SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d) of
The Securities Act of 1934
Date of Report (Date of earliest event reported):
September 4, 1997.
HOME PROPERTIES OF NEW YORK, INC.
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(Exact name of registrant as specified in its charter)
Delaware 0-13136 16-1455126
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
850 Clinton Square, Rochester, New York 14604
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (716)246-4150
Not Applicable
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(Former name or former address, if changed since last report.)
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
a. Financial Statements of Businesses Acquired.
None
b. Pro Forma Financial Information.
None.
c. Exhibits
4 Instruments defining rights of security holders including
indentures.
1. Home Properties of New York, L.P. Second Amended and
Restated Agreement of Limited Partnership, dated
September 23, 1997.
2. Home Properties Trust Declaration of Trust, dated
September 19, 1997.
99 Additional Exhibits
1. Credit Agreement dated as of September 4, 1997 among
Home Properties of New York, L.P. and The Chase
Manhattan Bank, as Administrative Agent, Chase
Securities Inc., as Arranger, Manufacturers and
Traders Trust Company, as Co-Agent.
2. Amendment No. One to Credit Agreement, dated as of
September 4, 1997, among Home Properties of New York,
L.P. a New York limited partnership , the Lenders
party hereto, The Chase Manhattan Bank, as
Administrative Agent, and Manufacturers and Traders
Trust Company, as Co-Agent.
3. Promissory Note, dated September 4, 1997 from Home
Properties of New York, L.P. to The Chase Manhattan
Bank.
4. Promissory Note, dated September 4, 1997 from Home
Properties of New York, L.P. to Manufacturers and
Traders Trust Company.
5. Purchase and Sale Agreement dated July 25, 1997 by and
between Home Properties of New York, L.P. and Louis S.
and Molly B. Wolk Foundation.
6. Purchase Agreement, dated April 30, 1997 between Home
Properties of New York, L.P. and Briggs Wedgewood
Associates, L.P.
7. Agreement and Plan of Merger, dated July 31, 1997
between Home Properties of New York, L.P. and
Chesfield Partnership
8. Agreement and Plan of Merger, dated July 31, 1997
between Home Properties of New York, L.P. and
Valspring Partnership
9. Agreement and Plan of Merger, dated July 31, 1997
between Home Properties of New York, L.P. and Exmark
Partnership
10. Agreement and Plan of Merger, dated July 31, 1997
between Home Properties of New York, L.P. and New
Orleans East Limited Partnership
11. Agreement and Plan of Merger, dated July 31, 1997
between Home Properties of New York, L.P. and Glenvwk
Partnership
12. Agreement and Plan of Merger, dated July 31, 1997
between Home Properties of New York, L.P. and PK
Partnership
13. First Amendment to Agreement and Plan of Merger, dated
September 1, 1997 between Home Properties of New York,
L.P. and PK Partnership and its partners
14. First Amendment to Agreement and Plan of Merger, dated
September 1, 1997 between Home Properties of New York,
L.P. and NOP Corp. and Norpark Partnership
15. Contribution Agreement, dated July 31, 1997 between
Home Properties of New York, L.P. and Lamar
Partnership
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
Dated: September 24, 1997
Home Properties of New York, Inc.
By:/s/ Amy L. Tait
------------------------------
Amy L. Tait,
Executive Vice President
HOME PROPERTIES OF NEW YORK, L.P.
SECOND AMENDED AND RESTATED
AGREEMENT OF LIMITED
PARTNERSHIP
THE UNITS (AS DEFINED HEREIN) HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR UNDER THE
SECURITIES LAWS OF ANY STATE. THE UNITS ARE BEING OFFERED AND SOLD UNDER THE
EXEMPTION PROVIDED BY SECTION 4(2) OF THE SECURITIES ACT AND PURSUANT TO RULE
506 OF REGULATION D OF THE SECURITIES AND EXCHANGE COMMISSION.
A PURCHASER OF THE UNITS MUST BE PREPARED TO BEAR THE ECONOMIC RISK
OF THE INVESTMENT FOR AN INDEFINITE PERIOD OF TIME BECAUSE THE UNITS HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OR UNDER THE SECURITIES LAWS OF ANY
STATE AND, THEREFORE, CANNOT BE SOLD UNLESS THEY ARE SUBSEQUENTLY REGISTERED
OR AN EXEMPTION FROM REGISTRATION IS AVAILABLE. THERE IS NO OBLIGATION OF
THE PARTNERSHIP TO REGISTER THE UNITS UNDER THE SECURITIES ACT OR UNDER THE
SECURITIES LAWS OF ANY STATE.
THIS LIMITED PARTNERSHIP AGREEMENT PROVIDES FOR FURTHER
RESTRICTIONS ON THE TRANSFER OF THE UNITS.
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TABLE OF CONTENTS
Page
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ARTICLE I DEFINITIONS. . .. . . . . . . . . . . . . . . . 1
Section 1.01 Act . . . . .. . . . . . . . . . . . . . . . 1
Section 1.02 Additional Limited Partner.
Section 1.03 Additional Partnerships . . .. . . . . . . . 1
Section 1.04 Adjusted Capital Account Deficit . . . . . . 1
Section 1.05 Assignee. . . . . . . . . . . . . . . . . . 2
Section 1.06 Affiliated Person . . . . . . . . . . . . . 2
Section 1.07 Assignment of Limited Partnership
Interest . . . . . . . . . . . . . . . . . . . 2
Section 1.08 Assignment of Home Leasing Assets . . . . . 2
Section 1.09 Available Cash. . . . . . . . . . . . . . . 2
Section 1.10 Business Day. . . . . . . . . . . . . . . . 3
Section 1.11 Capital Account . . . . . . . . . . . . . . 3
Section 1.12 Capital Contribution. . . . . . . . . . . . 4
Section 1.13 Cash Amount . . . . . . . . . . . . . . . . 4
Section 1.14 Certificate . . . . . . . . . . . . . . . . 4
Section 1.15 Closing Date. . . . . . . . . . . . . . . . 4
Section 1.16 Code. . . . . . . . . . . . . . . . . . . . 4
Section 1.17 Conifer . . . . . . . . . . . . . . . . . . 4
Section 1.18 Contributed Interests . . . . . . . . . . . 4
Section 1.19 Contribution Agreements . . . . . . . . . . 4
Section 1.20 Conversion Factor . . . . . . . . . . . . . 5
Section 1.21 Distribution . . . . . . . .. . . . . . . . 5
Section 1.22 Equivalent HP Share . . . . . . . . . . . . 5
Section 1.23 Existing Partnerships . . . . . . . . . . . 5
Section 1.24 Fiscal Year . . . . . . . . . . . . . . . . 5
Section 1.25 General Partner . . . . . . . . . . . . . . 5
Section 1.26 General Partner Interest. . . . . . . . . . 5
Section 1.27 Home Leasing Assets . . . . . . . . . . . . 5
Section 1.28 Home Leasing Corporation. . . . . . . . . . 6
Section 1.29 Home Properties . . . . . . . . . . . . . . 6
Section 1.30 HP Management . . . . . . . . . . . . . . . 6
Section 1.31 HP Securities . . . . . . . . . . . . . . . 6
Section 1.32 HP Share. . . . . . . . . . . . . . . . . . 6
Section 1.33 HP Shares Amount. . . . . . . . . . . . . . 6
Section 1.34 Immediate Family. . . . . . . . . . . . . . 6
Section 1.35 Income Or Loss. . . . . . . . . . . . . . . . 6
Section 1.36 Indemnified Persons . . . . . . . . . . . .. 7
Section 1.37 Limited Partner . . . . . . . . . . . . . .. 7
Section 1.38 Limited Partners. . . . . . . . . . . . . .. 7
Section 1.39 Limited Partnership Interest. . . . . . . .. 7
Section 1.40 Liquidator. . . . . . . . . . . . . . . . .. 7
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Section 1.41 Majority of Limited Partners. . . . . . . .. 7
Section 1.42 Management Agreements . . . . . . . . . . .. 7
Section 1.43 Market Value. . . . . . . . . . . . . . . .. 7
Section 1.44 Merged Partnerships . . . . . . . . . . . .. 8
Section 1.45 Mergers . . . . . . . . . . . . . . . . . .. 8
Section 1.46 New HP Securities . . . . . . . . . . . . .. 8
Section 1.47 Nonrecourse Deductions. . . . . . . . . . .. 8
Section 1.48 Nonrecourse Liability . . . . . . . . . . .. 8
Section 1.49 Notice of Sale. . . . . . . . . . . . . . .. 9
Section 1.50 Original Limited Partners . . . . . . . . .. 9
Section 1.51 Original Agreement. . . . . . . . . . . . .. 9
Section 1.52 Partner . . . . . . . . . . . . . . . . . .. 9
Section 1.53 Partner Minimum Gain. . . . . . . . . . . .. 9
Section 1.54 Partner Nonrecourse Debt. . . . . . . . . .. 9
Section 1.55 Partner Nonrecourse Deductions. . . . . . .. 9
Section 1.56 Partners. . . . . . . . . . . . . . . . . .. 9
Section 1.57 Partnership . . . . . . . . . . . . . . . .. 9
Section 1.58 Partnership Agreement or Agreement. . . . .. 9
Section 1.59 Partnership Interest. . . . . . . . . . . .. 9
Section 1.60 Partnership Minimum Gain. . . . . . . . . .. 10
Section 1.61 Percentage Interest . . . . . . . . . . . .. 10
Section 1.62 Person. . . . . . . . . . . . . . . . . . .. 10
Section 1.63 Purchase Right. . . . . . . . . . . . . . .. 10
Section 1.64 QRS . . . . . . . . . . . . . . . . . . . .. 10
Section 1.65 Record Date . . . . . . . . . . . . . . . .. 10
Section 1.66 Regulations . . . . . . . . . . . . . . . .. 10
Section 1.67 Regulatory Allocations. . . . . . . . . . .. 10
Section 1.68 REIT. . . . . . . . . . . . . . . . . . . .. 11
Section 1.69 Reserves. . . . . . . . . . . . . . . . . .. 11
Section 1.70 Selling Partner . . . . . . . . . . . . . .. 11
Section 1.71 Specified Purchase Date . . . . . . . . . .. 11
Section 1.72 Substitute Limited Partner. . . . . . . . .. 11
Section 1.70 Unit. . . . . . . . . . . . . . . . . . . .. 11
ARTICLE II ORGANIZATION AND CONTINUATION. . . . . . . . .. 11
Section 2.01 Formation and Continuation. . . . . . . . .. 11
Section 2.02 Name. . . . . . . . . . . . . . . . . . . .. 11
Section 2.03 Purpose . . . . . . . . . . . . . . . . . .. 11
Section 2.04 Principal Office. . . . . . . . . . . . . .. 12
Section 2.05 Term. . . . . . . . . . . . . . . . . . . .. 12
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<PAGE>
ARTICLE III CAPITAL CONTRIBUTIONS. . . . . . . . . . . . . 12
Section 3.01 Initial Capitalization. . . . . . . . . . . 12
Section 3.02 Issuance of Additional Units. . . . . . . . 13
Section 3.03 Issuance of Other Partnership
Interests. . . . . . . . . . . .. . . . . . . . 13
Section 3.04 Issuance of Securities by General
Partner. . . . . . . . . . . . .. . . . . . . . 14
Section 3.05 Admission of Additional Limited
Partners . . . . . . . . . . . .. . . . . . . . 15
Section 3.06 Return of Capital Contributio. . . . . . . . 15
Section 3.07 No Preemptive Rights. . . . .. . . . . . . . 15
ARTICLE IV ALLOCATIONS AND DISTRIBUTIONS. . . . . . . . . 15
Section 4.01 Allocations Of Income Or Loss . . . . . . . 15
Section 4.02 Special Allocations . . . . . . . . . . . . 15
Section 4.03 Curative Allocations. . . . . . . . . . . . 17
Section 4.04 Other Allocation Rules. . . . . . . . . . . 17
Section 4.05 Distributions . . . . . . . . . . . . . . . 18
ARTICLE V MANAGEMENT OF PARTNERSHIP BUSINESS . . . . .. . 20
Section 5.01 Powers of General Partner . . . . . . . .. . 20
Section 5.02 Duties of General Partner . . . . . . . .. . 22
Section 5.03 Partnership Tax Matters . . . . . . . . .. . 23
Section 5.04 Indemnification . . . . . . . . . . . . .. . 23
Section 5.05 Liabilities of General Partner. . . . . . . 24
Section 5.06 Title to Partnership Assets . . . . . . . . 25
Section 5.07 Authority of General Partner. . . . . . . . 25
Section 5.08 Contracts with Affiliated Persons . . . . . 26
Section 5.09 Reimbursement of the General Partner. . . . 26
Section 5.10 Resignation, Withdrawal and Removal of
General Partner. . . . . . . . . . . . . . 27
Section 5.11 Outside Activities of the General
Partner. . . . . . . . . . . . . . . . . . . . 28
ARTICLE VI THE LIMITED PARTNERS . . . . . . .. . . . . . . 29
Section 6.01 Liability of Limited Partners .. . . . . . . 29
Section 6.02 Management of Business. . . . .. . . . . . . 29
Section 6.03 Outside Activities of Limited Partners. .. . 29
Section 6.04 Rights of Limited Partners Relating
to the Partnership . . . . . . . . . .. . . . . 30
Section 6.05 Transfer of Partnership Interests .. . . . . 31
Section 6.06 Substitute Limited Partners . . . .. . . . . 32
Section 6.07 Meetings of Partners and Consent. .. . . . . 32
Section 6.08 Purchase Right. . . . . . . . . . .. . . . . 34
Section 6.09 Withdrawal. . . . . . . . . . . . .. . . . . 35
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<PAGE>
ARTICLE VII DISSOLUTION. . . . . . . . . . . . . . .. . . . 35
Section 7.01 Dissolution . . . . . . . . . . . . .. . . . 35
Section 7.02 Liquidation . . . . . . . . . . . . . . . . 36
Section 7.03 Final Statement . . . . . . . . . . . . . . 37
ARTICLE VIII BOOKS AND ACCOUNTS . . . . . . . . . . . . . . 38
Section 8.01 Books . . . . . . . . . . . . . . . . . . . 38
Section 8.02 Reports . . . . . . . . . . . . . . . . . . 38
Section 8.03 Bank Accounts . . . . . . . . . . . . . . . 38
ARTICLE IX GENERAL. . . . . . . . . . . . . . . . . . . . 39
Section 9.01 Notices . . . . . . . . . . . . . . . . . . 39
Section 9.02 Captions. . . . . . . . . . . . . . . . . . 39
Section 9.03 Pronouns and Plurals. . . . . . . . . . . . 40
Section 9.04 Entire Agreement. . . . . . . . . . . . . 40
Section 9.05 Further Action. . . . . . . . . . . . . . . 40
Section 9.06 Binding Effect. . . . . . . . . . . . . . . 40
Section 9.07 Creditors . . . . . . . . . . . . . . . . . 40
Section 9.08 Validity. . . . . . . . . . . . . . . . . . 40
Section 9.09 Governing Law . . . . . . . . . . . . . . . 40
Section 9.10 Amendment . . . . . . . . . . . . . . . . . 40
Section 9.11 Power of Attorney . . . . . . . . . . . . . 42
ARTICLE X CLASS A LIMITED PARTNERSHIP INTERESTS. . . . 43
Section 10.01 Name . . . . . . . . . . . . . . . . . . . 43
Section 10.02 Capital Contribution . . . . . . . . . . . 43
Section 10.03 Status of Holders. . . . . . . . . . . . . 43
Section 10.04 Preferred Return . . . . . . . . . . . . . 44
Section 10.05 Transfer Rights. . . . . . . . . . . . . . 46
Section 10.06 Conversion Rights. . . . . . . . . . . . . 46
Section 10.07 Voting Rights. . . . . . . . . . . . . . . 53
Section 10.08 Calculation of Percentage Interest . . . . 59
Section 10.09 Liquidation. . . . . . . . . . . . . . . . 59
Section 10.10 Redemption of the Class A Limited
Partnership Interest . . . . . . . . . .. . 60
Section 10.11 Notices. . . . . . . . . . . . . . . . .. . 60
EXHIBIT A NOTICE OF SALE
EXHIBIT B ASSIGNMENT OF CLASS A INTEREST
EXHIBIT C CLASS A LIMITED PARTNERSHIP
SCHEDULE A PARTNERS, UNITS AND PERCENTAGE INTEREST
SCHEDULE B DEFICIT RESTORATION SCHEDULE
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<PAGE>
HOME PROPERTIES OF NEW YORK, L.P.
SECOND AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
This Second Amended and Restated Agreement of Limited Partnership
is entered into as of this 23rd day of September, 1997, by and among Home
Properties of New York, Inc., a Maryland corporation, as the general
partner, and each of the persons whose names are set forth on Schedule A
hereto, as the limited partners.
Home Properties of New York, L.P. was formed as a limited
partnership under the laws of the State of New York pursuant to an
Agreement of Limited Partnership dated as of December 17, 1993 by and
between the General Partner and the Original Limited Partners and a
Certificate of Limited Partnership dated December 17, 1993 and filed with
the Secretary of State of the State of New York on December 20, 1993. An
Amended and Restated Agreement of Limited Partnership was entered into on
August 4, 1994 to reflect the reorganization of the Partnership in
connection with the initial public offering of the General Partner's Common
Stock. The General Partner has entered into twelve amendments to the
Amended and Restated Agreement of Limited Partnership, all of which are
reflected in this Second Amendment Restated Agreement of Limited
Partnership as well as additional amendments to: (a) convert all but 1%
of the interest of Home Properties of New York, Inc. (the "General
Partner") into a limited partnership interest and to transfer that limited
partnership interest to a newly formed entity in which the General Partner
is the sole beneficial owner and which is treated for federal income tax
purposes as a "qualified REIT subsidiary" ("QRS"), (b) admit the General
Partner's QRS as a limited partner of the Partnership, (c) amend the
definition of "Specified Purchase Date" and related provisions to provide
that the Market Value used in calculating the amount to be received by a
Limited Partner exercising his Purchase Right under the Partnership
Agreement will be based on the ten consecutive trading days prior to the
date on which the Limited Partner gives Notice of Sale relating to his
intention to exercise the Purchase Right and to provide that the purchase
will occur within five business days after the Limited Partner's notice,
(d) add a provision for special allocation of tax losses to certain
limited partners who voluntarily agree to make a cash contribution, upon
the liquidation of the Partnership, of an amount equal to the amount of any
deficit in their capital account or their agreed percentage of certain
Partnership recourse liabilities, whichever would result in the smaller
contribution, and to amend the provisions governing allocation of
nonrecourse liabilities to provide that the General Partner may allocate
excess nonrecourse liabilities among the Partners in any manner permitted
under the regulations and rulings of the Internal Revenue Service, (e) make
other amendments to conform the Partnership Agreement to the foregoing,
(f) reflect the issuance of Units to former partners and holders of
interests in properties in connection with the merger of the Partnership
with P-K Partnership, Glenvwk Partnership, Exmark Partnership, [Curren
Partnership], Valspring Partnership and Chesterfield Partnership, each a
Pennsylvania limited partnership, and New Orleans East Limited Partnership,
a New Jersey limited partnership or, in the event that New Orleans East
Limited Partnership is dissolved prior to the merger and its assets
distributed to its partners, the merger of the Partnership with Norpark
Partnership, a Pennsylvania limited partnership, which is the limited
partner of New Orleans East Limited Partnership, and the acquisition of
Patricia Court Apartments and Karen Court Apartments
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(in part through the merger with P-K Partnership and in part directly from the
other partner) and two additional properties known as Marshall House and
Landon Court, and (g) restate the Partnership Agreement, as so amended, as
the Second Amended and Restated Agreement of Limited Partnership.
In consideration of the mutual covenants set forth below, the
Partners agree as follows:
ARTICLE I
DEFINITIONS
As used in this Second Amended and Restated Agreement of Limited
Partnership, including the preamble hereof, the following terms shall have
the meanings indicated:
Section 1.01 Act. Article 8-A of the New York Partnership Law,
known as the New York Revised Limited Partnership Act, as such Act may be
amended from time to time, and any successor thereto.
Section 1.02 Additional Limited Partner. A Person admitted to
the Partnership as a Limited Partner pursuant to Section 3.05 hereof.
Section 1.03 Additional Partnerships. Those limited or general
partnership interests in which are acquired by the Partnership from time to
time by contribution, merger or otherwise.
Section 1.04 Adjusted Capital Account Deficit. The deficit
balance, if any, in a Partner's Capital Account as of the end of any Fiscal
Year after such Capital Account has been: (a) increased by any amounts
which such Partner (i) is obligated to restore pursuant to the terms of
this Agreement; (ii) is otherwise treated as being obligated to restore
under Section 1.704-1(b)(2)(ii)(c) of the Regulations; or (iii) is deemed
to be obligated to restore pursuant to the penultimate sentences of
Sections 1.704-2(g)(1) and 1.704-2(i)(5) of the Regulations; and
(b) decreased by the items described in Sections 1.704-1(b)(2)(ii)(d)(4),
(5) and (6) of the Regulations. The foregoing definition of Adjusted
Capital Account Deficit is intended to comply with the provisions of
Section 1.704-1(b)(2)(ii)(d) of the Regulations and shall be interpreted
consistently therewith.
Section 1.05 Assignee. A Person to whom a Limited Partnership
Interest is transferred, but who has not become a Substitute Limited
Partner pursuant to Section 6.06 hereof.
Section 1.06 Affiliated Person. Any Person who is the General
Partner or that controls, or is controlled by or is under common control
with, the General Partner and
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any officer, director, general partner or
trustee of any such Person. For purposes of this definition, "control"
shall mean the possession, direct or indirect, of the power to direct or
cause the direction of the management and policies of a Person, whether
through the ownership of voting securities, by contract, or otherwise, and,
for purposes hereof, the ownership of ten percent or more of the
outstanding voting interests of a Person shall be deemed to be "control".
Section 1.07 Assignment of Limited Partnership Interest. A duly
completed and executed assignment of limited partnership interest, in a
form reasonably acceptable to the General Partner.
Section 1.08 Assignment of Home Leasing Assets. The Assignment,
dated August 4, 1994, pursuant to which Home Leasing Corporation
transferred the Home Leasing Assets to the Partnership.
Section 1.09 Available Cash. Available cash means, with respect
to any period for which such calculation is being made,
(a) the sum of:
(i) the Partnership's Income or Loss (as the case may be)
for such period (without regard to adjustments resulting from
allocations described in Sections 4.02, 4.03 and 4.04 hereof);
(ii) depreciation and all other noncash charges deducted in
determining Income or Loss for such period;
(iii) the amount of any reduction in the Reserves
(including, without limitation, reductions resulting because the
General Partner determines such amounts are no longer necessary);
and
(iv) all other cash received by the Partnership for such
period that was not included in determining Income or Loss for
such period,
less (b) the sum of:
(i) all principal payments on debt made by the Partnership
during such period;
(ii) capital expenditures made by the Partnership during
such period;
(iii) investments made by the Partnership during such
period in any entity (including loans made thereto) to the extent
that such investments are not otherwise described in clause (b)
(i) or (b) (ii);
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(iv) all other expenditures and payments not deducted in
determining Income or Loss for such period;
(v) any amount included in determining Income or Loss for
such period that was not received by the Partnership during such
period;
(vi) the amount of any increase in Reserves during such
period which the General Partner determines to be necessary or
appropriate in its sole discretion; and
(vii) the amount of any working capital accounts and
other cash or similar balances which the General Partner
determines to be necessary or appropriate, in its sole
discretion.
Section 1.10 Business Day. Any day except a Saturday, Sunday or
other day on which commercial banks in New York, New York are authorized or
required by law to close.
Section 1.11 Capital Account. The Capital Account of each
Partner shall be the amount of cash or the fair market value of any
property contributed by such Partner to the Partnership pursuant to
Article III hereof:
(a) increased by: (i) the amount of any other cash and the fair
market value (as determined by the Contributing Partner and the
Partnership) of any other property contributed by the Partner to the
Partnership; (ii) the amount of Income allocated to the Partner and any
items in the nature of income or gain which are specially allocated to the
Partner pursuant to Sections 4.02, 4.03 and 4.04 (except as provided in the
last sentence of paragraph (b) of Section 4.04); and (iii) the amount of
any Partnership liabilities assumed by the Partner, including, without
limitation, the amount of such Partner's deficit restoration obligation set
forth on Schedule B to this Partnership Agreement, if any, or which are
secured by any Partnership property distributed to such Partner; and
(b) decreased by: (i) the amount of cash and the fair market
value (as determined by the General Partner in its sole discretion) of any
Partnership property distributed to the Partner as a Distribution; (ii) the
amount of Losses allocated to the Partner and any items in the nature of
expenses or losses that are specially allocated pursuant to Sections 4.02,
4.03 and 4.04 (except as provided in the last sentence of paragraph (b) of
Section 4.04); and (iii) the amount of any liabilities of such Partner
assumed by the Partnership or which are secured by any property contributed
by such Partner to the Partnership.
Capital Accounts shall be maintained and adjusted in accordance with the
provisions of Section 1.704-1(b)(2)(iv) of the Regulations. In the event
that any interest in the Partnership is transferred in accordance with the
terms of this Agreement, the transferee shall succeed to
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the Capital
Account of the transferor to the extent it relates to the transferred
interest. The foregoing provisions and the other provisions of this
Agreement relating to the maintenance of Capital Accounts are intended to
comply with Section 1.704-1(b) of the Regulations, and shall be interpreted
and applied in a manner consistent with such Regulations.
Section 1.12 Capital Contribution. The cash, cash equivalent or
other property contributed to the Partnership by a Partner in accordance
with Article III hereof.
Section 1.13 Cash Amount. An amount of cash equal to the Market
Value of the HP Shares Amount on the date the General Partner receives the
Notice of Sale.
Section 1.14 Certificate. The Certificate of Limited
Partnership of the Partnership filed with the Secretary of State of the
State of New York on December 20, 1993, as such may be amended from time to
time.
Section 1.15 Closing Date. August 4, 1994, the date the sale by
the General Partner of HP Shares in its initial public offering was
consummated.
Section 1.16 Code. The Internal Revenue Code of 1986, as
amended.
Section 1.17 Conifer. Conifer Realty Corporation, a Maryland
corporation with its principal office at 850 Clinton Square, Rochester, New
York 14604.
Section 1.18 Contributed Interests. The limited partnership
interests in the Existing Partnerships and any Additional Partnerships
contributed to the Partnership by the Limited Partners as described in the
Contribution Agreements entered into from time to time with the
Partnership.
Section 1.19 Contribution Agreements. The agreements between
the Partnership and certain Limited Partners pursuant to which the Limited
Partners have agreed to contribute the Contributed Interests and Home
Leasing Assets to the Partnership.
Section 1.20 Conversion Factor means 1.0, provided that in the
event that the General Partner (a) declares or pays a dividend on its
outstanding HP Shares in HP Shares or makes a distribution to all holders
of its outstanding HP Shares in HP Shares; (b) subdivides its outstanding
HP Shares; or (c) combines its outstanding HP Shares into a smaller number
of HP Shares, the Conversion Factor shall be adjusted by multiplying the
Conversion Factor by a fraction, the numerator of which shall be the number
of HP Shares issued and outstanding on the record date for such dividend,
distribution, subdivision or combination assuming for such purpose that
such dividend, distribution, subdivision or combination has occurred as of
such time, and the denominator of which shall be the actual number of HP
Shares (determined without the above assumption) issued and outstanding on
the record date for such dividend, distribution, subdivision or
combination. Any adjustment of the
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Conversion Factor shall become
effective immediately after the effective date of such event retroactive to
the record date, if any, for such event.
Section 1.21 Distribution. Any transfer of money or other
property to a Partner, in his capacity as a Partner, from the Partnership.
The term "Distribution" shall not include amounts paid to the General
Partner pursuant to Sections 5.04 or 5.09 hereof. For purposes of this
definition, property is to be valued at its fair market value on the date
of transfer.
Section 1.22 Equivalent HP Share. A share of stock of the
General Partner which has such rights and powers that the economic
interests attributable to such share are substantially similar to the
rights and powers of a particular class or group of Partnership Interests
established by the General Partner pursuant to Section 3.03 hereof.
Section 1.23 Existing Partnerships. Fairview Associates, II;
Finger Lakes Manor Associates; Newcastle Associates; Perinton Manor
Associates; Raintree Island Associates; Riverton Knolls Associates; 1600
Elmwood Associates; Springcreek Associates; Waterfalls Village Associates;
Wedgewood Shopping Center Limited Partnership; Wedgewood Park Limited
Partnership and Williamstowne Associates.
Section 1.24 Fiscal Year. From January 1 to December 31 of each
year or such portion thereof as the Partnership shall be in existence.
Section 1.25 General Partner. Home Properties or its successors
as general partner of the Partnership.
Section 1.26 General Partner Interest. The 1% Partnership
Interest held by the General Partner. The General Partner Interest may be
expressed as a number of Units.
Section 1.27 Home Leasing Assets. The assets of Home Leasing
Corporation contributed to the Partnership by Home Leasing Corporation and
more fully described in the Assignment of Home Leasing Assets, dated August
4, 1994.
Section 1.28 Home Leasing Corporation. Home Leasing
Corporation, a New York corporation with its principal office at
850 Clinton Square, Rochester, New York 14604.
Section 1.29 Home Properties. Home Properties of New York,
Inc., a Maryland corporation with its principal office at 850 Clinton
Square, Rochester, New York 14604, the initial General Partner of the
Partnership.
Section 1.30 HP Management. Home Properties Management, Inc., a
Maryland corporation with its principal office at 850 Clinton Square,
Rochester, New York 14604.
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Section 1.31 HP Securities. HP Shares or New HP Securities
issued by the General Partner (including without limitation any Equivalent
HP Shares).
Section 1.32 HP Share. A share of Common Stock of the General
Partner.
Section 1.33 HP Shares Amount. A number of HP Shares equal to
the product of the number of Units offered for redemption by a Selling
Partner, multiplied by the Conversion Factor; provided that in the event
the General Partner issues to all holders of HP Shares transferable rights,
options, warrants or convertible or exchangeable securities entitling the
shareholders to subscribe for or purchase HP Shares, or any other
securities or property (collectively, the "rights") then, the HP Shares
Amount shall also include such rights that a holder of that number of HP
Shares would be entitled to receive.
Section 1.34 Immediate Family. With respect to any natural
Person, such natural Person's spouse, parents, descendants, nephews,
nieces, brothers and sisters.
Section 1.35 Income or Loss. Income or Loss for any Fiscal Year
means the Partnership's taxable income or loss for the Fiscal Year,
determined in accordance with Section 703(a) of the Code (for this purpose,
all items of income, gain, loss or deduction required to be stated
separately pursuant to Section 703(a)(1) of the Code shall be included in
taxable income or loss), with the following adjustments:
(a) Any expenditures of the Partnership described in
Section 705(a)(2)(B) of the Code or treated as Code Section 705(a)(2)(B)
expenditures pursuant to Section 1.704-1(b)(2)(iv)(i) of the Regulations
shall be subtracted from such taxable income or loss;
(b) Any income of the Partnership that is exempt from federal
income tax and not otherwise taken into account in computing Income or Loss
pursuant to this definition shall be added to such taxable income or loss;
(c) Any gain or loss which would have been realized by the
Partnership on the sale of assets distributed in kind to Partners,
determined with reference to the fair market value and the adjusted tax
basis of such property for federal income tax purposes immediately prior to
such distribution, shall be added to or subtracted from such taxable income
of loss;
(d) Income or Loss does not include any amount allocated
pursuant to paragraph (b) of Section 4.04; and
(e) The computation of all items of income, gain, loss or
deduction shall be made without regard to any adjustment to the adjusted
tax basis of a Partnership asset resulting from an election under
Section 754 of the Code (except to the extent required under
Section 1.704-1(b)(2)(iv)(m) of the Regulations).
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Section 1.36 Indemnified Persons. Any Person made a party to a
proceeding by reason of his status as the General Partner or as a director
or officer of the General Partner of the Partnership and any other Persons
(including Affiliated Persons) as the General Partner may designate in
writing from time to time, in its sole discretion.
Section 1.37 Limited Partner. Any Person named as a Limited
Partner in Schedule A attached hereto, as such Schedule may be amended from
time to time, or any Substitute Limited Partner or Additional Limited
Partner, in such person's capacity as a Limited Partner of the Partnership.
Section 1.38 Limited Partners. All of the Limited Partners.
Section 1.39 Limited Partnership Interest. The Partnership
Interest held by a Limited Partner in the Partnership representing a
fractional part of the Partnership Interests of all Limited Partners. A
Limited Partnership Interest may be expressed as a number of Units.
Section 1.40 Liquidator. The General Partner or other Person
appointed to liquidate the assets of the Partnership pursuant to Section
7.02 hereof.
Section 1.41 Majority of Limited Partners. Limited Partners
holding a majority of the Units held by all Limited Partners.
Section 1.42 Management Agreements. The agreements for the
management of properties owned by affiliates of Home Leasing Corporation,
C.O.F., Inc. and Conifer Development, Inc. and third parties to be entered
into by such persons and HP Management or Conifer or assigned or
subcontracted by Home Leasing Corporation, C.O.F., Inc. or Conifer
Development, Inc. to HP Management or Conifer.
Section 1.43 Market Value. (a) With respect to an HP Share, the
average of the daily market price for the ten (10) consecutive trading days
immediately preceding the date on which the Market Value is to be
determined. The market price for each such trading day shall be: (i) if
the HP Shares are listed or admitted to trading on any securities exchange
or the NASDAQ-National Market System, the closing price, regular way, on
such day, or if no such sale takes place on such day, the average of the
closing bid and asked prices on such day, or (ii) if the HP Shares are not
listed or admitted to trading on any securities exchange or the NASDAQ-
National Market System, the last reported sale price on such day or, if no
sale takes place on such day, the average of the closing bid and asked
prices on such day, as reported by a reliable quotation source designated
by the General Partner, or if no such last reported sale price or closing
bid and asked prices are available, the average of the reported high bid
and low asked prices on such day, as reported by a reliable quotation
source designated by the General Partner, or if there shall be no bid and
asked prices on such day, the average of the high bid and low asked prices,
as so reported, on the most recent day (not more than 10 days prior to the
date in question) for which prices have been so reported;
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provided that if
there are no bid and asked prices reported during the 10 days prior to the
date in question, the Market Value of the HP Shares shall be determined by
the General Partner acting in good faith on the basis of such quotations
and other information as it considers, in its reasonable judgment,
appropriate.
(b) In the event the HP Shares Amount includes rights that
a holder of HP Shares would be entitled to receive, then the Market Value
of such rights shall be determined by the General Partner acting in good
faith on the basis of such quotations and other information as it
considers, in its reasonable judgment, appropriate.
Section 1.44 Merged Partnerships. All of the Existing
Partnerships other than Wedgewood Shopping Center Limited Partnership and
Wedgewood Park Limited Partnership and any Additional Partnerships merged
with and into the Partnership.
Section 1.45 Mergers. The transactions pursuant to which the
Merged Partnerships are merged into the Partnership.
