

 

6.31 Intellectual Property.

 

(a) Disclosure Schedule 6.31 (a) sets forth a list of all Intellectual Property
which is owned by, licensed by, or licensed to Company or otherwise used or able
to be used in the Company Business (other than commonly-used computer software
which is generally available to the public and the use rights to which were
legally acquired by Company either for free or through established retail
facilities) and indicates, with respect to each item of Intellectual Property
listed thereon, the owner thereof and, if applicable, the name of the licensor
and licensee thereof and the terms of such license or other contract relating
thereto. Company owns or has the lawful right to use all Intellectual Property
as currently used or as necessary for the conduct of the Company Business as now
conducted.

 

(b) Except as set forth in Disclosure Schedule 6.31(b), Company has no liability
or obligations to any third parties incident to the Intellectual Property used
or able to be used by Company in the conduct of the Company Business as
heretofore conducted, and Company has timely met all of its obligations to any
third parties incident to the Intellectual Property used or able to be used by
Company in the conduct of the Company Business as heretofore conducted, and such
obligations have been correctly and adequately disclosed in the Financial
Statements.

 

(c) Except as set forth in Disclosure Schedule 6.31(c), Company is not a party
to any confidentiality or other agreement which materially restricts its use or
disclosure of information.

 

6.32 Brokerage. Except as listed on Disclosure Schedule 6.32, Company has not
made any agreement or taken any other action which might cause a claim for
brokerage commissions, finders’ fees or similar compensation in connection with
the transaction contemplated by this Agreement.

 

6.33 Other Information. None of the documents or written information delivered,
or representations or KGH’s good faith warranties made, to Buyer in connection
with the transaction contemplated by this Agreement contains or will contain any
untrue statement of a material fact or omits or will omit to state a material
fact necessary in order to make the statements contained therein not misleading.
The budget of Company attached hereto as Exhibit G delivered to Buyer
constitutes an estimate of the information purported to be shown therein as of
the Effective Date, and KGH is not aware of any fact or information that would
lead it to believe that such projections are incorrect in any material respect,
except for real estate tax and insurance cost estimates.

 

6.34 Continuing Representations. The representations and warranties in this
Agreement shall be true and correct on the Closing Date with the same effect as
though made at such Closing, or if any change in the matters covered shall occur
between the Effective Date and the date of Closing, such change shall have been
disclosed in writing to Buyer and shall not materially adversely affect the
condition, repair, value, expense of operation, or income potential of the

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Property. Sellers’ representations and warranties set forth in this Agreement
shall expire if Buyer sells to any party other than an Affiliate of Buyer more
than fifty percent (50%) of its membership interest in the Company or causes
Company to sell more than a fifty percent (50%) interest in the Property.

 

For purposes of this Article 6, the term “to the best of KGH’s knowledge” or
words of similar import shall mean the facts or other information which are
known by Thomas L. Cavanaugh (or which would be known but for his reckless
disregard of known facts or information), who is the individual having knowledge
regarding the matters addressed in this Article 6, and acting solely in his
capacity as an officer, agent or employee of KGH, PAC or of an Affiliate of
either of them and is in no manner expressly or impliedly making any of these
representations in an individual capacity and Buyer agrees that it shall not
bring any action against him.

 

Article 6A

Separate Representations and Warranties of PAC.

 

PAC represents and warrants to Buyer the accuracy of the following statements as
of the Effective Date and as of the Closing Date, as set forth in Section 6.34
hereof:

 

6A.1 PAC Capacity and Authority. PAC has full legal right and all requisite
power and authority to execute, deliver, and perform this Agreement and every
Ancillary Agreement to which it is a party. The execution, delivery, and
performance by PAC of this Agreement and the Ancillary Agreements to which it is
a party have been duly authorized by all requisite corporate action of PAC and
will not:

 

(a) violate any law, regulation, injunction, decree, or order of any court or
Governmental Authority;

 

(b) conflict with the articles of incorporation or bylaws of PAC or the articles
of organization or limited liability company agreement of Company or any other
charter agreement of either PAC or Company;

 

(c) require any notice to, filing or registration with, or consent, license,
approval, or authorization of, any Governmental Authority or other Person other
than KGH, Victoria or Osprey; or

 

(d) result in a breach or default, the imposition of a penalty, a suspension,
cancellation, modification, or termination (or create any right of suspension,
cancellation, or termination), or the acceleration of the maturity of any
liability, obligation, or indebtedness of PAC under or pursuant to any order,
decree, lease, contract, mortgage, indenture, judgment, promissory note,
security agreement, or other agreement or instrument to which PAC is a party or
against which its assets are bound other than as set forth on Disclosure
Schedule 6A.1(d).

 

6A.2 Execution and Delivery; Binding Effect. This Agreement has been duly and
validly executed and delivered by PAC, and PAC will have duly and validly
executed each of the Ancillary Agreements to which it is a party before that
Ancillary Agreement is delivered to the other parties to this Agreement at the
Closing This Agreement is, and (when executed and delivered to the other parties
at the Closing) each Ancillary Agreement to which PAC is a party will be, valid,
effective, and enforceable by the other parties to this Agreement against PAC in
accordance with its terms.

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6A.3 Organization. Company is a limited liability company folded under the laws
of the State of Florida and has all requisite power and authority to own its
property and to conduct its business, as now conducted. PAC is a corporation
formed under the laws of the State of Florida and has all requisite power and
authority to own its property and to conduct its business, as now conducted.

 

6A.4 Financial Statements. The balance sheet of PAC as of March 31, 2003, and
the income and financial information to be delivered to Buyer, fairly present
the financial position of PAC as of the dates thereof and the results of
operations and cash flows for the periods then ended (subject to normal
recurring year-end adjustments in the case of the interim financial statements).
PAC makes and keeps accurate books and records reflecting its assets and
maintains internal accounting controls that provide reasonable assurance that
(i) transactions are executed with management’s authorization, (ii) transactions
are recorded as necessary to permit preparation of PAC’s financial statements
and to maintain accountability for the assets of PAC, and (iii) access to the
assets of PAC is permitted only in accordance with management’s authorization.

 

6A.5 Shareholders; Incumbency. Disclosure Schedule 6A.5 lists PAC’s shareholders
(including names, addresses and number of shares owned), officers and directors.

 

Article 6B.

As Is, Where Is Transaction, Release

 

6B.1 As Is, Where Is. Except to the extent specifically set forth in this
Agreement, Sellers make and shall make no representation or warranty either
express or implied regarding the condition, operability, safety, fitness for
intended purpose or use of the Property. The Buyer specifically acknowledges and
agrees that the Property is being transferred to Buyer, through Sellers’ sale of
their Membership Interests in Company, on an “AS IS, WHERE IS, AND WITH ALL
FAULTS” basis and that, except as specifically set forth in Agreement, Buyer is
not relying on any representations or warranties of any kind whatsoever, express
or implied, from Sellers, their agents, officers, or employees, as to any
matters concerning the Property, including, as to the economics of the operation
of the Property, the freedom of the Property from latent or apparent vices or
defects.

 

6B.2 Release. Except to the extent specifically set forth in this Agreement,
Buyer shall have no rights or claims against Sellers for damages, rescission of
the sale, or reduction or return of the Purchase Price because of any matter not
warranted to Buyer by any Seller, Company, KGH, PAC, or any of them, and all
such rights and claims are hereby expressly waived by Buyer.

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Article 7

Indemnity

 

7.1 Indemnification. If the Closing occurs, Sellers and PAC agree to the
following provisions of this Article 7. If Closing does not occur, Buyer’s sole
remedies shall be those set forth in Section 16.1 and 17.10 of this Agreement.
Subject to Section 7.2:

 

(a) KGH and PAC, jointly and severally, agree to indemnify and hold harmless
Buyer and its shareholders, directors, members, managers, officers, employees,
and agents, from, against, and in respect of, each and every loss. liability,
claim, demand, or expense, including reasonable attorneys’ fees (including those
incurred in all bankruptcy and probate matters), reasonable investigation, and
consultant fees and costs, and of any other kind whatsoever arising out of or
resulting from each and every instance of any of the following:

 

(i) Any breach of any representation or warranty of KGH, individually or on
behalf of Company, or PAC, or failure of KGH or PAC to fulfill any agreement or
covenant of any Seller, KGH, Company or PAC under this Agreement, any Ancillary
Agreement, or any other agreement or document delivered by Sellers, or any one
of them, to Buyer, in connection with the transaction contemplated by this
Agreement; and

 

(ii) Any and all actions, suits, proceedings, demands, assessments, judgments,
costs, and reasonable legal and other expenses (including those incurred in all
bankruptcy and probate matters) incident to any of the foregoing listed in
clause (i) above; and

 

(iii) In connection with events occurring prior to Closing, any and all claims
by tenants under any Lease that the landlord thereunder is in default under the
Lease, that any Lease is terminated, or that the tenant’s obligations thereunder
are limited in any way.