Section 1.46 New HP Securities. The meaning set forth in
Section 3.04(b) hereof.
Section 1.47 Nonrecourse Deductions. For any Fiscal Year, an
amount equal to the excess, if any, of the net increase, if any, in the
amount of Partnership Minimum Gain during that Fiscal Year over the
aggregate amount of any Distributions during that Fiscal Year of proceeds
of a Nonrecourse Liability that are allocable to an increase in Partnership
Minimum Gain, determined according to the provisions of Section 1.704-2(c)
of the Regulations.
Section 1.48 Nonrecourse Liability. Any Partnership liability
(or portion thereof) for which no Partner bears the economic risk of loss,
determined in accordance with Section 1.704-2(b)(3) of the Regulations.
Section 1.49 Notice of Sale. A Notice of Sale substantially in
the form of Exhibit A hereto.
Section 1.50 Original Limited Partners. Norman P. Leenhouts and
Nelson B. Leenhouts.
Section 1.51 Original Agreement. The Agreement of Limited
Partnership of the Partnership entered into by and among Home Properties,
as the General Partner, and Norman P. Leenhouts and Nelson B. Leenhouts, as
the Limited Partners, dated as of December 17, 1993.
Section 1.52 Partner. The General Partner or any Limited
Partner.
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Section 1.53 Partner Minimum Gain. An amount, with respect to
each Partner Nonrecourse Debt, equal to the Partnership Minimum Gain that
would result if such Partner Nonrecourse Debt were treated as a Nonrecourse
Liability, determined in accordance with Section 1.704-2(i)(3) of the
Regulations.
Section 1.54 Partner Nonrecourse Debt. Any Nonrecourse
Liability of the Partnership for which any Partner bears the economic risk
of loss, determined in accordance with Section 1.704-2(b)(4) of the
Regulations.
Section 1.55 Partner Nonrecourse Deductions. For any Fiscal
Year, any amount with respect to a Partner Nonrecourse Debt equal to the
excess of the net increase in the amount of Partner Minimum Gain
attributable to such Partner Nonrecourse Debt during that Fiscal Year over
the aggregate amount of any Distributions during that Fiscal Year to the
Partner that bears the economic risk of loss for such Partner Nonrecourse
Debt to the extent such Distributions are from the proceeds of such Partner
Nonrecourse Debt and are allocable to an increase in Partner Minimum Gain
attributable to such Partner Nonrecourse Debt, determined in accordance
with Section 1.704-2(i)(2) of the Regulations.
Section 1.56 Partners. The General Partner and the Limited
Partners.
Section 1.57 Partnership. The limited partnership formed under
the Act and pursuant to the Certificate and the Original Agreement, as
amended and continued by the Amended and Restated Agreement of Limited
Partnership, dated August 4, 1994, as amended and as further amended and
continued this Partnership Agreement, and any successor thereto.
Section 1.58 Partnership Agreement or Agreement. This Second
Amended and Restated Agreement of Limited Partnership, as such may be
amended from time to time.
Section 1.59 Partnership Interest. An ownership interest in the
Partnership representing a Capital Contribution by a Partner, including any
and all benefits to which the holder of such a Partnership Interest may be
entitled as provided in this Partnership Agreement, together with all
obligations of such Person to comply with the terms and provisions of this
Partnership Agreement. The Partnership Interest of each Partner shall be
personal property for all purposes. A Partnership Interest may be
expressed as a number of Units.
Section 1.60 Partnership Minimum Gain. The aggregate of the
amount of any gain that would be realized by the Partnership if it disposed
of the Partnership property subject to each Nonrecourse Liability in a
taxable transaction in full satisfaction of such Liability and for no other
consideration. It is intended that Partnership Minimum Gain be determined
in accordance with Section 1.704-2(d) of the Regulations.
Section 1.61 Percentage Interest. The proportionate interest of
a Partner in the allocations of Income or Loss and Distributions of the
Partnership. With respect to
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allocations of Income or Loss and
Distributions available for Units, the Partner's interest is determined by
dividing the Units owned by such Partner by the total number of Units then
outstanding. With respect to allocations of Income or Loss and
Distributions available for Partnership Interests not expressed as Units,
the Partner's Percentage Interest is as set forth in the amendment to this
Partnership Agreement pursuant to Section 3.03 establishing such
Partnership Interests.
Section 1.62 Person. An individual, or a corporation,
partnership, trust, unincorporated organization, association or other
entity or a government or an agency or political subdivision thereof.
Section 1.63 Purchase Right. The meaning set forth in
Section 6.08 hereof.
Section 1.64 QRS. Home Properties Trust, a Maryland real estate
investment trust formed by the General Partner, or any other entity, all of
the equity interests of which are held, directly or indirectly by the
General Partner and which is a "qualified REIT subsidiary" as such term is
used in Section 856(i) of the Code, or any replacement or subsequent
provision of the Code.
Section 1.65 Record Date. With respect to Distributions, the
first day of the month during which a Distribution is made, after
reflecting assignments effective as of such day. With respect to voting,
the date specified in the notice of meeting described in Section 6.07(b)
hereof.
Section 1.66 Regulations. The federal income tax regulations
promulgated under the Code, including Temporary Regulations, promulgated
under the Code, as such regulations may be amended from time to time
(including corresponding provisions of succeeding regulations).
Section 1.67 Regulatory Allocations. The allocations set forth
in paragraphs (c), (d) and (e) of Section 4.02.
Section 1.68 REIT. A real estate investment trust as defined
in Section 856 of the Code.
Section 1.69 Reserves. Reserves established by the General
Partner pursuant to Section 5.01(a)(xi) hereof.
Section 1.70 Selling Partner. The meaning set forth in Section
6.08 hereof.
Section 1.71 Specified Purchase Date. The fifth Business Day
after receipt by the General Partner of a Notice of Sale; provided that if
the General Partner combines its outstanding HP Shares, no Specified
Purchase Date shall occur after the record date and prior to the effective
date of such combination.
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Section 1.72 Substitute Limited Partner. A Person who is
admitted to the Partnership as a Limited Partner pursuant to Section 6.06
hereof.
Section 1.70 Unit. A fractional, undivided share of the
Partnership Interests of all Partners issued pursuant to Section 3.01 and
3.02 hereof.
ARTICLE II
ORGANIZATION AND CONTINUATION
Section 2.01 Formation and Continuation. The Partnership was
formed pursuant to the Act and, except where otherwise provided in this
Partnership Agreement and permitted by the Act, shall be operated in
accordance with the provisions thereof. The Partners hereby agree to
continue the Partnership upon the terms and conditions of this Partnership
Agreement.
Section 2.02 Name. The name of the Partnership is Home
Properties of New York, L.P. The Partnership may conduct its business
under such other name or names as the General Partner may deem advisable,
and the General Partner, in its sole discretion, may change the name of the
Partnership at any time and from time to time; provided, however, that the
words "Limited Partnership" or "L.P." or similar words or letters shall be
included in the Partnership's name where necessary for purposes of
complying with the applicable laws of any jurisdiction that so requires.
The General Partner shall notify the Limited Partners of any change in the
name of the Partnership in the next regular communication to the Limited
Partners.
Section 2.03 Purpose. The purpose of the Partnership is to
engage in any lawful act or activity for which limited partnerships may be
organized under the Act, including, but not limited to, the acquisition,
financing, development, holding, management and disposition of real
property with a view to generating Distributions and long-term capital
appreciation, and to perform any acts necessary or appropriate to
accomplish the foregoing purposes; provided, however, that such activities
shall be limited to and conducted in such a manner as to permit the General
Partner at all times to be treated as a REIT for federal income tax
purposes, unless and until such time as the General Partner ceases to
qualify as a REIT for reasons other than the conduct of the business of the
Partnership and is not seeking to re-elect REIT status.
Section 2.04 Principal Office. The principal office of the
Partnership shall be located at 850 Clinton Square, Rochester, New York
14604 or at such other place as the General Partner may from time to time
designate by written notice to the Limited Partners. The Partnership may
maintain offices at such other place or places within or outside the State
of New York as the General Partner deems advisable.
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Section 2.05 Term. The Partnership commenced on December 20,
1993 and shall continue through December 31, 2093, unless sooner dissolved
in accordance with the terms of this Partnership Agreement or as otherwise
provided by law.
ARTICLE III
CAPITAL CONTRIBUTIONS
Section 3.01 Current Capitalization.
(a) On the Closing Date, the General Partner contributed cash in
the amount equal to the net proceeds received by it from the sale of HP
Shares and received the number of Units equal to the number of HP Shares
sold.
(b) From time to time, certain Limited Partners named on
Schedule A hereto transferred the Contributed Interests and Home Leasing
Assets to the Partnership in accordance with the provisions of the
Contribution Agreements and have received the number of Units and the
amount of cash set forth in the respective Contribution Agreements.
(c) From time to time, upon the consummation of the Mergers
(i) Home Leasing Corporation was deemed to have contributed to the
Partnership its general partnership interests in the Merged Partnerships,
(ii) the holders of certain partnership interests were deemed to have
contributed to the Partnership their limited partnership interests in the
Merged Partnerships, and (iii) each partner of the Merged Partnerships
received the number of Units or amount of cash set forth in the respective
agreements with respect to the Mergers.
(d) In consideration of the Capital Contributions described in
subsections (a) through (c) of this Section 3.01, each Partner received the
number of Units and shall have the Percentage Interests in the Partnership
as set forth on Schedule A hereto as amended from time to time by the
General Partner to the extent necessary to reflect accurately such Capital
Contributions, any additional Capital Contributions, the issuance of
additional Units or other Partnership Interests, the admission of
Additional Limited Partners or other similar events affecting a Partner's
Percentage Interest.
Section 3.02 Issuance of Additional Units.
(a) Subject to subsection (b) of this Section 3.02, the General
Partner is hereby authorized to cause the Partnership to issue Units (in
addition to those issued pursuant to Section 3.01 hereof) to Partners or
other Persons from time to time and to require such Partners or other
Persons to make such Capital Contributions as consideration for such Units
as it shall determine in its sole discretion.
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(b) The General Partner shall not issue any additional Units to
itself or to the QRS unless the additional Units are issued in connection
with the issuance of HP Shares by the General Partner and the General
Partner makes or causes the QRS an additional Capital Contribution to the
Partnership in an amount equal to the net proceeds raised in connection
with the issuance of such HP Shares by the General Partner.
Section 3.03 Issuance of Other Partnership Interests.
(a) Subject to subsection (b) of this Section 3.03, the General
Partner is hereby authorized to cause the Partnership to issue additional
Partnership Interests (other than Units) to Partners or other Persons from
time to time and to require such Partners or other Persons to make such
Capital Contributions as consideration for such Partnership Interests as it
shall determine in its sole discretion. Any such additional Partnership
Interests shall consist of one or more classes or groups having such name
and relative rights and powers, including rights and powers senior to Units
or other outstanding classes or groups of Partnership Interests, as shall
be determined by the General Partner in its sole discretion. Prior to
issuing any such additional Partnership Interests, the General Partner
shall have executed an amendment to this Partnership Agreement setting
forth the relative rights and powers of the class or group of Partnership
Interests to be issued, including, at a minimum, (i) the name of the class
or group of Partnership Interests, (ii) the allocations of items of
Partnership income, gain, loss, deduction and credit to the Partners
holding such class or group of Partnership Interests, (iii) the right of
the Partners holding such class or group of Partnership Interests to share
in Distributions, (iv) the right of the Partners holding such class or
group of Partnership Interests to share in the assets of the Partnership
upon its dissolution and liquidation, (v) the right, if any, of the
Partners holding such class or group of Partnership Interests to vote or
consent to certain transactions by the Partnership, and (vi) the right, if
any, of the Partners holding such class or group of Partnership Interests
to convert such Partnership Interests into Units or another class or group
of Partnership Interests.
(b) The General Partner shall not issue any additional
Partnership Interests to itself pursuant to Section 3.03(a) hereof unless
the additional Partnership Interests are issued in connection with the
issuance of Equivalent HP Shares by the General Partner and the General
Partner makes an additional Capital Contribution to the Partnership in an
amount equal to the net proceeds raised in connection with the issuance of
such Equivalent HP Shares by the General Partner.
(c) The Partnership Interest held by the General Partner
immediately prior to the date of this Partnership Agreement in excess of
its 1% General Partnership Interest shall be a Limited Partnership Interest
which may be held either by the General Partner or by the QRS (or in part
by both).
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Section 3.04 Issuance of Securities by General Partner.
(a) After the initial public offering of HP Shares, the General
Partner shall not issue any HP Shares to any Persons, other than to all of
the holders of HP Shares on a pro rata basis or to Limited Partners
pursuant to Section 6.08(b) hereof, unless it (i) causes the Partnership to
issue one additional Unit to itself or, following the date of this
Partnership Agreement, to the QRS for each HP Share so issued, and
(ii) contributes, or causes the QRS to contribute, the net proceeds from
the issuance of each HP Share to the Partnership as a Capital Contribution.
(b) The General Partner shall not issue any shares of stock
other than HP Shares or any rights, options, warrants or convertible or
exchangeable securities containing the right to subscribe for or purchase
HP Shares or any other shares of stock of the General Partner
(collectively, "New HP Securities"), other than to all of the holders of HP
Shares on a pro rata basis, unless it (i) causes the Partnership to issue
to itself or, following the date of this Partnership Agreement, to the QRS
additional Partnership Interests or rights, options, warrants or
convertible or exchangeable securities of the Partnership having rights and
powers such that the economic interests are substantially similar to those
of the New HP Securities, and (ii) contributes, or causes the QRS to
contribute, the net proceeds from the issuance of such New HP Securities
and from the exercise of rights contained in such New HP Securities to the
Partnership.
(c) Without limiting Section 3.04(a) or (b) hereof, the General
Partner is expressly authorized to issue HP Shares or New HP Securities for
less than fair market value, and the General Partner is expressly
authorized to cause the Partnership to issue to the General Partner or,
following the date of this Partnership Agreement, to the QRS corresponding
Units or other Partnership Interests pursuant to Section 3.04(a) or (b)
hereof, as applicable, so long as the General Partner concludes in good
faith that such issuance is in the interests of the General Partner and the
Partnership (for example, and not by way of limitation, the General Partner
may issue HP Shares and corresponding Units pursuant to an employee stock
purchase plan providing for employee purchases of HP Shares at a discount
from fair market value or employee stock options that have an exercise
price that is less than the fair market value of the HP Shares either at
the time of issuance or at the time of exercise).
Section 3.05 Admission of Additional Limited Partners. The
General Partner may admit Persons who are issued Units or other Partnership
Interests pursuant to Section 3.02 or 3.03 hereof as Additional Limited
Partners of the Partnership. Such Persons shall be admitted to the
Partnership as an Additional Limited Partners only upon furnishing to the
General Partner: (a) evidence, in form satisfactory to the General
Partner, of acceptance of all the terms and conditions of this Agreement;
(b) a Power of Attorney substantially identical to that contained in
Section 9.11 hereof; and (c) such other documents or instruments as may be
required, in the sole discretion of the General Partner, to effect such
admission. Such Persons shall be deemed admitted to the Partnership
pursuant to this Section 3.05 upon the
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execution by the General Partner of
an amendment to this Partnership Agreement adding the name or names of such
Persons to Schedule A hereto and reflecting such other changes to such
Schedule A as are appropriate in connection therewith.
Section 3.06 Return of Capital Contributions. Neither the
Partnership nor any Partner shall have personal liability for the return of
the Capital Contribution of any Partner, or any portion thereof. No
Partner shall be entitled to interest on his Capital Contribution.
Section 3.07 No Preemptive Rights. No Person shall have any
preemptive, preferential or other similar right with respect to the
issuance or sale of any Units or other Partnership Interests as a result of
this Partnership Agreement.
ARTICLE IV
ALLOCATIONS AND DISTRIBUTIONS
Section 4.01 Allocations Of Income Or Loss.
(a) Except as provided in sections 4.02, 4.03 and 4.04, Income
shall be allocated as follows: (i) first, to each Class A Interest Holder
to the extent of, and in proportion to, the excess of the cumulative Losses
allocated to such Class A Interest Holder pursuant to Section 4.01(b)(ii)
hereof over the cumulative amount of Income allocated to such Class A
Interest Holders pursuant to this Section 4.01(a)(i); and (ii) thereafter,
to the Partners who hold Units, pro rata in accordance with their
respective Percentage Interests.
(b) Except as provided in Sections 4.02, 4.03 and 4.04, Loss
shall be allocated as follows: (i) first, to the Partners who hold Units,
pro rata in accordance with their respective Percentage Interests, until
each such Partner has a zero Capital Account; (ii) second, to the Class A
Interest Holders to the extent of, and in proportion to, the positive
balance in their Capital Accounts; (iii) third, to the General Partner
until the General Partner has a negative Capital Account balance equal to
the excess, if any, of the amount of the Partnership's recourse liabilities
over the aggregate amount of Limited Partners' deficit restoration
obligations as set forth on Schedule B, as amended from time to time; (iv)
fourth to the Limited Partners listed on Schedule B in proportion to each
such Limited Partner's deficit restoration to the aggregate of the deficit
restoration obligations set forth on Schedule B until the sum of such
Limited Partners' negative Capital Account balances equals the aggregate of
the deficit restoration obligations set forth on Schedule B, and (v)
thereafter, to the General Partner.
Section 4.02 Special Allocations. The following special
allocations shall be made in the following order:
(a) Minimum Gain Chargeback. Notwithstanding any other
provision of this Article IV, if there is a net decrease in Partnership
Minimum Gain during any Fiscal
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Year, each Partner shall be specially
allocated items of Partnership income and gain for such Fiscal Year (and,
if necessary, subsequent Fiscal Years) in an amount equal to such Partner's
share of the net decrease in Partnership Minimum Gain during that Fiscal
Year, determined in accordance with Section 1.704-2(g) of the Regulations.
It is intended that items to be so allocated shall be determined and the
allocations made in accordance with the minimum gain chargeback requirement
of Section 1.704-2(f) of the Regulations, and this paragraph (a) shall be
interpreted consistently therewith.
(b) Partner Minimum Gain Chargeback. Notwithstanding any other
provision of this Article IV except paragraph (a) of this Section 4.02, if
there is a net decrease in Partner Minimum Gain during any Fiscal Year,
each Partner who has a share of the net decrease in Partner Minimum Gain
determined in accordance with Section 1.704-2(i)(5) of the Regulations,
shall be specially allocated items of Partnership income and gain for such
Fiscal Year (and, if necessary, subsequent Fiscal Years) in an amount equal
to such Partner's share of the net decrease in Partner Minimum Gain during
that Fiscal Year, determined in accordance with Section 1.704-2(i)(4) of
the Regulations. It is intended that the items to be so allocated shall be
determined and the allocations made in accordance with the minimum gain
chargeback requirement of Section 1.704-2(i)(4) of the Regulations, and
this paragraph (b) shall be interpreted consistently therewith.
(c) Qualified Income Offset. In the event any Partner
unexpectedly receives in any Fiscal Year any adjustments, allocations or
distributions described in Section 1.704-1(b)(2)(ii)(d)(4), (5) or (6) of
the Regulations, items of Partnership income and gain shall be specially
allocated to such Partner in such Fiscal Year (and, if necessary, in
subsequent Fiscal Years) in an amount and manner sufficient to eliminate,
to the extent required by the Regulations, the Adjusted Capital Account
Deficit of such Partner as quickly as possible.
(d) Limit on Loss Allocations. No Loss or item of Partnership
deduction for any Fiscal Year shall be allocated to any Partner to the
extent such allocation (i) would cause such Partner to have an Adjusted
Capital Account Deficit, or (ii) would increase such Partner's Adjusted
Capital Account Deficit. Any Loss or item of Partnership deduction which
cannot be allocated as a result of the restrictions contained in this
paragraph (d) shall be allocated to the General Partner.
(e) Gross Income Allocation. In the event that any Partner has
a deficit Capital Account at the end of any Fiscal Year that is in excess
of the sum of (i) the amount, if any, such Partner is obligated to restore
under Section 121-607 of the Act, and (ii) the amount such Partner is
deemed to be obligated to restore pursuant to the penultimate sentences of
Sections 1.704-2(g)(i) and 1.704-2(i)(5) of the Regulations, each such
Partner shall be specially allocated items of Partnership gross income and
gain in the amount of such excess as soon thereafter as possible, provided
that an allocation pursuant to this paragraph (e) shall be made if and only
to the extent that such Partner would have a deficit Capital Account in
excess of such sum after all other allocations provided for in this
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Article IV have been tentatively made as if paragraph (c) of this
Section 4.02 and this paragraph (e) were not in the Agreement.
(f) Nonrecourse Deductions. Nonrecourse Deductions for any
Fiscal Year shall be specially allocated to the Partners first, in
accordance with each Partner's share of the portion of any Section 704(c)
gain (as determined pursuant to Section 4.04 of this Agreement) in excess
of Section 7.04(c) minimum gain (as determined pursuant to Section 1.752-
3(a)(2) of the Regulations) with respect to the Partnership's property that
is subject to Nonrecourse Liabilities, and thereafter in accordance with
each Partner's Percentage Interest.
(g) Partner Nonrecourse Deductions. Any Partner Nonrecourse
Deductions for any Fiscal Year shall be specially allocated to the Partner
who bears the economic risk of loss with respect to the Partner Nonrecourse
Debt to which such Partner Nonrecourse Deductions are attributable in
accordance with Section 1.704-2(i)(1) of the Regulations.
(h) Preferred Return. For each Fiscal Year or other applicable
period, Income, and if necessary gross income, (after taking into account
any adjustments allocated to each Class A Interest Holder to the extent not
included in the computation of Income) shall be allocated to each Class A
Interest Holder to the extent of, and in proportion to, the excess of the
cumulative Preferred Return, Accrued Return or other distributions paid to
such Class A Interest Holder pursuant to Section 10.04 hereof over the
cumulative amount of Income allocated to such Class A Interest Holder
pursuant to this Section 4.02(h).
Section 4.03 Curative Allocations. The Regulatory Allocations
are intended to comply with certain requirements of Sections 1.704-1(b) of
the Regulations. Notwithstanding any other provisions of this Article IV
(other than Sections 4.02(a), (b), (c), (d), (e), (f) and (g) and
Sections 4.04(b) and (c)), the General Partner shall, to the extent
possible, make allocations of Income or Loss simultaneously with or
subsequent to such Regulatory Allocations to the extent necessary so that
the net amount of such allocations of Income and Loss and the Regulatory
Allocations to each Partner shall be equal to the net amount that would
have been allocated to each such Partner if the Regulatory Allocations had
not occurred.
Section 4.04 Other Allocation Rules.
(a) In the event of the admission of additional Partners or an
assignment of a Unit or other Partnership Interest in any Fiscal Year,
Income or Loss for that Fiscal Year shall be allocated among the Partners
to reflect their varying interests during the Fiscal Year. In accordance
with Section 706 of the Code, for purposes of computing the varying
interests of each Partner, the Partnership shall make an interim closing of
its books as of the effective date of the admission of a Partner or the
assignment of a Unit or other Partnership Interest and compute the items of
Income or Loss applicable to the period of time before and
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after that date
using the accrual method of accounting. Any assignment of a Unit or other
Partnership Interest, if consented to by the General Partner, shall be
effective as of the first day of the calendar month nearest the date of
assignment.
(b) Except as provided in the following sentence, for federal
income tax purposes each item of income, gain, loss or deduction shall be
allocated in the same manner as the corresponding item is allocated for
Capital Account purposes. In accordance with Sections 704(c) and 704(b) of
the Code and the Regulations thereunder, items of income, gain, loss or
deduction with respect to any asset contributed to the capital of the
Partnership shall, solely for tax purposes, be allocated among the Partners
so as to take account of any variation between the adjusted basis of such
property to the Partnership for federal income tax purposes and the fair
market value of such asset at the time of contribution, as determined by
the contributing Partner and the Partnership. The amount of income, gain,
loss or deduction allocated under the immediately preceding sentence of
this paragraph (b) shall not increase or decrease the Capital Accounts of
the contributing Partners to the extent that the fair market value of such
asset has been previously added to the Capital Accounts.
(c) The General Partner shall allocate "excess nonrecourse
liabilities" in any manner authorized under the Regulations and applicable
rulings by the Internal Revenue Service, including, without limitation,
Revenue Ruling 95-41.
Section 4.05 Distributions.
(a) The General Partner shall cause the Partnership to make
Distributions of all or a portion of Available Cash from time to time as
determined by the General Partner, but in any event not less frequently
than quarterly, in such amounts as the General Partner shall determine in
its sole discretion. Such Distributions shall be made to the Partners who
are Partners on the applicable Record Date in accordance with their
respective Percentage Interests on such Record Date subject to any
withholding required pursuant to the Code or any provisions of applicable
state or local tax law, except as otherwise provided in any agreement
between the General Partner or the Partnership and such Partner, and
subject to any special distribution to holders of any other Partnership
Interests issued pursuant to Section 3.03.
(b) All amounts withheld pursuant to the Code or any provisions
of any state or local tax law with respect to any allocation, payment or
Distribution to a Partner shall be treated as Distributions to such Partner
for all purposes under this Agreement.
(c) The General Partner may from time to time, in its sole
discretion, make, and the Limited Partners shall accept, Distributions in
the form of property of the Partnership. The General Partner shall
reasonably determine in good faith the fair market value attributable to
such property and may distribute different types of property to different
Partners; provided, that the fair market value of the property distributed
to each Partner is
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equal to the amount of the Distribution such Partner is
entitled to based on the fair market value of the property distributed to
all Partners.
(d) The General Partner shall take such reasonable efforts, as
determined by it in its sole discretion and consistent with its
qualification as a REIT, to make Distributions to the Limited Partners in a
manner which will preclude any such Distribution or portion thereof from
being treated as part of a sale of property to the Partnership by a Limited
Partner under Section 707 of the Code or the Regulations thereunder;
provided, that the General Partner and the Partnership shall have no
liability to a Limited Partner under any circumstances as a result of any
Distribution to a Limited Partner being so treated.
ARTICLE V
MANAGEMENT OF PARTNERSHIP BUSINESS
Section 5.01 Powers of General Partner.
(a) Except as limited by paragraph (b) of this Section 5.01 or
by the Act, the General Partner has complete discretion in the management
and control of the business of the Partnership and is hereby authorized to
take any and all actions on behalf of the Partnership which it could take
if the Partnership was a general partnership of which the General Partner
was a partner. Without limiting the generality of the foregoing, the
General Partner is hereby authorized to:
(i) make expenditures, lend or borrow money (including,
without limitation, the making of prepayments on loans
and borrowing of money to permit the Partnership to
make Distributions in such amounts as will permit the
General Partner (so long as the General Partner
qualifies as a REIT) to avoid the payment of any
federal income tax (including, for this purpose, any
excise tax pursuant to Section 4981 of the Code) and to
make distributions to its shareholders sufficient to
permit the General Partner to maintain its REIT
status), issue, assume or guarantee indebtedness and
other liabilities (including the securing of such
indebtedness or other liabilities by mortgage, deed of
trust or other lien or encumbrance on the Partnership's
assets) and incur obligations, all for and on behalf of
the Partnership as it deems necessary or desirable for
the conduct of the activities of the Partnership;
(ii) acquire, sell, transfer, convey, lease, make capital
improvements to, pledge, encumber, exchange or
otherwise deal with the assets of the Partnership;
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(iii) negotiate, enter into, execute, deliver and perform or
assign contracts on behalf of the Partnership;
(iv) repay in whole or in part, refinance, recast, modify or
extend any indebtedness of the Partnership and in
connection therewith to recast, modify or extend any
security interest relating to the assets of the
Partnership;
(v) make tax, regulatory and other filings and render
periodic or other reports to governmental or other
agencies having jurisdiction over the business or
assets of the Partnership;
(vi) determine the terms of any offering of additional Units
or other Partnership Interests, including the
commissions to be paid, if any, and the manner of
complying with applicable laws, and in connection
therewith to execute for and on behalf of the
Partnership any registration statement or other
document required under any federal or state securities
law and to take any additional action it shall deem
necessary or desirable to effectuate any such offering;
(vii) form, acquire an interest in and contribute property to
any limited or general partnerships, joint ventures,
corporations or other relationships or associations
that it deems desirable;
(viii) to hire and dismiss employees of the Partnership
(including, without limitation, employees having titles
such as "president," "vice president," "secretary" and
"treasurer") and agents, independent contractors,
attorneys and accountants and consultants of the
Partnership and to determine their compensation and
other terms of employment or hiring;
(ix) obtain and maintain insurance for the protection of the
Partnership and its assets and the Partners as it deems
necessary or appropriate including without limitation
casualty, liability and other insurance on the property
of the Partnership and liability insurance for
Indemnified Persons hereunder;
(x) commence, defend, compromise or settle any claims,
proceedings, actions or litigation for and on behalf of
the Partnership (including claims, proceedings, actions
or litigation involving the General Partner in its
capacity as General Partner), retain legal counsel in
connection therewith, and pay out of the property of
the Partnership any and all liabilities and expenses
<PAGE>
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(including fees of legal counsel) incurred in
connection therewith;
(xi) establish such Reserves which it reasonably determines
in its sole discretion to be necessary or desirable to
provide for working capital, capital improvements to
the property of the Partnership and to satisfy any
contingent liabilities of the Partnership;
(xii) prepare, execute, file and deliver any document for and
on behalf of the Partnership; and
(xiii) expend Partnership funds, use Partnership assets, make
such decisions, enter into such agreements and take
such other actions as it may reasonably believe to be
necessary or desireable to conduct the business of the
Partnership and to carry out the purpose of the
Partnership.
(b) The General Partner shall not:
(i) sell, exchange, lease, or otherwise dispose of all or
substantially all of the assets of the Partnership in a
single transaction or a series of related transactions
(including by way of merger, consolidation or other
combination with any other Person) without the prior
consent of a Majority of Limited Partners;
(ii) merge, consolidate or otherwise reorganize the
Partnership or cause the Partnership to be dissolved
without the prior consent of a Majority of Limited
Partners;
(iii) take any action in contravention of any provision of
this Partnership Agreement without the prior consent of
each Limited Partner adversely affected thereby;
(iv) admit any Person as a general partner of the
Partnership without the prior consent of each Limited
Partner adversely affected thereby;
(v) use any Partnership property for other than a
Partnership purpose without the prior consent of each
Limited Partner adversely affected thereby; or
(vi) terminate its status as a REIT without the prior
consent of a Majority of Limited Partners.
<PAGE>
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Section 5.02 Duties of General Partner.
(a) The General Partner shall have responsibility for, and
control over, the ordinary and usual day-to-day management and operation of
the Partnership business. The General Partner shall devote such of its
time as it deems necessary to the affairs of the Partnership and shall
indemnify and hold the Partnership harmless from any loss, damage or
liability due to, or arising out of, the General Partner's fraud, bad faith
or gross negligence. The General Partner shall keep, or cause to be kept,
all books and records required by this Partnership Agreement, prepare or
cause to be prepared all statements and reports, and obtain or cause to be
obtained and kept in force such insurance, in such amounts, on such terms,
and with such carriers as may be required to reasonably protect the
Partnership, the Partners and the assets of the Partnership.
(b) The General Partner shall at all times hold Units with a
Percentage Interest equal to not less than one percent (1%) and may hold
the balance of its Percentage Interest, whether designated as Units or
otherwise directly, or indirectly through the QRS, as a Limited Partner.
Section 5.03 Partnership Tax Matters. The General Partner is
designated as the tax matters partner for the Partnership for federal,
state and local purposes, pursuant to Section 6231(a)(7) of the Code and in
similar provisions in state and local law. The General Partner shall have
authority to make such elections (including but not limited to making an
election under Section 754 of the Code and selecting any reasonable method
to allocate income pursuant to Section 704(c) of the Code), take such
actions and enter into such agreements on behalf of the Partners as is
permitted by law or the Regulations. Any expense incurred by the
Partnership in contesting with the Internal Revenue Service or any state
income tax authorities any change in Income or Loss or the allocation of
Income or Loss to any Partner shall be an expense of the Partnership.
Section 5.04 Indemnification.
(a) The Partnership shall indemnify, save harmless and pay all
judgments and claims against the Indemnified Persons arising from any
liability, loss or damage incurred by them or the Partnership by reason of
any act performed or omitted to be performed by them when acting in
connection with the business of the Partnership as contemplated by this
Partnership Agreement, including costs and attorneys' fees and any amounts
expended in the settlement of any claims or liability, loss or damage;
provided, however, that, if such liability, loss or claim arises out of any
action or inaction of the Indemnified Persons, the Indemnified Persons must
have determined in good faith that such course of conduct was in the best
interests of the Partnership and did not constitute fraud, bad faith or
gross negligence by the Indemnified Persons. Notwithstanding the
foregoing, indemnification will not be available for any liability, loss or
damage resulting from the acts of an Indemnified Person if a judgment or
other final adjudication adverse to the Indemnified Person establishes that
his acts were committed in bad faith or were the result of active and
<PAGE>
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deliberate dishonesty and were material to the cause of action so
adjudicated, or that he personally gained in fact a financial profit or
other advantage to which he was not legally entitled. Indemnified Persons
shall be entitled to receive advances for attorney's fees and other legal
costs and expenses arising out of claims made against them, provided that
no such advances may be made with respect to any claim unless the action
relates to the performance of duties or services by the Indemnified Person
on behalf of the Partnership and the Indemnified Person undertakes in
writing prior to receipt of such advances that such Person will repay in
full any such advanced funds if, upon the ultimate disposition of the
claim, the Indemnified Person is determined not to be entitled to
indemnification hereunder. Notwithstanding any other provision hereof,
Affiliated Persons will be indemnified only for liabilities arising out of
activities in which they engage on behalf of the Partnership or in
connection with its business which are (i) within the scope of activities
permitted to be performed by Affiliated Persons under this Agreement and
(ii) duly authorized by the General Partner.
(b) Notwithstanding paragraph (a) of this Section 5.04, the
Indemnified Persons shall not be indemnified from any liability, loss or
damage incurred by them in connection with any claim or settlement
involving violations of federal or state securities laws by the Indemnified
Persons or any liability for fraud, bad faith or gross negligence;
provided, however, that indemnification will be allowed for settlements and
related expenses of lawsuits alleging securities law violations, and for
expenses incurred in successfully defending such lawsuits, if (i) there has
been a successful adjudication on the merits of each count involving
alleged securities law violations as to the party seeking indemnification;
(ii) a court dismisses each count involving alleged securities law
violations with prejudice as to the party seeking indemnification; or
(iii) a court approves the settlement and finds that indemnification of any
payment in settlement and related costs should be made and, before seeking
court approval for indemnification, the party seeking indemnification shall
place before the court the position of the Securities and Exchange
Commission and any state securities administrators of any state in which
Units or other Partnership Interests have been offered or sold or in which
Partners then reside with respect to the issue of indemnification for
securities law violations.
(c) Any indemnification pursuant to this Section 5.04 shall be
recoverable only from the assets of the Partnership.
(d) Nothing contained herein shall constitute a waiver by a
Limited Partner of any right which he may have against any Indemnified
Person under federal or state securities laws.
Section 5.05 Liabilities of General Partner.
(a) The General Partner and Affiliated Persons shall not be
liable, responsible or accountable in damages or otherwise to the
Partnership or to any Partner or to any Assignee by reason of any acts or
omissions performed or omitted in good faith and
<PAGE>
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reasonably believed to be
within the scope of the authority conferred by this Partnership Agreement.
(b) The General Partner may consult with legal counsel,
accountants, appraisers, management consultants, investment bankers,
architects, engineers, environmental consultants and other consultants and
advisers selected by it, and any act taken or omitted to be taken in
reliance upon the opinion of such Persons as to matters which the General
Partner reasonably believes to be within such Person's professional or
expert competence shall be conclusively presumed to have been done or
omitted in good faith and in accordance with such opinion.
(c) Notwithstanding any other provisions of this Agreement or
the Act, any action of the General Partner on behalf of the Partnership or
any decision of the General Partner to refrain from acting on behalf of the
Partnership, undertaken in the good faith belief that such action or
omission is necessary or advisable in order (i) to protect the ability of
the General Partner to continue to qualify as a REIT or (ii) to avoid the
General Partner incurring any federal income or excise taxes, is expressly
authorized under this Partnership Agreement and is deemed approved by all
of the Limited Partners. The Limited Partners expressly acknowledge that
the General Partner is acting on behalf of the Partnership and the General
Partner's shareholders collectively, that the General Partner may, but is
under no obligation to, consider the separate interests of the Limited
Partners (including, without limitation, the tax consequences to Limited
Partners, Additional Limited Partners or Assignees) in deciding whether to
cause the Partnership to take (or decline to take) any actions, and that
the General Partner shall not be liable for monetary damages for losses
sustained, liabilities incurred, or benefits not derived by Limited
Partners in connection with such decisions, provided that the General
Partner has acted in good faith.
Section 5.06 Title to Partnership Assets.
(a) Title to Partnership assets, whether real, personal or mixed
and whether tangible or intangible, shall be deemed to be owned by the
Partnership as an entity, and no Partner, individually or collectively,
shall have any ownership interest in such Partnership assets or any portion
thereof. No Partner shall have any right of partition with respect to the
assets of the Partnership.
(b) Title to any or all of the Partnership assets may be held in
the name of the Partnership, the General Partner or one or more nominees,
as the General Partner may determine, including Affiliated Persons. The
General Partner hereby declares and warrants that any Partnership assets
for which legal title is held in the name of the General Partner, any
nominee or Affiliated Persons, shall be held for the use and benefit of the
Partnership in accordance with the provisions of this Agreement; provided,
however, that the General Partner shall use its best efforts to cause
beneficial and record title to Partnership assets to be vested in the
Partnership as soon as reasonably practicable. All Partnership assets
shall be
<PAGE>
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recorded as the property of the Partnership in its books and
records, irrespective of the name in which legal title to such Partnership
assets is held.
Section 5.07 Authority of General Partner. In no event shall
any Person (other than an Affiliated Person) dealing with the General
Partner with respect to any property or business of the Partnership be
obligated to determine whether the terms of this Partnership Agreement have
been complied with or be obligated to inquire into the necessity or
expediency of any act or action of the General Partner, and every contract,
agreement, lease, promissory note, mortgage, certificate or other
instrument or document, executed by the General Partner with respect to the
property or business of the Partnership, shall be conclusive evidence in
favor of any and every Person (other than an Affiliated Person) relying
thereon or claiming thereunder that:
(a) at the time of the execution or delivery thereof, this
Partnership Agreement was in full force and effect;
(b) such instrument or document was duly executed in accordance
with the terms and provisions of this Partnership Agreement and is binding
upon the Partnership and the Partners; and
(c) the General Partner was duly authorized and empowered to
execute and deliver such instrument or document for and on behalf of the
Partnership.
Section 5.08 Contracts with Affiliated Persons.
(a) The Partnership may acquire property or services from, or
enter into other types of transactions with, an Affiliated Person, provided
that any such transaction between the Partnership and an Affiliated Person
shall be fully disclosed to the Limited Partners and, other than the loans
expressly authorized by paragraph (b) of this Section 5.08, shall be on
terms which are fair and competitive with those which may be obtained from
unaffiliated Persons.
(b) The Partnership may lend or contribute monies or property to
the General Partner, Affiliated Persons or other Persons in which it has an
equity investment, and such Persons may borrow funds from the Partnership,
all on terms and conditions established in the sole discretion of the
General Partner. The authority conferred in this Section 5.08(b) shall not
create any right or benefit in favor of any Affiliated Person or any other
Person.
(c) The Partnership has contributed certain of the Home Leasing
Assets and its right to require Home Leasing Corporation to enter into the
Management Agreements to HP Management in exchange for 9,900 shares of
non-voting common stock. HP Management and Conifer may enter into the
Management Agreements and into such
<PAGE>
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other contracts, including contracts
with Affiliated Persons if such contracts are approved by a majority of the
independent directors of the General Partner.
Section 5.09 Reimbursement of the General Partner.
(a) Except as provided in this Section 5.09 and elsewhere in
this Agreement (including the provisions of Article IV regarding
Distributions to which the General Partner may be entitled), the General
Partner shall not be compensated for its services as general partner of the
Partnership.
(b) The General Partner shall be reimbursed on a monthly basis,
or such other basis as the General Partner may determine in its sole
discretion, for all expenses it incurs relating to the ownership and
operation of, or for the benefit of, the Partnership; provided, that the
amount of any such reimbursement shall be reduced by any interest earned by
the General Partner with respect to bank accounts or other instruments held
by it as permitted in Section 5.11(c) hereof. The Limited Partners
acknowledge that the General Partner's sole business is the ownership,
directly or through a QRS, of interests in and operation of the Partnership
and that all the General Partner's expenses are deemed incurred for the
benefit of the Partnership and that all reimbursements shall be in addition
to any amounts payable to the General Partner as a result of
indemnification pursuant to Section 5.04 hereof.
(c) The General Partner shall also be reimbursed for all
expenses it incurs relating to its organization and the organization of the
Partnership, the reorganization of the Partnership pursuant to this
Agreement, the Mergers, the initial public offering of HP Shares by the
General Partner, and any other issuance of Units or other Partnership
Interests or HP Securities pursuant to Article III hereof.
Section 5.10 Resignation, Withdrawal and Removal of General
Partner.
(a) The General Partner shall have no right to resign or
withdraw as the general partner of the Partnership, to transfer, assign,
grant, convey, mortgage, or otherwise encumber its Partnership Interest
other than to assign any portion of such interest in excess of its 1%
General Partner Interest to a QRS, or to enter into any agreement as a
result of which any other Person shall become interested in the Partnership
as a general partner without the prior consent of all Partners. If the
General Partner purports to resign or withdraw as the general partner of
the Partnership in violation of the foregoing provision, it shall remain
liable for the debts, obligations and liabilities of the Partnership to the
same extent as if it had not resigned or withdrawn and, in addition, shall
be liable to the Partnership and the Limited Partners for any damages
sustained by reason of such purported resignation or withdrawal. Any
amounts for which the General Partner is liable pursuant to this Section
5.10(a) may be setoff by the Partnership against any amounts due to the
General Partner pursuant to this Partnership Agreement.
<PAGE>
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(b) If, pursuant to Section 7.01(a)(iii) hereof, the Partnership
shall continue after the occurrence of an event of withdrawal with respect
to the General Partner, whether such withdrawal is in violation of
Section 5.10(a) hereof or otherwise, the General Partnership Interest of
the General Partner shall automatically convert to a Limited Partnership
Interest, to the extent that such General Partnership Interest is not
acquired by the Person substituted as general partner of the Partnership
pursuant to Section 7.01(a)(iii) hereof. As a Limited Partner, the former
general partner of the Partnership shall be entitled to receive the
Distributions and allocations to which it is entitled by virtue of its
ownership of its Partnership Interests and shall not be entitled to receive
any Distribution with respect to the fair value of its Partnership
Interests pursuant to Section 121-604 of the Act except to the extent other
Limited Partners are entitled to receive such Distributions.
(c) The General Partner may not be removed as the general
partner of the Partnership, with or without cause.
(d) Except as otherwise provided in Section 5.10(e) hereof, the
General Partner shall not engage in any merger, consolidation or other
combination with or into another Person or sale of all or substantially all
of its assets, or any reclassification, or recapitalization or change of
outstanding HP Shares (other than a change in par value, or from par value
to no par value, or as a result of a subdivision or combination as
described in the definition of "Conversion Factor") (hereinafter referred
to as a "Transaction"), unless the Transaction has been approved by the
requisite consent of Limited Partners pursuant to Section 5.01(b) hereof
and as a result of which all Limited Partners will or may elect to receive
for each Unit an amount of cash, securities, or other property equal to the
greater of the Conversion Factor or the greatest amount of cash, securities
or other property paid to a holder of one HP Share in connection with the
Transaction is consummated, provided that if, in connection with the
Transaction, a purchase, tender or exchange offer shall have been made to
and accepted by the holders of more than 50 percent of the outstanding HP
Shares, the holders of Units shall or may elect to receive the greatest
amount of cash, securities, or other property which a Limited Partner would
have received had it exercised the Purchase Right and received HP Shares in
exchange for its Units immediately prior to the expiration of such
purchase, tender or exchange offer.
(e) Notwithstanding Section 5.10(d) hereof, the General Partner
may merge with another entity if immediately after such merger
substantially all of the assets of the surviving entity, other than
Partnership Interests held by the General Partner, are contributed,
directly or indirectly, to the Partnership as a capital contribution in
exchange for Partnership Interests issued to the General Partner or the QRS
with a fair market value equal to the fair market value of the assets so
contributed.
Section 5.11 Outside Activities of the General Partner.
(a) The General Partner shall not directly or indirectly enter
into any transactions or conduct any business or other activity other than
(i)in connection with the
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ownership, acquisition and disposition of
Units or other Partnership Interests as a General Partner or Limited
Partner, directly or indirectly through the QRS, (ii) the issuance or
redemption of HP Securities, (iii) the management of the business of the
Partnership, and (iv) such activities as are incidental thereto.
(b) The General Partner shall not incur any debts other than (i)
debts for which it is liable in its capacity as General Partner of the
Partnership and (ii) debts incurred where the proceeds thereof are
contributed to the Partnership as a loan.
(c) The General Partner shall not own any assets other than
Partnership Interests as a General Partner or Limited Partner, directly or
indirectly through the QRS and such bank accounts or similar instruments or
accounts as it deems necessary to carry out its responsibilities
contemplated under this Partnership Agreement and its Articles of
Incorporation.
(d) The General Partner and any Affiliated Persons may acquire
Limited Partnership Interests and shall be entitled to exercise all rights
of a Limited Partner relating to such Limited Partnership Interests held by
them, except as provided in Section 6.07(a) hereof.
ARTICLE VI
THE LIMITED PARTNERS
Section 6.01 Liability of Limited Partners. No Limited Partner
shall be obligated to make any contribution to the capital of the
Partnership in addition to the Capital Contributions specified in
Article III hereof, and no Limited Partner shall be obligated to make loans
to the Partnership. The Limited Partners shall not have any personal
liability with respect to the liabilities or obligations of the
Partnership, except as otherwise expressly provided under the Act.
Section 6.02 Management of Business. No Limited Partner or
Assignee (other than the General Partner or any Affiliated Person, or an
officer, director, employee, partner or agent of the General Partner, an
Affiliated Person or the Partnership in their capacity as such) shall take
part in the operation, management or control (within the meaning of the
Act) of the Partnership's business, transact any business in the
Partnership's name or have the power to sign documents for or otherwise
bind the Partnership. The transaction of any such business by the General
Partner or an Affiliated Person, or an officer, director, employee, partner
or agent of the General Partner, an Affiliated Person or the Partnership in
their capacity as such, shall not affect, impair or eliminate the
limitations on the liability of any Limited Partner or Assignee under this
Agreement.
<PAGE>
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Section 6.03 Outside Activities of Limited Partners.
Subject to any agreements entered into by a Limited Partner with the
Partnership, any Limited Partner (other than the General Partner) and any
officer, director, employee, agent, trustee or shareholder of any Limited
Partner is entitled to have business interests and to engage in business
activities in addition to those relating to the Partnership, including
business interests and activities that are in direct competition with the
Partnership or that are enhanced by the activities of the Partnership, and
may engage in any other business, trade, profession, or employment
whatsoever, on his or her own account or in partnership, or as an employee,
officer, director, or stockholder of any other Person. Neither the
Partnership, the Partners nor any other Person shall have any rights by
virtue of this Partnership Agreement in any business ventures of any Limited
Partner. The Limited Partners shall have no obligation pursuant to this
Partnership Agreement to offer any interest in any business venture to the
Partnership, any Partner or any other Person.
Section 6.04 Rights of Limited Partners Relating to the
Partnership.
(a) In addition to other rights provided by this Partnership
Agreement or by the Act, and except as limited by Section 6.04(c) hereof,
each Limited Partner shall have the right, for a purpose reasonably related
to such Limited Partner's interest as a limited partner in the Partnership,
upon written demand with a statement of the purpose of such demand and at
such Limited Partner's own expense (including such copying and
administrative charges as the General Partner may establish from time to
time), to:
(i) obtain a copy of the most recent annual and quarterly
reports filed with the Securities and Exchange
Commission by the General Partner pursuant to the
Securities Exchange Act of 1934;
(ii) obtain a copy of the Partnership's financial statements
and federal, state and local income tax returns for
each of the three most recent Fiscal Years of the
Partnership;
(iii) obtain a current, alphabetical list of the name and
last known mailing address of each Partner with a
description of the Capital Contribution and the share
of profits and losses of each Partner; and
(iv) obtain a copy of this Partnership Agreement, the
Certificate and all amendments to either of them,
together with executed copies of all powers of attorney
pursuant to which any of the foregoing have been
executed.
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(b) The Partnership shall notify each Limited Partner in writing
of any change made to the Conversion Factor within 10 Business Days of the
date such change becomes effective.
(c) Notwithstanding any other provision of this Section 6.04 ,
the General Partner may keep confidential from the Limited Partners, for
such period of time as the General Partner determines in its sole
discretion to be reasonable, any information that (i) is material
information not otherwise required to be publicly disclosed at that time by
applicable law; (ii) the General Partner reasonably believes to be in the
nature of trade secrets or other confidential information the disclosure of
which the General Partner in good faith believes is not in the best
interests of the Partnership or could damage the Partnership or its
business; or (iii) the Partnership is required by law or by agreements with
an unaffiliated party to keep confidential.
Section 6.05 Transfer of Partnership Interests.
(a) Except as provided in Section 6.08 hereof, no Limited
Partner shall transfer, assign, grant, convey, pledge, or otherwise
encumber his Partnership Interests other than to the Partnership, or enter
into any agreement as a result of which any other Person shall become
interested in the Partnership (hereinafter, a "transfer") other than
pledges of Units owned directly or indirectly by Norman or Nelson
Leenhouts, without the prior written consent of the General Partner, which
consent may be given or withheld by the General Partner in its sole
discretion.
(b) Upon the bankruptcy, assignment for the benefit of
creditors, dissolution, death, disability or legal incapacity of any
Partner, the executor, administrator, trustee, guardian, conservator or
other legal representative may exercise all of the Partner's rights for
settling his estate or administering his property, including the power
pursuant to Section 6.06 hereof of an Assignee to become a Substitute
Limited Partner.
(c) Notwithstanding the provisions of Section 6.05(a) hereof,
and subject to Section 6.05(d) hereof, a Limited Partner may transfer, with
or without the consent of the General Partner, all or a portion of such
Limited Partner's Limited Partnership Interest to (i) a person that
controls, is controlled by or is under common control with such Limited
Partner, (ii) a Person who is a member of such Limited Partner's Immediate
Family, (iii) a Person who is an equity holder of such Limited Partner,
(iv) any other Limited Partner, (v) any Person all of the beneficial owners
of which are Persons described in clauses (i), (ii) (iii) or (iv) hereof,
or (vi) any charitable organization qualified under Section 501(c)(3) of
the Code in a donative transfer that does not involve the receipt of any
consideration; unless, in each case, in the opinion of legal counsel to
the Partnership, such transfer would require filing of a registration
statement under the Securities Act of 1933 or would otherwise violate any
federal or state securities laws or regulations applicable to the
Partnership or the Limited Partnership Interests.
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(d) No transfer by a Limited Partner of its Limited Partnership
Interests may be made to any Person if (i) in the opinion of legal counsel
to the Partnership, it would result in the Partnership being treated as an
association, taxable as a corporation, or (ii) such transfer is effectuated
through an "established securities market" or a "secondary market (or the
substantial equivalent thereof)" within the meaning of Section 7704 of the
Code.
(e) No transfer of all or any portion of a Limited Partner's
Partnership Interests, though otherwise permitted by this Section 6.05,
shall be valid and effective, and the Partnership shall not recognize the
same for the purpose of Distributions or for the allocation of Income or
Loss until an Assignment of Limited Partnership Interest is delivered to
the General Partner. Upon the delivery of an Assignment of Limited
Partnership Interest and the consent of the General Partner to that
assignment, if required hereunder, the assignee identified therein shall
become an Assignee with respect to the Partnership Interests assigned
thereby.
(f) Unless admitted to the Partnership as a Limited Partner in
accordance with Section 6.06 hereof, an Assignee shall not be entitled to
any of the rights, powers, or privileges of his predecessor in interest,
except that such transferee shall be entitled to receive the Distributions
and have allocated to him Income or Loss attributable to the Partnership
Interests assigned.
Section 6.06 Substitute Limited Partners. No Limited
Partner shall have the right to substitute an Assignee as a Limited Partner
in his place. The General Partner shall, however, have the right to
consent to the admission of an Assignee as a Substitute Limited Partner,
which consent may be given or withheld by the General Partner in its sole
discretion. An Assignee may be admitted to the Partnership as a Limited
Partner upon furnishing to the General Partner all of the following:
(a) evidence, in form satisfactory to the General Partner, of
acceptance of all the terms of this Partnership Agreement including, if the
assigning Limited Partner has a deficit restoration obligation as set forth
on Schedule B, an assumption of that obligation;
(b) if it be a corporation or similar organization, a certified
copy of a resolution of its Board of Directors or comparable body
authorizing it to become a Limited Partner under the terms of this
Partnership Agreement and, if requested by the General Partner, a written
legal opinion regarding formation, good standing and authority to purchase
Partnership Interests;
(c) a Power of Attorney substantially identical to that
contained in Section 9.11;
(d) such other documents or instruments as may be required, in
the sole discretion of the General Partner, to effect the Assignee's
admission as a Limited Partner; and
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(e) payment of such reasonable expenses as may be incurred in
connection with such admission as a Limited Partner.
An Assignee shall be deemed admitted to the Partnership pursuant to this
Section 6.06 upon the execution by the General Partner of an amendment to
this Partnership Agreement amending Schedule A to reflect the name,
address, number of Units and Percentage Interest of such Substitute Limited
Partner and to eliminate or adjust, if necessary, the name, address and
interest of the predecessor of such Substitute Limited Partner.
Section 6.07 Meetings of Partners and Consent.
(a) Whenever the vote or consent of Limited Partners is
permitted or required under this Agreement, the General Partner shall
obtain such vote or consent at a meeting of Partners or in the manner
provided in subparagraph (e) of this Section 6.07. Except as otherwise
expressly provided in this Agreement, or required by the Act, (i) the
consent of holders of a majority of the Units held by Limited Partners
entitled to vote or consent with respect to a proposed action shall
constitute consent; and (ii) if the General Partner is also a Limited
Partner, directly or indirectly through the QRS, neither the General
Partner nor the QRS shall be entitled to vote or consent to an action as a
Limited Partner and its Limited Partnership Interest shall be disregarded
in determining whether the requisite consent has been obtained. The voting
rights of holders of Partnership Interests other than Units shall be set
forth in the amendment to this Agreement described in Section 3.03.
(b) Meetings of the Partners may be called by the General
Partner and shall be called upon the receipt by the General Partner of a
written request by a Majority of Limited Partners. Written notice of any
such meeting shall be given to the Partners not less than seven (7) days
nor more than thirty (30) days prior to the date of such meeting and shall
state the Record Date, which date shall be a date determined by the General
Partner which is no earlier than the date of such notice, and the nature of
the business to be transacted at such meeting. Partners may vote in person
or by proxy at such meeting. A Partner may waive the notice required by
this Section 6.07(b) in writing before, during or after any meeting, and
any Partner who attends a meeting without contesting the meeting for a
failure to give notice shall be deemed to have waived the notice
requirement.
(c) Each Limited Partner may authorize any Person or Persons to
act for him by proxy on all matters in which a Limited Partner is entitled
to participate, including waiving notice of any meeting, or voting or
participating at a meeting. Every proxy must be signed by the Limited
Partner or his attorney-in-fact. No proxy shall be valid after the
expiration of eleven (11) months from the date thereof unless otherwise
provided in the proxy. Every proxy shall be revocable at the pleasure of
the Limited Partner executing it, such revocation to be effective upon the
General Partner's receipt of written notice of such revocation from the
Limited Partner executing such proxy.
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(d) The General Partner or such other Person as the General
Partner may appoint shall preside at each meeting of Partners, and each
meeting shall be conducted pursuant to such rules for the conduct of the
meeting as the Person presiding at the meeting deems appropriate.
(e) Any action required or permitted to be taken at a meeting of
the Partners may be taken without a meeting if a written consent setting
forth the action so taken is signed by holders of a majority of the Units
held by Partners entitled to vote or consent to such action, (or such other
percentage as is expressly required by this Agreement). Such written
consent may be in one instrument or in several instruments and shall have
the same force and effect as a vote taken at a meeting of the Partners held
in accordance with subparagraph (b) hereof on the effective date set forth
in such written consent. Such written consent shall be delivered to the
General Partner and maintained by the General Partner with the records of
the Partnership.
Section 6.08 Purchase Right.
(a) Subject to Section 6.08(c) hereof, at any time on or before
30 days preceding any dissolution of the Partnership under subparagraph (i)
or (ii) of Section 7.01(a) hereof, each Limited Partner (other than the
General Partner or the QRS, if the General Partner or the QRS is also a
Limited Partner) shall have the right (the "Purchase Right") to require the
Partnership to purchase on the Specified Purchase Date all or a portion of
the Units held by such Limited Partner at a price equal to and in the form
of the Cash Amount to be paid by the Partnership. The Purchase Right shall
be exercised pursuant to a Notice of Sale delivered to the General Partner
by the Limited Partner who is exercising the Purchase Right (the "Selling
Partner"). A Limited Partner may not exercise the Purchase Right for fewer
than One Thousand (1,000) Units or, if such Limited Partner holds fewer
than One Thousand (1,000) Units, all of the Units held by such Partner.
The Selling Partner shall have no right, with respect to any Units so
purchased, to receive any Distributions with a Record Date after the
Specified Purchase Date. The Assignee of any Limited Partner may exercise
the rights of such Limited Partner pursuant to this Section 6.08, and such
Limited Partner shall be deemed to have assigned such rights to such
Assignee and shall be bound by the exercise of such rights by such Limited
Partner's Assignee. In connection with any exercise of such rights by such
Assignee on behalf of such Limited Partner, the Cash Amount shall be paid
by the Partnership directly to such Assignee and not to such Limited
Partner.
(b) Notwithstanding the provisions of Section 6.08(a) hereof,
the General Partner may, in its sole discretion, on written notice given to
the Selling Partner on or before the second day prior to the Specified
Purchase Date, elect to purchase the Units subject to the Purchase Right by
delivering HP Shares Amount. In that event, on the Specified Purchase
Date, the General Partner shall issue and deliver to the Selling Partners
HP Shares in an amount equal to the HP Shares Amount, whereupon the General
Partner shall, directly or indirectly through the QRS, acquire the Units
offered for sale by the Selling Partner and shall be treated for all
purposes of this Agreement as the owner of such Units. If the
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General
Partner gives notice of its intent to deliver the HP Shares Amount, the
Limited Partner may revoke his Notice of Sale in a written notice to the
General Partner on or prior to the Specified Purchase Date and accompanied
by any certificate for the HP Shares that has been delivered to the Selling
Partner by the General Partner. Each Selling Partner agrees to execute
such documents as the General Partner may reasonably require in connection
with the issuance of HP Shares Amount upon exercise of the Purchase Right.
(c) Notwithstanding the provisions of Section 6.08(a) and
Section 6.08(b) hereof, a Partner shall not be entitled to exercise the
Purchase Right pursuant to Section 6.08(a) if (i) the delivery of HP Shares
Amount to such Partner on the Specified Purchase Date by the General
Partner pursuant to Section 6.08(b) would cause the General Partner to be
taxed as a corporation rather than as a real estate investment trust for
federal income tax purposes, or (ii) the exercise of the Purchase Right
would cause the sum of the Units that have been sold, assigned,
transferred, redeemed or otherwise disposed of (other than transfers at
death, transfers between certain family members, and other transfers
described in Section II.B of IRS Notice 88-75) in the Fiscal Year to exceed
ten (10) percent of all Units outstanding. This Section 6.08(c)(ii) is
intended to satisfy the safe harbor in Section II.E.1 of IRS Notice 88-75
under which transfers of partnership interests pursuant to a redemption or
repurchase agreement will be disregarded for purposes of determining
whether interests in the partnership will be treated as readily tradeable
on a secondary market (or the substantial equivalent thereof) within the
meaning of Section 7704 of the Code.
Section 6.09 Withdrawal. No Limited Partner shall have the
right to withdraw from the Partnership other than as a result of a
permitted transfer of all or a portion of such Limited Partner's Limited
Partnership Interest in accordance with Section 6.05 hereof or pursuant to
the redemption of all or a portion of such Limited Partner's Limited
Partnership Interest in accordance with Section 6.08 hereof. If a Limited
Partner withdraws or attempts to withdraw from the Partnership in violation
of this Section 6.09, such Limited Partner shall only have the rights of an
Assignee with respect to the Limited Partnership Interest held by such
Limited Partner at the time of withdrawal or attempted withdrawal and,
notwithstanding Section 121-604 of the Act, shall not be entitled to
receive (i) any Distribution other than such Limited Partner's share of any
Distribution made to all Limited Partners and Assignees pursuant to this
Partnership Agreement or (ii) the fair value of his interest as would
otherwise be provided by Section 121-604 of the Act.
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ARTICLE VII
DISSOLUTION
Section 7.01 Dissolution.
(a) In addition to any other causes stated herein or in the Act,
the Partnership shall be dissolved upon the first to occur of any of the
following events:
(i) the disposal of all or substantially all of the
Partnership's assets, provided that if the Partnership
receives a purchase money mortgage or other non-cash
consideration in connection with such disposal or sale,
the Partnership shall not dissolve until the non-cash
consideration is converted into cash or distributed to
the Partners;
(ii) the dissolution of the Partnership is approved by the
General Partner and consented to by a Majority of
Limited Partners;
(iii) the occurrence of an event of withdrawal with respect
to the General Partner as defined in Section 121-402 of
the Act (other than an event of bankruptcy) unless
within 90 days after that event all remaining Partners
consent in writing to the continuation of the
Partnership and to the appointment, effective as of the
date of such event, of a new general partner;
(iv) entry of a decree of judicial dissolution of the
Partnership pursuant to the provisions of the Act;
(v) a final and non-appealable judgment is entered by a
court of competent jurisdiction ruling that the General
Partner is bankrupt or insolvent, or a final and non-
appealable order for relief is entered by a court with
appropriate jurisdiction against the General Partner,
in each case under any federal or state bankruptcy or
insolvency laws as now or hereafter in effect, unless
prior to the entry of such order or judgment all of the
remaining Partners agree in writing to continue the
business of the Partnership and to the appointment,
effective as of a date prior to the date of such order
or judgment, of a substitute General Partner; or
(vi) the expiration of the term of the Partnership.
(b) Prior to obtaining the approval of the Limited Partners
required by subparagraph (a)(ii) of this Section 7.01, the General Partner
shall transmit to all Limited
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Partners a written notice setting forth the
advantages and disadvantages of dissolution, estimated liquidation values
and specific recommendations concerning liquidation of the Partnership at
any time the General Partner believes dissolution to be in the interest of
the Partnership.
Section 7.02 Liquidation.
(a) Upon the dissolution of the Partnership, the Partnership
shall continue solely for the purposes of winding up its affairs in an
orderly manner, liquidating its assets, and satisfying the claims of its
creditors and Partners. No Partner shall take any action that is
inconsistent with, or not necessary to or appropriate for, the winding up
of the Partnership's business and affairs. The General Partner or, in the
event there is no remaining General Partner, any Person elected by a
majority in interest of the Limited Partners (the "Liquidator") shall be
responsible for overseeing the winding up and dissolution of the
Partnership and shall take full account of the Partnership's liabilities
and assets and the Partnership's assets shall be liquidated as promptly as
is consistent with obtaining the fair value thereof, and the proceeds
therefrom (which may, to the extent determined by the General Partner,
include shares of stock in the General Partner) shall be applied and
distributed in the following order of priority: (1) first, to the payment
and discharge of all debts, liabilities and obligations of the Partnership
to creditors other than Partners and the expenses of liquidation; (2) next,
to the payment and discharge of all debts, liabilities and obligations of
the Partnership to the Partners; (3) next, to the establishment of such
reserves as the General Partner may reasonably deem necessary for any
contingent liabilities of the Partnership; and (4) the balance, if any, to
the Partners in proportion to their positive Capital Account balances
(determined after giving effect to all allocations of Income or Loss for
all Fiscal Years of the Partnership and to all prior Distributions). The
liquidation of the Partnership shall be carried out in conformity with the
timing requirements of Section 1.704-1(b)(2)(b) of the Regulations.
(b) Notwithstanding the provisions of Section 7.02(a) hereof
which require liquidation of the assets of the Partnership, but subject to
the order of priorities set forth therein, if prior to or upon dissolution
of the Partnership the Liquidator determines that an immediate sale of part
or all of the Partnership's assets would be impractical or would cause
undue loss to the Partners, the Liquidator may, in its sole discretion,
defer for a reasonable period of time the liquidation of any assets except
those necessary to satisfy liabilities of the Partnership (including to
those Partners as creditors) and/or distribute to the Partners, in lieu of
cash, as tenants in common and in accordance with the provisions of
Section 7.02(a) hereof, undivided interests in such Partnership assets as
the Liquidator deems not suitable for liquidation. Any such distributions
in kind shall be made only if, in the good faith judgment of the
Liquidator, such distributions in kind are in the best interest of the
Partners, and shall be subject to such conditions relating to the
disposition and management of such properties as the Liquidator deems
reasonable and equitable and to any agreements governing the operation of
such properties at such time. The Liquidator shall determine the fair
market
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value of any property distributed in kind using such reasonable
method of valuation as it may adopt.
(c) If there shall be a deficit balance in any Partner's Capital
Account (after giving effect to all contributions, distributions and
allocations for all Fiscal Periods, including the Fiscal Period in which
liquidation occurs), such Partner shall have no obligation to make any
contribution to the capital of the Partnership with respect to such deficit
balance, provided, however, that if such Partner has a deficit restoration
obligation as shown on Schedule B, such Partner shall be obligated to
contribute cash to the capital of the Partnership in an amount equal to the
lessor of: (i) the amount required to increase such Partner's Capital
Account as of such date to zero, and (ii) such Partner's deficit
restoration obligation as shown on Schedule B. Any contribution required
of a Partner with respect to such Partner's deficit restoration obligation
shall be made on or before the later of (y) the end of the Fiscal Year in
which the liquidation occurs, or (z) the 90th day following the date of
such liquidation and shall only be paid to any then creditors of the
Partnership, including Partners which are Partnership creditors and shall
not be distributed to other Partners then having positive balances in their
Capital Accounts. After the death or incompetency of any Limited Partner
or the dissolution of any entity which is a Limited Partner (or the death
of any of its partners) which has a deficit restoration obligation set
forth on Schedule B, the legal representative of such deceased, incompetent
or dissolved partner may elect to reduce or eliminate the deficit
restoration guarantee of such Limited Partner by delivering to the General
Partner a notice setting forth the maximum amount, if any, which the
persons taking the Partnership Interest of such deceased, incompetent or
dissolved Limited Partner are willing to restore (regardless of whether
such Partner has at that time a negative Capital Account balance). The
notice must be given by the legal representative within 270 days of the
death, determination of incompetence or dissolution of such Limited Partner
or the deficit restoration obligation shall be an obligation of the persons
taking the Partnership Interests of such Limited Partner.
Section 7.03 Final Statement. As soon as practicable after the
dissolution of the Partnership, a final statement of its assets and
liabilities shall be prepared by an independent certified public accountant
and furnished to all Partners.
ARTICLE VIII
BOOKS AND ACCOUNTS
Section 8.01 Books. The General Partner shall keep or cause to
be kept at the principal office of the Partnership appropriate books and
records with respect to the Partnership's business in which the
transactions of the Partnership shall be entered fully and accurately. The
books of the Partnership shall be maintained, for financial and tax
reporting purposes, on an accrual basis in accordance with generally
accepted accounting principles.
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Section 8.02 Reports.
(a) As soon as practicable, but in no event later than one
hundred five (105) days after the close of each Fiscal Year, the General
Partner shall cause to be mailed to each Limited Partner an annual report
containing financial statements of the Partnership, or of the General
Partner if such statements are prepared solely on a consolidated basis with
the General Partner, for such Fiscal Year, presented in accordance with
generally accepted accounting principles, such statements to be audited by
a nationally recognized firm of independent public accountants selected by
the General Partner.
(b) As soon as practicable, but in no event later than one
hundred five (105) days after the close of each calendar quarter (except
the last calendar quarter of each year), the General Partner shall cause to
be mailed to each Limited Partner a report containing unaudited financial
statements of the Partnership, or of the General Partner if such statements
are prepared solely on a consolidated basis with the General Partner, for
such calendar quarter and such other information as may be required by this
Partnership Agreement or by applicable law or regulation, or as the General
Partner determines to be appropriate.
(c) The General Partner shall use all reasonable efforts to
furnish each of the Limited Partners, within ninety (90) days of the close
of each Fiscal Year, with the tax information reasonably required by
Limited Partners for federal and state income tax reporting purposes.
Section 8.03 Bank Accounts. The General Partner shall, in the
name of the Partnership, open and maintain accounts with one or more
financial institutions in which shall be deposited all funds of the
Partnership. Amounts on deposit in such Partnership accounts shall be used
solely for the business of the Partnership. Withdrawals from such accounts
may be made only upon the signature of any Person authorized by the General
Partner to make withdrawals.
ARTICLE IX
GENERAL
Section 9.01 Notices. Unless otherwise specified in a writing
sent to the Partnership, the address of each Partner for all purposes shall
be as set forth in Schedule A hereto, as amended. Any notices and demands
required to be given hereunder other than any Notice of Sale pursuant to
Section 6.08 shall be in writing and delivered in person or sent by first
class, certified or registered mail or overnight delivery service, postage
or delivery charges prepaid, to such address or addresses and shall be
deemed given when so delivered or sent.