 

Notice of any indemnification claim under this section shall be provided to
Sellers’ Agent and Sellers’ counsel, at the addresses set forth herein.

 

(b) Each Seller (except as to KGH in the event that its indemnification under
Section 7.1(a) applies), separately agrees to indemnify and hold harmless Buyer
and its shareholders, directors, members, managers, officers, employees, and
agents, from, against, and in respect of, each and every loss, liability, claim,
demand, or expense, including reasonable attorneys’ fees (including those
incurred in all bankruptcy and probate matters), reasonable investigation, and
consultant fees and costs, and of any other kind whatsoever arising out of or
resulting from each and every instance of any of the following:

 

(i) Any material breach of any representation or warranty by such Seller or
failure of such Seller to fulfill any agreement or covenant of such Seller under
this Agreement, any Ancillary Agreement, or any other, agreement or document
delivered by such Seller to Buyer, in connection with the transaction
contemplated by this Agreement; and

 

(ii) Any and all actions, suits, proceedings, demands, assessments, judgments,
costs, and reasonable legal and other expenses (including those incurred in all
bankruptcy and probate matters) incident to any of the foregoing listed in
clause (i) above.

 

7.2 Limitations on KGH and PAC Indemnity. Except as provided in Section 13.2(a),
in no event shall the aggregate obligations of KGH and PAC under Section 7.1a
exceed the Escrow Amount plus four million dollars ($4,000,000.00), and KGH’s
and PAC’s obligations under this Agreement shall survive until the expiration of
the Survival Period.

 

7.3 Limitation on Seller Indemnity. The separate obligations of each Seller
under Section 7.1(b), first, with respect to its representations under Articles
3, 4 and 5, respectively, shall not be

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limited hereby, and second, with respect to any other obligations under Section
7.1(b) shall be limited to the Escrow Amount; provided, however, that with
respect to the indemnity obligations of PAC and KGH, the limitations shall be
the Escrow Amount plus four million dollars ($4,000,000). Each Seller’s
obligations under this Agreement shall survive until the expiration of the
Survival Period.

 

7.4 Notice. Except as provided in Sections 5.25 and 13.2(a), and notwithstanding
anything to the contrary contained in this Agreement, KGH, PAC and Sellers shall
not be required to indemnify, hold harmless and defend Buyer with respect to
claims pursuant to Section 7.1(a) or 7.1(b) unless KGH, PAC or such Seller shall
have received notice of such claim (describing the claim, the amount thereof, if
known and quantifiable, and the basis thereof) within the Survival Period.

 

7.5 Indemnification Procedure.

 

(a) Any party making a claim for indemnification under this Agreement (an
“Indemnitee”) shall notify the indemnifying party or parties, as the case may be
(an “Indemnitor”) of the claim in writing promptly (but in no event later than
thirty (30) days) after receiving written notice of any action, lawsuit,
proceeding, investigation or other claim against it (if by a third party) or
discovering the liability, obligation or facts which may reasonably be expected
to give rise to such claim for indemnification, describing the claim, the amount
thereof (if known and quantifiable), and the basis thereof (a “Notice of
Claim”); provided, however, that the failure so to notify Indemnitor shall not
relieve the Indemnitor of its obligations hereunder except to the extent such
failure shall have actually prejudiced the Indemnitor.

 

(b) With respect to any third party action, lawsuit, proceeding, investigation
or other claim which is the subject of a Notice of Claim (a “Third Party
Claim”), an Indemnitor shall be entitled to assume and control (with counsel of
its choice) the defense of such Third Party Claim at the Indemnitor’s expense
and at its option by sending written notice of its election to do so within
fifteen (15) days after receiving the Notice of Claim from the Indemnitee as
aforesaid; provided, however, that:

 

(i) The Indemnitee shall be entitled to participate in the defense of such Third
Party Claim and to employ counsel of its choice for such purpose (the fees and
expenses of such separate counsel shall be borne by the Indemnitee);

 

(ii) If the Indemnitor elects to assume the defense of any such Third Party
Claim, the Indemnitor shall be entitled to compromise or settle such Third Party
Claim in its sole discretion so long as either (i) such compromise or settlement
is purely monetary and provides an unconditional release of the Indemnitee with
respect to such claim or (ii) the Indemnitor shall obtain the prior written
consent of the Indemnitee (which shall not be unreasonably withheld or delayed);

 

(iii) If the Indemnitor shall not have assumed the defense of such Third Party
Claim within the fifteen (15) day period set forth above, the Indemnitee may
assume the defense of such Third Party Claim with counsel selected by it and may
make any compromise or settlement thereof or otherwise protect against the same
and be entitled to all amounts paid as a

--------------------------------------------------------------------------------

result of such Third Party Claim or any compromise or settlement thereof, to the
extent Indemnitee is entitled to indemnification hereunder with respect thereto,
provided that, in the case of any such compromise or settlement, (i) such
compromise or settlement is purely monetary and provides an unconditional
release of the Indemnitor with respect to such claim or (ii) the Indemnitee
shall obtain the prior written consent of the Indemnitor (which shall not be
unreasonably withheld, delayed or conditioned); and

 

(iv) The Indemnitor shall be entitled to assume the defense of such Third Party
Claim only to the extent that if the Third Party Claimant of such Third Party
Claim prevails, such victory would not result in (i) a Material Adverse Change
in the value of the Company; (ii) any encumbrance in excess of One Hundred
Thousand and No/100 Dollars ($100,000.00) against Company, Buyer, the Property
or any assets of Company; (iii) a materially adverse impact on the Company’s
ability to operate its business or the Property; or (iv) constitute a default
under any agreements between Buyer or an Affiliate of Buyer and Lender. If the
Indemnitee assumes the defense of such Third Party Claim under this subsection
(iv), Indemnitee may make any compromise or settlement thereof or otherwise
protect against the same and be entitled to all amounts paid as a result of such
Third Party Claim or any compromise or settlement thereof, to the extent
Indemnitee is entitled to indemnification hereunder with respect thereto,
provided that, in the case of any such compromise or settlement, (i) such
compromise or settlement is purely monetary and provides an unconditional
release of the Indemnitor with respect to such claim or (ii) the Indemnitee
shall obtain the prior written consent of the Indemnitor (which shall not be
unreasonably withheld, delayed or conditioned).

 

(c) The Indemnitee shall at all times cooperate, at its own expense, in all
reasonable ways with, make its relevant files and records available for
inspection and copying by, and make its employees available or otherwise render
reasonable assistance to the Indemnitor. Any failure by the Indemnitee to
cooperate with the Indemnitor shall render null and void any obligation of the
Indemnitor to indemnify the Indemnitee pursuant to this Section 7.5 to the
extent that the Indemnitor has been materially prejudiced by such failure to
cooperate.

 

(d) Upon payment of any amount pursuant to any indemnification claim, the
Indemnitor shall be subrogated, to the extent of such payment, to all of the
Indemnitee’s rights of recovery (and, if KGH, PAC or Sellers are the
Indemnitors, the Indemnitee shall cause the KGH, PAC or Sellers, as the case may
be, to be subrogated to all of Buyer’s rights of recovery) against third parties
with respect to the matters to which such indemnification claim relates.