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Any Notice of Sale given by a Limited Partner shall be sent in
triplicate by recognized overnight delivery service and shall be deemed
given on the business day following the date it was sent addressed as
follows:
Notice of Sale
Home Properties of New York, Inc.
850 Clinton Square
Rochester, NY 14604
With a copy to:
General Counsel
Home Properties of New York, Inc.
850 Clinton Square
Rochester, NY 14604
And a copy to:
Norman P. Leenhouts, Chairman
Home Properties of New York, Inc.
850 Clinton Square
Rochester, NY 14604
Section 9.02 Captions. The Article and Section titles and
captions contained in this Partnership Agreement are for convenience only
and shall not be deemed part of the context of this Partnership Agreement.
Section 9.03 Pronouns and Plurals. Whenever the context may
require, any pronoun used herein shall include the corresponding masculine,
feminine or neuter forms and the singular form of nouns, pronouns and verbs
shall include the plural and vice versa.
Section 9.04 Entire Agreement. This Partnership Agreement and
the schedules and exhibits hereto, and the documents referred to herein
contain the entire understanding among the Partners and supersede any prior
understandings or written or oral agreements between or among any of them
with respect to the within subject matter. There are no representations,
agreements, arrangements or understandings, oral or written, between or
among any of the Partners relating to the subject matter of this
Partnership Agreement which are not fully expressed herein.
Section 9.05 Further Action. The Partners shall execute and
deliver all documents, provide all information and take or forebear from
all such action as may be necessary or appropriate to achieve the purpose
of this Partnership Agreement.
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Section 9.06 Binding Effect. This Partnership Agreement shall
be binding on and inure to the benefit of the Partners and their heirs,
executors, administrators, successors, legal representatives and permitted
assigns.
Section 9.07 Creditors. None of the provisions of this
Partnership Agreement shall be for the benefit of, or enforceable by, any
creditor of the Partnership.
Section 9.08 Validity. In the event that any provision of this
Partnership Agreement shall be held to be invalid, the same shall not
affect in any respect whatsoever the validity of the remainder of this
Partnership Agreement.
Section 9.09 Governing Law. This Partnership Agreement shall be
governed by the laws of the State of New York without regard to its
conflicts of law principles.
Section 9.10 Amendment.
(a) Amendments to this Agreement may be proposed by the General
Partner or by a Majority of Limited Partners. Except as provided by
Section 9.10(b) and (c) hereof, this Partnership Agreement may be amended
or modified only by the consent of the General Partner and of a Majority of
Limited Partners.
(b) Notwithstanding Section 9.10(a) hereof, the General Partner
shall have the power, without the consent of the Limited Partners, to amend
this Agreement as may be required to facilitate or implement any of the
following purposes:
(i) to add to the obligations of the General Partner or
surrender any right or power granted to the General
Partner or any Affiliated Persons for the benefit of
the Limited Partners;
(ii) to reflect the admission, substitution, termination, or
withdrawal of Partners in accordance with this
Agreement;
(iii) to set forth the rights, powers, duties, and
preferences of the holders of any additional
Partnership Interests issued pursuant to
Section 3.03 hereof;
(iv) to reflect a change that is of an inconsequential
nature and does not adversely affect the Limited
Partners in any material respect, or to cure any
ambiguity, correct or supplement any provision in this
Agreement not inconsistent with law or with other
provisions, or make other changes with respect to
matters arising under this Agreement that will not be
inconsistent with law or with the provisions of this
Agreement; and
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(v) to satisfy any requirements, conditions, or guidelines
contained in any order, directive, opinion, ruling or
regulation of a federal or state agency or contained in
federal or state law.
The General Partner will provide notice to the Limited Partners when any
action under this Section 9.10(b) is taken.
(c) Notwithstanding Section 9.10(a) hereof, this Agreement shall
not be amended without the consent of each Partner adversely affected if
such amendment would (i) convert a Limited Partner's interest in the
Partnership into a general partner's interest, (ii) modify the limited
liability of a Limited Partner, (iii) alter the rights of a Partner to
receive allocations or Distributions specified in Article IV hereof (except
as permitted pursuant to Sections 3.02, 3.03, 3.04 and 3.05 and
Section 9.10(b)(3) hereof), (iv) alter or modify the Purchase Right and HP
Shares Amount, (v) cause the termination of the Partnership prior to the
time set forth in Sections 2.05 or 7.01 hereof, or (vi) amend this
Section 9.10(c). Further, no provision of this Partnership Agreement
requiring the vote or consent of Limited Partners may be amended without
the consent of Limited Partners specified in such provision.
(d) All amendments to this Partnership Agreement shall be in
writing and executed by the General Partner on its own behalf and by the
Limited Partners on their own behalf or pursuant to the powers of attorney
granted to the General Partner pursuant to this Agreement.
(e) Schedule A to the Partnership Agreement shall be deemed to
be automatically amended to reflect the increase in the number of Units
held by Home Properties, directly or indirectly through the QRS, pursuant
to Section 3.04 of this Agreement on each occasion that an additional Unit
or Units are issued to Home Properties, or the QRS in connection with the
issuance of additional HP Shares by Home Properties pursuant to its
Dividend Reinvestment, Stock Purchase, Resident Stock Purchase and Employee
Stock Purchase Plan. Home Properties shall keep a schedule of the number
of additional Units issued to it and the date on which such Units were
issued and on each occasion that it causes the Partnership Agreement to be
amended for any other reason, it will cause Schedule A thereto to be
revised to reflect the current number of Units, including fractional Units,
then held by Home Properties or the QRS.
Section 9.11 Power of Attorney.
(a) Each Limited Partner hereby irrevocably constitutes and
appoints the General Partner, any Liquidator, and authorized officers and
attorneys-in-fact of each, and each of those acting singly, in each case
with full power of substitution as his true and lawful attorney-in-fact,
with full power and authority in his name, place and stead, to:
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(i) execute, swear to, acknowledge, deliver, file and
record in the appropriate public offices (A) all
certificates, documents and other instruments
(including, without limitation, this Agreement and the
Certificate and all amendments or restatements thereof)
that the General Partner or the Liquidator deems
appropriate or necessary to form, qualify or continue
the existence or qualification of the Partnership as a
limited partnership (or a partnership in which the
limited partners have limited liability) in the State
of New York and in all other jurisdictions in which the
Partnership may conduct business or own property; (B)
all instruments that the General Partner deems
appropriate or necessary to reflect any amendment,
change, modification or restatement of this Agreement
in accordance with its terms; (C) all conveyances and
other instruments or documents that the General Partner
deems appropriate or necessary to reflect the
dissolution and liquidation of the Partnership pursuant
to the terms of this Agreement, including, without
limitation, a certificate of cancellation; (D) all
instruments relating to the admission, withdrawal,
removal or substitution of any Partner pursuant to the
terms of this Agreement; and (E) all certificates,
documents and other instruments relating to the
determination of the rights, preferences and privileges
of Partnership Interests issued pursuant to
Section 3.03 hereof; and
(ii) execute, swear to, acknowledge and file all ballots,
consents, approvals, waivers, certificates and other
instruments appropriate or necessary, in the sole
discretion of the General Partner, to make, evidence,
give, confirm or ratify any vote, consent, approval,
agreement or other action which is made or given by the
Partners hereunder or is consistent with the terms of
this Agreement or appropriate or necessary, in the sole
discretion of the General Partner, to effectuate the
terms or intent of this Agreement.
Nothing contained herein shall be construed as authorizing the General
Partner to amend this Agreement except in accordance with Section 9.10
hereof or as may be otherwise expressly provided for in this Agreement.
(b) This power of attorney is hereby declared to be irrevocable
and a power coupled with an interest and shall survive an assignment by any
Limited Partner of all or any part of his or Partnership Interest until
such time as the General Partner has taken the action necessary or
appropriate to effect the substitution of the Assignee as a Limited
Partner.
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(c) This power of attorney shall, to the extent permitted by
law, survive any death, disability, incompetence, merger, bankruptcy,
receivership or dissolution of a Limited Partner.
(d) Each Limited Partner shall execute such instruments as the
General Partner may request in order to give evidence of, and to
effectuate, the granting of this power of attorney, whether by executing a
separate counterpart thereof or otherwise.
ARTICLE X
CLASS A LIMITED PARTNERSHIP INTERESTS
Section 10.01 Name. Pursuant to Section 3.03 of this
Partnership Agreement there is hereby created and issued a new class of
Partnership Interest to be known as the Class A Limited Partnership
Interest (the "Class A Interest").
Section 10.02 Capital Contribution. State Treasurer of the
State of Michigan, Custodian of Michigan Public School Employees'
Retirement System, State Employees' Retirement System, Michigan State
Police Retirement System and Michigan Judges' Retirement System ("SMRS")
shall contribute $35,000,000 (the "Original Investment") to the Partnership
in consideration for the issuance to it by the Partnership of the Class A
Interest. The Original Investment shall be deemed to be the Capital
Contribution of the Class A Interest Holder(s).
Section 10.03 Status of Holders. Holder(s) of all or any
portion of the Class A Interest shall be Limited Partners of the
Partnership and, except as otherwise provided herein, shall be entitled to
all of the rights and privileges of the other Limited Partners, as well as
the additional rights and privileges described below. For purposes of
voting on matters that must be approved by the Limited Partners, the Class
A Interest Holder(s) shall be deemed to hold the number of Units equal to
$35,000,000 divided by the Conversion Price times the percentage of the
Class A Interest originally issued hereby that has not been converted into
HP Shares (as defined in, and subject to adjustment in accordance with,
Section 10.06(b) below).
Section 10.04 Preferred Return.
(a) The Partnership shall pay the Class A Interest Holder(s) on
a quarterly basis in accordance with Section 10.04(c), prior to payment of
any Distributions to the holders of any Units, including but not limited to
the General Partner, a distribution equal to the preferred return described
below (the "Preferred Return"). Except as described in this Section 10.04,
the Partnership shall not be obligated to pay to the Class A Interest
Holder(s) any Distributions pursuant to Section 4.05 of this Partnership
Agreement.
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(i) Commencing on the date that the Class A Interest is
originally issued (the "Class A Closing Date") and
continuing to the second anniversary of the Closing
Date (the "9.25% Preferred Return Period"), the holders
of the Class A Interest shall receive, on a quarterly
basis in accordance with Section 10.04(c), a
distribution equal to the greater of: (a) $809,375; or
(b) an amount equal to the dividends and other
distributions that would have been paid on the number
of HP Shares equal to $35,000,000 divided by the
Conversion Price (the "9.25% Preferred Return").
(ii) Commencing on the date following the end of the 9.25%
Preferred Return Period and, except as provided below
in this subparagraph (ii), continuing to the seventh
anniversary of the Closing Date (the "9.0% Preferred
Return Period"), the holders of the Class A Interest
shall receive, on a quarterly basis in accordance with
Section 10.04(c), a distribution equal to the greater
of: (x) $787,500 or (y) an amount equal to the
dividends and other distributions that would have been
paid on the number of HP Shares equal to $35,000,000
divided by the Conversion Price (the "9.0% Preferred
Return"). Notwithstanding the above, if on the seventh
anniversary of the Class A Closing Date the Class A
Interest Holder(s) have not been paid actual
distributions of at least $809,375 on each of the prior
eight (8) consecutive Preferred Return Payment Dates
(defined below) or any distribution of a Preferred
Return from any prior period remains unpaid, the 9.0%
Preferred Return Period shall continue until the
Preferred Return Payment Date which shall be the eighth
(8th) consecutive Preferred Return Payment Date
thereafter occurring on which the Class A Interest
Holder(s) have been paid actual distributions of at
least $809,375 and until there remains outstanding no
unpaid distribution of a Preferred Return.
(b) After the end of the periods described in (i) and (ii)
above, the holders of the Class A Interest shall continue to receive, on a
quarterly basis in accordance with Section 10.04(c), a distribution equal
to the dividends and other distributions that would have been paid on the
number of HP Shares equal to $35,000,000 divided by the Conversion Price
times the percentage of the Class A Interest originally issued hereby that
has not been converted into HP Shares.
(c) The distributions required by this Section 10.04 shall be
payable to the holders of the Class A Interest on a quarterly basis on the
same date that the General Partner pays a quarterly dividend or other
distribution to the holders of HP Shares. If the General
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Partner does not
pay a distribution to the holders of HP Shares, the distributions required
by this Section 10.04 shall be payable on the fourth Tuesday of each of
February, May, August and November or on the next Business Day thereafter
if such day shall not be a Business Day. Each of the dates on which such a
distribution shall be so payable shall be a "Preferred Return Payment
Date." The first Preferred Return Payment Date shall be determined in
accordance with this paragraph (c) and shall occur in the first calendar
quarter following the Class A Closing Date. The first distribution payable
to the holders of the Class A Interest shall be pro-rated for the number of
days occurring from the Class A Closing Date to and including the last day
of the calendar quarter in which the Class A Closing Date occurs. To the
extent that the Class A Closing Date is not the last day of a calendar
quarter, the following rules shall apply to the proration of any
distribution of a Preferred Return in those calendar quarters in which the
rate of payment of such distribution is adjusted pursuant to Section
10.04(a) and (b); (i) the distribution payable with respect to the quarter
in which the second anniversary of the Class A Closing Date occurs shall be
pro-rated such that the 9.25% Preferred Return shall be payable for the
number of days occurring between the first day of that quarter to and
including the second anniversary of the Class A Closing Date and the 9.0%
Preferred Return shall be payable for the number of days occurring from the
day after the second anniversary of the Class A Closing Date to and
including the last day of quarter in which the second anniversary of the
Class A Closing Date occurs; and (ii) the distribution payable with respect
to the quarter in which the 9.0% Preferred Return Period terminates shall
be pro-rated such that the 9.0% Preferred Return shall be payable for the
number of days occurring from the first day of that quarter to and
including the day on which the 9.0% Preferred Return Period terminates and
the distribution described in paragraph (b) of this Section 10.04 shall be
payable for the number of days occurring from the day after the day on
which the 9.0% Preferred Return Period terminates to and including the last
day of the quarter in which the 9.0% Preferred Return Period terminates.
(d) To the extent that the Class A Interest Holder(s) convert
any portion of the Class A Interest held by them to HP Shares as permitted
by Section 10.06 below, the distributions described in subparagraphs (i)
and (ii) of paragraph (a) above shall terminate with respect to the portion
of the Class A Interest so converted.
(e) To the extent that a distribution required by this Section
10.04 is not paid on any Preferred Return Payment Date, the amount not paid
shall accrue interest at the rate of 9.25% per annum during the 9.25%
Preferred Return Period and at the rate of 9.0% per annum during the 9.0%
Preferred Return Period, compounded quarterly on each Preferred Return
Payment Date that it remains unpaid (the "Accrued Return"). Thereafter,
any distributions paid by the Partnership shall first be applied to pay any
Accrued Return previously due, but not paid. While any distribution owing
to the holders of the Class A Interest remains unpaid, no distributions
shall be paid to the holders of any Units, including but no limited to the
General Partner.
Section 10.05 Transfer Rights. The Class A Interest may be
transferred at any time providing that: (a) no transfer of all or a portion
of the Class A Interest may be
<PAGE>
made to a person if, in the written opinion
of legal counsel to the Partnership, it would result in the Partnership
being treated as an association taxable as a corporation; (b) such transfer
is effectuated through an "established securities market" or a "secondary
market" (or substantial equivalent thereof) within the meaning of Section
7704 of the Code; and (c) no transfer of all or a portion of the Class A
Interest shall be valid and effective and the Partnership shall not
recognize the same for the payment of the Preferred Return, allocation of
Income or Loss or Approval Rights (as hereafter defined) until an
Assignment of Class A Interest is delivered to the General Partner. The
Assignment of Class A Interest shall be in substantially the form attached
to this Partnership Agreement as Exhibit B. With respect to the transfer
of all or any portion of the Class A Interest, the provisions of this
Section 10.05 shall apply in substitution for the provisions of Sections
6.05 and 6.06 of the Partnership Agreement. Upon receipt of a duly
executed Assignment of Class A Interest, and the furnishing of the
additional documents described in Section 3.05 of the Partnership
Agreement, the General Partner shall execute an amendment to this
Partnership Agreement adding the name or names of such Persons to Schedule
A and the assignee shall be admitted to the Partnership as an Additional
Limited Partner.
Section 10.06 Conversion Rights.
(a) Any Class A Interest Holder shall have the right to convert
all or any portion of its Class A Interest into HP Shares (the "Conversion
Right"). In the event that any Class A interest Holder wishes to exercise
its Conversion Right, it shall so notify the General Partner in writing
(the"Conversion Notice"), specifying the percentage of the Class A Interest
that it wishes to convert. Within ten (10) days after the receipt of a
Conversion Notice (the "Conversion Date"), the General Partner will issue
and deliver to the holder, on the holder's written order, a certificate or
certificates representing the number of full HP Shares issuable upon the
conversion of the specified portion of the Class A Interest. Any
fractional HP Shares arising upon a conversion will be settled as provided
in paragraph (e) of this Section 10.06. Each conversion will be deemed to
have been effected on the Conversion Date and the person in whose name a
certificate for HP Shares is to be issued upon a conversion will be deemed
to have become the holder of record of the HP Shares represented by that
certificate at such effective time. All HP Shares delivered upon
conversion of all or any portion of the Class A Interest will, upon
delivery, be duly and validly issued and fully paid and nonassessable, free
of all liens and charges and not subject to any preemptive rights. The
portion of the Class A Interest so converted will no longer be deemed to be
outstanding and all rights of the holder with respect to that portion so
converted will immediately terminate, except the right to receive the HP
Shares and any Accrued Return.
(b) Upon conversion, the holder of the Class A Interest so
converted will receive that number of HP Shares as shall equal the
percentage of the Class A Interest originally issued hereby represented by
such Class A Interest so converted times $35,000,000 divided by the
conversion price, which will initially be $21.00 and will be adjusted as
follows from time to time if any of the events described below occurs (the
"Conversion Price"):
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(i) If the General Partner: (x) pays a dividend or makes a
distribution on HP Shares in HP Shares; (y) subdivides
the outstanding HP Shares into a greater number of HP
Shares; or (z) combines the outstanding HP Shares into
a smaller number of HP Shares, the Conversion Price in
effect immediately prior to that event will be adjusted
so that the holder of all or a portion of the Class A
Interest to be converted after that event will receive
the number of HP Shares which such holder would have
received as a result of the event if the portion of the
Class A Interest to be converted had been converted
immediately before the happening of such event (or, if
there is more than one such event, if the portion of
the Class A Interest to be converted had been converted
immediately before the first of those events and the
holder had retained all the HP Shares or other
securities or assets received after the conversion).
An adjustment made pursuant to this Section 10.6(b)(i)
will become effective immediately after the record date
in the case of a dividend or distribution, and will
become effective immediately after the effective date
in the case of a subdivision or combination. If such
dividend or distribution is declared but is not paid or
made, the Conversion Price then in effect will be
appropriately readjusted. However, a readjustment of
the Conversion Price will not affect any conversion
which takes place before the readjustment.
(ii) If the General Partner issues rights or warrants to the
holders of the HP Shares as a class entitling them to
subscribe for or purchase HP Shares at a price per
share less than the Conversion Price in effect on the
record date for the determination of shareholders
entitled to receive the rights or warrants, the
Conversion Price in effect immediately before the
issuance of the rights or warrants will be reduced in
accordance with the equation set forth on Exhibit C
hereto, which is hereby incorporated by reference
herein. The adjustment provided for this Section
10.6(b)(ii) will be made successively whenever any
rights or warrants are issued, and will become
effective immediately after each record date. In
determining whether any rights or warrants entitle the
holders of HP Shares to subscribe for or purchase HP
Shares at less than the Conversion Price, and in
determining the aggregate sale price of the HP Shares
issuable on the exercise of rights or warrants, there
will be taken into account any consideration received
by the General Partner for the rights or warrants, with
the value of that consideration, if other than cash, to
be determined by the Board of Directors of
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the General
Partner (whose determination, if made in good faith,
will be conclusive). If any rights or warrants which
lead to an adjustment of the Conversion Price expire or
terminate without having been exercised, the Conversion
Price than if effect will be appropriately readjusted.
However, a readjustment of the Conversion Price will
not affect any conversions which take place before the
readjustment.
(iii) If the General Partner distributes to the holders of
the HP Shares as a class any shares of stock of the
General Partner (other than HP Shares) or evidences of
indebtedness or assets (other than cash dividends or
distributions) or rights or warrants (other than those
referred to in Section 10.6(b)(ii)) to subscribe for or
purchase any of its securities, then, in each such
case, the Conversion Price will be reduced so that it
will equal the price determined by multiplying the
Conversion Price in effect immediately prior to the
record date for the distribution by a fraction of which
the numerator is the Market Value of the HP Shares on
the record date for the distribution less the then fair
market value (as determined by the Board of Directors,
whose determination, if made in good faith, will be
conclusive) of the stock, evidences of indebtedness,
assets, rights or warrants which are distributed with
respect to one HP Share, and of which the denominator
is the Market Value of the HP Shares on that record
date. Each adjustment will become effective
immediately after the record date for the determination
of the shareholders entitled to receive the
distribution. If any distribution is declared but not
made, or if any rights or warrants expire or terminate
without having been exercised, effective immediately
after the decision is made not to make the distribution
or the rights or warrants expire or terminate, the
Conversion Price then in effect will be appropriately
readjusted. However, a readjustment will not affect
any conversions which take place before the
readjustment.
(iv) If the General Partner issues or sells (or the
Partnership issues or sells) any equity or debt
securities which are convertible, directly or
indirectly, into or exchangeable for HP Shares
("Convertible Securities") or any rights, options
(other than the issuance or exercise after the date
hereof of stock options covering no more than 699,778
HP Shares, the exercise price of which will be no less
than the Market Value of the HP Shares on the date of
grant as determined in good faith by the Board of
Directors, which number of HP Shares shall be subject
to
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appropriate adjustment to the extent that the
Corporation: (x) pays a dividend or makes a
distribution on the HP Shares; (y) subdivides the
outstanding HP Shares into a greater number of shares;
or (z) combines the outstanding HP Shares into a
smaller number of shares, issued to employees or
directors of the General Partner and its subsidiaries
under the General Partner's existing employee stock
incentive plans) or warrants to purchase HP Shares at a
conversion, exchange or exercise price per share which
is less than the Conversion Price, unless the
provisions of Section 10.6(b)(ii) or (iii) are
applicable, the General Partner will be deemed to have
issued or sold, on the later of the date on which the
Convertible Securities, rights, options or warrants are
issued or the date on which they first may be
converted, exchanged or exercised, the maximum number
of HP Shares into or for which the Convertible
Securities may then be converted or exchanged or which
are then issuable upon the exercise of the rights,
options or warrants immediately prior to the close of
business on the later of the date on which the
Convertible Securities, rights, options or warrants are
issued or the date on which they may first be
converted, exchanged or exercised, and the Conversion
Price shall be adjusted downward as if it were an event
covered by Section 10.6(b)(v). However, no further
adjustment of the Conversion Price will be made as a
result of the actual issuance of HP Shares upon
conversion, exchange or exercise of the Convertible
Securities, rights, options or warrants. If any
Convertible Securities, rights, options or warrants to
which this Section applies are redeemed, retired or
otherwise extinguished or expire without any HP Shares
having been issued upon conversion, exchange or
exercise thereof, effective immediately after the
Convertible Securities, rights, options or warrants
expire, the Conversion Price then in effect will be
readjusted to what it would have been if those
Convertible Securities, rights options or warrants had
not been issued. However, a readjustment will not
affect any conversion which takes place before the
readjustment. For the purposes of this Section
10.6(b)(iv), (x) the price of HP Shares issued or sold
upon conversion or exchange of Convertible Securities
or upon exercise of rights, options or warrants will
be: (A) the consideration paid to the General Partner
for the Convertible Securities, rights, options or
warrants, plus: (B) the consideration contemplated to
be paid to the General Partner upon conversion,
exchange or exercise of the Convertible Securities,
rights, options or warrants, with the value of the
consideration, if other than cash, to be determined
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by
the Board of Directors of the General Partner (whose
determination, if made in good faith, will be
conclusive) and (y) any change in the conversion or
exchange price of Convertible Securities or the
exercise price of rights, options or warrants will be
treated as an extinguishment, when the change becomes
effective, of the Convertible Securities, rights,
options or warrants which had the old conversion,
exchange or exercise price and an immediate issuance of
new Convertible Securities, rights, options or warrants
with the new conversion, exchange or exercise price.
(v) If the General Partner issues or sells any HP Shares
(other than on conversion or exchange of Convertible
Securities or exercise of rights, options or warrants
to which Section 10.6(b)(ii), (iii) or (iv) applies)
for a consideration per share less than the Conversion
Price on the date of the issuance or sale (or on
exercise of options or warrants, for less than the
Conversion Price on the day the options or warrants are
issued), upon consummation of the issuance or sale, the
Conversion Price in effect immediately prior to the
issuance or sale will be reduced in accordance with the
equation set forth on Exhibit C hereto, which is hereby
incorporated by reference herein.
(vi) If there is a reclassification or change of outstanding
HP Shares (other than a change in par value, or as a
result of a subdivision or combination), or a merger or
consolidation of the General Partner with any other
entity that results in a reclassification, change,
conversion, exchange or cancellation of outstanding HP
Shares, or a sale or transfer of all or substantially
all of the assets of the Corporation, upon any
subsequent conversion of any portion of the Class A
Interest, each holder of the Class A Interest so
converted will be entitled to receive the kind and
amount of securities, cash and other property which the
holder would have received if the holder had converted
the Class A Interest into HP Shares immediately before
the first of any of the foregoing events and had
retained all the securities, cash and other assets
received as a result of such events. In the event that
a transaction may be viewed as causing this
Section 10.6(b)(vi) to be applicable and
Section 10.6(b)(iii) is also applicable, then Section
10.6(b)(iii) will be applied and this Section
10.6(b)(vi) will not be applied.
(vii) Notwithstanding anything to the contrary above, no
adjustment in the Conversion Price will be required in
the following
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situations: (x) the General Partner
issues (or the Partnership issues) any HP Shares or
Partnership Interests or any equity or debt securities
which are convertible, directly or indirectly, into or
exchangeable for HP Shares at a price or exchange or
exercise price per share which is less than the
Conversion Price as consideration for all or a portion
of the purchase price in connection with the
acquisition of property or real estate operating
businesses; (y) the General Partner issues or sells (or
the Partnership issues or sells) to the Class A
Interest Holders any HP Shares or Partnership Interests
or any equity or debt securities which are convertible,
directly or indirectly, into or exchangeable for HP
Shares at a price or exchange or exercise price per
share which is less than the Conversion Price; and (z)
the General Partner issues HP Shares at less than the
Conversion Price pursuant to the dividend reinvestment
portion of the General Partner's Dividend Reinvestment,
Stock Purchase, Resident Stock Purchase and Employee
Stock Purchase Plan.
(viii) No adjustment in the Conversion Price will be required
unless the adjustment would require a change of at
least 1% in the Conversion Price; provided, however,
that any adjustments which are not made because of this
Section 10.6(b)(viii) will be carried forward and taken
into account in any subsequent adjustments. All
calculations under this Section 10.06 will be made to
the nearest cent or to the nearest one hundredth of a
share, as the case may be.
(ix) Whenever the Conversion Price is adjusted, the
Corporation will promptly send each Class A Interest
Holder a notice of the adjustment of the Conversion
Price setting forth the adjusted Conversion Price and
the date on which the adjustment becomes effective and
containing a brief description of the events which
caused the adjustment.
(c) If any one of the events in Section 10.6(b)(i) through
10.6(b)(v) occurs, then the General Partner will mail to each of the
Class A Interest Holders of record, no later than 15 Business Days after
the applicable date specified below, a notice stating, as applicable, one
of the following: (i) the date on which a record was taken for the purpose
of the dividend, distribution or grant of rights or warrants, or, if no
record was taken, the date as of which the holders of HP Shares of record
who were entitled to the dividend, distribution or rights or warrants was
determined; (ii) the date on which the Convertible Securities were issued
or the date on which the change in the conversion, exchange or exercise
price of the Convertible Securities, rights, options or warrants was
effective; (iii) the date on which the General Partner sold HP Shares for
less than the Conversion Price on the
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date of the sale; or (vi) the date on
which the reclassification, consolidation, merger, share exchange, sale,
transfer, dissolution, liquidation or winding up became effective, and the
date on which holders of record of HP Shares were entitled to exchange
their HP Shares for securities or other property deliverable upon the
reclassification, consolidation, merger, share exchange, sale, transfer,
dissolution, liquidation or winding up. Failure to give any such notice or
any defect in the notice will not affect the legality or validity of the
reclassification, consolidation, merger, share exchange, sale, transfer,
dissolution, liquidation or winding up.
(d) (i) The General Partner will at all times reserve and keep
available, free from preemptive rights, out of the
authorized but unissued HP Shares, for the purpose of
effecting conversion of the Class A Interest, the
maximum number of HP Shares which the General Partner
would be required to deliver upon the conversion of all
the outstanding Class A Interest. For the purpose of
this Section 10.6(d)(i), the number of HP Shares which
the General Partner would be required to deliver upon
the conversion of all the outstanding Class A Interests
will be computed as if at the time of the computation
all the outstanding Class A Interests were held by a
single holder.
(ii) Before taking any such action which would cause an
adjustment reducing the Conversion Price below the then
par value (if any) of the HP Shares deliverable upon
conversion of the Class A Interest, the General Partner
will take all corporate action which may, in the
written opinion of its counsel, be necessary in order
that the General Partner may validly and legally issue
fully paid and non-assessable HP Shares at the adjusted
Conversion Price.
(e) No fractional HP Shares will be issued upon conversion of
the Class A Interest. Any fractional interest in an HP Share resulting
from conversion of the Class A Interest will be paid in cash (computed to
the nearest cent) based on the Market Value of the HP Shares on the trading
day next preceding the Conversion Date.
(f) As of the Closing Date, the HP Shares to be issued upon
conversion of all or any portion of the Class A Interest will be approved
for listing on the New York Stock Exchange subject to official notice of
issuance. After the Closing Date, the General Partner will continue the
listing of the HP Shares required to be delivered upon conversion of all or
any portion of the Class A Interest on the New York Stock Exchange or on
each national securities exchange, if any, upon which the outstanding HP
Shares are listed at the time of delivery.
(g) With respect to Conversion Dates occurring on or after the
fifth anniversary of the Issuance Date, the Class A Interest Holder of the
portion of the Class A Interest so converted shall receive, in addition to
the HP Shares to be issued pursuant to
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Section 10.6(b), that additional
number of HP Shares, if any, as shall be necessary in order that such
holder will receive, on the next date on which dividends are paid by the
General Partner with respect to HP Shares, dividends equal to $7,875 for
each 1% of the Class A Interest converted, assuming that the dividend paid
per HP Share did not change from that applicable on the dividend payment
date immediately preceding the Conversion Date.
Section 10.07 Voting Rights.
(a) As used in this Section 10.07 and elsewhere in this
Partnership Agreement, the following terms shall have the indicated
meanings:
(i) Affiliate of SMRS. Any Person that controls, is
controlled by or is under common control with SMRS, as
evidenced by contract or agreement.
(ii) Approval Rights. The Right Holders' right to approve
certain matters as described in Section 10.07 of this
Partnership Agreement and pursuant to Section 6 of the
Partnership Interest Agreement.
(iii) Change of Control. The occurrence of any of the
following events: (i) the General Partner takes or
fails to take any action such that it ceases to be
required to file reports under Section 13 of the
Securities Exchange Act of 1934, as amended (the
"Exchange Act"), or any successor to that Section;
(ii) any "person" (as defined in Sections 13(d) and
14(d) of the Exchange Act) is permitted by the General
Partner or the Subsidiaries, or their respective Boards
of Directors, to become the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of either (a) 30% of more of the
outstanding HP Shares, or (b) 30% or more (by right to
vote or grant or withhold any approval) of the
outstanding securities of any other class or classes
which individually or together have the power to elect
a majority of the members of such Board of Directors;
(iii) either of the Boards of Directors of the General
Partner or the Subsidiaries determine to recommend the
acceptance of any proposal set forth in a tender offer
statement or proxy statement filed by any person with
the Securities and Exchange Commission which indicates
the intention on the part of that person acquiring,
control of the General Partner or the Subsidiaries;
(iv) the General Partner ceases to be the sole general
partner of the Partnership or grants or sells to any
third party the power to control or direct the actions
of the Partnership as if such third party were a
general
<PAGE>
-55-
partner of the Partnership; or (v) the
Partnership is a party to any entity conversion or any
merger or consolidation in which the Partnership is not
the surviving entity in such merger or consolidation.
(iv) Equity Capitalization. The aggregate of the Value of
the Interest, the Value of the Units not owned by the
General Partner and the Market Value of all outstanding
HP Shares at the time the determination is made.
(v) HP Conversion Shares. The HP Shares received on
conversion of all or any portion of the Class A
Interest that have not previously been sold or
otherwise transferred on a Public Basis.
(vi) Investor Group Representative. The Person appointed by
the Rights Holders to act as their representative as
described in paragraph (c) of this Section 10.07.
(vii) Market/Offer Price. The product of: (i) the greater
of (a) the highest price (or value of other
consideration) per HP Share agreed upon during such
12-month period pursuant to any Business Combination
Transaction, which was made during such 12-month period
and was not terminated or withdrawn prior to the end of
such period; and (b) the average closing price per HP
Share as shown on the composite tape of the New York
Stock Exchange over such 12-month period; and (ii) the
number of such HP Shares.
(viii) Market Value. As defined in Section 1.41 of this
Partnership Agreement, provided that the Rights
Holders, by accepting the issuance or assignment to
them of all or a portion of the Class A Interest or the
HP Conversion Shares, covenant and agree that, during
the ten (10) consecutive trading days immediately
preceding the date on which the Market Value is to be
determined, they will not purchase or sell any HP
Shares, cause the purchase and sale of any HP Shares or
take any other actions that are intended to or that
actually affect the market price of HP Shares.
(ix) Partnership Interest Agreement. The Partnership
Interest Purchase Agreement, dated as of December 20th,
1996 by and between the Partnership, the General
Partner and SMRS.
<PAGE>
-56-
(x) Public Basis. The sale of any HP Shares by means of
any public stock exchange or in any Public Offering.
(xi) Public Offering. A public offering of HP Shares,
preferred shares of the General Partner or Partnership
Interests (including Units), other than a registration
relating solely to the sale of securities to
participants in a dividend reinvestment plan, a
registration on Form S-4 relating to a business
combination or similar transaction permitted to be
registered on such Form S-4, a registration on Form S-8
relating solely to the sale of securities to
participants in a stock or employee benefit plan, or a
registration permitted under Rule 462 under the
Securities Act registering additional securities of the
same class as were included in an earlier registration
statement for the same offering and declared effective.
(xii) Related Entity. The Partnership, the General Partner
or any Person in which the Partnership or the General
Partner has beneficial ownership, whether direct or
indirect, of: (x) 50% or more of the outstanding
shares of any class of stock or any class of ownership
interest or (y) such lower percentage of the
outstanding shares of any class of stock or any class
of such other ownership interest as is sufficient to
render such Person a subsidiary of the Partnership or
the General Partner for purposes of generally accepted
accounting principles as in effect at the time of
determination of the status of such Person for purposes
of this definition.
(xiii) Rights Holders. The Class A Interest Holders and the
holders of the HP Conversion Shares.
(xiv) Rights Termination Date. The date on which the
combined Value of the Class A Interest and the Value of
the HP Conversion Shares held by the Rights Holders:
(i) shall be less than $35,000,000; and (ii) cease to
exceed 8% of the Equity Capitalization of the
Partnership for a period of 30 consecutive trading
days.
(xv) Total Capitalization. The aggregate of the Equity
Capitalization plus the aggregate outstanding principal
amount at the time the determination is made of all
liabilities of the Partnership and the General Partner
arising from the borrowing of any money or the deferral
of any of the purchase price of any asset or pursuant
to any capital lease.
<PAGE>
-57-
(xvi) Value of the HP Conversion Shares. Market Value of the
equivalent number of HP Shares.
(xvii) Value of the Class A Interest. Market Value of the HP
Shares to which the Class A Interest can be converted.
(xviii) Value of the Units. Market Value of the HP Shares to
which the outstanding Units can be converted.
(b) Prior to the Rights Termination Date, the General Partner or
the Partnership, as the case may be, shall not take any of the actions
described in Section 6.4 of the Partnership Interest Agreement or any of
the following actions without obtaining the prior written approval of the
Rights Holders, voting as a group:
(i) permit the outstanding principal liabilities of Related
Entities arising from the borrowing of any money (for
this purpose, any indebtedness or other liability which
is guaranteed, endorsed or discounted with recourse by
a Related Entity shall be deemed to be a principal
liability of such Related Entity) or the deferral of
the purchase price of any asset or pursuant to any
capital lease to exceed 50% of the Total
Capitalization;
(ii) purchase of any assets in a single transaction or
series of related transactions (including by way of
merger, consolidation or other combination with any
other Person or the purchase of equity interests in the
entity owning such assets) if the consideration to be
paid for those assets exceeds 25% of Total
Capitalization;
(iii) sell, exchange, lease or otherwise dispose of any
assets or securities in a single transaction or a
series of related transactions (including by way of
merger, consolidation or other combination with any
other Person or the sale of equity interests in the
entity owning such assets) if the assets or securities
to be sold, exchanged, leased or otherwise disposed of
have a value exceeding 25% of the Total Capitalization;
(iv) amend any provision of the Articles of Incorporation or
By-laws of the General Partner or this Partnership
Agreement if such amendment would adversely affect the
rights of the Class A Interest Holders;
(v) liquidate or dissolve any Related Entity;
<PAGE>
-58-
(vi) with respect to any Related Entity, commence a
voluntary case under any applicable bankruptcy,
insolvency or other similar law now or hereafter in
effect, or consent to the entry of an order for relief
in an involuntary case under any such law;
(vii) terminate the election, or take any action which would
cause termination other than by election, of the
General Partner as a real estate investment trust under
the Code;
(viii) alter any business purpose (as may be stated in the
Articles of Incorporation of the General Partner and
the Subsidiaries, the Partnership Agreement or
otherwise) of, or allow a Change of Control to occur
with respect to, any Related Entity;
(ix) create or issue any security which would be pari passu
or senior in right, either as to distributions or upon
liquidation, to the Class A Interest or reclassify the
Class A Interest or any Units if such creation,
issuance or reclassification would adversely affect the
rights or benefits of the holders of the Class A
Interest;
(x) increase the size of the Board of Directors of the
General Partner, except to the extent necessary to add
an Investor Nominee (as defined in the Partnership
Interest Agreement) pursuant to the Partnership
Interest Agreement; and
(xi) except as otherwise provided in this Article X, require
the exchange of the Class A Interest for other
securities.
(c) The General Partner shall provide the Investor Group
Representative with a written request for the approval of any matter
described in paragraph (b) of this Section 10.07. Such written notice
shall include a reasonable description of the matter for which approval is
sought and shall be made in accordance with the provisions of
Section 10.11. If the Investor Group Representative does not respond
within fifteen (15) Business Days after the date of receipt of such a
written request the Rights Holders shall be deemed to have approved the
matter as to which their approval was sought.
(d) With respect to their approval rights pursuant to
paragraph (b) of this Section 10.07, the Rights Holders shall only be
permitted to act as a group. In the event that there is more than one
Rights Holder, the Rights Holder shall select one Person to act as their
Investor Group Representative and shall so notify the General Partner.
SMRS shall be the initial Investor Group Representative. Upon failure of
the Rights Holders to select an Investor Group Representative, the largest
single holder of Class A Interests shall be designated by the General
Partner as the Investor Group Representative. The General Partner and the
Partnership shall be entitled and obligated to rely on any and all
notifications
<PAGE>
-59-
and directions given to it by the Investor Group
Representative and shall have no obligation to verify that such
notifications and directions constitute the consensus of the Rights
Holders. In addition, upon receipt of notice from any or all other Rights
Holders that such notifications and directions do not constitute the
consensus of the Rights Holders, the General Partner and the Partnership
shall still be obligated to follow the directions of the Investor Group
Representatives.
(e) In addition to their rights under this Section 10.07, the
Rights Holders shall have the right to appoint and nominate one or more
Investor Nominees and to approve the other matters as described in
Section 6 of the Partnership Interest Agreement.
(f) If the General Partner solicits the approval of the Rights
Holders for any of the matters described in paragraph (b) of Section 6.4 of
the Partnership Interest Agreement or this Section 10.07 of this Agreement
and is informed by the Investor Group Representative that the Rights
Holders do not approve of the matter submitted, then the Partnership shall
have the right to purchase the remaining portion of the Class A Interest
from the holders thereof at a price (the "Interest Purchase Price") that is
equal to 105% of the greater of: (i) the Value of the Class A Interests as
of the date of purchase (the "Purchase Closing"), including any Accrued
Return; and (ii) the Original Investment, including any Accrued Return,
times the percentage of the Class A Interest originally issued hereby that
has not been converted to HP Shares. Upon full payment of the purchase
right described in this paragraph (f) of Section 10.07 (the "Purchase
Right") the holder of any HP Conversion Shares shall cease to be a Rights
Holder and a Class A Interest Holder for purposes of this Partnership
Agreement and the Partnership Interest Agreement. If the Partnership
intends to exercise its Purchase Right, it shall so notify the Class A
Interest Holders in writing within five (5) Business Days after receipt of
notice that the Rights Holders have not approved any matter submitted to
them for approval pursuant to Section 10.07 of this Partnership Agreement
of Section 6.4 of the Partnership Interest Agreement. Payment of the
Interest Purchase Price as described above shall be made in cash within
twenty (20) Business Days after receipt of that notice by the Class A
Interest Holders. In the event that the Partnership exercises its Purchase
Right in connection with the refusal of the Rights Holders to approve any
tender or exchange offer or merger, consolidation, share exchange, business
combination, or similar transaction involving the General Partner (each, a
"Business Combination"), then at the completion of the 12-month period
following the Purchase Closing, the General Partner shall determine the
Market/Offer Price for such HP Shares. If the Market/Offer Price is higher
than the Interest Purchase Price paid at the Purchase Closing, the
Partnership shall pay over to the holders of record of the Class A
Interest as of the date of the Purchase Closing, an additional amount (the
"Additional Amount") equal to such difference. The payment of the
Additional Amount shall be due on the earlier of: (i) ten days after the
end of such 12-month period; or (ii) the closing date of any Business
Combination Transaction closed during such period. In the event that the
Rights Holders on two occasions do not approve a matter submitted for their
approval pursuant to paragraph (b) of Section 6.4 of the Partnership
Interest Purchase Agreement or this Section 10.07 and the Partnership does
not exercise its Purchase Right, then the Rights
<PAGE>
-60-
Holders may request from
the General Partner a waiver of the Volume Limitation, as defined i n the
letter agreement from SMRS to the General Partner whereby SMRS acknowledges
certain restrictions on the sale of HP Shares received on conversion of all
or a portion of the Class A Interest. The General Partner shall not
unreasonably withhold its approval of such a waiver, provided that it shall
not be unreasonable for the General Partner to withhold its approval if the
sale of HP Shares beyond the Volume Limitation is reasonably anticipated to
have a material negative effect on the market for, and the market price of,
HP Shares.
Section 10.08 Calculation of Percentage Interest. The
Percentage Interest of the entire Class A Interest shall initially be
58.07838 as of the Class A Closing Date. That percentage is calculated
based on total Partnership Interests (including Units) deemed to be
outstanding, as of the Class A Closing Date, of 2,869,686. To the extent
that the number of Units or other Partnership Interests changes (thus
changing the denominator), or any portion of the Class A Interest is
converted to HP Shares (thus changing the numerator), the Percentage
Interest associated with the Class A Interest shall be proportionately
adjusted.
Section 10.09 Liquidation. Notwithstanding the provisions of
Section 7.02 of this Partnership Agreement, upon liquidation of the
Partnership, the General Partner shall, to the extent of funds available,
pay to the holder(s) of the Class A Interest prior to making any
distribution to any other security holder in the aggregate the amount of
the original Investment times the percentage of the Class A Interest
originally issued hereby that has not been converted into HP Shares as
described in Section 10.06 above, plus any Accrued Return. Such payment is
to be made to each such holder in proportion to its then current percentage
interest in the remaining Class A Interest and such payment to be made
prior to and in lieu of the payment to Partners described in sub-
paragraph (4) of paragraph (a) of Section 7.02 of this Partnership
Agreement. For purposes of this Section 10.09, a consolidation or a merger
of the Partnership with another entity wherein the Partnership is not the
surviving entity, or a sale of all or substantially all of the
Partnership's assets for cash or securities, will be considered a
liquidation of the Partnership.
Section 10.10 Redemption of the Class A Limited Partnership
Interest. From and after the tenth anniversary of the Issuance Date, the
Partnership shall have the right to redeem the remaining portion of the
Class A Interest for a redemption price equal to 100% of the amount of
Original Investment times the percentage of the Class A Interest that had
not as yet been converted into HP Shares as described in Section 10.06
above (the "Redemption Price"), plus any Accrued Return. The Partnership
shall give the Interest Holder(s) no less than thirty-five (35) Business
Days prior written notice of its intention to exercise the redemption right
described above. Within thirty (30) Business Days after receipt of the
above described notice of intention from the Partnership, the Interest
Holder(s) shall notify the Partnership as to whether they plan to exercise
their Conversion Right with respect to the remaining portion of the Class A
Interest prior to the redemption of the Class A Interest. If the holder(s)
do not so exercise their Conversion Right, then upon payment of the
Redemption Price, all of the rights of the holders of the Class A Interest,
under this Partnership Agreement and the Partnership Interest Agreement
shall terminate.
<PAGE>
-61-
Section 10.11 Notices. All notices and other communications
under this Article X shall be sufficiently given for all purposes hereunder
if in writing and delivered personally, sent by documented overnight
delivery service or, to the extent receipt is confirmed, telecopy, telefax
or other electronic transmission serviced to the appropriate address or
number as set forth below. Notices to the General Partner and the
Partnership shall be addressed to:
Home Properties of New York, Inc.
850 Clinton Square
Rochester, New York 14604
Attn: Amy L. Tait
(716) 546-4900
Telecopier No.: (716) 546-5433
with a copy to:
Ann M. McCormick, Esq.
c/o Home Properties of New York, Inc.
850 Clinton Square
Rochester, New York 14604
(716) 546-4900
Telecopier No.: (716) 546-5433
or at such other address and to the attention of such other person as the
General Partner or the Partnership may designate by written notice to SMRS.
Notices to SMRS shall be addressed to:
Express Mail:
Mortgage and Real Estate Division
Michigan Department of Treasury
430 West Allegan
Lansing, Michigan 48922
Attn: Administrator
(517) 373-0702
Telecopier No.: (517) 373-0635
Other Mail:
Mortgage and Real Estate Division
Michigan Department of Treasury
P.O. Box 15128
Lansing, Michigan 48901
Attn: Administrator
<PAGE>
-62-
with a copy to:
Michigan Department of Attorney General
Finance and Development Division
One Michigan Avenue Building
120 North Washington Square
Lansing, Michigan 48933
Attn: Assistant in Charge
(517) 373-1130
Telecopier No.: (517) 335-3088
and an additional copy to:
Rogers & Wells
200 Park Avenue
New York, New York 10166-0153
Attn: Jay Bernstein
or at such other address and to the attention of such other person as SMRS
may designate by written notice to the General Partner.
Notices to other Rights Holders, holders of the Class A Interest
and the Investor Group Representative shall be by the above means and to
such addresses and to the attention of such person as the Rights Holders,
holders of the Class A Interest and the Investor Group Representative may
designate by written notice to the General Partner.
For purposes of this Agreement, the Investor Group Representative
will only be deemed to have received any notice upon the written
acknowledgment by one individual designated by the Investor Group
Representative with authority to acknowledge such receipt or upon refusal
by any such designee to accept receipt of any notice. The Investor Group
Representative shall at all times provide the General Partner with a
written designation of at least two individuals or titles of positions that
are so designated with authority to acknowledge receipt of written notice.
In all cases where a failure by the Rights Holders, Class A
Interest Holders and/or the Investor Group Representative to respond within
a specified time frame shall be deemed to be their approval pursuant to
this Partnership Agreement, then the written notice or request provided by
the General Partner shall specifically state that a failure to respond
within the indicated time frame shall be deemed to be an approval of the
matter for which approval was sought.
IN WITNESS WHEREOF, this Second Amended and Restated Agreement of
Limited Partnership of Home Properties of New York, L.P. is hereby executed
as of the date first above written.
<PAGE>
-63-
GENERAL PARTNER
HOME PROPERTIES OF NEW YORK, INC.
By: /S/ Norman P. Leenhouts
_______________________________________
Norman P. Leenhouts
Its: Chairman
LIMITED PARTNERS LISTED ON ATTACHED SCHEDULE
A:
By: Home Properties of New York, Inc.,
as attorney-in-fact
By: /s/ Norman P. Leenhouts
________________________
Title: Chairman
<PAGE>
EXHIBIT A
NOTICE OF SALE
The undersigned hereby irrevocably (i) tenders
____________________ Units in Home Properties of New York, L.P. in
accordance with the terms of the Amended and Restated Agreement of Limited
Partnership of Home Properties of New York, L.P. (the "Partnership
Agreement") and the Purchase Right referred to therein, (ii) surrenders
such Units and all right, title and interest therein, and (iii) directs
that the Cash Amount or HP Shares Amount (as determined by the General
Partner) deliverable upon exercise of the Purchase Right be delivered to
the address specified below, and if HP Shares Amount are to be delivered,
such HP Shares Amount be registered or placed in the name(s) and at the
address(es) specified below, provided, however, that if the General Partner
determines to deliver HP Amount, this Notice of Sale may be revoked as
provided in Section 6.08(b) of the Partnership Agreement.
Dated: ____________________
Name of Limited Partner: ___________________________
--------------------------------
(Signature of Limited Partner)
--------------------------------
(Street Address)
--------------------------------
(City) (State) (Zip)
Signature Guaranteed by:
If HP Shares Amount are to be issued, issue to: _________________________
Please insert social security or identifying number: _________________
Address: _________________________
_________________________
_________________________
<PAGE>
EXHIBIT B
TO
SECOND AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
ASSIGNMENT OF CLASS A INTEREST
In consideration for $____________________ and other good and
valuable consideration, __________________________________________________
(the "Assignor"), hereby assigns to
__________________________________________________ the ("Assignee"), all of
the Assignor's right, title and interest in and to _____% of the Class A
Interest originally issued to State Treasurer of the State of Michigan,
Custodian of Michigan Public School Employees' Retirement System, State
Employees' Retirement System, Michigan State Police Retirement
System and Michigan Judges' Retirement System (the "Class A Interest") in
Home Properties of New York, L.P. (the "Partnership") a limited partnership
organized under the laws of the State of New York, and directs that,
effective ____________________, all future distributions and allocations of
taxable income or loss on account of such _____% of the Class A Interest be
paid or allocated to such Assignee.
Assignee hereby accepts the _____% of the Class A Interest
subject to all terms, covenants and conditions of the Partnership's Amended
and Restated Agreement of Limited Partnership as the same may have been
amended from time to time.
ASSIGNOR:
Dated: ____________________ _______________________________
By:____________________________
Title:_________________________
ASSIGNEE:
_______________________________
By:____________________________
_______________________________
Assignee's Address
_______________________________
Assignee's Social Security or Taxpayer
Identification Number
[Appropriate Notary Block Depending on Type of Entity]
<PAGE>
EXHIBIT C
SECOND AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
HOME PROPERTIES OF NEW YORK, L.P.
CLASS A LIMITED PARTNERSHIP INTEREST
Adjustment Formula Pursuant to Section 10.06(b)(ii) and (v) ("Adjustment
Formula")
OBJECTIVE: To keep the Class A Interest Holders' relative ownership
percentage constant (as compared to a transaction consummated at the
Conversion Price), upon the issuance of a "New Dilutive Security" (see
definition below), the then applicable Conversion Price of the Class A
Interest will be adjusted as follows:
<TABLE>
<CAPTION>
PRIOR ANTI-DILUTION ADJUSTED
CONVERSION ADJUSTMENT CONVERSION
PRICE FORMULA PRICE
- ------------ ----- ------------- ----- ----------
<S> <C> <C> <C> <C>
PCP X (A+B+C)+EX = ACP
----------
(A+B+C*)+EX*
</TABLE>
. .must be solved for per calculation
included in example below
DEFINITIONS:
PCP - Conversion Price of Class A Interest prior to issuance of "New
Dilutive Security."
"New Dilutive Security" - A common stock or common stock equivalent
issuance
at a price below PCP.
ACP - Conversion Price of Class A Interest adjusted for issuance of "New
Dilutive Security".
A- The number of common stock equivalent shares outstanding which
includes: (i) HP Shares issued and outstanding; (ii) all Dilutive
(defined below) convertible securities outstanding, excluding Units
and the number of HP Shares issuable upon conversion of the Class A
Interest; and (iii) all Dilutive options issued and outstanding on
an as-exercised basis (excluding stock options covering
699,778 shares of Common Stock) prior to issuance of "New Dilutive
Security". For purposes of this definition, a security described
under (ii) or (iii) will be considered "Dilutive" in all subsequent
applications of the Adjustment Formula if it triggers the Adjustment
Formula upon issuance.
B - HP Shares issuable upon conversion of all Units outstanding prior to
issuance of "New Dilutive Security"
C - HP Shares issuable upon conversion of the entire Class A Interest,
assuming the prior Conversion Price (or PCP).
C* - HP Shares issuable upon conversion of the entire Class A Interest,
assuming the adjusted Conversion Price for the New Dilutive Security
issuance (or ACP).
<PAGE>
-2-
EX - "New Dilutive Security" equivalent common shares, assuming the prior
Conversion Price (or PCP).
EX* - "New Dilutive Security" equivalent common shares, based on actual
conversion of security.
EXAMPLE:
Assume a 1.5 million share common stock issuance at $19.50/share (the "New
Dilutive Security") following an investment of $35 million for the Class A
Interest at a $21.00 Conversion Price:
SOLUTION:
Prior to solving for C*, the following table must be created:
<TABLE>
<CAPTION>
POST NEW DILUTIVE SECURITY POST NEW DILUTIVE SECURITY
ISSUANCE AT $19.50/SHARE ISSUANCE AT $21.00/SHARE
ADJUSTED
- -------------------- -------------------------- --------------------------
SHARE # OF SHARES PERCENTAGE # OF SHARES PERCENTAGE
CAPITALIZATION
- -------------------- ------------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
HP shares (A) 5,900,000 58.0328 5,900,000 58.6509
Partnership Units (B) 1,100,000 10.8197 1,100,000 10.9349
Class A Interest 1,666,667 16.3934 1,666,667 16.5681
Equivalent Shares (C)
New Dilutive Security 1,500,000 14.7541 1,392,857 18.8461
Shares (EX*/EX)
TOTAL 10,166,667 100.00% 10,059,524 100.00%
</TABLE>
C* is the number of HP Shares into which the outstanding Class A Interest
must convert in order to maintain the Class A Interest Holders' ownership
percentage at 16.5681 (i.e., as if the issuance were done at the Conversion
Price prior to the issuance (or PCP) given the new Dilutive Security
issuance at $19.50 per common share. To solve for C*, the following
calculations must be made:
<PAGE>
-3-
<TABLE>
<CAPTION>
# OF COMMON EQUIVALENT
SHARES
<S> <C>
Share Capitalization, post New 10,166,667
Dilutive Security Issuance as
issued at $19.50 per share and
unadjusted
- - (C) (1,666,667)
= Share Capitalization less 8,500,000
Class A Interest/(100% - ---------
16.5681) or 100% less .834319
ownership percentage holders
of Class A Interest are to
maintain
= Total Share Capitalization 10,187,950
Requires for Class A Interest
to maintain ownership
percentage at 16.5681%
x Requires ownership 16.5681%
percentage pursuant to above
=C* 1,687,950
</TABLE>
GIVEN C*, ONE SOLVES FOR ACP AS FOLLOWS:
- ----------------------------------------
<TABLE>
<CAPTION>
PRICE
CONVERSION ADJUSTMENT FORMULA
PRICE OR PCP
- --------------- ----- ----------------------------------------------------
<S> <C> <C>
$21.00 X (5,900,000+1,100,000+1,666,667)+($29,250,000/21)
--------------------------------------------------
(5,900,000+1,100,000+1,687,950)+($29,250,000/19.50)=
$21.00 X 98.7394% =
$20.74 = ACP
</TABLE>
<PAGE>
-4-
PROOF OF CALCULATION:
- --------------------
<TABLE>
<CAPTION>
POST-NEW DILUTIVE SECURITY ISSUANCE AS
ISSUED AT $19.50 PER SHARE AND AS
ADJUSTED
# of Shares %
- -------------------- ---------------- ---------------
<S> <C> <C>
Share Capitalization 5,900,000 57.9115
of HP Shares (A)
Partnership Units (B) 1,100,000 10.7971
Class A Interest 1,687,950 16.5681
Equivalent Shares
(C*/C)
New Dilutive Security 1,500,000 14.7233
Shares (EX*/EX)
TOTAL 10,187,950 100.00%
</TABLE>
NOTE: Some of the numbers included in this Exhibit C are not the actual
numbers and are included for illustration purposes only.
<PAGE>
-5-
SCHEDULE A
[From Home Properties]
<PAGE>
SCHEDULE B
LIMITED PARTNER DEFICIT RESTORATION SCHEDULE
Name of Limited Partner Amount of Deficit Restoration Obligation
- ----------------------- ----------------------------------------
HOME PROPERTIES TRUST
DECLARATION OF TRUST
This Declaration of Trust is made this 19th day of September, 1997
to create a real estate investment trust under the laws of the State of
Maryland to be a "qualified REIT subsidiary" under section 856(i) of the
Internal Revenue Code of 1986, as amended, of Home Properties of New York,
Inc. Certain capitalized terms used herein are defined in Section 1.3 of
this Declaration of Trust.
NOW, THEREFORE, the Initial Trustees hereby declare that they
will hold in trust all Trust Property which they may have or acquire as
Trustees, together with the proceeds thereof, in trust for the benefit of
the holders of the Shares as provided below.
ARTICLE I - THE TRUST; REGISTERED AGENT; DEFINITIONS
Section 1.1 TRUST. The Initial Trustees hereby create a real
estate investment trust under Title 8 of the Maryland Corporations and
Associations Code Annotated, Section 8-101 ET SEQ. The name of the trust
is "Home Properties Trust."
Section 1.2 REGISTERED AGENT. The registered agent of the Trust
shall initially be The Prentice-Hall Corporation. Its address is 11 East
Chase Street, Baltimore, Maryland 21202.
Section 1.3 PRINCIPAL OFFICE. The principal office of the Trust
is 850 Clinton Square, Rochester, New York 14604.
Section 1.4 DEFINITIONS.
"By-Laws" means the by-laws of the Trust as in effect from time
to time.
"Code" means the Internal Revenue Code of 1986, as amended, and
any applicable Regulations.
"Declaration of Trust" means this Declaration of Trust, as
amended from time to time in accordance with its terms.
"Home Properties" means Home Properties of New York, Inc., a
Maryland corporation.
"Initial Trustees" means Norman P. Leenhouts and Amy L. Tait.
"Interest" means an ownership interest as a limited partner in
the Operating Partnership representing a capital contribution to the
Operating Partnership.
<PAGE>
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"Operating Partnership" means Home Properties of New York, L.P.,
a New York limited partnership.
"Person" means an individual, or a corporation, partnership,
trust, unincorporated organization, association or other entity or a
government or an agency or political subdivision thereof.
"Regulations" means the federal income tax regulations
promulgated under the Code, including Temporary Regulations, as such
regulations may be amended from time to time (including corresponding
provisions of succeeding regulations) and to the extent applicable, any
interpretative guidance provided by the Internal Revenue Service in revenue
rulings or other published documents.
"REIT Statute" means Title 8 of the Maryland Corporations and
Associations Code Ann. Section 8-101 ET SEQ., as in effect from time to
time.
"Shareholders" means the holders of record of any outstanding
Shares.
"Shares" means transferable shares of beneficial interest of the
Trust of any class or series.
"Trust" means the trust created by this Declaration of Trust, and
not the Trustees individually nor the Shareholder(s), officers, agents or
employees of such Persons.
"Trust Property" means all property, real or personal, including
without limitation, the Interests in the Operating Partnership, owned or
held by or for the account of the Trust.
"Trustees" means the trustees of the Trust elected from time to
time by the Shareholders of the Trust.
ARTICLE II - MEETINGS
Section 2.1 ANNUAL MEETINGS. A meeting of the Shareholders shall
be held annually after the delivery of the Trust's annual report at a
convenient location upon proper notice as set forth in the By-Laws.
Section 2.2 SPECIAL MEETINGS. Special meetings of the
Shareholders or the Board of Trustees may be held as set forth in the By-
Laws. The first meeting of the Shareholders shall be held on or before the
date of the first contribution of Trust Property to the Trust.
<PAGE>
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Section 2.3 ACTION BY SHAREHOLDERS WITHOUT A MEETING.
Shareholders may take action without a meeting as set forth in the By-Laws.
ARTICLE III - TRUSTEES
Section 3.1 INITIAL BOARD OF TRUSTEES. The initial Board of
Trustees shall consist of two members who shall hold office until the first
meeting of the Shareholders. The Initial Trustees are Norman P. Leenhouts
and Amy L. Tait.
Section 3.2 COMPOSITION AND NUMBER. From the date of the first
meeting of Shareholders of the Trust, the number of Trustees comprising the
Board of Trustees shall be the same number as the number of members of the
Board of Directors of Home Properties from time to time. Each such Trustee
shall hold office for a period of one year or until the next annual meeting
of Shareholders and his successor is elected and has qualified, except as
otherwise provided in the By-Laws. For so long as Home Properties is the
sole Shareholder, each member of the Board of Directors of Home Properties,
whether elected by the stockholders at the annual meeting of stockholders
of Home Properties or by the Board of Directors of Home Properties, shall
be deemed to have been elected by the Shareholder as a Trustee of the
Trust.
Section 3.3 POWERS. Except as otherwise provided herein or in
the By-Laws, the business and affairs of the Trust shall be managed under
the direction of the Board of Trustees of the Trust. The Trustees may take
such actions as are, in their sole discretion, necessary or desirable in
the conduct of the business of the Trust. The Board of Trustees shall have
and may exercise all the rights, powers and privileges of the Trust except
those that are by law, this Declaration of Trust or the By-Laws, conferred
upon or reserved to the Shareholders. This Declaration of Trust and the
By-Laws shall be construed in favor of the grant of power and authority of
the Trustees. The enumeration and definition of particular powers of the
Trustees in this Declaration of Trust or in the By-Laws shall not in any
way limit or restrict the powers conferred on the Trustees by the laws of
the State of Maryland in effect from time to time, including, without
limitation, the REIT Statute.
Section 3.4 SPECIFIC POWERS. In carrying on its business, or for
the purpose of attaining or furthering any of its objectives, the Trust
shall have all of the rights, powers and privileges granted to trusts by
the laws of the State of Maryland, as well as the power to do any and all
acts and things that a natural person or partnership could do as now or
hereafter authorized by law, either alone or in partnership or conjunction
with others. In furtherance and not in limitation of the powers conferred
by statute, the powers of the Trustees shall include the following:
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(A) to expend Trust funds in furtherance of the purposes of
the Trust;
(B) to invest and reinvest in securities or other property
of any character, real or personal, including, but not limited
to, common and preferred stocks, bonds, notes, debentures,
mortgages, leases and partnership interests (general or limited);
(C) to sell, exchange or otherwise dispose of any such
securities or other property at public or private sale and to
grant options for the purchase, exchange or other disposition
thereof, and to exercise or sell any options and any conversion,
subscription, voting and other rights, discretionary or
otherwise, in respect thereof;
(D) to the extent permitted by law, to declare and pay
dividends or other distributions to the Shareholders from time to
time out of the earnings, earned surplus, paid-in surplus or
capital of the Trust, notwithstanding that such declaration or
payment may result in the reduction of the capital of the Trust;
(E) to borrow and raise money, without limit and upon any
terms, for any Trust purposes; and, subject to applicable law, to
authorize the creation, issuance, assumption or guaranty of
bonds, debentures, notes, or other evidences of indebtedness for
money so borrowed, to include therein such provisions as to
redeemability, convertibility, or otherwise, as the Board of
Trustees, in its sole discretion, determines, and to secure the
payment of principal, interest, or sinking fund in respect
thereof by mortgage upon, or the pledge of, or the conveyance or
assignment in trust of, all or any part of the properties, assets
and goodwill of the Trust then owned or thereafter acquired;
(F) to make, alter, amend, change, add to or repeal the By-
Laws;
(G) to elect officers of the Trust as provided in the By-
Laws, which officers may execute and deliver all documents,
provide all information and take or forebear from all such action
as may be necessary or appropriate to achieve the purposes of the
Trust as provided in the By-Laws or authorized by the Trustees;
(H) to employ such agents, employees, independent
contractors, attorneys and accountants as the Trustees deem
reasonably necessary;
<PAGE>
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(I) to commence, defend, compromise or settle any claims,
proceedings, actions or litigation for and on behalf of the
Trust;
(J) to execute, deliver and file any amendment, restatement
or revocation of this Declaration of Trust as may be necessary or
appropriate to reflect actions properly taken by the Trustees;
(K) to prepare and file, on behalf of the Trust, any
required local, state and federal tax returns or other tax
reports or documents relating to the Trust;
(L) to execute, deliver, file and/or record any and all
instruments, documents or agreements of any kind which the
Trustees may deem appropriate or as may be necessary or desirable
to carry out the purposes of the Trust; and
(M) to take such other actions as the Trustees may
reasonably believe to be necessary or desirable to carry out the
purposes of the Trust.
ARTICLE IV - SHARES
Section 4.1 AUTHORIZED CAPITAL STOCK. The total number of Shares
of stock which the Trust has authority to issue is fifty million
(50,000,000) shares, consisting of (A) forty million (40,000,000) shares of
common stock ("Common Shares") and (B) ten million (10,000,000) shares of
preferred stock ("Preferred Shares"), all of which shall have a par value
of $0.01 (one cent) per share.
Section 4.2 PREFERRED SHARES. The Board of Trustees may issue
the Preferred Shares in one or more series consisting of such numbers of
shares and having such preferences, conversion and other rights, voting
powers, restrictions and limitations as to dividends, qualifications and
terms and conditions of redemption of stock as the Board of Trustees may
from time to time determine when designating such series which in each case
shall be comparable to the provisions of the corresponding shares of
Preferred Stock issued by Home Properties, the proceeds of which are
exchanged for the issuance of the Preferred Shares.
4.2.1 BOARD AUTHORITY. Subject to the foregoing, the
authority of the Board of Trustees with respect to each series
shall include, but not be limited to, determination of the
following:
(A) the designation of the series, which may be by
distinguishing number, letter or title;
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(B) the number of shares of the series, which number
the Board of Trustees may thereafter increase or decrease
(but not below the number of shares thereof then
outstanding);
(C) whether dividends, if any, shall be cumulative or
noncumulative and the dividend rate of the series;
(D) the dates at which dividends, if any, shall be
payable;
(E) the redemption rights and price or prices, if any,
for shares of the series;
(F) the terms and amounts of any sinking fund to be
established for the purchase or redemption of shares of the
series;
(G) the amounts payable on shares of the series in the
event of any voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the Trust;
(H) whether the shares of the series shall be
convertible into shares of any other class or series, or any
other security, of the Trust or any other Person, and, if
so, the specification of such other class or series or such
other security, the conversion price or rate, any
adjustments thereof, the date or dates on which such shares
shall be convertible and all other terms and conditions upon
which such conversion may be made;
(I) restrictions on the issuance of shares of the same
series or of any other class or series; and
(J) the voting rights, if any, of the holders of shares
of the series.
4.2.2 RIGHTS UPON LIQUIDATION. Unless the terms of a series
of Preferred Shares provide otherwise, with respect to any
distribution of the assets of the Trust following the voluntary
or involuntary liquidation, dissolution or winding up of the
Trust, the portion of the assets distributed to each holder of
shares of each series of Preferred Shares shall be determined in
accordance with the terms of such series.
<PAGE>
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4.3 COMMON SHARES. The Common Shares shall be subject to the
express terms of the Preferred Shares and every series thereof. Each
Common Share shall be equal to every other Common Share.
4.3.1 DIVIDEND RIGHTS. The holders of Common Shares shall
be entitled to receive such dividends as may be declared by the
Board of Trustees out of funds legally available therefor.
4.3.2 RIGHTS UPON LIQUIDATION. With respect to any
distribution of the assets of the Trust following the voluntary
or involuntary liquidation, dissolution or winding up of the
Trust, each holder of Common Shares shall be entitled to receive,
ratably with each other holder of Common Shares, that portion of
the assets of the Trust available for distribution to the holders
of its Common Shares as the number of Common Shares held by such
holder bears to the total number of Common Shares then
outstanding.
4.3.3 VOTING RIGHTS. The holders of Common Shares shall be
entitled to vote on all matters submitted to the holders of
Common Shares for a vote at all meetings of the Shareholders, and
each holder of Common Shares shall be entitled to one vote for
each Common Share held by such Shareholder.
4.4 PREEMPTIVE RIGHTS. Except as may be provided in the terms
of any series of Preferred Shares as designated by the Board of Trustees,
no Shareholder shall have any preferential or preemptive right to acquire
additional Shares.
4.5 CLASSIFICATION OF SHARES. The Board of Trustees may
classify or reclassify any unissued Shares from time to time by setting or
changing the preferences, conversion and other rights, voting powers,
restrictions and limitations as to dividends, qualifications, and the terms
and conditions of redemption of those Shares, including, but not limited
to, the reclassification of (A) unissued Common Shares to Preferred Shares,
(B) unissued Preferred Shares to Common Shares, or (C) the issuance of any
rights plan or similar plan.