 

(e) The rights and remedies of Buyer and KGH, PAC and Sellers under this Section
7.5 are exclusive and in lieu of any and all other rights and remedies which
Buyer or KGH, PAC and Sellers, as the case may be, may have against the other,
under this Agreement or otherwise, (a) with respect to (i) the inaccuracy of any
representation, warranty, certification or other statement made by KGH, PAC,
Sellers or Buyer in or pursuant to this Agreement or (ii) any breach of, or
failure to perform or comply with, any covenant or agreement set forth in this
Agreement or (b) otherwise with respect to the transactions contemplated by this
Agreement; provided, however, that this sentence shall not limit the rights of
the parties to seek specific performance of any provision of this Agreement or
any other rights and remedies expressly set forth in this Agreement. All claims
for indemnification must be asserted, if at all, in good faith, in accordance
with the provisions this Section 7.5 and within the Survival Period.

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(f) If at any time subsequent to the receipt by an Indemnitee of an indemnity
payment hereunder, such Indemnitee receives any recovery, settlement or other
similar payment with respect to the claim, debt or liability for which it
received such indemnity payment (the “Recovery”), such Indemnitee shall promptly
pay the Indemnitor an amount equal to the amount of such Recovery up to the
amount of the indemnity payment actually received by such Indemnitee, less any
expense incurred by such Indemnitee in connection with such Recovery, but in no
event shall any such payment exceed the amount of such indemnity payment.

 

(g) None of the indemnified parties shall be entitled to recover for any losses,
costs, expenses, or damages arising under this Agreement or in connection with
or with respect to the transactions contemplated in this Agreement, any amount
in excess of the actual compensatory damages, court costs and reasonable
attorney fees and costs, suffered by such party, except that any punitive,
special, exemplary and consequential damages recovered by a third party against
a person entitled to indemnity pursuant to this Section shall be included in the
damages recoverable under such indemnity. Except as provided in the immediately
preceding sentence, each indemnified party waives any right to recover punitive,
special, exemplary or consequential damages arising in connection with or with
respect to the transactions contemplated in this Agreement. This Section shall
not limit Sellers’ right to retain the Deposit as liquidated damages.

 

(h) Each person entitled to indemnification hereunder or otherwise to damages in
connection with the transactions contemplated in this Agreement shall take all
reasonable steps to mitigate all losses, costs, expenses and damages after
becoming aware of any event or circumstance that could reasonably be expected to
Rive rise to any losses, costs, expenses and damages that are indemnifiable or
recoverable hereunder or in connection herewith.

 

(i) The provisions of this Section 7.5 shall survive Closing or the termination
of this Agreement.

 

7.6 Buyer Indemnity. Buyer shall indemnify and hold harmless Sellers for any and
all actions, suits, proceedings, demands, assessments, judgments, costs, and
reasonable legal and other expenses (including those incurred in all bankruptcy
and probate matters) incident to Company’s activities after the Closing Date and
not otherwise the responsibility of Sellers, PAC, or any of them under this
Agreement.

 

Article 8

KGH’s and Sellers’ Covenants.

 

8.1 Affirmative Covenants of KGH. From the Effective Date until Closing, KGH
shall cause Company to:

 

(a) Make all payments of principal and interest required pursuant to all
mortgages on all or a portion of the Property to be made prior to Closing and
perform all of the terms and provisions thereof on the part of the mortgagor to
be performed.

 

(b) Keep the Improvements insured against loss or damage (including rental loss)
by fire and all risks covered by an extended coverage endorsement on a
replacement cost basis.

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(c) Perform the landlord’s obligations to the tenants of the Property and in the
ordinary course of business enforce the obligations of the tenants under their
Leases in accordance with the terms of those Leases.

(d) Maintain the Improvements as a first class apartment complex and make any
necessary repairs or replacements to the Improvements required to keep the
Improvements in good condition and repair, ordinary wear and tear excepted.

(e) Use its commercially reasonable efforts to negotiate leases for unleased
units and garages for the rents and on the other terms described in the form of
lease attached as Exhibit H and to advertise and market those units and garages
in accordance with the Company’s ordinary course of business.

(f) Put all units and garages that are vacant prior to Closing into move-in
condition by Closing. “Move-in condition” means, as applicable, that all
appliances and carpeting have been installed, the appliances, fixtures,
plumbing, equipment, doors, windows are in good working order, the carpeting is
either new or has been cleaned to an acceptable level, and the unit or garage
has been appropriately painted and cleaned.

(g) Pay all costs incurred or arising from the operation and maintenance of the
Property prior to Closing and pay all costs required to be paid in connection
with all Leases executed prior to Closing for the leasing, preparation of space,
concessions, and allowances to tenants, and brokerage commissions and finders
fees incurred in entering into those Leases.

(h) Conduct its business in the ordinary course consistent with past practice
and use normal efforts to preserve intact the business organization and
relationships of Company with third parties.

 

(i) Give Buyer, its counsel, financial advisors, auditors, and other authorized
representatives full access to the offices, properties, books, and records of
Company, furnish Buyer, its counsel, financial advisors, auditors and other
authorized representatives such financial and operating data and other
information relating to Company as such Persons reasonably may request, and
instruct counsel and financial advisors of Company to cooperate with Buyer and
its employees and agents in their investigations of Company and the Property.

 

(j) Promptly notify Buyer of:

 

(1) each notice or other communication from any Person alleging that the consent
of such Person is or may be required in connection with the transaction
contemplated by this Agreement;

 

(2) each notice or other communication from any Governmental Authority in
connection with the Property or the transaction contemplated by this Agreement;

 

(3) all actions, suits, claims, investigations, or proceedings commenced or, to
the best of KGH’s knowledge, threatened against, relating to or involving, or
otherwise affecting Company that, if pending on the Effective Date, would have
been required to have been disclosed pursuant to Article 5, or that relate to
the consummation of the transaction contemplated by this Agreement;

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(4) KGH’s breach of any obligation, representation, warranty, or covenant under
this Agreement, or any fact that would cause any representation or other fact in
this Agreement to be inaccurate; and

 

(5) all material inaccuracies in the Due Diligence Documents.

 

(k) Timely pay and discharge, or cause to be timely paid and discharged, when
due, all Taxes (including all Federal, state, and local sales, use, property,
employment, and payroll taxes), assessments, and other governmental charges
imposed on Company, any or all Sellers, or all or a portion of the Property or
Company’s Assets.

 

(l) Maintain in full force and effect its limited liability company existence,
rights, franchises, and all Permits and Trademarks owned or possessed by Company
and necessary to the conduct of Company’s business, and comply with all
applicable laws and regulations, whether now in effect or hereafter enacted or
promulgated by any Governmental Authority having jurisdiction.

 

(m) Pay all liabilities and fulfill all obligations of the Company which are due
and payable prior to Closing, except for those liabilities and obligations
arising subsequent to Closing. (Notwithstanding the foregoing, KGH shall cause
the Company to pay those commissions set forth on Disclosure Schedule 6.18(e)).

 

(n) On or before the Closing Date, pay the following amounts:

 

(i) all amounts required to be paid by Sellers pursuant to Section 2.3 hereof;

 

(ii) any and all amounts necessary to remove any lien, including mortgage liens,
on the Property.

 

8.2 Affirmative Covenants of Sellers. From the Effective Date until Closing,
each Seller shall promptly notify Buyer of:

 

(a) each notice or other communication from any Person received by such Seller
alleging that the consent of such Person is or may be required in connection
with the transaction contemplated by this Agreement;

 

(b) each notice or other communication from any Governmental Authority received
by such Seller of a violation or alleged violation of any law or regulation
governing the use of the Property or relating to the transaction contemplated by
this Agreement;

 

(c) all actions, suits, claims, investigation or proceedings, commenced or, to
the best of the knowledge of such Seller, threatened against, relating to or
involving, or otherwise affecting its business or membership interest in Company
that, if pending on the Effective Date, would have been required to have been
disclosed pursuant to this Agreement, or that relate to the consummation of
transaction contemplated by this Agreement; and

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(d) a breach of any obligation, representation, warranty or covenant by such
Seller under this Agreement, or any fact that would cause any representation in
this Agreement to be inaccurate.

 

8.3 Right of First Offer. For a period of two (2) years after Closing, if PAC,
Sellers’ Agent, or any Affiliate of any of them wishes to develop or acquire
multi-fancily housing property within ten (10) miles of the Property, it or they
shall offer to Buyer or its designated Affiliate the right to (i) provide equity
to the project upon the same right offered to any third party, and (ii) purchase
the project on the same basis offered to any third party. All parties must use
their best efforts to execute a memorandum of understanding in connection with
any such new project within fifteen (15) days of such offer. If such memorandum
of understanding is not executed within such time period, and if Buyer is not
willing to execute such memorandum of understanding within such time period, the
offering party shall be free to obtain financing or sell the project free of the
restrictions of this subsection. The requirements of this subjection shall not
apply to those projects listed on Disclosure Schedule 8.3 and shall survive
Closing.

 

8.4 Negative Covenants. From the Effective Date to Closing, without the prior
written consent of Buyer, Sellers shall not, and shall cause Company to not:

 

(a) Rent any apartment furnished or provide any services to any tenant except
pursuant to a lease substantially in the form attached hereto as Exhibit H, or
provide any rent concession of any kind except for rent concessions of no
greater than one (1) month’s rent for leases for a term of no less than twelve
(12) months duration.

 

(b) Except in the ordinary course of business, waive any default in any material
obligation under any Lease, cancel any Lease, or accept the surrender of any
Lease (except for default in the payment of rent or in performance of another
material obligation).

 

(c) Incur any obligation (including any Contract) which will create a liability
accruing after the Closing, except for obligations incurred to satisfy
maintenance requirements on commercially reasonable terms and which do not
create a liability in excess of one thousand dollars ($1,000.00) in any
individual case, or in excess of $10,000 in the aggregate, or which have been
approved by Buyer pursuant to Section 6.12.

 

(d) Enter into (i) any contract of sale of all or a portion of the Property or
grant any option to purchase or first refusal rights (except as provided in this
Agreement), (ii) any additional mortgage, or (iii) any other document affecting
title to all or a portion of the Property.

 

(e) Make any direct or, indirect redemption, purchase, or other acquisition of
any of its equity interests.

 

(f) Create any pension, profit sharing plan, bonus, deferred compensation, death
benefit, or any other fringe benefit plan or program or pay any bonus, incentive
compensation, extraordinary distributions, or other similar obligations.

 

(g) Amend its articles of organization or its operating agreement.

 

(h) Issue any membership interests or equity interests of any kind.

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(i) Grant, confer, or award any option, warrant, or conversion right.

 

(j) Take or agree or commit to take any action that would make any
representation or warranty of on behalf of Company pursuant to this Agreement
inaccurate in any material respect at, or as of any time prior to, the Closing.

 

(k) Omit or agree or commit to omit to take any commercially reasonable action
necessary, to the best knowledge of KGH, to prevent any such representation or
warranty from being materially inaccurate in any respect at any such time.

 

Article 9

Buyer’s Representations and Warranties,

 

Buyer represents and warrants to Sellers the accuracy of the following
statements:

 

9.1 Buyer Capacity and Authority Relative to Agreement. Buyer has full legal
right and all requisite power and authority to execute, deliver, and perform
this Agreement and every Ancillary Agreement to which it is a party. Buyer has
provided its Federal Employer Identification Number to Seller’s Counsel. At
Closing, Buyer shall be qualified to do business as a foreign corporation in the
State of Florida. The execution, delivery, and performance by Buyer of this
Agreement and the Ancillary Agreements to which it is a party have been duly
authorized by all requisite corporate action of Buyer and will not:

 

(a) violate any law, regulation, injunction, decree, or order of any court of
competent, jurisdiction or Governmental Authority;

 

(b) conflict with the articles of incorporation of by-laws of Buyer or any other
charter agreement of Buyer; or

 

(c) require any notice to, filing or registration with, or consent, license,
approval, or authorization of, any Governmental Authority or other Person.

 

9.2 Execution and Delivery; Binding Effect. This Agreement has been duly and
validly executed and delivered by Buyer, and Buyer will have duly and validly
executed each of the Ancillary Agreements to which it is a party before that
Ancillary Agreement is delivered to the other parties to this Agreement at the
Closing. This Agreement is, and (when executed and delivered to the other
parties at the Closing) each Ancillary Agreement to which Buyer is a party will
be, valid, effective, and enforceable by the other parties to this Agreement
against Buyer in accordance with its terms.

 

9.3 Organization. Buyer is a corporation formed under the laws of the State of
Delaware and has all requisite power and authority to own its property and to
conduct its business, as now conducted.

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Article 10

Conditions Precedent.

 

10.1 Buyer’s Closing Conditions. As conditions precedent to Buyer’s obligation
to purchase the Membership Interests and to perform its other obligations at
Closing:

 

(a) Each of the Company, KGH, PAC and Sellers shall have performed or observed
all of the covenants in Article 8 and all obligations required to be performed
by each them on or prior to the Closing.

 

(b) The representations and warranties in this Agreement, in the Ancillary
Agreements or in any certificate or other writing delivered by KGH, PAC and each
individual Seller pursuant to this Agreement shall be true and correct in all
material respects on the date of the Closing with the same effect as though made
on such date and Buyer shall have received a certificate or certificates from
each of them to the foregoing effect.

 

(c) Buyer shall have received at Closing Title Company’s endorsement to the
Title Commitment (including the title commitment for Lender) deleting all
conditions to the issuance of the Title Policy (including the title policy for
Lender) and all exceptions which are not Permitted Encumbrances.

 

(d) Buyer shall have obtained a commitment for the financing of at least eighty
percent (80%) of the Purchase Price on terms including an interest rate at not
more than 6% per annum, for a term of no less than ten (10) years and with an
amortization schedule of thirty (30) years.

 

(e) Sellers shall tender or cause to be tendered to Buyer all of the items
required by Article 12.

 

(f) Buyer shall have received an opinion of counsel to each of Sellers, in form
and substance reasonably acceptable to Buyer and Buyer’s counsel and dated as of
the Closing, opining that as to the respective Seller as of the Closing: (i)
such Seller has the requisite power and authority to enter into this Agreement
and the assignment of its Membership Interest; (ii) the execution and delivery
of this Agreement and the assignment of its Membership Interest has been duly
authorized by all necessary company actions; (iii) the execution and delivery of
this Agreement and the assignment of its Membership Interest will not (A)
violate any statute, law, rule, or regulation applicable to such Seller or any
order, writ, judgment or decree of any court or any Governmental Authority
applicable to such Seller, (B) violate or conflict with any provisions of the
organizational documents of such Seller, or (C) based solely on the
certification of Sellers, conflict with or result in the breach of or default
under any material agreement, indenture, loan or credit agreement or any other
agreement or instrument to which such Seller is a party; and (iv) based solely
on the certification of Sellers, there is no action, lawsuit, proceeding,
inquiry or investigation before or by any court or Governmental Authority
pending or threatened in writing against such Seller which in the opinion of
such counsel would materially and adversely affect such Sellers ability to
consummate the transaction contemplated by this Agreement.

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(g) Each Seller shall have waived any right of first refusal or such other
encumbrance or similar right that such Seller shall have with respect to the
acquisition of the Membership Interests.

 

(h) Buyer shall have received certificates of good standing for each Seller, the
general partner of Victoria, any other entity signing on behalf of any Seller
and for Company from the state in which such entity is organized all dated and
certified within twenty (20) days of the date of the Closing.

 

(i) Buyer shall have received the Closing Balance Sheet from Sellers.

 

(j) At least 85% of the units on the Real Property shall have been leased and
occupied by tenants who have entered into Qualified Leases and who are not in
default under the terms of their respective Qualified Leases.

 

(k) All financing statements described in Section 2.3(g) shall be terminated,
released or discharged.

 

(l) All liens and claims described in Section 2.3(h) shall have been terminated,
released, or discharged.

 

(m) Sellers shall have paid for, either prior to or at the time of Closing, all
items required in Section 2.3 of this Agreement to be paid for by Seller.

 

10.2 Commercially Reasonable Efforts. Sellers shall use commercially reasonable
efforts to perform with reasonable dispatch the acts to be done by each of them
to satisfy the conditions of Article 10.

 

10.3 Buyer’s Termination Option. Notwithstanding anything to the contrary in
Section 10.1, if the condition set forth in Section 10.1(d) is not satisfied
within forty-five (45) days after the Effective Date, Buyer or Sellers may
exercise a Termination Option. If any of the other conditions set forth in
Section 10.1 are not satisfied at or before Closing, then Buyer may exercise a
Termination Option within ten (10) days after the date by which such condition
was to be satisfied, unless otherwise provided in this Agreement.