4.6 ISSUANCE OF SHARES. The Board of Trustees may authorize the
issuance from time to time of Shares of any class, whether now or hereafter
authorized, or securities or rights convertible into Shares, for such
consideration as the Board of Trustees may deem advisable (or without
consideration in the case of a share split or dividend), subject to such
restrictions or limitations, if any, as may be set forth in the By-Laws of
the Trust. The Board of Trustees may authorize the appropriate officers of
the Trust to issue Shares to Home Properties where terms, restrictions and
limitations shall be comparable to the terms,
<PAGE>
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restrictions and limitations of the capital stock of Home Properties whose
net proceeds are delivered to the Trust in consideration of the Shares.
ARTICLE V - INVESTMENT POLICY
The investment policy of the Trust is to hold Trust Property and
make investments thereof to comply with the REIT Statute and to cause the
Trust to be a "qualified REIT subsidiary" of Home Properties as provided in
Section 856(i) of the Code.
ARTICLE VI - INTERESTED TRANSACTIONS
Any Trustee or officer individually, or any firm of which any
Trustee or officer may be a member, or any corporation or association of
which any Trustee or officer may be a director or officer or in which any
Trustee or officer may be interested as the holder of any amount of its
equity capital or otherwise, may be a party to, or may be pecuniarily or
otherwise interested in, any contract or transaction of the Trustee, and,
in the absence of fraud, no contract or other transaction shall be thereby
affected or invalidated; provided, however, that (A) such fact shall have
been disclosed or shall have been known to the Board of Trustees that
approved such contract or transaction and such contract or transaction
shall have been approved or satisfied by the affirmative vote of a majority
of the disinterested Trustees, or (B) such fact shall have been disclosed
or shall have been known to the Shareholders entitled to vote, and such
contract or transaction shall have been approved or ratified by a majority
of the votes cast by the Shareholders entitled to vote, other than the
votes of Shares owned of record or beneficially by the interested Trustee,
officer, corporation, firm or other entity, or (C) the contract or
transaction is fair and reasonable to the Trust. Any Trustee of the Trust
who is also a director or officer of, or holds an interest in such other
corporation or association, or the firm of which he is a member is so
interested, may be counted in determining the existence of a quorum at any
meeting of the Board of Trustees of the Trust which shall authorize any
such contract or transaction, with like force and effect as if he were not
such director or officer of such other corporation or association or were
not so interested or were not a member of a firm so interested.
ARTICLE VII - LIABILITY
To the fullest extent permitted under the REIT Statute or
Section 5-350 of the Courts and Judicial Proceedings Code of Maryland or
any successor thereto, as amended from time to time, no Trustee,
Shareholder or officer of the Trust shall be personally liable to the Trust
for any obligations of the Trust or for any money damages for any breach of
any
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duty owed by such Trustee, Shareholder or officer to the Trust. Neither
the amendment or repeal of this Article, nor the adoption of any other
provision in this Declaration of Trust inconsistent with this Article,
shall eliminate or reduce the protection afforded by this Article to a
Trustee, Shareholder or officer of the Trust with respect to any matter
which occurred, or any cause of action, suit or claim which but for this
Article would have accrued or arisen, prior to such amendment, repeal or
adoption.
ARTICLE VIII - INDEMNIFICATION
Section 8.1 INDEMNIFICATION. To the full extent authorized or
permitted by the REIT Statute or any other governing statute, law, rule or
regulation, the Trust shall indemnify any person ("Indemnified Person")
made, or threatened to be made, a party to any threatened, pending or
completed action or proceeding, whether civil, criminal, administrative,
investigative or otherwise ("Proceeding"), by reason of the fact that he,
his testator, intestate, spouse or parent (a "Responsible Person"), (A) is
or was a Trustee, officer, employee or agent of the Trust, or (B) is
serving or served, in any capacity, another corporation or any partnership,
joint venture, trust, employee benefit plan, or other enterprise at the
request of the Trust. The Trust shall indemnify each such Indemnified
Person against all judgments, fines, penalties, amounts paid in settlement
(provided the Trust shall have consented to such settlement, which consent
shall not be unreasonably withheld by it) and reasonable expenses,
including attorneys' fees and costs of investigation (collectively,
"Reimbursable Expenses"), incurred by such Indemnified Person with respect
to any Proceeding.
Section 8.2 ADVANCEMENT OF EXPENSES. The Trust shall advance to
each Indemnified Person any Reimbursable Expenses incurred by such
Indemnified Person within ten days of receiving (A) a written affirmation
of the Indemnified Person that (1) the act or omission giving rise to the
Proceeding was not committed in bad faith or the result of active and
deliberate dishonesty, (2) the Indemnified Person did not receive an
improper personal benefit in money, property or services and (3) in the
case of a criminal proceeding, the Indemnified Person did not have
reasonable cause to believe the act or omission giving rise to the
Proceeding was unlawful, and (B) a written undertaking by or on behalf of
the Indemnified Person to repay the amount advanced if it is ultimately
determined that the Indemnified Person has not met the standard of conduct
necessary for indemnification.
Section 8.3. CONTRACTUAL ARTICLE; AMENDMENT; REPEAL. This
Article shall be deemed to constitute a contract between the Trust and each
Responsible Person (with each Indemnified Person who is not a Responsible
Person being treated as an intended third-party beneficiary thereof). No
repeal or amendment of this Article, insofar as it reduces the scope of the
indemnification available hereunder, shall be effective with respect to any
event, act or
<PAGE>
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omission occurring or allegedly occurring prior to the date of such repeal
or amendment. This Article shall be binding on any successor to the Trust,
including any corporation or other entity which acquires all or
substantially all of the Trust's assets.
Section 8.4 INSURANCE. The Trust shall have the power to
purchase and maintain insurance on behalf of any Indemnified Person against
any liability, whether or not the Trust would have power to indemnify such
person against such liability.
Section 8.5 NO LIMITATION; INDEMNIFICATION AGREEMENTS. In
addition to any indemnification provided by this Declaration of Trust, the
Board of Trustees shall, in its own discretion, have the power to grant
such indemnification as it deems in the interest of the Trust to the full
extent permitted by law and to enter into additional agreements relating to
such indemnification.
<PAGE>
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IN WITNESS WHEREOF, this Declaration of Trust is executed as of
the date first set forth above.
TRUSTEES
/s/ Norman P. Leenhouts
___________________________
Norman P. Leenhouts
/s/ Amy L. Tait
___________________________
Amy L. Tait
<PAGE>
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STATE OF NEW YORK )
: SS.:
COUNTY OF MONROE )
On the 19th day of September, 1997 personally appeared Norman
P. Leenhouts to me personally known and known to me to be the same person
described in and who executed the foregoing instrument, and he duly
acknowledged to me that he executed the same.
Notary Public
/s/ Ann M. McCormick
Notary Public
County of Monroe
State of New York
Commission Expires 3/21/98
<PAGE>
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STATE OF NEW YORK )
: SS.:
COUNTY OF MONROE )
On the 19th day of September, 1997 personally appeared Amy L.
Tait to me personally known and known to me to be the same person described
in and who executed the foregoing instrument, and she duly acknowledged to
me that she executed the same.
Notary Public
/s/ Ann M. McCormick
Notary Public
County of Monroe
State of New York
Commission Expires 3/21/98
CREDIT AGREEMENT
dated as of
September 4, 1997
among
HOME PROPERTIES OF NEW YORK, L.P.
The Lenders Party Hereto
and
THE CHASE MANHATTAN BANK,
as Administrative Agent
___________________________
CHASE SECURITIES INC.,
as Arranger
___________________________
MANUFACTURERS AND TRADERS TRUST COMPANY,
as Co-Agent
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
Definitions
SECTION 1.01. Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.02. Classification of Loans and Borrowings. . . . . . . . . . . . .16
SECTION 1.03. Terms Generally . . . . . . . . . . . . . . . . . . . . . . . .16
SECTION 1.04. Accounting Terms; GAAP. . . . . . . . . . . . . . . . . . . . .16
ARTICLE II
The Credits
SECTION 2.01. Commitments; Extension of Maturity Date . . . . . . . . . . . .17
SECTION 2.02. Loans and Borrowings. . . . . . . . . . . . . . . . . . . . . .17
SECTION 2.03. Requests for Borrowings . . . . . . . . . . . . . . . . . . . .18
SECTION 2.04. Letters of Credit . . . . . . . . . . . . . . . . . . . . . . .19
SECTION 2.05. Funding of Borrowings . . . . . . . . . . . . . . . . . . . . .22
SECTION 2.06. Interest Elections. . . . . . . . . . . . . . . . . . . . . . .22
SECTION 2.07. Termination and Reduction of Commitments. . . . . . . . . . . .24
SECTION 2.08. Repayment of Loans; Evidence of Debt. . . . . . . . . . . . . .24
SECTION 2.09. Prepayment of Loans . . . . . . . . . . . . . . . . . . . . . .24
SECTION 2.10. Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .26
SECTION 2.11. Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . .27
SECTION 2.12. Alternate Rate of Interest. . . . . . . . . . . . . . . . . . .27
SECTION 2.13. Increased Costs . . . . . . . . . . . . . . . . . . . . . . . .28
SECTION 2.14. Break Funding Payments. . . . . . . . . . . . . . . . . . . . .29
SECTION 2.15. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . .29
SECTION 2.16. Payments Generally; Pro Rata Treatment; Sharing of Set-offs . .30
SECTION 2.17. Mitigation Obligations; Replacement of Lenders. . . . . . . . .31
ARTICLE III
Representations and Warranties
SECTION 3.01. Organization; Powers. . . . . . . . . . . . . . . . . . . . . .32
SECTION 3.02. Authorization; Enforceability . . . . . . . . . . . . . . . . .32
SECTION 3.03. Governmental Approvals; No Conflicts. . . . . . . . . . . . . .33
SECTION 3.04. Financial Condition; No Material Adverse Change . . . . . . . .33
SECTION 3.05. Properties. . . . . . . . . . . . . . . . . . . . . . . . . . .33
SECTION 3.06. Intellectual Property . . . . . . . . . . . . . . . . . . . . .34
SECTION 3.07. Litigation and Environmental Matters. . . . . . . . . . . . . .34
SECTION 3.08. Compliance with Laws and Agreements . . . . . . . . . . . . . .35
SECTION 3.09. Investment and Holding Company Status . . . . . . . . . . . . .35
SECTION 3.10. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . .35
SECTION 3.11. ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . .35
SECTION 3.12. Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . .35
SECTION 3.13. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . .36
SECTION 3.14. REIT Status . . . . . . . . . . . . . . . . . . . . . . . . . .36
SECTION 3.15. Solvency. . . . . . . . . . . . . . . . . . . . . . . . . . . .36
SECTION 3.16. Margin Regulations. . . . . . . . . . . . . . . . . . . . . . .36
SECTION 3.17. Representations and Warranties in the Loan Documents. . . . . .37
ARTICLE IV
Conditions
SECTION 4.01. Effective Date. . . . . . . . . . . . . . . . . . . . . . . . .37
SECTION 4.02. Each Credit Event . . . . . . . . . . . . . . . . . . . . . . .38
ARTICLE V
Affirmative Covenants
SECTION 5.01. Financial Statements and Other Information. . . . . . . . . . .39
SECTION 5.02. Notices of Material Events. . . . . . . . . . . . . . . . . . .41
SECTION 5.03. Existence; Conduct of Business. . . . . . . . . . . . . . . . .42
SECTION 5.04. Payment of Obligations. . . . . . . . . . . . . . . . . . . . .42
SECTION 5.05. Maintenance of Properties; Insurance; Management. . . . . . . .42
SECTION 5.06. Books and Records; Inspection Rights. . . . . . . . . . . . . .43
SECTION 5.07. Compliance with Laws. . . . . . . . . . . . . . . . . . . . . .43
SECTION 5.08. Use of Proceeds and Letters of Credit . . . . . . . . . . . . .43
SECTION 5.09. Company Status. . . . . . . . . . . . . . . . . . . . . . . . .44
SECTION 5.10. Ownership of Projects and Property; Unencumbered Assets . . . .44
SECTION 5.11. Shareholder Communication, Filings, etc . . . . . . . . . . . .44
SECTION 5.12. Further Assurances. . . . . . . . . . . . . . . . . . . . . . .44
ARTICLE VI
Negative Covenants
SECTION 6.01. Indebtedness and Other Financial Covenants. . . . . . . . . . .44
SECTION 6.02. Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . .45
SECTION 6.03. Fundamental Changes . . . . . . . . . . . . . . . . . . . . . .45
SECTION 6.04. Investments, Loans, Advances, Guarantees and Acquisitions . . .46
SECTION 6.05. Hedging Agreements. . . . . . . . . . . . . . . . . . . . . . .47
SECTION 6.06. Transactions with Affiliates. . . . . . . . . . . . . . . . . .47
SECTION 6.07. Restriction on Fundamental Changes. . . . . . . . . . . . . . .47
SECTION 6.08. Margin Regulations; Securities Laws . . . . . . . . . . . . . .47
SECTION 6.09. Negative Covenants of the Company and the QRS Subsidiary. . . .47
<PAGE>
ARTICLE VII
Events of Default
ARTICLE VIII
The Administrative Agent
ARTICLE IX
Miscellaneous
SECTION 9.01. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . .52
SECTION 9.02. Waivers; Amendments . . . . . . . . . . . . . . . . . . . . . .52
SECTION 9.03. Expenses; Indemnity; Damage Waiver. . . . . . . . . . . . . . .54
SECTION 9.04. Successors and Assigns. . . . . . . . . . . . . . . . . . . . .55
SECTION 9.05. Survival. . . . . . . . . . . . . . . . . . . . . . . . . . . .57
SECTION 9.06. Counterparts; Integration; Effectiveness. . . . . . . . . . . .57
SECTION 9.07. Severability. . . . . . . . . . . . . . . . . . . . . . . . . .57
SECTION 9.08. Right of Setoff . . . . . . . . . . . . . . . . . . . . . . . .57
SECTION 9.09. Governing Law; Jurisdiction; Consent to Service of Process. . .57
SECTION 9.10. WAIVER OF JURY TRIAL. . . . . . . . . . . . . . . . . . . . . .58
SECTION 9.11. Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . .58
SECTION 9.12. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . .58
SECTION 9.13. Interest Rate Limitation. . . . . . . . . . . . . . . . . . . .59
SCHEDULES:
Schedule 2.01--Commitments
Schedule 3.02--Ownership Structure
Schedule 3.04--Existing Indebtedness
Schedule 3.07--Disclosed Matters
Schedule 3.13--Insurance
EXHIBITS:
Exhibit A--Form of Assignment and Acceptance
Exhibit B--Form of Guaranty
Exhibit C--Form of Note
Exhibit D-1--Form of Borrowing Request and Compliance Certificate
Exhibit D-2--Form of Notice of Issuance and Compliance Certificate
Exhibit E--Form of Opinion of Borrower's Counsel
Exhibit F--Form of Quarterly/Annual Compliance Certificate
<PAGE>
CREDIT AGREEMENT, dated as of September 4, 1997, among HOME PROPERTIES OF
NEW YORK, L.P., a New York limited partnership, the LENDERS party hereto,
and THE CHASE MANHATTAN BANK, as Administrative Agent, and MANUFACTURERS
AND TRADERS TRUST COMPANY, as Co-Agent.
The parties hereto agree as follows:
ARTICLE I
Definitions
SECTION 1.01. Defined Terms. As used in this Agreement, the
following terms have the meanings specified below:
"ABR", when used in reference to any Loan or Borrowing, refers to
whether such Loan, or the Loans comprising such Borrowing, are bearing
interest at a rate determined by reference to the Alternate Base Rate.
"Adjusted EBITDA" means, for any period, EBITDA for such period
plus management, development and other income for such period less the
Capital Expenditure Reserve Amount for such period.
"Adjusted NOI" means, for any period, NOI for such period from
Eligible Projects less the Capital Expenditure Reserve Amount for such
period.
"Adjusted Unencumbered NOI" means, for any period, Adjusted NOI
derived from Unencumbered Eligible Projects and which Adjusted NOI is not
subject to any Liens,
"Adjusted LIBO Rate" means, with respect to any Eurodollar
Borrowing for any Interest Period, an interest rate per annum (rounded
upwards, if necessary, to the next 1/16 of 1%) equal to (a) the LIBO Rate for
such Interest Period multiplied by (b) the Statutory Reserve Rate.
"Adjusted Recourse Secured Indebtedness" means Recourse Secured
Indebtedness where for the purposes of clause (b) of the definition of
Recourse Secured Indebtedness (i) the Secured Indebtedness to Total Property
Value of the Project is greater than 60% or (ii) the ratio of Adjusted NOI to
Debt Service of the Project is less than 1.4 to 1.0.
"Administrative Agent" means The Chase Manhattan Bank, in its
capacity as administrative agent for the Lenders hereunder.
"Administrative Questionnaire" means an Administrative
Questionnaire in a form supplied by the Administrative Agent.
"Affiliate" means, with respect to a specified Person, another
Person that directly, or indirectly through one or more intermediaries,
Controls or is Controlled by or is under common Control with the Person
specified.
"Alternate Base Rate" means, for any day, a rate per annum equal
to the greatest of (a) the Prime Rate in effect on such day, (b) the Base CD
Rate in effect on such day plus 1% and (c) the Federal Funds Effective Rate
in effect on such day plus 1/2 of 1%. Any change in the Alternate Base Rate
due to a change in the Prime Rate, the Base CD Rate or the Federal Funds
Effective Rate shall be effective from and including the effective date of
such change in the Prime Rate, the Base CD Rate or the Federal Funds
Effective Rate, respectively.
"Annual Compliance Certificate" shall have the meaning set forth
in Section 5.01(b)(iii).
"Applicable Percentage" means, with respect to any Lender, the
percentage of the total Commitments represented by such Lender's Commitment.
If the Commitments have terminated or expired, the Applicable Percentages
shall be determined based upon the Commitments most recently in effect,
giving effect to any assignments.
"Applicable Eurodollar Margin" means, for any day, 125 basis
points.
"Assessment Rate" means, for any day, the annual assessment rate
in effect on such day that is payable by a member of the Bank Insurance Fund
classified as "well-capitalized" and within supervisory subgroup "B" (or a
comparable successor risk classification) within the meaning of 12 C.F.R.
Part 327 (or any successor provision) to the Federal Deposit Insurance
Corporation for insurance by such Corporation of time deposits made in
dollars at the offices of such member in the United States; provided that if,
as a result of any change in any law, rule or regulation, it is no longer
possible to determine the Assessment Rate as aforesaid, then the Assessment
Rate shall be such annual rate as shall be determined by the Administrative
Agent to be representative of the cost of such insurance to the Lenders.
"Assignment and Acceptance" means an assignment and acceptance
entered into by a Lender and an assignee (with the consent of any party whose
consent is required by Section 9.04), and accepted by the Administrative
Agent, in the form of Exhibit A or any other form approved by the
Administrative Agent.
"Availability Period" means the period from and including the
Effective Date to but excluding the earlier of the Maturity Date and the date
of termination of the Commitments.
"Bankruptcy Code" shall have the meaning set forth in Section
3.15.
"Base CD Rate" means the sum of (a) the Three-Month Secondary CD
Rate multiplied by the Statutory Reserve Rate plus (b) the Assessment Rate.
"Board" means the Board of Governors of the Federal Reserve System
of the United States of America.
"Book Value" means the value at which a Property is reported on
the financial statements of the Company in accordance with GAAP, less the
amount of any Indebtedness or Liens related to such Property.
"Borrower" means Home Properties of New York L.P., a New York
limited partnership.
"Borrowing" means Revolving Loans of the same Type, made,
converted or continued on the same date and, in the case of Eurodollar Loans,
as to which a single Interest Period is in effect.
"Borrowing Request" means a request by the Borrower for a
Revolving Loan in accordance with Section 2.03.
"Business Day" means any day that is not a Saturday, Sunday or
other day on which commercial banks in New York City are authorized or
required by law to remain closed; provided that, when used in connection with
a Eurodollar Loan, the term "Business Day" shall also exclude any day on
which banks are not open for dealings in dollar deposits in the London
interbank market.
"CAD" means "cash available for distribution" and shall mean, for
any period, FFO less an annual reserve for anticipated recurring, nonrevenue
generating capitalized costs, as reported on the financial statements of the
Company in accordance with GAAP.
"Capital Expenditure Reserve Amount" means, for any period, an
amount equal to (i) $350 multiplied by the number of apartment units
contained in all Projects multiplied by (ii) a fraction, the numerator of
which is equal to the number of days in such period and the denominator of
which is equal to 365.
"Capital Lease Obligations" of any Person means the obligations
of such Person to pay rent or other amounts under any lease of (or other
arrangement conveying the right to use) real or personal property, or a
combination thereof, which obligations are required to be classified and
accounted for as capital leases on a balance sheet of such Person under GAAP,
and the amount of such obligations shall be the capitalized amount thereof
determined in accordance with GAAP.
"Cash and Cash Equivalents" means unrestricted (i) cash;
(ii) marketable direct obligations issued or unconditionally guaranteed by
the United States government and backed by the full faith and credit of the
United States government; (iii) domestic and Eurodollar certificates of
deposit and time deposits, bankers' acceptances and floating rate
certificates of deposit issued by any commercial bank organized under the
laws of the United States, any state thereof, the District of Columbia, any
foreign bank, or its branches or agencies (fully protected against currency
fluctuations), which, at the time of acquisition, are rated A-1 (or better)
by S&P or P-1 (or better) by Moody's, provided that the maturities of such
Cash and Cash Equivalents shall not exceed one year; (iv) publicly traded
equity securities issued by a REIT that primarily owns multi-family
properties; and (iv) other marketable securities acceptable to the Required
Lenders.
"CERCLA" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, 42 U.S.C. Seciton 96011 et seq., any
amendments thereto, any successor, statutes and any regulations or guidance
promulgated thereunder.
"Change in Control" means (a) the acquisition of ownership,
directly or indirectly, beneficially or of record, by any Person or group
(within the meaning of Section 13(d)(3) of the Securities Exchange Act of
1934 and the rules of the Securities and Exchange Commission thereunder as in
effect on the date hereof), of shares representing more than 25% of the
aggregate ordinary voting power represented by the issued and outstanding
capital stock of the Company; (b) occupation of a majority of the seats
(other than vacant seats) on the board of directors of the Company by Persons
who were neither (i) nominated by the board of directors of the Company nor
(ii) appointed by directors so nominated; or (c) the acquisition of direct or
indirect Control of the Borrower or the Company by any Person or group.
"Change in Law" means (a) the adoption of any law, rule or
regulation after the date of this Agreement, (b) any change in any law, rule
or regulation or in the interpretation or application thereof by any
Governmental Authority after the date of this Agreement or (c) compliance by
any Lender or the Issuing Bank (or, for purposes of Section 2.13(b), by any
lending office of such Lender or by such Lender's or the Issuing Bank's
holding company, if any) with any request, guideline or directive (whether or
not having the force of law) of any Governmental Authority made or issued
after the date of this Agreement.
"Co-Agent" means Manufacturers and Traders Trust Company, in its
capacity as co-agent for the Lenders hereunder.
"Code" means the Internal Revenue Code of 1986, as amended from
time to time.
"Commitment" means, with respect to each Lender, the commitment
of such Lender to make Revolving Loans and to acquire participations in
Letters of Credit hereunder, expressed as an amount representing the maximum
aggregate amount of such Lender's Revolving Credit Exposure hereunder, as
such commitment may be (a) reduced from time to time pursuant to Section 2.07
and (b) reduced or increased from time to time pursuant to assignments by or
to such Lender pursuant to Section 9.04. The initial amount of each Lender's
Commitment is set forth on Schedule 2.01, or in the Assignment and Acceptance
pursuant to which such Lender shall have assumed its Commitment, as
applicable. The initial aggregate amount of the Lenders' Commitments is
$50,000,000.
"Company" means Home Properties of New York, Inc., a New York
corporation.
"Consolidated Businesses" means the Company, the Borrower, the
Management Companies, and their wholly-owned Subsidiaries.
"Contingent Obligation" as to any Person means, without
duplication, (i) any contingent obligation of such Person required to be
shown on such Person's balance sheet in accordance with GAAP, and (ii) any
obligation required to be disclosed in the footnotes to such Person's
financial statements in accordance with GAAP, guaranteeing partially or in
whole any non-recourse Indebtedness, lease, dividend or other obligation,
exclusive of contractual indemnities (including, without limitation, any
indemnity or price-adjustment provision relating to the purchase or sale of
securities or other assets) and guarantees of non-monetary obligations (other
than guarantees of completion) which have not yet been called on or
quantified, of such Person or of any other Person. The amount of any Contin-
gent Obligation described in clause (ii) shall be deemed to be (a) with
respect to a guaranty of interest or interest and principal, or operating
income guaranty, the sum of all payments required to be made thereunder
(which in the case of an operating income guaranty shall be deemed to be
equal to the debt service for the note secured thereby), calculated at the
interest rate applicable to such Indebtedness, through (i) in the case of an
interest or interest and principal guaranty, the stated date of maturity of
the obligation (and commencing on the date interest could first be payable
thereunder), or (ii) in the case of an operating income guaranty, the date
through which such guaranty will remain in effect, and (b) with respect to
all guarantees not covered by the preceding clause (a) an amount equal to the
stated or determinable amount of the primary obligation in respect of which
such guaranty is made or, if not stated or determinable, the maximum
reasonably anticipated liability in respect thereof (assuming such Person is
required to perform thereunder) as recorded on the balance sheet and on the
footnotes to the most recent financial statements of the applicable Borrower
required to be delivered pursuant hereto. Notwithstanding anything contained
herein to the contrary, (1) guarantees of completion shall not be deemed to
be Contingent Obligations unless and until a claim for payment has been made
thereunder, at which time any such guaranty of completion shall be deemed to
be a Contingent Obligation in an amount equal to any such claim and (2) Low
Income Housing Credit Program Guarantees shall not be deemed to be Contingent
Obligations. Subject to the preceding sentence, (i) in the case of a joint
and several guaranty given by such Person and another Person (but only to the
extent such guaranty is recourse, directly or indirectly to the applicable
Borrower), the amount of the guaranty shall be deemed to be 100% thereof
unless and only to the extent that (X) such other Person has delivered Cash
or Cash Equivalents to secure all or any part of such Person's guaranteed
obligations or (Y) such other Person holds an Investment Grade Credit Rating
from either Moody's or S&P, and (ii) in the case of a guaranty, (whether or
not joint and several) of an obligation otherwise constituting Debt of such
Person, the amount of such guaranty shall be deemed to be only that amount in
excess of the amount of the obligation constituting Indebtedness of such Per-
son.
"Control" means the possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of a
Person, whether through the ability to exercise voting power, by contract or
otherwise. "Controlling" and "Controlled" have meanings correlative thereto.
"Default" means any event or condition which constitutes an Event
of Default or which upon notice, lapse of time or both would, unless cured or
waived, become an Event of Default.
"Disclosed Matters" means the actions, suits and proceedings and
the environmental matters disclosed in Schedule 3.07.
"dollars" or "$" refers to lawful money of the United States of
America.
"Debt Service" means for any period the sum of (i) all interest
obligations accrued on all Indebtedness with respect to a Project, (ii) all
payments of principal required to be made (other than payments of any
principal balance remaining to be paid by the terms of the applicable
Indebtedness at the maturity thereof) with respect to any Indebtedness on a
Project and (iii) the amortization of loan fees, original issue discount,
non-cash interest payments, the interest component of Capital Lease
Obligations and hedging costs (but excluding extraordinary interest expense,
and net of amortization of deferred costs associated with new financings or
refinancings of existing Indebtedness) during such period.
"EBITDA" means, for any period, NOI for such period, less
allocated corporate marketing, general and administrative expenses for such
period.
"Effective Date" means the date on which the conditions specified
in Section 4.01 are satisfied (or waived in accordance with Section 9.02).
"Eligible Project" means any Project that (i) is 100% owned by a
Consolidated Business, free of all title defects and material structural
defects, (ii) has achieved an occupancy rate of not less than 80%, (iii) is
managed by the Borrower, either Management Company or other Subsidiary of the
Borrower, (iv) is free of all Hazardous Materials as verified by an
environmental assessment report in form and substance satisfactory to the
Administrative Agent.
"Eligible Assignee" means (i) a Lender or any Affiliate thereof;
(ii) a commercial bank having total assets in excess of $5,000,000,000;
(iii) the central bank of any country which is a member of the Organization
for Economic Cooperation and Development having total assets in excess of
$10,000,000,000; or (iv) a finance company or other financial institution
reasonably acceptable to the Administrative Agent, which is regularly engaged
in making, purchasing or investing in loans and having total assets in excess
of $1,000,000,000 or is otherwise reasonably acceptable to the Administrative
Agent.
"Encumbered Eligible Project" means any Eligible Project all or
any portion of which is encumbered by a Lien.
"Environmental Laws" means any and all present and future federal,
state or local laws, rules, regulations, statutes or codes and any and all
ordinances, orders, decrees, judgments, injunctions, notices or binding
agreements issued, promulgated or entered into by any Governmental Authority,
relating in any way to the environment, preservation or reclamation of
natural resources, the management, release or threatened release of any
Hazardous Material or to health and safety matters.
"Environmental Liability" means any liability, contingent or
otherwise (including any liability for damages, costs of environmental
remediation, fines, penalties or indemnities), of the Borrower or any
Subsidiary of the Borrower directly or indirectly resulting from or based
upon (a) violation of any Environmental Law, (b) the presence, generation,
use, handling, transportation, storage, treatment or disposal of any
Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the release
or threatened release of any Hazardous Materials into the environment or (e)
any contract, agreement or other consensual arrangement pursuant to which
liability is assumed or imposed with respect to any of the foregoing.
"Equity Value" means Total Value less Total Outstanding
Indebtedness.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended from time to time.
"ERISA Affiliate" means any trade or business (whether or not
incorporated) that, together with the Borrower, is treated as a single
employer under Section 414(b) or (c) of the Code or, solely for purposes of
Section 302 of ERISA and Section 412 of the Code, is treated as a single
employer under Section 414 of the Code.
"ERISA Event" means (a) any "reportable event", as defined in
Section 4043 of ERISA or the regulations issued thereunder with respect to a
Plan (other than an event for which the 30-day notice period is waived);
(b) the existence with respect to any Plan of an "accumulated funding
deficiency" (as defined in Section 412 of the Code or Section 302 of ERISA),
whether or not waived; (c) the filing pursuant to Section 412(d) of the Code
or Section 303(d) of ERISA of an application for a waiver of the minimum
funding standard with respect to any Plan; (d) the incurrence by the Borrower
or any of its ERISA Affiliates of any liability under Title IV of ERISA with
respect to the termination of any Plan; (e) the receipt by the Borrower or
any ERISA Affiliate from the PBGC or a plan administrator of any notice
relating to an intention to terminate any Plan or Plans or to appoint a
trustee to administer any Plan; (f) the incurrence by the Borrower or any of
its ERISA Affiliates of any liability with respect to the withdrawal or
partial withdrawal from any Plan or Multiemployer Plan; or (g) the receipt by
the Borrower or any ERISA Affiliate of any notice, or the receipt by any
Multiemployer Plan from the Borrower or any ERISA Affiliate of any notice,
concerning the imposition of Withdrawal Liability or a determination that a
Multiemployer Plan is, or is expected to be, insolvent or in reorganization,
within the meaning of Title IV of ERISA.
"Eurodollar", when used in reference to any Loan or Borrowing,
refers to whether such Loan, or the Loans comprising such Borrowing, are
bearing interest at a rate determined by reference to the Adjusted LIBO Rate.
"Event of Default" has the meaning assigned to such term in
Article VII.
"Excluded Taxes" means, with respect to the Administrative Agent,
any Lender, the Issuing Bank or any other recipient of any payment to be made
by or on account of any obligation of the Borrower hereunder, (a) income or
franchise taxes imposed on (or measured by) its net income by the United
States of America, or by the jurisdiction under the laws of which such
recipient is organized or in which its principal office is located or, in the
case of any Lender, in which its applicable lending office is located, (b)
any branch profits taxes imposed by the United States of America or any
similar tax imposed by any other jurisdiction in which the Borrower is
located and (c) in the case of a Foreign Lender (other than an assignee
pursuant to a request by the Borrower under Section 2.17(b)), any withholding
tax that is imposed on amounts payable to such Foreign Lender at the time
such Foreign Lender becomes a party to this Agreement (or designates a new
lending office) or is attributable to such Foreign Lender's failure to comply
with Section 2.15(e), except to the extent that such Foreign Lender (or its
assignor, if any) was entitled, at the time of designation of a new lending
office (or assignment), to receive additional amounts from the Borrower with
respect to such withholding tax pursuant to Section 2.15(a).
"Federal Funds Effective Rate" means, for any day, the weighted
average (rounded upwards, if necessary, to the next 1/100 of 1%) of the rates
on overnight Federal funds transactions with members of the Federal Reserve
System arranged by Federal funds brokers, as published on the next succeeding
Business Day by the Federal Reserve Bank of New York, or, if such rate is not
so published for any day that is a Business Day, the average (rounded
upwards, if necessary, to the next 1/100 of 1%) of the quotations for such
day for such transactions received by the Administrative Agent from three
Federal funds brokers of recognized standing selected by it.
"FFO" means "funds from operations" as defined in the National
Association of Real Estate Investment Trusts ("NAREIT") White Paper on Funds
From Operations as approved by the NAREIT Board of Governors on March 3,
1995.
"Financial Officer" means the chief financial officer, principal
accounting officer, treasurer or controller of the Borrower.
"Fixed Charges" means, with respect to any fiscal period, the sum
of (a) Total Interest Expense and (b) the aggregate of all scheduled
principal payments on Indebtedness made or required to be made during such
fiscal period for the Consolidated Businesses (but excluding balloon payments
of principal due upon the stated maturity of an Indebtedness) and (c) the
aggregate of all dividends declared and payable on the Company's, the
Borrower's or any of their Subsidiaries' preferred stock or preferred
partnership units, as the case may be, provided, however, that the
distributions payable on the currently outstanding Class A Limited
Partnership Interests of the Borrower shall not be included in this clause
(c).
"Foreign Lender" means any Lender that is organized under the laws
of a jurisdiction other than that in which the Borrower is located. For
purposes of this definition, the United States of America, each State thereof
and the District of Columbia shall be deemed to constitute a single
jurisdiction.
"GAAP" means generally accepted accounting principles in the
United States of America.
"General Partner" means the Company and any successor general
partner(s) of the Borrower.
"Governmental Authority" means the government of the United States
of America, any other nation or any political subdivision thereof, whether
state or local, and any agency, authority, instrumentality, regulatory body,
court, central bank or other entity exercising executive, legislative,
judicial, taxing, regulatory or administrative powers or functions of or
pertaining to government.