 

Article 11

Closing.

 

11.1 Closing and Closing Date. The date on which Closing shall occur shall be
that date which is seventy five (75) days after the Effective Date, or such
other date as the parties shall agree on in writing (“Closing Date”). In no
event shall the Closing Date be more than one hundred eighty (180) days after
the Effective Date. Provided that all the conditions precedent to Buyer’s
obligations to close under this Agreement have been satisfied (or waived by
Buyer), the Closing shall occur at the office of Baker & Hostetler LLP at 200
South Orange Avenue, Suite 2300, Orlando, FL 32802, or such other location
reasonably required by Lender, at 10:00 A.M. on the Closing Date. Sellers and
Buyer (or their representatives) shall meet at that place in order to complete
and execute documents. Sellers shall have senior management personnel for
Company at the Real Property at least one day prior to the Closing Date to
assist in the final physical and

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financial inspection. Title Agent shall complete the Closing by recording and
delivering the applicable deposited documents and distributing the funds
provided by Buyer and Escrow Agent pursuant to Buyer’s escrow instructions.
Notwithstanding the foregoing, Buyer shall have the right to extend the Closing
Date for fifteen (15) days, by: (i) providing written notice of such extension
to all other parties pursuant to Section 17.3 of this Agreement; and (ii)
delivering to Escrow Agent an additional deposit of one hundred thousand dollars
($100.000.00) (“Extension Deposit”), which shall be applied to the Purchase
Price. The Extension Deposit shall be nonrefundable except as set forth in
Section 1.2(b) hereof.

 

Article 12

Closing Obligations of Parties.

 

12.1 Sellers’ and PAC’s Closing Obligations. At or before 10:00 A.M. on the
Closing Date, Sellers and PAC shall deliver, or cause to be delivered, to Buyer
or Title Agent (as applicable) the following:

 

(a) Assignments of Membership Interest, substantially in the fours annexed as
Exhibits C-E, by each applicable Seller conveying to Buyer all of Sellers’
interests as members of Company, free of all liens and encumbrances.

 

(b) A certificate from each Seller and PAC, certifying the organizational
documents of each Seller and PAC and stating that the representations and
warranties of such Seller made pursuant to thus Agreement are true and correct
in all material respects at Closing with the same effect as though such
representations and warranties had been made at and as of Closing.

 

(c) A rent roll in the form of the Contract Rent Roll, certified by KGH to be
correct (“Closing Rent Roll”).

 

(d) The original or duplicate originals of all written service contracts which
Buyer has approved.

 

(e) Evidence of the due authorization of the execution and performance of this
Agreement, the Ancillary Agreements, and any and all other documents described
in this Section 12.1.

 

(f) An affidavit as to the non-existence of parties in possession (except
tenants under Leases) and construction liens, any instrument necessary to
evidence the completion of the construction of the Improvements, and any “gap”
indemnities required by the Title Company to issue the endorsement described in
Section 10.1(c).

 

(g) A certificate, in the form provided for in the regulations promulgated by
the Treasury Department pursuant to §1445 of the Internal Revenue Code of 1986,
as amended (“Code”) stating, under penalty of perjury, Sellers’ United States
taxpayer identification numbers and that no Seller is a foreign Person.

 

(h) An affidavit, or other statement acceptable to Title Company, providing the
information necessary for the title agent to file the Form 1099 required by the
provisions of Section 6045(e) of the Code.

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(i) A Management and Leasing Contract in form and substance acceptable to Buyer
executed by Property Asset Management, LLC (“Property Manager”) (“Management and
Leasing Contract”), Property Manager shall execute any and all documents
reasonably required by Lender, including an assignment of the Management and
Leasing Contract.

 

(j) Any and all other documents required pursuant to this Agreement, or as may
be reasonably and timely requested by Buyer, to be delivered by or on behalf of
Company, PAC or any or all Sellers.

 

(k) Possession of the Property, subject only to the Leases listed on the Closing
Rent Roll and the Permitted Encumbrances.

 

(l) Proof of payment of all amounts necessary to pay off all existing liens and
debts secured by security interests covered by financing statements on all or
any of the Property and Sellers’ interests in Company.

 

(m) Within two (2) days prior to Closing, a schedule of all tenant delinquencies
at the Property.

 

(n) Incumbency Certificates of each Seller and PAC.

 

(o) Authorizing Resolutions of each Seller and PAC.

 

12.2 Buyer’s Closing Obligations. Before 10:00 A.M. on the Closing Date, Buyer
shall:

 

(a) Pay to Escrow Agent the sums due under this Agreement.

 

(b) Provide to Sellers a certificate stating that the representations and
warranties of Buyer made pursuant to this Agreement are true and correct in all
material respects at Closing with the same effect as though such representations
and warranties had been made at and as of Closing.

 

12.3 Further Assurances, Assistance and Cooperation. In addition to the
obligations required to be performed by the parties at Closing, the parties
agree to perform such other acts and to execute, acknowledge, and deliver
subsequent to Closing such other instruments, documents and other materials, as
each party reasonably may request in order to enforce this Agreement or to
effectuate the consummation of the transaction contemplated in this Agreement.
On the request of either party (“Requesting Party”), the other party (“Other
Party”) shall assist the Requesting Party in the conduct or defense of any
litigation involving or connected with Company or all or a portion of the
Property (“Other Litigation”), except for matters for which the Requesting Party
must indemnify the Other Party or which the Requesting Party is obligated to
conduct or defend pursuant to provisions in this Agreement other than this
Section 12.3. The Other Party will be reimbursed for reasonable out-of-pocket
expenses incurred in connection with Other Litigation, subject to the prior
written consent of the Requesting Party, which consent shall not unreasonably be
withheld. This Section 12.3 shall survive Closing and the delivery of the deed,
if any.

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Article 13

Closing Adjustments and Payments.

 

13.1 Post-Closing Adjustments and Payments.

 

(a) Apportionment of Rents, Taxes, Charges and Other Income and Expenses. The
following shall be apportioned between the parties on a basis of a 12-month
year, a 30-day month, as of 11:59 P.M. of the date preceding the Closing, as the
case may be:

 

(i) All rents and other periodic charges, including any pet rents or other
recurring rents and fees (collectively, “Rent”), when, as, and if collected. The
first monies collected on account of Rent after Closing shall be successively
applied to the payment of (1) Rent due and payable in the month in which the
Closing occurs, (2) Rent due and payable in the months succeeding the month in
which the Closing occurs and (3) Rent due and payable in the months preceding
the month in which the Closing occurs, if any. Each party promptly shall account
to the other party for any Rent received after Closing to which the other party
would be entitled under this Section 13.1(a)(i). Buyer shall have no obligation
to collect delinquent Rent.

 

(ii) All real and personal property taxes and assessments and other taxes
imposed on the owner of the Property, as owner, and not paid by others. If the
Closing shall occur before the taxes are fixed for the current tax year, the
apportionment of such taxes shall be tentatively made on the basis of the best
available information on the current assessment and tax rate and shall be
finally adjusted (and any necessary payments shall be made) within sixty (60)
days after the tax bill shall be issued. The proration of undetermined taxes
shall be based on a 365 day year and on the last available tax rate or
valuation, etc., whether or not officially certified, and maximum allowable
discount.

 

(iii) Utility charges payable by the owner of the Property, including water and
sewer charges.

 

(iv) Periodic income and operating expenses, including income and charges under
the Contracts accepted by Buyer under this Agreement.

 

(b) Post-Closing Adjustment. The parties shall cooperate after Closing to
prorate any post-Closing income or charges to the Company, asset forth in
Section 13.1(a). Except with respect to general real estate and personal
property taxes, any proration which must be estimated at Closing shall be
reprorated and finally adjusted as soon as practicable after the Closing Date,
but not later than one hundred eighty (180) days thereafter; otherwise all
prorations shall be final, Utility bonds and other deposits posted for the
Company’s benefit by any Seller, PAC or an Affiliate of any of them shall be
released at Closing, unless Buyer was debited for such bond or deposit at
Closing. Buyer acknowledges it shall post replacement security, as may be
legally required. Disclosure Schedule 13.1(b) lists the amounts of all relevant
bonds and deposits, with whom such bonds and deposits have been posted, the form
of collateral and all other details relevant to each such bond and deposit.

 

(c) Buyer and Sellers acknowledge and agree that effective as of the Closing
Date, Sellers may remove all or a portion of the funds from any and all
financial institution accounts owned by the Company and Buyer shall not receive
a credit or other adjustment as a result of

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such removal. Notwithstanding the foregoing, Sellers shall not remove any funds
equal to tenant security deposits, prepaid rents or amounts equal to credits
granted to tenants, unless Buyer receives a credit against the Purchase Price at
Closing for such amounts, Buyer acknowledges and agrees that Sellers shall
retain all rights to Account No. 2000014593640 (the “Bank Account”) held at
Wachovia Bank National Association in Jacksonville, Florida in the name of
Company post closing and Sellers shall use such account to make post closing
adjustments and disbursements. Buyer shall open new accounts in the name of
Company after Closing. Sellers, PAC and KGH shall indemnify Buyer for any
charges or claims against it as a result of Sellers’ use of the Bank Account
after Closing.

 

This Section 13.1 shall survive Closing and the delivery of the deed, if any.

 

13.2 Holdbacks.

 

(a) Real Estate Taxes. Notwithstanding any other provision of this Agreement,
Sellers shall place three hundred thousand and no/100 dollars ($300,000.00) of
the Purchase Price into escrow for the payment of any liabilities of Sellers
under this Section 13.2(a). If the aggregate real estate tax liability relating
to the Property exceeds nine hundred and no/100 dollars ($900.00) per unit
(“Base Tax Amount”) for the calendar year during which the Closing occurs,
Sellers shall be liable to Buyer for the amount by which the actual real estate
taxes exceeds the Base Tax Amount. Similarly, for calendar years 2003, 2004 and
2005, Sellers shall be liable to Buyer for the excess of the actual real estate
taxes paid relating to the Property exceeds the Base Tax Amount with the
following annual adjustments: the Base Tax Amount for each year following the
calendar year which includes the Closing shall be increased by four percent (4%)
over the Base Tax Amount for the preceding year. The balance, if any, shall be
disbursed to Sellers on December 31, 2005, Sellers shall pay Buyer any amounts
owed under this subsection within five (5) days of when such amount is due.

 

(b) Indemnification Escrow. Notwithstanding any other provision of this
Agreement, Sellers shall place one million five hundred thousand and no/100
dollars ($1,500,000.00) of the Purchase Price into escrow for the payment of any
liabilities of Sellers and PAC under Article 7.

 

(c) Escrow Amount. At Closing, Sellers, out of Closing funds, shall pay the Tax
Escrow and the Indemnification Escrow into escrow with the Escrow Agent. The
amounts paid into Escrow shall be held and released pursuant to the terms of an
Escrow Agreement, attached hereto as part of Exhibit I.

 

(d) Survival. This Section 13.2 shall survive Closing.

 

13.3 Income and Expense Items. In addition to the foregoing specific
apportionments, and except as otherwise specifically designated in this
Agreement, Sellers shall receive all other income relating to periods prior to
the Closing and shall pay all operating expenses accrued or incurred prior to
Closing and Buyer shall receive all other income accruing on and after Closing
and shall pay all other expenses incurred or accrued on and after Closing. If
tenants are entitled to post-Closing credits or rent concessions in any form
from Company, Sellers shall pay to Buyer an amount equal to the total of such
amount. Buyer shall receive a credit for the unamortized portion of all such
rent concessions or any other special discounts that survive Closing. All items

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of income or expense which should be apportioned and which are not or cannot be
apportioned at Closing shall be duly apportioned as soon as determined and in
accordance with Section 13.1(b). This Section 13.3 shall survive Closing.

 

13.4 Buyer Credits. Buyer shall receive a credit at Closing in an amount equal
to the sum of:

 

(a) prepaid rents and security deposits,

 

(b) the interest on the Deposit, and

 

(c) any credit due to Buyer pursuant to Section 1.3.1 of this Agreement and
calculable as of the Closing Date.

 

13.5 Costs. No deed shall be recorded in connection with this transaction Buyer
shall pay all documentary stamps, intangible taxes, and recording fees with
respect to any of its financing arrangements. Each party shall bear its own
attorneys fees and costs in connection with this Agreement, except as otherwise
provided in this Agreement. All other charges payable pursuant to this Agreement
shall be paid as set forth in the particular provision describing such charges.

 

Article 14

Casualty and Condemnation.

 

14.1 Risk of Loss. Risk of loss up to and including the Closing Date shall be
borne by Sellers. In the event of any material damage to or destruction of all
or a portion of the Property, Buyer may, at its option, by notice to Sellers
given within ten (10) business days after Sellers notify Buyer of such damage or
destruction (and if necessary the Closing Date shall be extended to give Buyer
the full ten (10) business day period to make such election): (i) terminate this
Agreement and Sellers shall cause Escrow Agent immediately to return the Deposit
to Buyer, or (ii) proceed under this Agreement, receive any and all insurance
proceeds (including any and all rent loss insurance applicable to any period on
and after the Closing Date) due Sellers or Company as a result of such damage or
destruction and assume responsibility for such repair, and Buyer shall receive a
credit at Closing for any deductible, uninsured, or coinsured amount under such
insurance policies. If no notice is given by Buyer after receipt of proper
notice from Sellers, Buyer shall be deemed to have elected to terminate this
Agreement. If Buyer elects (ii) above, Buyer may extend the Closing Date for up
to an additional thirty (30) business day period in which to obtain insurance
settlement agreements with the Company’s insurers, and Sellers will cooperate
with Buyer in obtaining the insurance proceeds and such agreements from the
Company’s insurers, If all or a portion of the Property is not materially
damaged, then Buyer shall not have the right to terminate this Agreement, and at
Closing Buyer shall receive any and all insurance proceeds (including any rent
loss insurance applicable to any period on and after the Closing Date) due the
Company as a result of such damage or destruction and assume responsibility for
such repair, and Buyer shall receive a credit at Closing for any deductible,
uninsured, or coinsured amount under said insurance policies. “Material damage”
and “materially damaged” means damage (x) reasonably estimated to exceed two
hundred fifty thousand dollars ($250,000.00), unless otherwise required by
Lender, or (y) which, in Buyer’s reasonable estimation, will take longer than
ninety (90) days to repair.

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14.2 Condemnation. If prior to Closing, condemnation or eminent domain
proceedings are commenced against all or any portion of the Property, or if
Sellers receive a notice that such proceedings are contemplated, Sellers shall
give Buyer written notice thereof, at which point Buyer shall have the option to
(i) terminate this Agreement by giving a Termination Notice, in which event
Sellers shall cause Escrow Agent immediately to return the Deposit to Buyer, or
(ii) proceed to Closing in accordance with this Agreement, in which event the
net award to which Sellers shall be entitled shall be paid or assigned by
Sellers to Buyer at Closing. If Buyer does not exercise its Termination Option
within thirty (30) days after receiving notice of the condemnation proceedings,
Buyer will be deemed to have elected to proceed to Closing as provided in clause
(ii) above.

 

14.3 Binding Effect. This Article 14 is an express provision with respect to
destruction and eminent domain and is intended to supersede any applicable
statute regarding risk of loss.

 

Article 15

Brokerage.

 

15.1 Broker. Neither party has had any contact or dealings regarding all or a
portion of the Property, or any communication in connection with the subject
matter of this transaction, through any licensed real estate broker or other
Person who can claim a right to a commission or finder’s fee as a procuring
cause of the sale contemplated in this Agreement. Buyer shall indemnify, save
harmless, and defend Sellers from any liability, cost, or expense (including
reasonable attorneys’ fees, and including those incurred in all bankruptcy and
probate proceedings) arising out of or connected with any claim for any
commission or compensation made by any Person claiming to have been retained or
contacted by Buyer in connection with this transaction. Sellers shall indemnify,
save harmless, and defend Buyer from any liability, cost, or expense (including
reasonable attorneys’ fees, and including those incurred in all bankruptcy and
probate proceedings) arising out of or connected with any claim, for any
commission or compensation made by any Person claiming to have been retained or
contacted by Sellers in connection with this transaction. This Article shall
survive the Closing, the delivery of the deed (if any), and any termination of
this Agreement.

 

Article 16

Defaults.