"Guarantee" of or by any Person (the "guarantor") means any
obligation, contingent or otherwise, of the guarantor guaranteeing or having
the economic effect of guaranteeing any Indebtedness or other obligation of
any other Person (the "primary obligor") in any manner, whether directly or
indirectly, and including any obligation of the guarantor, direct or
indirect, (a) to purchase or pay (or advance or supply funds for the purchase
or payment of) such Indebtedness or other obligation or to purchase (or to
advance or supply funds for the purchase of) any security for the payment
thereof, (b) to purchase or lease property, securities or services for the
purpose of assuring the owner of such Indebtedness or other obligation of the
payment thereof, (c) to maintain working capital, equity capital or any other
financial statement condition or liquidity of the primary obligor so as to
enable the primary obligor to pay such Indebtedness or other obligation or
(d) as an account party in respect of any letter of credit or letter of
guaranty issued to support such Indebtedness or obligation; provided, that
the term Guarantee shall not include (i) endorsements for collection or
deposit in the ordinary course of business, (ii) guarantees of completion
unless and until a claim for payment has been made thereunder, at which time
any such guaranty of completion shall be deemed to be a Guaranty in an amount
equal to any such claim and (iii) Low Income Housing Credit Program
Guarantees.
"Guaranty" means the Guaranty Agreement of even date herewith made
by the Company for the benefit of the Lenders in the form attached hereto as
Exhibit B.
"Hazardous Materials" means toxic substances, hazardous waste,
hazardous materials or hazardous substances, as such terms are defined in the
Resource Conservation and Recovery Act of 1976, as amended (42 U.S.C. Section
9601 et seq.), the Comprehensive Environmental, Response, Compensation and
Liability Act, as amended (42 U.S.C. Sections 9601 and 9657 et seq.) and/or
the Hazardous Materials Transportation Act, as amended (49 U.S.C. Sections
1801 et seq.), and the regulations promulgated pursuant to any such laws, any
asbestos or asbestos related products and any oils, petroleum-derived
compounds or pesticides; provided that "Hazardous Materials" shall not
include (a) materials which exist in quantities or in a compounded non-
hazardous form in compliance with all applicable Federal, state and local
laws, ordinances, rules and regulations such as asphalt contained in road
surfacing materials and (b) materials customarily used in the day-to-day
operation and maintenance of the Properties which are stored, used and
disposed of in accordance with all applicable Federal, state and local laws,
ordinances, rules and regulations such as cleaning fluids.
"Hedging Agreement" means any interest rate protection agreement,
foreign currency exchange agreement, commodity price protection agreement or
other interest or currency exchange rate or commodity price hedging
arrangement.
"Improvements" means all buildings, fixtures, structures, parking
areas, landscaping and all other improvements whether existing now or
hereafter constructed, together with all machinery and mechanical,
electrical, HVAC and plumbing systems presently located thereon and used in
the operation thereof, excluding (a) any such items owned by utility service
providers, (b) any such items owned by tenants or other third-parties
unaffiliated with the Borrower and (c) any items of personal property.
"Indebtedness" of any Person means, without duplication, (a) all
obligations (including, without limitation, Contingent Obligations) of such
Person for borrowed money or with respect to deposits or advances of any
kind, (b) all obligations (including, without limitation, Contingent
Obligations) of such Person evidenced by bonds, debentures, notes or similar
instruments, (c) all obligations (including, without limitation, Contingent
Obligations) of such Person upon which interest charges are customarily paid,
(d) all obligations (including, without limitation, Contingent Obligations)
of such Person under conditional sale or other title retention agreements
relating to property acquired by such Person, (e) all obligations of such
Person in respect of the deferred purchase price of property or services
(excluding current accounts payable incurred in the ordinary course of
business), (f) all Indebtedness of others secured by (or for which the holder
of such Indebtedness has an existing right, contingent or otherwise, to be
secured by) any Lien on property owned or acquired by such Person, whether or
not the Indebtedness secured thereby has been assumed, (g) all Guarantees by
such Person of Indebtedness of others, (h) all Capital Lease Obligations
(including, without limitation, Contingent Obligations) of such Person,
(i) all obligations (including, without limitation, Contingent Obligations)
of such Person as an account party in respect of letters of credit and
letters of guaranty and (j) all obligations (including, without limitation,
Contingent Obligations) of such Person in respect of bankers' acceptances.
The Indebtedness of any Person shall include the Indebtedness of any other
entity (including any partnership in which such Person is a general partner)
to the extent such Person is liable therefor as a result of such Person's
ownership interest in or other relationship with such entity, except to the
extent the terms of such Indebtedness provide that such Person is not liable
therefor.
"Indemnified Taxes" means Taxes other than Excluded Taxes.
"Interest Election Request" means a request by the Borrower to
convert or continue a Revolving Loan in accordance with Section 2.06.
"Interest Payment Date" means the first day of each calendar
month.
"Interest Period" means the period commencing on the date of any
Eurodollar Borrowing and ending on the numerically corresponding day in the
calendar month that is one, two, three or six months thereafter, as the
Borrower may elect, provided that (i) if any Interest Period would end on a
day other than a Business Day, such Interest Period shall be extended to the
next succeeding Business Day unless such next succeeding Business Day would
fall in the next calendar month, in which case such Interest Period shall end
on the next preceding Business Day and (ii) any Interest Period that
commences on the last Business Day of a calendar month (or on a day for which
there is no numerically corresponding day in the last calendar month of such
Interest Period) shall end on the last Business Day of the last calendar
month of such Interest Period. For purposes hereof, the date of a Borrowing
initially shall be the date on which such Borrowing is made and, in the case
of a Revolving Loan, thereafter shall be the effective date of the most
recent conversion or continuation of such Borrowing.
"Issuing Bank" means The Chase Manhattan Bank, in its capacity as
the issuer of Letters of Credit hereunder, and its successors in such
capacity as provided in Section 2.04(i). The Issuing Bank may, in its
discretion, arrange for one or more Letters of Credit to be issued by
Affiliates of the Issuing Bank, in which case the term "Issuing Bank" shall
include any such Affiliate with respect to Letters of Credit issued by such
Affiliate.
"LC Disbursement" means a payment made by the Issuing Bank
pursuant to a Letter of Credit.
"LC Exposure" means, at any time, the sum of (a) the aggregate
undrawn amount of all outstanding Letters of Credit at such time plus (b) the
aggregate amount of all LC Disbursements that have not yet been reimbursed by
or on behalf of the Borrower at such time. The LC Exposure of any Lender at
any time shall be its Applicable Percentage of the total LC Exposure at such
time.
"Lease" means a lease, license, concession agreement or other
agreement providing for the use or occupancy of any portion of any Project,
including all amendments, supplements, modifications and assignments thereof
and all side letters or side agreements relating thereto.
"Lenders" means the Persons listed on Schedule 2.01 and any other
Person that shall have become a party hereto pursuant to an Assignment and
Acceptance, other than any such Person that ceases to be a party hereto
pursuant to an Assignment and Acceptance.
"Letter of Credit" means any letter of credit issued pursuant to
this Agreement.
"LIBO Rate" means, with respect to any Eurodollar Borrowing for
any Interest Period, the rate appearing on Page 3750 of the Telerate Service
(or on any successor or substitute page of such Service, or any successor to
or substitute for such Service, providing rate quotations comparable to those
currently provided on such page of such Service, as determined by the
Administrative Agent from time to time for purposes of providing quotations
of interest rates applicable to dollar deposits in the London interbank
market) at approximately 11:00 a.m., London time, two Business Days prior to
the commencement of such Interest Period, as the rate for dollar deposits
with a maturity comparable to such Interest Period. In the event that such
rate is not available at such time for any reason, then the "LIBO Rate" with
respect to such Eurodollar Borrowing for such Interest Period shall be the
rate (rounded upwards, if necessary, to the next 1/16 of 1%) at which dollar
deposits of $5,000,000 and for a maturity comparable to such Interest Period
are offered by the principal London office of the Administrative Agent in
immediately available funds in the London interbank market at approximately
11:00 a.m., London time, two Business Days prior to the commencement of
such Interest Period.
"Lien" means, with respect to any asset, (a) any mortgage, deed
of trust, lien, pledge, hypothecation, encumbrance, charge or security
interest in, on or of such asset, (b) the interest of a vendor or a lessor
under any conditional sale agreement, capital lease or title retention
agreement (or any financing lease having substantially the same economic
effect as any of the foregoing) relating to such asset and (c) in the case of
securities, any purchase option, call or similar right of a third party with
respect to such securities.
"Loans" means the loans made by the Lenders to the Borrower
pursuant to this Agreement.
"Loan Documents" means this Agreement, the Notes, the Guaranty and
all other instruments, agreements and written obligations between the
Borrower and any of the Lenders pursuant to or in connection with the
transactions contemplated hereby.
"Low Income Housing Credit Program Guarantees" means the assurance
by the Borrower to limited partners of certain Affiliates of the Borrower, of
which the Borrower or a Subsidiary of the Borrower is the general partner,
that the real properties developed and operated by such Affiliates under the
Low Income Housing Tax Credit program established under the Code will be kept
in compliance with applicable requirements to avoid loss of, or recapture of,
low income housing tax credits.
"Management Company" means either, (i) Home Properties Management,
Inc., a Maryland corporation, 99% of the issued and outstanding capital stock
of which is and shall continue to be owned, beneficially and of record, by
the Borrower, and (ii) Conifer Realty Corporation, a Maryland corporation,
99% of the issued and outstanding capital stock of which is and shall
continue to be owned, beneficially and of record, by the Borrower.
"Margin Stock" means "margin stock" as such term is defined in
Regulation U and Regulation G of the Federal Reserve Board as in effect from
time to time.
"Material Adverse Effect" means a material adverse effect on
(a) the business, assets, operations or condition (financial or otherwise) of
the Borrower and its wholly-owned Subsidiaries, taken as a whole, (b) the
ability of the Company, the Borrower or any of their Subsidiaries to perform
any of their obligations under this Agreement or the Loan Documents or
(c) the rights of or benefits available to the Lenders under this Agreement
or the Loan Documents.
"Material Indebtedness" means Indebtedness (other than the Loans
and Letters of Credit), or obligations in respect of one or more Hedging
Agreements, of any one or more of the Borrower and its Subsidiaries in an
aggregate principal amount exceeding $7,500,000. For purposes of determining
Material Indebtedness, the "principal amount" of the obligations of the
Borrower or any Subsidiary of the Borrower in respect of any Hedging
Agreement at any time shall be the maximum aggregate amount (giving effect to
any netting agreements) that the Borrower or such Subsidiary would be
required to pay if such Hedging Agreement were terminated at such time.
"Maturity Date" means September 4, 1999, as the same may be
extended as provided in Section 2.01(b).
"Maximum Availability" means the lesser of (a) $50,000,000 and (b)
the sum of (i) 60% of the Total Property Value of Unencumbered Eligible
Projects plus (ii) 60% of the Total Property Value of Encumbered Eligible
Projects minus the amount of any Secured Indebtedness affecting such
Projects, provided that such amount in this clause (ii) shall not be less
than zero.
"Money Market", when used in reference to any Loan or Borrowing,
refers to whether such Loan or the Loans comprising such Borrowing, are
bearing interest at a rate determined by reference to the Money Market Rate.
"Money Market Loan Maturity Date" means, with respect to any Money
Market Loan, the maturity date requested by the Borrower in connection
therewith (which date shall in no event be later than the earlier of (a) 29
days after the date of such Borrowing thereof and (b) the Maturity Date).
"Money Market Rate" means, with respect to any proposed Money
Market Loan, the quoted rate per annum obtained by the Administrative Agent
with respect thereto, and accepted by all the Lenders in their sole
discretion, no later than 10:00 a.m., New York City time, two Business Days
prior to the requested date of Borrowing (or, in the case of Money Market
Loans having a Money Market Maturity Date of six days or less from the
relevant date of Borrowing, the quoted rate per annum obtained by the
Administrative Agent with respect thereto, and accepted by all the Lenders in
their sole discretion, no later than one hour after the quote is obtained by
the Administrative Agent, which quote shall in no event be obtained later
than 12:00 noon, New York City time, on the relevant date of Borrowing).
"Moody's" means Moody's Investors Service, Inc.
"Multiemployer Plan" means a multiemployer plan as defined in
Section 4001(a)(3) of ERISA.
"Net Cash Proceeds" means all cash when and as received in
connection with the sale or refinancing of any Real Property, less the amount
of Secured Indebtedness required to be repaid in connection with the sale or
refinancing of such Real Property, real estate transfer taxes payable in
connection with the sale of such Real Property and reasonable costs and
expenses paid by the Borrower or its Subsidiaries in connection with such
sale or refinancing.
"Net Offering Proceeds" means all cash received by the Company as
a result of the sale of common shares, preferred shares, partnership
interests, limited liability company interests, convertible securities or
other ownership or equity interests in the Company, less customary costs and
discounts of issuance paid by the Company.
"NOI" means net operating income derived from Projects determined
in accordance with GAAP, adjusted, however, to exclude accrued rent with
respect to tenants that are more than 90 days in arrears in the payment of
rent, and further adjusted to account for the actual management fee, if any,
paid with respect to the Projects.
"Note" means a promissory note in the form attached hereto as
Exhibit C payable to a Lender, evidencing certain of the Obligations of the
Borrower to such Lender and executed by the Borrower, as the same may be
amended, supplemented, modified or restated from time to time; "Notes" means,
collectively, all of such Notes outstanding at any given time.
"Other Taxes" means any and all present or future stamp or
documentary taxes or any other excise or property taxes, charges or similar
levies arising from any payment made hereunder or from the execution,
delivery or enforcement of, or otherwise with respect to, this Agreement.
"PBGC" means the Pension Benefit Guaranty Corporation referred to
and defined in ERISA and any successor entity performing similar functions.
"Permitted Encumbrances" means:
(a) Liens imposed by law for taxes that are not yet due or are
being contested in compliance with Section 5.04;
(b) carriers', warehousemen's, mechanics', materialmen's,
repairmen's and other like Liens imposed by law, arising in the ordinary
course of business and securing obligations that are not overdue by more than
30 days or are being contested in compliance with Section 5.04;
(c) pledges and deposits made in the ordinary course of
business in compliance with workers' compensation, unemployment insurance and
other social security laws or regulations;
(d) deposits to secure the performance of bids, trade
contracts, leases, statutory obligations, surety and appeal bonds,
performance bonds and other obligations of a like nature, in each case in the
ordinary course of business; and
(e) easements, zoning restrictions, rights-of-way and similar
encumbrances on real property imposed by law or arising in the ordinary
course of business that do not secure any monetary obligations and do not
materially detract from the value of the affected property or interfere with
the ordinary conduct of business of the Borrower or any Subsidiary of the
Borrower;
provided that the term "Permitted Encumbrances" shall not include any Lien
securing Indebtedness.
"Permitted Investments" means:
(a) Cash and Cash Equivalents;
(b) direct obligations of, or obligations the principal of and
interest on which are unconditionally guaranteed by, the United States of
America (or by any agency thereof to the extent such obligations are backed
by the full faith and credit of the United States of America), in each case
maturing within one year from the date of acquisition thereof;
(c) investments in commercial paper maturing within 270 days from
the date of acquisition thereof and having, at such date of acquisition, the
highest credit rating obtainable from S&P or from Moody's;
(d) investments in certificates of deposit, banker's acceptances
and time deposits maturing within 180 days from the date of acquisition
thereof issued or guaranteed by or placed with, and money market deposit
accounts issued or offered by, any domestic office of any commercial bank
organized under the laws of the United States of America or any State thereof
which has a combined capital and surplus and undivided profits of not less
than $500,000,000; and
(e) fully collateralized repurchase agreements with a term of not
more than 30 days for securities described in clause (b) above and entered
into with a financial institution satisfying the criteria described in
clause (d) above.
"Person" means any natural person, corporation, limited liability
company, trust, joint venture, association, company, partnership,
Governmental Authority or other entity.
"Plan" means any employee pension benefit plan (other than a
Multiemployer Plan) subject to the provisions of Title IV of ERISA or
Section 412 of the Code or Section 302 of ERISA, and in respect of which the
Borrower or any ERISA Affiliate is (or, if such plan were terminated, would
under Section 4069 of ERISA be deemed to be) an "employer" as defined in
Section 3(5) of ERISA.
"Prime Rate" means the rate of interest per annum publicly
announced from time to time by The Chase Manhattan Bank as its prime rate in
effect at its principal office in New York City; each change in the Prime
Rate shall be effective from and including the date such change is publicly
announced as being effective.
"Project" means any residential housing building, related group
of buildings or community owned 100%, directly or indirectly, by any of the
Consolidated Businesses.
"Property" means any Real Property or personal property, plant,
building, facility, structure, equipment, general intangible, receivable, or
other asset owned or leased by any Consolidated Business.
"QRS Subsidiary" means the Company's wholly-owned Subsidiary that
after the date hereof owns limited partnership interests in the Borrower.
"Qualified Community Reinvestment Projects" means those Projects
that comply with the Community Reinvestment Act or other applicable federal
and state laws.
"Quarterly Compliance Certificate" shall have the meaning set
forth in Section 5.01(a)(iii).
"Real Property" means all of the Borrower's present and future
right, title and interest (including, without limitation, any leasehold
estate) in (i) any plots, pieces or parcels of land, (ii) any IMarket Loan, the
maturity date requested by the Borrower in connection
therewith (which date shall in no event be later than the earlier of (a) 29
days after the date of such Borrowing thereof and (b) the Maturity Date).
"Money Market Rate" means, with respect to any proposed Money Market
Loan, the quoted rate per annum obtained by the Administrative Agent with
respect thereto, and accepted by all the Lenders in their sole discretion, no
later than 10:00 a.m., New York City time, two Business Days prior to the
requested date of Borrowing (or, in the case of Money Market Loans having a
Money Market Maturity Date of six days or less from the relevant date of
Borrowing, the quoted rate per annum obtained by the Administrative Agent
with respect thereto, and accepted by all the Lenders in their sole discretion,
no later than one hour after the quote is obtained by the Administrative Agent,
which quote shall in no event be obtained later than 12:00 noon, New York City
time, on the relevant date of Borrowing).
"Moody's" means Moody's Investors Service, Inc.
"Multiemployer Plan" means a multiemployer plan as defined in
Section 4001(a)(3) of ERISA.
"Net Cash Proceeds" means all cash when and as received in connection
with the sale or refinancing of any Real Property, less the amount of Secured
Indebtedness required to be repaid in connection with the sale or refinancing
of such Real Property, real estate transfer taxes payable in connection with
the sale of such Real Property and reasonable costs and expenses paid by the
Borrower or its Subsidiaries in connection with such sale or refinancing.
"Net Offering Proceeds" means all cash received by the Company as a
result of the sale of common shares, preferred shares, partnership interests,
limited liability company interests, convertible securities or other ownership
or equity interests in the Company, less customary costs and discounts of
issuance paid by the Company.
"NOI" means net operating income derived from Projects determined
in accordance with GAAP, adjusted, however, to exclude accrued rent with
respect to tenants that are more than 90 days in arrears in the payment of
rent, and further adjusted to account for the actual management fee, if any,
paid with respect to the Projects.
"Note" means a promissory note in the form attached hereto as
Exhibit C payable to a Lender, evidencing certain of the Obligations of the
Borrower to such Lender and executed by the Borrower, as the same may be
amended, supplemented, modified or restated from time to time; "Notes" means,
collectively, all of such Notes outstanding at any given time.
"Other Taxes" means any and all present or future stamp or
documentary taxes or any other excise or property taxes, charges or similar
levies arising from any payment made hereunder or from the execution, delivery
or enforcement of, or otherwise with respect to, this Agreement.
"PBGC" means the Pension Benefit Guaranty Corporation referred to
and defined in ERISA and any successor entity performing similar functions.
"Permitted Encumbrances" means:
(a) Liens imposed by law for taxes that are not yet due or are
being contested in compliance with Section 5.04;
(b) carriers', warehousemen's, mechanics', materialmen's,
repairmen's and other like Liens imposed by law, arising in the ordinary
course of business and securing obligations that are not overdue by more
than 30 days or are being contested in compliance with Section 5.04;
(c) pledges and deposits made in the ordinary course of business
in compliance with workers' compensation, unemployment insurance and other
social security laws or regulations;
(d) deposits to secure the performance of bids, trade contracts,
leases, statutory obligations, surety and appeal bonds, performance bonds and
other obligations of a like nature, in each case in the ordinary course of
business; and
(e) easements, zoning restrictions, rights-of-way and similar
encumbrances on real property imposed by law or arising in the ordinary course
of business that do not secure any monetary obligations and do not materially
detract from the value of the affected property or interefere with the
ordinary conduct of business of the Borrower or any Subsidiary of the
Borrower;
provided that the term "Permitted Encumbrances" shall not include any Lien
securing Indebtedness.
"Permitted Investments" means:
(a) Cash and Cash Equivalents;
(b) direct obligations of, or obligations the principal of and
interest on which are unconditionally guaranteed by, the United States of
America (or by any agency thereof to the extent such obligations are backed
by the full faith and credit of the United States of America), in each case
maturing within one year from the date of acquisition thereof;
(c) investments in commercial paper maturing within 270 days
from the date of acquisition thereof and having, at such date of acquisition,
the highest credit rating obtainable from S&P or from Moody's;
(d) investments in certificates of deposit, banker's acceptances
and time deposits maturing within 180 days from the date of acquisition thereof
issued or guaranteed by or placed with, and money market deposit accounts
issued or offered by, any domestic office of any commercial bank organized
under the laws of the United States of America or any State thereof which has
a combined capital and surplus and undivided profits of not less than
$500,000,000; and
(e) fully collateralized repurchase agreements with a term of
not more than 30 days for securities described in clause (b) above and entered
into with a financial institution satisfying the criteria described in
clause (d) above.
"Person" means any natural person, corporation, limited liability
company, trust, joint venture, association, company, partnership, Governmental
Authority or other entity.
"Plan" means any employee pension benefit plan (other than a
Multiemployer Plan) subject to the provisions of Title IV or ERISA or Section
412 of the Code or Section 302 of ERISA, and in respect of which the Borrower
or any ERISA Affiliate is (or, if such plan were terminated, would under
Section 4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5)
of ERISA.
"Prime Rate" means the rate of interest per annum publicly announced
from time to time by The Chase Manhattan BAnk as its prime rate in effect at
its principal office in New York City; each change in the Prime Rate shall be
effective from and including the date such change is publicly announced as
being effective.
"Project" means any residential housing building, related group of
buildings or community owned 100%, directly or indirectly, by any of the
Consolidated Businesses.
"Property" means any Real Property or personal property, plant,
building, facility, structure, equipment, general intangible, receivable, or
other asset owned or leased by any Consolidated Business.
"QRS Subsidiary" means the Company's wholly-owned Subsidiary that
after the date hereof owns limited partnership interests in the Borrower.
"Qualified Community Reinvestment Projects" means those Projects that
comply with the Community Reinvestment Act or other applicable federal and
state laws.
"Quarterly Compliance Certificate" shall have the meaning set forth
in Section 5.01(a)(iii).
"Real Property" means all of the Borrower's present and future
right, title and interest (including, without limitation, any leasehold estate)
in (i) any plots, pieces or parcels of land, (ii) any Improvements of every
nature whatsoever (the rights and interests described in clauses (i) and (ii)
above being the "Premises"), (iii) all easements, rights of way, gores of land
or any lands occupied by streets, ways alleys, passages, sewer rights, water
courses, water rights and powers, and public places adjoining such land, and
any other interests in property constituting appurtenances to the Premises,
or which hereafter shall in any way belong, relate or be appurtenant thereto,
(iv) all hereditaments, gas, oil, minerals (with the right to extract, sever
and remove such gas, oil and minerals), and easements, of every nature
whatsoever, located in, on or benefiting the Premises and (v) all other
rights and privileges thereunto belonging or appertaining and all extensions,
additions, improvements, betterments, renewals, substitutions and
replacements to or of any of the rights and interests described in clauses
(iii) and (iv) above.
"Recourse Secured Indebtedness" means (a) Guarantees of the
mpany, the Borrower and their Subsidiaries and (b) Secured Indebtedness
affecting any Project that is recourse to the Borrower or its Subsidiaries.
"Register" has the meaning set forth in Section 9.04.
"REIT" means a domestic trust or corporation that qualifies as a
real estate investment trust under the provisions of Sections 856, et seq. of
the Code.
"Related Parties" means, with respect to any specified Person,
such Person's Affiliates and the respective directors, officers, employees,
agents and advisors of such Person and such Person's Affiliates.
"Required Lenders" means, at any time, Lenders having Revolving
Credit Exposures and unused Commitments representing at least 75% of the sum
of the total Revolving Credit Exposures and unused Commitments at such time.
"Restricted Payment" is defined in Section 6.01 hereof.
"Revolving Credit Exposure" means, with respect to any Lender at
any time, the sum of the outstanding principal amount of such Lender's
Revolving Loans and its LC Exposure at such time.
"Revolving Loan" means a Loan made pursuant to Section 2.03.
"S&P" means Standard & Poor's.
"Secured Indebtedness" means any Indebtedness secured by a Lien.
"Statutory Reserve Rate" means a fraction (expressed as a
decimal), the numerator of which is the number one and the denominator of
which is the number one minus the aggregate of the maximum reserve
percentages (including any marginal, special, emergency or supplemental
reserves) expressed as a decimal established by the Board to which the
Administrative Agent is subject (a) with respect to the Base CD Rate, for new
negotiable non-personal time deposits in dollars of over $100,000 with
maturities approximately equal to three months and (b) with respect to the
Adjusted LIBO Rate, for eurocurrency funding (currently referred to as
"Eurocurrency Liabilities" in Regulation D of the Board). Such reserve
percentages shall include those imposed pursuant to such Regulation D.
Eurodollar Loans shall be deemed to constitute eurocurrency funding and to be
subject to such reserve requirements without benefit of or credit for
proration, exemptions or offsets that may be available from time to time to
any Lender under such Regulation D or any comparable regulation. The
Statutory Reserve Rate shall be adjusted automatically on and as of the
effective date of any change in any reserve percentage.
"Subsidiary" means, with respect to any Person (the "parent") at
any date, any corporation, limited liability company, partnership,
association or other entity the accounts of which would be consolidated with
those of the parent in the parent's consolidated financial statements if such
financial statements were prepared in accordance with GAAP as of such date.
"Taxes" means any and all present or future taxes, levies,
imposts, duties, deductions, charges or withholdings imposed by any
Governmental Authority.
"Three-Month Secondary CD Rate" means, for any day, the secondary
market rate for three-month certificates of deposit reported as being in
effect on such day (or, if such day is not a Business Day, the next preceding
Business Day) by the Board through the public information telephone line of
the Federal Reserve Bank of New York (which rate will, under the current
practices of the Board, be published in Federal Reserve Statistical
Release H.15(519) during the week following such day) or, if such rate is not
so reported on such day or such next preceding Business Day, the average of
the secondary market quotations for three-month certificates of deposit of
major money center banks in New York City received at approximately
10:00 a.m., New York City time, on such day (or, if such day is not a
Business Day, on the next preceding Business Day) by the Administrative Agent
from three negotiable certificate of deposit dealers of recognized standing
selected by it.
"Total Interest Expense" means, for any period, the sum of (i)
interest expense of the Consolidated Businesses paid during such period and
(ii) interest expense of the Consolidated Businesses accrued and/or
capitalized for such period in each case including participating interest
expense, the amortization of loan fees, original issue discount, non-cash
interest payment, the interest component of Capital Lease Obligations and
hedging costs but excluding extraordinary interest expense, and net of amor-
tization of deferred costs associated with new financings or refinancings of
existing Indebtedness.
"Total Outstanding Indebtedness" means, as of any date, the sum
of (i) all Indebtedness of the Consolidated Businesses and (ii) without
duplication, all Contingent Obligations of the Consolidated Businesses which
are recourse to the Borrower. "Total Outstanding Indebtedness" shall not be
deemed to include (a) completion guarantees of construction loans or (b) Low
Income Housing Tax Credit Program Guarantees.
"Total Property Value" means, as of any date, the sum of (i) with
respect to all Eligible Projects which have been owned by the Borrower for
not less than four full consecutive calendar quarters, as of the first day of
each fiscal quarter for the immediately preceding consecutive four calendar
quarters, an amount equal to Adjusted NOI relating to such Eligible Project
for such period divided by an annual interest rate equal to 9.5%, and (ii)
with respect to all Eligible Projects which have been owned by the Borrower
for less than four full consecutive calendar quarters, an amount equal to the
cost of acquiring such Eligible Projects less reasonable and customary
transaction costs incurred in connection with such acquisition.
"Total Value" means, as of any date, the sum of (i) Total Property
Value for all Eligible Projects; (ii) an amount equal to 500% of the EBITDA
derived from management and development activities of the Consolidated
Businesses as of the first day of each fiscal quarter for the immediately
preceding consecutive four calendar quarters; (iii) unrestricted Permitted
Investments of the Consolidated Businesses; (iv) an amount equal to 50% of
Book Value of undeveloped land and Projects on which construction is in
progress, up to a maximum of 10% of Total Value before including the amount
of Total Value derived from this clause (iv); (v) an amount equal to 75% of
all (1) investments in notes secured by mortgages on the Property of any
Person (including Affiliates) and (2) obligations of Affiliates and
directors, officers and employees of the Company, the Borrower, the
Borrower's Subsidiaries, the Borrower's Affiliates and the Management
Companies to repay any loans and advances; and (vi) Borrower's pro rata share
of investments in Real Property not constituting Eligible Projects, valued at
the lower of cost or the value specified in clauses (i) through (vi) above.
"Transactions" means the execution, delivery and performance by
the Borrower of this Agreement, the borrowing of Loans, the use of the
proceeds thereof and the issuance of Letters of Credit hereunder.
"Type", when used in reference to any Loan or Borrowing, refers
to whether the rate of interest on such Loan, or on the Loans comprising such
Borrowing, is determined by reference to the Adjusted LIBO Rate, the
Alternate Base Rate or the Money Market Rate.
"Unencumbered Eligible Project" means any Eligible Project with
is not an Encumbered Eligible Project.
"Unsecured Interest Expense" means the interest expense paid,
accrued or capitalized on all Total Outstanding Indebtedness that is not
Secured Indebtedness for the applicable period.
"Withdrawal Liability" means liability to a Multiemployer Plan as
a result of a complete or partial withdrawal from such Multiemployer Plan, as
such terms are defined in Part I of Subtitle E of Title IV of ERISA.
SECTION 1.02. Classification of Loans and Borrowings. For
purposes of this Agreement, Loans may be classified and referred to by Type
(e.g., a "Eurodollar Loan"). Borrowings also may be classified and referred
to by Type (e.g., a "Eurodollar Borrowing").
SECTION 1.03. Terms Generally. The definitions of terms herein
shall apply equally to the singular and plural forms of the terms defined.
Whenever the context may require, any pronoun shall include the corresponding
masculine, feminine and neuter forms. The words "include", "includes" and
"including" shall be deemed to be followed by the phrase "without
limitation". The word "will" shall be construed to have the same meaning and
effect as the word "shall". Unless the context requires otherwise (a) any
definition of or reference to any agreement, instrument or other document
herein shall be construed as referring to such agreement, instrument or other
document as from time to time amended, supplemented or otherwise modified
(subject to any restrictions on such amendments, supplements or modifications
set forth herein), (b) any reference herein to any Person shall be construed
to include such Person's successors and assigns, (c) the words "herein",
"hereof" and "hereunder", and words of similar import, shall be construed to
refer to this Agreement in its entirety and not to any particular provision
hereof, (d) all references herein to Articles, Sections, Exhibits and
Schedules shall be construed to refer to Articles and Sections of, and
Exhibits and Schedules to, this Agreement and (e) the words "asset" and
"property" shall be construed to have the same meaning and effect and to
refer to any and all tangible and intangible assets and properties, including
cash, securities, accounts and contract rights.
SECTION 1.04. Accounting Terms; GAAP. Except as otherwise
expressly provided herein, all terms of an accounting or financial nature
shall be construed in accordance with GAAP, as in effect from time to time;
provided that, if the Borrower notifies the Administrative Agent that the
Borrower requests an amendment to any provision hereof to eliminate the
effect of any change occurring after the date hereof in GAAP or in the
application thereof on the operation of such provision (or if the
Administrative Agent notifies the Borrower that the Required Lenders request
an amendment to any provision hereof for such purpose), regardless of whether
any such notice is given before or after such change in GAAP or in the
application thereof, then such provision shall be interpreted on the basis of
GAAP as in effect and applied immediately before such change shall have
become effective until such notice shall have been withdrawn or such
provision amended in accordance herewith.
ARTICLE II
The Credits
SECTION 2.01. Commitments; Extension of Maturity Date. (a)
Subject to the terms and conditions set forth herein, each Lender agrees to
make Loans to the Borrower from time to time during the Availability Period
in an aggregate principal amount that will not result in (i) such Lender's
Revolving Credit Exposure exceeding such Lender's Commitment or (ii) the sum
of the total Revolving Credit Exposures exceeding the total Maximum
Availability. Within the foregoing limits and subject to the terms and
conditions set forth herein, the Borrower may borrow, prepay and reborrow
Loans.
(b) At the option of the Borrower and subject to the terms and
conditions set forth herein, the Borrower may request that the Maturity Date
be extended by one year to September 4, 2000. If the Borrower desires to so
extend the Maturity Date, it shall deliver written notice of such desire (the
"Extension Notice") to the Administrative Agent not later than the date which
is ninety (90) days prior to the Maturity Date, together with (i) a
certificate of a Financial Officer of the Borrower certifying that (A) the
representations and warranties of the Borrower set forth in this Agreement
are true and correct on and as of the date of certification, (B) no Default
has occurred and is continuing and (C) no event has occurred since the date
of this Agreement which has had, and continues to have, or is reasonably
likely to have, a Material Adverse Effect; and (ii) the payment of any fee
provided for in Section 2.10(c). Upon receipt of the foregoing, the Maturity
Date then in effect shall be extended until September 4, 2000, but the
Borrower shall have no further right to extend the Maturity Date.
SECTION 2.02. Loans and Borrowings. (a) Each Loan shall be made
as part of a Borrowing consisting of Loans made by the Lenders ratably in
accordance with their respective Commitments. The failure of any Lender to
make any Loan required to be made by it shall not relieve any other Lender of
its obligations hereunder; provided that the Commitments of the Lenders are
several and no Lender shall be responsible for any other Lender's failure to
make Loans as required.
(b) Subject to Section 2.12, each Borrowing shall be comprised
entirely of ABR Loans, Money Market Loans or Eurodollar Loans as the Borrower
may request in accordance herewith. Each Lender at its option may make any
Eurodollar Loan by causing any domestic or foreign branch or Affiliate of
such Lender to make such Loan; provided that any exercise of such option
shall not affect the obligation of the Borrower to repay such Loan in accord-
ance with the terms of this Agreement.
(c) At the commencement of each Interest Period for any
Eurodollar Loan, such Loan shall be in an aggregate amount that is an
integral multiple of $100,000 and not less than $1,000,000. At the time that
each ABR Loan is made, such Borrowing shall be in an aggregate amount that is
an integral multiple of $100,000 and not less than $1,000,000; provided that
an ABR Loan may be in an aggregate amount that is equal to the entire unused
balance of the total Commitments or that is required to finance the
reimbursement of an LC Disbursement as contemplated by Section 2.04(e).