 

16.1 Sellers’ Default. If the sale of the Membership Interests under this
Agreement shall fail to close due to Sellers’ default or breach, Buyer’s sole
and exclusive remedies (except for Sellers’ indemnity obligations under this
Agreement which expressly survive such termination) shall be either to (i)
terminate this Agreement by exercise of a Termination Option, at which point the
Deposit shall be returned to Buyer (at which time this Agreement shall be null
and void and neither party shall have any further rights or obligations under
this Agreement, except as expressly set forth in this Agreement), or (ii) seek
specific performance of this Agreement. Buyer shall not exercise a Termination
Option due to Sellers’ default or breach unless Buyer gives Sellers notice of
such default or breach and such default or breach is not cured within ten (10)
days of the provision of such notice.

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16.2 Buyer’s Default. If the sale of the Membership Interests under this
Agreement shall fail to close due to Buyer’s default or breach, Sellers’ sole
and exclusive remedy, shall be to terminate this Agreement by exercise of a
Termination Option and to receive the Deposit, which shall be forfeited to
Seller as liquidated damages in accordance with Section 16.3 below (at which
time this Agreement shall be null and void and neither party shall have any
further rights or obligations under this Agreement except as expressly set forth
in this Agreement.).

 

16.3 EXCLUSIVE REMEDY FOR BUYER’S DEFAULT IN FAILING TO CLOSE. BUYER AND SELLERS
HEREBY ACKNOWLEDGE AND AGREE THAT THE AMOUNT OF SELLERS’ DANLAGES IN THE EVENT
OF A BREACH OF THIS AGREEMENT BY BUYER WOULD BE DIFFICULT OR IMPOSSIBLE TO
DETERMINE AND THE AMOUNT OF THE DEPOSIT IS THE PARTIES’ BEST AND MOST ACCURATE
ESTIMATE OF THE DAMAGES SELLERS WOULD SUFFER IF THE TRANSACTION PROVIDED FOR. IN
THIS AGREEMENT FAILS TO CLOSE AND THAT SUCH ESTIMATE IS REASONABLE TINDER. THE
CIRCUMSTANCES EXISTING AS OF THE EFFECTIVE DATE AND UNDER THE CIRCUMSTANCES THAT
SELLERS AND BUYER REASONABLY ANTICIPATE WOULD EXIST AT THE TIME OF SUCH BREACH.
BUYER AND SELLERS AGREE THAT SELLERS’ RIGHTS UNDER. THE PRECEDING SENTENCE SHALL
BE THE SOLE REMEDIES OF SELLERS IF THIS TRANSACTION FAILS TO CLOSE BECAUSE OF A
BREACH OF THIS AGREEMENT BY BUYER. TO CONFIRM THE FOREGOING. BUYER AND SELLERS
HEREBY INITIAL THIS AGREEMENT AS FOLLOWS:

 

Buyer                             

  

Seller (KGH)                             

    

Seller (Osprey)                         

    

Seller (Victoria)                         

 

Article 17

Miscellaneous.

 

17.1 Survival. The representations, warranties, undertakings, covenants and
indemnifications of Sellers in this Agreement, any Ancillary Agreement, or in
any other document or certificate delivered by Sellers in connection herewith
shall survive the Closing for the Survival Period, and no action or proceeding
thereon shall be valid or enforceable, at law or in equity, if a legal
proceeding is not commenced within that time.

 

17.2 Business Days and Time Periods. If the day for performance of any action
described in this Agreement shall fall on a Saturday, Sunday, or a day on which
the banks are closed in the state in which the Real Property is located, the
time for such action shall be extended to the next business day after such
Saturday, Sunday, or day in which the banks are closed.

--------------------------------------------------------------------------------

17.3 Notices. Unless otherwise specified in this Agreement, all notices,
demands, elections, requests, or other communications that any party to this
Agreement may desire or be required to give under this Agreement shall be in
writing and shall be given by hand delivery or by a recognized overnight courier
service providing confirmation of delivery, addressed as follows:

 

If to Sellers:

  

KGH Corporation

c/o P.A.C. Land Development Corporation

730 Bonnie Brae Street

Winter Park, FL 32789

Attention: Thomas L. Cavanaugh

and to:

  

Victoria Place Apartments, Ltd.

c/o P.A.C. Land Development Corporation

730 Bonnie Brae Street

Winter Park, FL 32789

Attention: Thomas L. Cavanaugh

and to:

  

Osprey Capital, Inc.

c/o Douglas McNeill

1400 Marsh Landing Parkway Suite 109

Jacksonville Beach, FL 32250

and to:

  

P.A.C. Land Development Corporation

730 Bonnie Brae Street

Winter Park, FL 32789

Attention: Thomas L. Cavanaugh

With a copy to:

  

Holland & Knight, LLP

200 South Orange Ave., Suite 2600

Orlando, Florida 32801

Attention: Lee S. Smith, Esq.

and to:

  

Adele Wailand, Esq.

Case, Pomeroy & Company, Inc.

529 Fifth Avenue, Suite 1600

New York, NY 10017

If to Sellers’ Agent:

  

Thomas L. Cavanaugh

730 Bonnie Brae Street

Winter Park, FL 32789

If to Buyer:

  

Bresler & Reiner, Inc.

11140 Rockville Pike, Suite 620

Rockville, MD 20852

Attention: Sidney M. Bresler, CEO

With a copy to:

  

Shaiman, Drucker, Beckman & Sobel, LLP

1845 Walnut Street, 14th Floor

Philadelphia, P A 19103

Attn: S. Laurence Shaiman, Esq.

--------------------------------------------------------------------------------

and a copy to:

  

Baker & Hostetler LLP

200 South Orange Avenue, Suite 2300

Orlando, Florida 32801

Attention: Karen Stedronsky, Esq.

If to Escrow Agent:

  

Holland & Knight, LLP

200 South Orange Ave., Suite 2600

Orlando, Florida 32801

 

Each Person shall have the right to designate another address or change in
address by written notice to the others in the manner prescribed in this
Agreement. All notices given and received pursuant to this Section shall be
deemed to have been given (i) if delivered by hand, on the date of delivery or
on the date delivery was refused by the addressee, or (ii) if delivered by
overnight courier, on the date of delivery as established by the return receipt
or courier service confirmation (or the date on which the return receipt or
courier service confirms that acceptance of delivery was refused by the
addressee). Counsel named above for a party may give notices for that party with
the same force and effect as if given by the party.

 

17.4 Escrow Provisions. The escrow of the Deposit and the Escrow Amount shall be
subject to the provisions set forth in the two Escrow Agreements attached hereto
as composite Exhibit I.

 

17.5 Entire Agreement. This Agreement constitutes the entire understanding
between the parties and may not be changed orally but only by an agreement in
writing signed by the party against whom enforcement of any waiver, change,
modification, or discharge is sought.

 

17.6 Governing Law. This Agreement is, and shall be deemed to be, a contract
entered into under and pursuant to the laws of the state of Florida and shall be
in all respects governed, construed, applied, and enforced in accordance with
the laws of Florida. Jurisdiction and venue shall be proper only in Orange
County, Florida.

 

17.7 Successors and Assigns. Subject to following provisions, this Agreement
shall be binding on and inure to the benefit of the parties and their respective
permitted successors and assigns. Without the prior written consent of Buyer, no
Seller shall, directly or indirectly, assign this Agreement or any of its rights
under this Agreement. Any attempted assignment in violation of this Agreement
shall, at the election of Buyer, be of no force or effect and shall constitute a
default by Sellers. Buyer may assign its rights under this Agreement subject to
the following conditions: (a) the assignment must be to a corporation, limited
partnership, limited liability company, or other entity controlled by Buyer; (b)
such assignee must assume all of Buyer’s obligations under this Agreement, but
Bresler & Reiner, Inc. shall not be released from any obligations under this
Agreement; and (c) at least five (5) days prior to the proposed assignment,
Buyer shall provide Sellers with notice thereof and evidence that the foregoing
conditions are satisfied.

 

17.8 Waiver. The excuse or waiver of the performance by a party of any
obligation of the other party under this Agreement shall only be effective if
evidenced by a written statement signed by the party so excusing or waiving. No
delay in exercising any right or remedy shall

--------------------------------------------------------------------------------

constitute a waiver thereof, and no waiver by Sellers or Buyer of the breach of
any covenant or condition of this Agreement shall be construed as a waiver of
any preceding or succeeding breach of the same or any other covenant or
condition of this Agreement.

 

17.9 Counterparts. This Agreement may be executed in any number of counterparts
and it shall be sufficient that the signature of each party appear on one or
more such counterparts. All counterparts collectively shall constitute a single
agreement.

 

17.10 Attorneys’ Fees, Costs. In the event of a judicial or administrative
proceeding or action by one party against the other party with respect to the
interpretation or enforcement (including specific performance) of this
Agreement, the prevailing party shall be entitled to recover reasonable costs
and expenses including reasonable attorneys’ fees, costs and expenses (including
those incurred in all bankruptcy and probate matters). The prevailing party
shall be determined by the court based on an assessment of which party’s major
arguments or position prevailed.

 

17.11 Headings; Word Meaning. The headings in this Agreement are inserted for
convenience only and shall not control or affect the meaning or construction of
any provisions of this Agreement. Words such as “herein”, “hereinafter”,
“hereof” and “hereunder” when used in reference to this Agreement, refer to this
Agreement as a whole and not merely to a subdivision in which such words appear,
unless the context otherwise requires. The singular shall include the plural and
the masculine gender shall include the feminine and neuter, and vice versa,
unless the context otherwise requires. The term “include” and similar terms
(e.g., includes, including, included, comprises, comprising, such as e.g., and
for example), when used as part of a phrase including one or more specific
items, are used by way of example and not of limitation.

 

17.12 Time of the Essence. Time is of the essence of this Agreement and all
covenants and deadlines under this Agreement. Without limiting the foregoing,
Buyer and Sellers hereby confirm their intention and agreement that time shall
be of the essence of each and every provision of this Agreement, notwithstanding
any subsequent modification or extension of any date or time period provided
under this Agreement.

 

17.13 Construction of Agreement. This Agreement shall not be construed more
strictly against one party than against the other merely by virtue of the fact
that it may have been prepared primarily by counsel for one of the parties, it
being recognized that both Buyer and Sellers have contributed substantially and
materially to the preparation of this Agreement.

 

17.14 Severability. The parties intend and believe that each provision in this
Agreement comports with all applicable local, state, and federal laws and
judicial decisions. If, however, any provision in this Agreement is found by a
court of competent, jurisdiction to be in violation of any applicable local,
state, or federal law, statute, ordinance, administrative or judicial decision,
or, public policy, or if in any other respect such a court declares any such
provision to be illegal, invalid, unlawful, void, or unenforceable as written,
then it is the intent of all parties that, consistent with and with a view
toward preserving the economic and legal arrangements among the parties as
expressed in this Agreement, such provision shall be given force and effect to
the fullest possible extent, and that the remainder of this Agreement shall be
construed as if such illegal, invalid, unlawful, void, or unenforceable
provision were not in this Agreement, and that the rights, obligations, and
interests of the parties under the remainder of this Agreement shall continue in
full force and effect.

--------------------------------------------------------------------------------

17.15 No Implied Agreement. Neither Sellers nor Buyer shall have any obligations
in connection with the transaction contemplated by this Agreement unless both
Sellers and Buyer, each acting in its sole discretion, elects to execute and
deliver this Agreement to the other party. No correspondence, course of dealing,
or submission of drafts or final versions of this Agreement between Sellers and
Buyer shall be deemed to create any binding obligations in connection with the
transaction contemplated by this Agreement, and no contract or obligation on the
part of Sellers or Buyer shall arise unless and until this Agreement is fully
executed by both Sellers and Buyer. Once executed and delivered by Sellers and
Buyer, this Agreement shall be binding on them notwithstanding the failure of
Escrow Agent or any broker or other Person to execute this Agreement.

 

17.16 Radon Gas Disclosure. Chapter 88-285, Florida Statutes, requires the
following notice to be provided with respect to the Agreement for sale and
purchase of any building, or a rental agreement for any building: “RADON GAS:
Radon is a naturally occurring radioactive gas that, when it has accumulated in
a building in sufficient quantities, may present health risks to persons who are
exposed to it over time. Levels of radon that exceed federal and state
guidelines have been found in buildings in Florida. Additional information
regarding radon and radon testing may be obtained from your county public health
unit.”

 

17.17 Exchange. Sellers agree to cooperate with Buyer if Buyer elects to cause
the sale or purchase of Company or the Property to be part of a tax free
exchange under Section 1031 of the Code. Sellers further agree to execute at or
prior to Closing such documents as may be reasonable, necessary, or appropriate
to cause this Agreement to be assigned to a qualified intermediary, to be
identified as a replacement property, or as shall otherwise be proposed by the
attorneys for Buyer or by a qualified exchange intermediary, provided that
Sellers do not thereby incur additional expense (other than such party’s
attorneys’ fees) or liability.

 

17.18 Facsimile. For all purposes under this Agreement, including the
negotiation and finalizing of this Agreement and Closing, each document
transmitted by facsimile machine shall be treated, in all manner and respect, as
an original document and the signature of any party on each document transmitted
by facsimile machine shall be considered, for all purposes, as an original
signature (except for any documents or instruments which must be recorded). Each
such document sued and transmitted by facsimile shall be considered to have the
same binding legal effect as an original signed document. At the request of
either party, any document sent by facsimile machine shall be re-executed and an
original signature sent to the requesting party. Each party agrees not to raise
an objection to any document that was transmitted by facsimile machine or as a
defense that any document is not binding on the party who signed the document
and transmitted it by facsimile machine. The parties further agree that any
document signed and transmitted by e-mail shall not be binding on either party
until an original signed copy of such document or a facsimile copy of such
document shall have been exchanged by the parties.

 

17.19 Restatement of Operating Agreement and Articles of Organization.
Immediately following the Closing, Buyer, at Buyer’s expense, shall amend and
restate the Operating Agreement of the Company and file amended Articles of
Organization evidencing removal of Manager as manager of the Company. Buyer
shall provide Sellers’ Agent with a copy of such filing.

 

[remainder of page left blank]

 

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In witness whereof, Sellers and Buyer have duly executed this Agreement as of
the date and year first above written.

 

Witnesses:

 

Victoria Place Apartments, Ltd.,
a Florida limited partnership

--------------------------------------------------------------------------------

(as to witness)

 

By:

 

KGH Corporation, a Florida corporation
as its general partner

       

By:

 

/s/ Thomas L. Cavanaugh

--------------------------------------------------------------------------------

/s/ Karen Stedronsky

--------------------------------------------------------------------------------

         

Name: Thomas L. Cavanaugh

Title: President

(as to witness)

               

Date:

 

5/6/03

--------------------------------------------------------------------------------

(as to witness)

 

KGH Corporation, a Florida corporation
as its general partner

       

By:

 

/s/ Thomas L. Cavanaugh

--------------------------------------------------------------------------------

/s/ Karen Stedronsky

--------------------------------------------------------------------------------

         

Name: Thomas L. Cavanaugh

Title: President

(as to witness)

           

Date:

 

5/6/03

--------------------------------------------------------------------------------

(as to witness)

 

P.A.C. Land Development Corporation

   

By:

 

/s/ Thomas L. Cavanaugh

--------------------------------------------------------------------------------

/s/ Karen Stedronsky

--------------------------------------------------------------------------------

     

Name: Thomas L. Cavanaugh

Title: President

(as to witness)

           

Date:

 

6 May 2003

--------------------------------------------------------------------------------

(as to witness)

 

Bresler & Reiner, Inc., a Delaware
corporation

       

By:

 

/s/ Sidney M. Bressler, CEO

--------------------------------------------------------------------------------

/s/ Karen Stedronsky

--------------------------------------------------------------------------------

         

Name: Sidney M. Bresler

Title: CEO

(as to witness)

           

Date:

 

May 6, 2003

 

[signatures continued on following page]

--------------------------------------------------------------------------------

[continuation of signature page]

 

Witnesses:

  Osprey Capital, Inc., a Delaware corporation

(2 as to each)

            By:  

/s/ Douglas W. McNeill

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

      Name: Douglas W. McNeill

(as to witness)

      Title: President

/s/ Norma J. Johnson

--------------------------------------------------------------------------------

  Date:   May 6, 2003

(as to witness)