Borrowings of more than one Type may be outstanding at the same time;
provided that there shall not at any time be more than a total of five
Eurodollar Loans outstanding.
(d) Notwithstanding anything herein to the contrary, at no
time shall the aggregate Revolving Credit Exposure be greater than the
Maximum Availability.
(e) Notwithstanding any other provision of this Agreement, the
Borrower shall not be entitled to request, or to elect to convert or
continue, any Borrowing if the Interest Period requested with respect thereto
would end after the Maturity Date.
(f) Notwithstanding any other provision of this Agreement, no
Loans with interest accruing at the Money Market Rate shall be made unless
all the Lenders accept the quoted Money Market Rate obtained by the
Administrative Agent.
SECTION 2.03. Requests for Borrowings. To request a Borrowing,
the Borrower shall notify the Administrative Agent of such request by
telephone (a) in the case of a Eurodollar Borrowing, not later than 11:00
a.m., New York City time, three Business Days before the date of the proposed
Borrowing, (b) in the case of a Money Market Borrowing, not later than 11:00
a.m., New York City time, two Business Days before the date of the proposed
Borrowing (or, in the case of Money Market Loans having a Money Market
Maturity Date of six days or less from the relevant date of Borrowing, not
later than 11:00 a.m., New York City time, on the date of the proposed
Borrowing), or (c) in the case of an ABR Borrowing, not later than 11:00
a.m., New York City time, one Business Day before the date of the proposed
Borrowing; provided that any such notice of an ABR Borrowing to finance the
reimbursement of an LC Disbursement as contemplated by Section 2.04(e) may be
given not later than 10:00 a.m., New York City time, on the date of the
proposed Borrowing. Each such telephonic Borrowing Request shall be
irrevocable and shall be confirmed promptly by hand delivery or telecopy to
the Administrative Agent of a written Borrowing Request in the form of
Exhibit D-1 attached hereto, or such other form approved by the
Administrative Agent, and signed by the Borrower. Each such telephonic and
written Borrowing Request shall specify the following information in
compliance with Section 2.02:
(i) the aggregate amount of the requested Borrowing;
(ii) the date of such Borrowing, which shall be a Business Day;
(iii) whether such Borrowing is to be an ABR Borrowing, a
Eurodollar Borrowing or a Money Market Borrowing;
(iv) in the case of a Eurodollar Borrowing, the initial Interest
Period to be applicable thereto, which shall be a period
contemplated by the definition of the term "Interest
Period";
(v) in the case of a Money Market Borrowing, the Money Market
Loan Maturity Date to be applicable thereto, which shall be
a date contemplated by the definition of the term "Money
Market Maturity Date"; and
(vi) the location and number of the Borrower's account to which
funds are to be disbursed, which shall comply with the
requirements of Section 2.05.
If no election as to the Type of Borrowing is specified, then the requested
Borrowing shall be a Eurodollar Borrowing with an Interest Period of one
month's duration. If no Interest Period is specified with respect to any
requested Eurodollar Borrowing, then the Borrower shall be deemed to have
selected an Interest Period of one month's duration. If no Money Market
Maturity Date is specified with respect to any requested Money Market
Borrowing, then the Borrower shall be deemed to have selected a Money Market
Maturity Date that is seven days after the date of such Borrowing. Promptly
following receipt of a Borrowing Request in accordance with this Section, the
Administrative Agent shall advise each Lender of the details thereof and of
the amount of such Lender's Loan to be made as part of the requested
Borrowing.
SECTION 2.04. Letters of Credit. (a) General. Subject to the
terms and conditions set forth herein, the Borrower may request the issuance
of Letters of Credit for its own account, in a form reasonably acceptable to
the Administrative Agent and the Issuing Bank, at any time and from time to
time during the Availability Period. In the event of any inconsistency
between the terms and conditions of this Agreement and the terms and
conditions of any form of letter of credit application or other agreement
submitted by the Borrower to, or entered into by the Borrower with, the
Issuing Bank relating to any Letter of Credit, the terms and conditions of
this Agreement shall control.
(b) Notice of Issuance, Amendment, Renewal, Extension; Certain
Conditions. To request the issuance of a Letter of Credit (or the amendment,
renewal or extension of an outstanding Letter of Credit), the Borrower shall
hand deliver or telecopy (or transmit by electronic communication, if
arrangements for doing so have been approved by the Issuing Bank) to the
Issuing Bank and the Administrative Agent (reasonably in advance of the
requested date of issuance, amendment, renewal or extension) a notice in the
form of Exhibit D-2 attached hereto, or such other form approved by the
Administrative Agent, and signed by the Borrower requesting the issuance of
a Letter of Credit, or identifying the Letter of Credit to be amended,
renewed or extended, the date of issuance, amendment, renewal or extension,
the date on which such Letter of Credit is to expire (which shall comply with
paragraph (c) of this Section), the amount of such Letter of Credit, the name
and address of the beneficiary thereof and such other information as shall be
necessary to prepare, amend, renew or extend such Letter of Credit. If
requested by the Issuing Bank, the Borrower also shall submit a letter of
credit application on the Issuing Bank's standard form in connection with any
request for a Letter of Credit. A Letter of Credit shall be issued, amended,
renewed or extended only if (and upon issuance, amendment, renewal or
extension of each Letter of Credit the Borrower shall be deemed to represent
and warrant that), after giving effect to such issuance, amendment, renewal
or extension (i) the LC Exposure shall not exceed an amount equal to 10% of
the Maximum Availability and (ii) the sum of the total Revolving Credit
Exposures shall not exceed the Maximum Availability.
(c) Expiration Date. Each Letter of Credit shall expire at or
prior to the close of business on the earlier of (i) the date one year after
the date of the issuance of such Letter of Credit (or, in the case of any
renewal or extension thereof, one year after such renewal or extension) and
(ii) the date that is five Business Days prior to the Maturity Date.
(d) Participations. By the issuance of a Letter of Credit (or an
amendment to a Letter of Credit increasing the amount thereof) and without
any further action on the part of the Issuing Bank or the Lenders, the
Issuing Bank hereby grants to each Lender, and each Lender hereby acquires
from the Issuing Bank, a participation in such Letter of Credit equal to such
Lender's Applicable Percentage of the aggregate amount available to be drawn
under such Letter of Credit. In consideration and in furtherance of the
foregoing, each Lender hereby absolutely and unconditionally agrees to pay to
the Administrative Agent, for the account of the Issuing Bank, such Lender's
Applicable Percentage of each LC Disbursement made by the Issuing Bank and
not reimbursed by the Borrower on the date due as provided in paragraph (e)
of this Section, or of any reimbursement payment required to be refunded to
the Borrower for any reason. Each Lender acknowledges and agrees that its
obligation to acquire participations pursuant to this paragraph in respect of
Letters of Credit is absolute and unconditional and shall not be affected by
any circumstance whatsoever, including any amendment, renewal or extension of
any Letter of Credit or the occurrence and continuance of a Default or
reduction or termination of the Commitments, and that each such payment shall
be made without any offset, abatement, withholding or reduction whatsoever.
(e) Reimbursement. If the Issuing Bank shall make any LC
Disbursement in respect of a Letter of Credit, the Borrower shall reimburse
such LC Disbursement by paying to the Administrative Agent an amount equal to
such LC Disbursement not later than 12:00 noon, New York City time, on the
date that such LC Disbursement is made, if the Borrower shall have received
notice of such LC Disbursement prior to 10:00 a.m., New York City time, on
such date, or, if such notice has not been received by the Borrower prior to
such time on such date, then not later than 12:00 noon, New York City time,
on (i) the Business Day that the Borrower receives such notice, if such
notice is received prior to 10:00 a.m., New York City time, on the day of
receipt, or (ii) the Business Day immediately following the day that the
Borrower receives such notice, if such notice is not received prior to such
time on the day of receipt; provided that, if such LC Disbursement is not
less than $1,000,000, the Borrower may, subject to the conditions to
borrowing set forth herein, request in accordance with Section 2.03 that such
payment be financed with a Money Market Loan in an equivalent amount and, to
the extent so financed, the Borrower's obligation to make such payment shall
be discharged and replaced by the resulting Money Market Loan. If the
Borrower fails to make such payment when due, the Administrative Agent shall
notify each Lender of the applicable LC Disbursement, the payment then due
from the Borrower in respect thereof and such Lender's Applicable Percentage
thereof. Promptly following receipt of such notice, each Lender shall pay to
the Administrative Agent its Applicable Percentage of the payment then due
from the Borrower, in the same manner as provided in Section 2.05 with
respect to Loans made by such Lender (and Section 2.05 shall apply, mutatis
mutandis, to the payment obligations of the Lenders), and the Administrative
Agent shall promptly pay to the Issuing Bank the amounts so received by it
from the Lenders. Promptly following receipt by the Administrative Agent of
any payment from the Borrower pursuant to this paragraph, the Administrative
Agent shall distribute such payment to the Issuing Bank or, to the extent
that Lenders have made payments pursuant to this paragraph to reimburse the
Issuing Bank, then to such Lenders and the Issuing Bank as their interests
may appear. Any payment made by a Lender pursuant to this paragraph to
reimburse the Issuing Bank for any LC Disbursement (other than the funding of
ABR Revolving Loans as contemplated above) shall not constitute a Loan and
shall not relieve the Borrower of its obligation to reimburse such LC
Disbursement.
(f) Obligations Absolute. The Borrower's obligation to reimburse
LC Disbursements as provided in paragraph (e) of this Section shall be
absolute, unconditional and irrevocable, and shall be performed strictly in
accordance with the terms of this Agreement under any and all circumstances
whatsoever and irrespective of (i) any lack of validity or enforceability of
any Letter of Credit or this Agreement, or any term or provision therein,
(ii) any draft or other document presented under a Letter of Credit proving
to be forged, fraudulent or invalid in any respect or any statement therein
being untrue or inaccurate in any respect, (iii) payment by the Issuing Bank
under a Letter of Credit against presentation of a draft or other document
that does not comply with the terms of such Letter of Credit, or (iv) any
other event or circumstance whatsoever, whether or not similar to any of the
foregoing, that might, but for the provisions of this Section, constitute a
legal or equitable discharge of, or provide a right of setoff against, the
Borrower's obligations hereunder. Neither the Administrative Agent, the
Lenders nor the Issuing Bank, nor any of their Related Parties, shall have
any liability or responsibility by reason of or in connection with the
issuance or transfer of any Letter of Credit or any payment or failure to
make any payment thereunder (irrespective of any of the circumstances
referred to in the preceding sentence), or any error, omission, interruption,
loss or delay in transmission or delivery of any draft, notice or other
communication under or relating to any Letter of Credit (including any
document required to make a drawing thereunder), any error in interpretation
of technical terms or any consequence arising from causes beyond the control
of the Issuing Bank; provided that the foregoing shall not be construed to
excuse the Issuing Bank from liability to the Borrower to the extent of any
direct damages (as opposed to consequential damages, claims in respect of
which are hereby waived by the Borrower to the extent permitted by applicable
law) suffered by the Borrower that are caused by the Issuing Bank's failure
to exercise care when determining whether drafts and other documents
presented under a Letter of Credit comply with the terms thereof. In
furtherance of the foregoing and without limiting the generality thereof, the
parties agree that, with respect to documents presented which appear on their
face to be in substantial compliance with the terms of a Letter of Credit,
the Issuing Bank may, in its sole discretion, either accept and make payment
upon such documents without responsibility for further investigation,
regardless of any notice or information to the contrary, or refuse to accept
and make payment upon such documents if such documents are not in strict
compliance with the terms of such Letter of Credit.
(g) Disbursement Procedures. The Issuing Bank shall, promptly
following its receipt thereof, examine all documents purporting to represent
a demand for payment under a Letter of Credit. The Issuing Bank shall
promptly notify the Administrative Agent, the Lenders and the Borrower by
telephone (confirmed by telecopy) of such demand for payment and whether the
Issuing Bank has made or will make an LC Disbursement thereunder; provided
that any failure to give or delay in giving such notice shall not relieve the
Borrower of its obligation to reimburse the Issuing Bank and the Lenders with
respect to any such LC Disbursement.
(h) Interim Interest. If the Issuing Bank shall make any LC
Disbursement, then, unless the Borrower shall reimburse such LC Disbursement
in full on the date such LC Disbursement is made, the unpaid amount thereof
shall bear interest, for each day from and including the date such LC
Disbursement is made to but excluding the date that the Borrower reimburses
such LC Disbursement, at the rate per annum then applicable to ABR Revolving
Loans; provided that, if the Borrower fails to reimburse such LC Disbursement
when due pursuant to paragraph (e) of this Section, then Section 2.11(e)
shall apply. Interest accrued pursuant to this paragraph shall be for the
account of the Issuing Bank, except that interest accrued on and after the
date of payment by any Lender pursuant to paragraph (e) of this Section to
reimburse the Issuing Bank shall be for the account of such Lender to the
extent of such payment.
(i) Replacement of the Issuing Bank. The Issuing Bank may be
replaced at any time by written agreement among the Borrower, the
Administrative Agent, the replaced Issuing Bank and the successor Issuing
Bank. The Administrative Agent shall notify the Lenders of any such
replacement of the Issuing Bank. At the time any such replacement shall
become effective, the Borrower shall pay all unpaid fees accrued for the
account of the replaced Issuing Bank pursuant to Section 2.10(b). From and
after the effective date of any such replacement, (i) the successor Issuing
Bank shall have all the rights and obligations of the Issuing Bank under this
Agreement with respect to Letters of Credit to be issued thereafter and (ii)
references herein to the term "Issuing Bank" shall be deemed to refer to such
successor or to any previous Issuing Bank, or to such successor and all
previous Issuing Banks, as the context shall require. After the replacement
of an Issuing Bank hereunder, the replaced Issuing Bank shall remain a party
hereto and shall continue to have all the rights and obligations of an
Issuing Bank under this Agreement with respect to Letters of Credit issued by
it prior to such replacement, but shall not be required to issue additional
Letters of Credit.
(j) Cash Collateralization. If any Event of Default shall occur
and be continuing, on the Business Day that the Borrower receives notice from
the Administrative Agent or the Required Lenders demanding the deposit of
cash collateral pursuant to this paragraph, the Borrower shall deposit in an
account with the Administrative Agent, in the name of the Administrative
Agent and for the benefit of the Lenders, an amount in cash equal to the LC
Exposure as of such date plus any accrued and unpaid interest thereon;
provided that the obligation to deposit such cash collateral shall become
effective immediately, and such deposit shall become immediately due and
payable, without demand or other notice of any kind, upon the occurrence of
any Event of Default with respect to the Borrower described in clause (h) or
(i) of Article VII. Such deposit shall be held by the Administrative Agent
as collateral for the payment and performance of the obligations of the
Borrower under this Agreement. The Administrative Agent shall have exclusive
dominion and control, including the exclusive right of withdrawal, over such
account. Other than any interest earned on the investment of such deposits,
which investments shall be made at the option and sole discretion of the
Administrative Agent and at the Borrower's risk and expense, such deposits
shall not bear interest. Interest or profits, if any, on such investments
shall accumulate in such account. Moneys in such account shall be applied by
the Administrative Agent to reimburse the Issuing Bank for LC Disbursements
for which it has not been reimbursed and, to the extent not so applied, shall
be held for the satisfaction of the reimbursement obligations of the Borrower
for the LC Exposure at such time or, if the maturity of the Loans has been
accelerated, be applied to satisfy other obligations of the Borrower under
this Agreement. If the Borrower is required to provide an amount of cash
collateral hereunder as a result of the occurrence of an Event of Default,
such amount (to the extent not applied as aforesaid) shall be returned to the
Borrower within three Business Days after all Events of Default have been
cured or waived to the satisfaction of the Required Lenders.
SECTION 2.05. Funding of Borrowings. (a) Each Lender shall make
each Loan to be made by it hereunder on the proposed date thereof by wire
transfer of immediately available funds by 12:00 noon, New York City time, to
the account of the Administrative Agent most recently designated by it for
such purpose by notice to the Lenders. The Administrative Agent will make
such Loans available to the Borrower by promptly crediting the amounts so
received, in like funds, to an account of the Borrower designated by the
Borrower in the applicable Borrowing Request; provided that ABR Revolving
Loans made to finance the reimbursement of an LC Disbursement as provided in
Section 2.04(e) shall be remitted by the Administrative Agent to the Issuing
Bank.
(b) Unless the Administrative Agent shall have received notice from
a Lender prior to the proposed date of any Borrowing that such Lender will
not make available to the Administrative Agent such Lender's share of such
Borrowing, the Administrative Agent may assume that such Lender has made such
share available on such date in accordance with paragraph (a) of this Section
and may, in reliance upon such assumption, make available to the Borrower a
corresponding amount. In such event, if a Lender has not in fact made its
share of the applicable Borrowing available to the Administrative Agent, then
the applicable Lender and the Borrower severally agree to pay to the
Administrative Agent forthwith on demand such corresponding amount with
interest thereon, for each day from and including the date such amount is
made available to the Borrower to but excluding the date of payment to the
Administrative Agent, at (i) in the case of such Lender, the greater of the
Federal Funds Effective Rate and a rate determined by the Administrative
Agent in accordance with banking industry rules on interbank compensation or
(ii) in the case of the Borrower, the interest rate applicable to ABR Loans.
If such Lender pays such amount to the Administrative Agent, then such amount
shall constitute such Lender's Loan included in such Borrowing.
SECTION 2.06. Interest Elections. (a) Each Loan initially shall
be of the Type specified in the applicable Borrowing Request and, in the case
of a Eurodollar Loan, shall have an initial Interest Period as specified in
such Borrowing Request. Thereafter, the Borrower may elect to convert such
Loan to a different Type or to continue such Loan and, in the case of a
Eurodollar Loan, may elect Interest Periods therefor, all as provided in this
Section. The Borrower may elect different options with respect to different
portions of the affected Borrowing, in which case each such portion shall be
allocated ratably among the Lenders holding the Loans comprising such
Borrowing, and the Loans comprising each such portion shall be considered a
separate Borrowing.
(b) To make an election pursuant to this Section, the Borrower
shall notify the Administrative Agent of such election by telephone by the
time that a Borrowing Request would be required under Section 2.03 if the
Borrower were requesting a Borrowing of the Type resulting from such election
to be made on the effective date of such election. Each such telephonic
Interest Election Request shall be irrevocable and shall be confirmed
promptly by hand delivery or telecopy to the Administrative Agent of a
written Interest Election Request in a form approved by the Administrative
Agent and signed by the Borrower.
(c) Each telephonic and written Interest Election Request shall
specify the following information in compliance with Section 2.02:
(i) the Borrowing to which such Interest Election Request
applies and, if different options are being elected with
respect to different portions thereof, the portions thereof
to be allocated to each resulting Borrowing (in which case
the information to be specified pursuant to clauses (iii)
and (iv) below shall be specified for each resulting
Borrowing);
(ii) the effective date of the election made pursuant to such
Interest Election Request, which shall be a Business Day;
(iii) whether the resulting Borrowing is to be an ABR Borrowing,
a Eurodollar Borrowing or a Money Market Borrowing;
(iv) if the resulting Borrowing is a Eurodollar Borrowing, the
Interest Period to be applicable thereto after giving
effect to such election, which shall be a period
contemplated by the definition of the term "Interest
Period"; and
(v) if the resulting Borrowing is a Money Market Borrowing, the
Money Market Loan Maturity Date to be applicable thereto,
which shall be a date contemplated by the definition of the
term "Money Market Maturity Date."
If any such Interest Election Request requests a Eurodollar Borrowing but
does not specify an Interest Period, then the Borrower shall be deemed to
have selected an Interest Period of one month's duration, and if any such
Interest Election Request requests a Money Market Borrowing but does not
specify a Money Market Maturity Date, then the Borrower shall be deemed to
have selected a Money Market Maturity Date that is seven days after the date
of such Borrowing.
(d) Promptly following receipt of an Interest Election Request, the
Administrative Agent shall advise each Lender of the details thereof and of
such Lender's portion of each resulting Borrowing.
(e) If the Borrower fails to deliver a timely Interest Election
Request with respect to (i) a Eurodollar Loan prior to the end of the
Interest Period applicable thereto, then, unless such Borrowing is repaid as
provided herein, at the end of such Interest Period such Loan shall be
converted to a Eurodollar Loan with an Interest Period of one month's
duration and (ii) a Money Market Loan prior to the Money Market Maturity Date
applicable thereto, then, unless such Borrowing is repaid as provided herein,
on the Money Market Maturity Date such Loan shall be converted to an ABR
Loan. Notwithstanding any contrary provision hereof, if an Event of Default
has occurred and is continuing and the Administrative Agent, at the request
of the Required Lenders, so notifies the Borrower, then, so long as an Event
of Default is continuing (i) no outstanding Loan may be converted to or
continued as a Eurodollar Loan and (ii) unless repaid, each Eurodollar Loan
shall be converted to an ABR Loan at the end of the Interest Period
applicable thereto and each Money Market Loan shall be converted to an ABR
Loan on the Money Market Maturity Date applicable thereto.
SECTION 2.07. Termination and Reduction of Commitments. (a)
Unless previously terminated, the Commitments shall terminate on the Maturity
Date.
(b) The Borrower may at any time terminate, or from time to time
reduce, the Commitments; provided that (i) each reduction of the Commitments
shall be in an amount that is an integral multiple of $100,000 and not less
than $1,000,000 and (ii) the Borrower shall not terminate or reduce the
Commitments if, after giving effect to any concurrent prepayment of the Loans
in accordance with Section 2.09, the Revolving Credit Exposures would exceed
the total Commitments.
(c) The Borrower shall notify the Administrative Agent of any
election to terminate or reduce the Commitments under paragraph (b) of this
Section at least three Business Days prior to the effective date of such
termination or reduction, specifying such election and the effective date
thereof. Promptly following receipt of any notice, the Administrative Agent
shall advise the Lenders of the contents thereof. Each notice delivered by
the Borrower pursuant to this Section shall be irrevocable; provided that a
notice of termination of the Commitments delivered by the Borrower may state
that such notice is conditioned upon the effectiveness of other credit
facilities, in which case such notice may be revoked by the Borrower (by
notice to the Administrative Agent on or prior to the specified effective
date) if such condition is not satisfied. Any termination or reduction of
the Commitments shall be permanent. Each reduction of the Commitments shall
be made ratably among the Lenders in accordance with their respective
Commitments.
SECTION 2.08. Repayment of Loans; Evidence of Debt. (a) The
Borrower hereby unconditionally promises to pay to the Administrative Agent
for the account of each Lender the then unpaid principal amount of each
Revolving Loan on the Maturity Date.
(b) Each Lender shall maintain in accordance with its usual
practice an account or accounts evidencing the indebtedness of the Borrower
to such Lender resulting from each Loan made by such Lender, including the
amounts of principal and interest payable and paid to such Lender from time
to time hereunder.
(c) The Administrative Agent shall maintain accounts in which it
shall record (i) the amount of each Loan made hereunder, the Type thereof and
the Interest Period applicable thereto, (ii) the amount of any principal or
interest due and payable or to become due and payable from the Borrower to
each Lender hereunder and (iii) the amount of any sum received by the
Administrative Agent hereunder for the account of the Lenders and each
Lender's share thereof.
(d) The entries made in the accounts maintained pursuant to
paragraph (b) or (c) of this Section shall be prima facie evidence of the
existence and amounts of the obligations recorded therein; provided that the
failure of any Lender or the Administrative Agent to maintain such accounts
or any error therein shall not in any manner affect the obligation of the
Borrower to repay the Loans in accordance with the terms of this Agreement.
SECTION 2.09. Prepayment of Loans. (a) The Borrower shall have
the right at any time and from time to time to prepay any Borrowing in whole
or in part, subject to prior notice in accordance with paragraph (b) of this
Section.
(b) The Borrower shall notify the Administrative Agent by
telephone (confirmed by telecopy) of any prepayment hereunder (i) in the case
of prepayment of a Eurodollar Loan, not later than 11:00 a.m., New York City
time, three Business Days before the date of prepayment, (ii) in the case of
prepayment of an ABR Loan, not later than 11:00 a.m., New York City time, one
Business Day before the date of prepayment, or (iii) in the case of
prepayment of a Money Market Loan, not later than 11:00 a.m., New York City
time, one Business Day before the date of prepayment. Each such notice shall
be irrevocable and shall specify the prepayment date and the principal amount
of each Borrowing or portion thereof to be prepaid; provided that, if a
notice of prepayment is given in connection with a conditional notice of
termination of the Commitments as contemplated by Section 2.07, then such
notice of prepayment may be revoked if such notice of termination is revoked
in accordance with Section 2.07. Promptly following receipt of any such
notice relating to a Loan, the Administrative Agent shall advise the Lenders
of the contents thereof. Each partial prepayment of any Loan shall be in an
amount that would be permitted in the case of an advance of a Loan of the
same Type as provided in Section 2.02. Each prepayment of a Loan shall be
applied ratably to the Loans included in the prepaid Borrowing. Prepayments
shall be accompanied by accrued interest to the extent required by Section
2.11.
(c) If at any time the Borrower or any of its Subsidiaries receives
proceeds from the sale, transfer, assignment, conveyance or refinancing of
any Real Property or any interest in any Real Property, the Borrower shall be
required to prepay a portion of the Loan in an amount equal to the Net Cash
Proceeds unless the Borrower shall have obtained prior written consent from
the Required Lenders to retain the Net Cash Proceeds. In the event of a
required prepayment in accordance with this clause (c), the Borrower shall
simultaneously with the receipt of such Net Cash Proceeds make such
prepayment together with the interest accrued to the date of the prepayment
on the principal amount prepaid. In connection with the prepayment of any
Loan prior to the maturity thereof, the Borrower shall also pay any
applicable expenses pursuant to Section 2.14 hereof. Each such prepayment
shall be applied to prepay ratably the Loans of the Lender. As used in this
clause (c) only, the phrase "sale, transfer, assignment, conveyance or
refinancing" shall not include sales or conveyances among Borrower and any of
its Subsidiaries.
(d) If at any time the Revolving Credit Exposure exceeds the
Maximum Availability, the Borrower shall be required to prepay a portion of
the Loan in an amount equal to such excess. In the event of a required
prepayment in accordance with this clause (d), the Borrower shall immediately
make such prepayment together with the interest accrued to the date of the
prepayment on the principal amount prepaid and shall, to the extent
necessary, return or cause to be returned to the Issuing Bank such Letters of
Credit so that immediately following such prepayment and return of such
Letters of Credit the Revolving Credit Exposure shall not exceed the Maximum
Availability; provided that in lieu of returning any such Letters of Credit,
the Borrower may deposit with the Administrative Agent cash collateral in
accordance with Section 2.04(j). In connection with the prepayment of any
Loan prior to the maturity thereof, the Borrower shall also pay any
applicable expenses pursuant to Section 2.14 hereof. Each such prepayment
shall be applied to prepay ratably the Loans of the Lender.
(e) If at any time (i) the Company or the Borrower merges or
consolidates with another Person and the Company or the Borrower, as the case
may be, is not the surviving entity, or (ii) the Company, the Borrower, any
of its Subsidiaries or either Management Company, individually or
collectively, ceases to provide property management and leasing services to
at least 80% of the total number of Projects in which the Borrower has an
ownership interest (the date any such event shall occur being the "Prepayment
Date"), the Borrower shall be required to prepay the Loans in their entirety
as if the Prepayment Date were the Maturity Date, and the Commitment shall be
terminated as of the Prepayment Date, without further notice to the Borrower.
In the event of a required prepayment in accordance with this clause (e), the
Borrower shall on the Prepayment Date make such prepayment together with the
interest accrued to the date of the prepayment on the principal amount
prepaid and shall return or cause to be returned all Letters of Credit to the
Issuing Bank. In connection with the prepayment of any Loan prior to the
maturity thereof, the Borrower shall also pay any applicable expenses
pursuant to Section 2.14 hereof. Each such prepayment shall be applied to
prepay ratably the Loans of the Lender. Amounts prepaid pursuant to this
clause (e) may not be reborrowed.
SECTION 2.10. Fees. (a) The Borrower agrees to pay to the
Administrative Agent for the account of each Lender an unused facility fee,
which shall accrue at a rate of 22.5 basis points per annum on the daily
amount of the unused Commitment of such Lender during the period from and
including the date hereof to but excluding the date on which such Commitment
terminates; provided that, if such Lender continues to have any Revolving
Credit Exposure after its Commitment terminates, then such facility fee shall
continue to accrue on the daily amount of such Lender's Revolving Credit
Exposure from and including the date on which its Commitment terminates to
but excluding the date on which such Lender ceases to have any Revolving
Credit Exposure. Accrued unused facility fees shall be payable in arrears on
the last day of March, June, September and December of each year and on the
date on which the Commitments terminate, commencing on the first such date to
occur after the date hereof; provided that any unused facility fees accruing
after the date on which the Commitments terminate shall be payable on demand.
All unused facility fees shall be computed on the basis of a year of 360 days
and shall be payable for the actual number of days elapsed (including the
first day but excluding the last day).
(b) The Borrower agrees to pay (i) to the Administrative Agent for
the account of each Lender a participation fee with respect to its
participations in Letters of Credit, which shall accrue at a rate of 125
basis points per annum on the average daily amount of such Lender's LC
Exposure (excluding any portion thereof attributable to unreimbursed LC
Disbursements) during the period from and including the Effective Date to but
excluding the later of the date on which such Lender's Commitment terminates
and the date on which such Lender ceases to have any LC Exposure, and (ii) to
the Issuing Bank a fronting fee, which shall accrue at the rate of 12.5 basis
points per annum on the average daily amount of the LC Exposure (excluding
any portion thereof attributable to unreimbursed LC Disbursements) during the
period from and including the Effective Date to but excluding the later of
the date of termination of the Commitments and the date on which there ceases
to be any LC Exposure, as well as the Issuing Bank's standard fees with
respect to the issuance, amendment, renewal or extension of any Letter of
Credit or processing of drawings thereunder. Participation fees and fronting
fees accrued through and including the last day of March, June, September and
December of each year shall be payable on the third Business Day following
such last day, commencing on the first such date to occur after the Effective
Date; provided that all such fees shall be payable on the date on which the
Commitments terminate and any such fees accruing after the date on which the
Commitments terminate shall be payable on demand. Any other fees payable to
the Issuing Bank pursuant to this paragraph shall be payable within 10 days
after demand. All participation fees and fronting fees shall be computed on
the basis of a year of 360 days and shall be payable for the actual number of
days elapsed (including the first day but excluding the last day).
(c) In the event that the Borrower exercises its option to extend
the Maturity Date in accordance with Section 2.10(b), the Borrower shall pay
to the Administrative Agent for the account of each Lender an aggregate
amount equal to 15 basis points on the then amount of the Commitment, which
amount shall be allocated among the Lender's pro rata in the proportion of
the respective Commitments of each Lender.
(d) The Borrower agrees to pay to the Administrative Agent, for its
own account, fees payable in the amounts and at the times separately agreed
upon between the Borrower and the Administrative Agent.
(e) All fees payable hereunder shall be paid on the dates due, in
immediately available funds, to the Administrative Agent (or to the Issuing
Bank, in the case of fees payable to it) for distribution, in the case of
facility fees and participation fees, to the Lenders. Fees paid shall not be
refundable under any circumstances. Upon its receipt of fees to which the
Lenders are entitled, the Administrative Agent shall promptly remit such fees
to the Lenders as provided herein.
SECTION 2.11. Interest. (a) The Loans comprising each ABR
Borrowing shall bear interest at the Alternate Base Rate, which rates are
subject to change without notice to the Borrower as specified in the
definition of Alternate Base Rate.
(b) The Loans comprising each Eurodollar Borrowing shall bear
interest at the Adjusted LIBO Rate for the Interest Period in effect for such
Borrowing plus the Applicable Eurodollar Margin.
(c) The Loans comprising each Money Market Borrowing shall bear
interest at the Money Market Rate.
(d) Notwithstanding the foregoing, if any principal of or interest
on any Loan or any fee or other amount payable by the Borrower hereunder is
not paid when due, whether at stated maturity, upon acceleration or
otherwise, such overdue amount shall bear interest, after as well as before
judgment, at a rate per annum equal to (i) in the case of overdue principal
of any Loan, 2% plus the rate otherwise applicable to such Loan as provided
in the preceding paragraphs of this Section or (ii) in the case of any other
amount, 2% plus the rate applicable to ABR Loans as provided in paragraph (a)
of this Section.
(e) Accrued interest on each Loan shall be payable in arrears on
each Interest Payment Date for the immediately preceding calendar month and
upon termination of the Commitments; provided that (i) interest accrued
pursuant to paragraph (d) of this Section 2.11 shall be payable on demand,
(ii) in the event of any repayment or prepayment of any Loan, accrued
interest on the principal amount repaid or prepaid shall be payable on the
date of such repayment or prepayment and (iii) in the event of any conversion
of any Eurodollar Loan prior to the end of the current Interest Period
therefor, accrued interest on such Loan shall be payable on the effective
date of such conversion.
(f) All interest hereunder shall be computed on the basis of a year
of 360 days, except that interest computed by reference to the Alternate Base
Rate at times when the Alternate Base Rate is based on the Prime Rate shall
be computed on the basis of a year of 365 days (or 366 days in a leap year),
and in each case shall be payable for the actual number of days elapsed
(including the first day but excluding the last day). The applicable
Alternate Base Rate, Adjusted LIBO Rate and Money Market Rate shall be
determined by the Administrative Agent, and such determination shall be
conclusive absent manifest error.
SECTION 2.12. Alternate Rate of Interest. If prior to the
commencement of any Interest Period for a Eurodollar Borrowing:
(a) the Administrative Agent determines (which determination shall
be conclusive absent manifest error) that adequate and reasonable means do
not exist for ascertaining the Adjusted LIBO Rate for such Interest Period;
or
(b) the Administrative Agent is advised by the Required Lenders
that the Adjusted LIBO Rate for such Interest Period will not adequately and
fairly reflect the cost to such Lenders (or Lender) of making or maintaining
their Loans (or its Loan) included in such Borrowing for such Interest
Period;
then the Administrative Agent shall give notice thereof to the Borrower and
the Lenders by telephone or telecopy as promptly as practicable thereafter
and, until the Administrative Agent notifies the Borrower and the Lenders
that the circumstances giving rise to such notice no longer exist, (i) any
Interest Election Request that requests the conversion of any Loan to, or
continuation of any Loan as, a Eurodollar Loan shall be ineffective and (ii)
if any Borrowing Request requests a Eurodollar Loan, such Borrowing shall be
made as a Money Market Loan with a Money Market Maturity Date of seven days
from the date of such Borrowing, provided that if the circumstances giving
rise to such notice affect only one Interest Period or one Type of
Borrowings, then the other Interest Periods and Type of Borrowings shall be
permitted.
SECTION 2.13. Increased Costs. (a) If any Change in Law shall:
(i) impose, modify or deem applicable any reserve, special
deposit or similar requirement against assets of, deposits
with or for the account of, or credit extended by, any
Lender (except any such reserve requirement reflected in
the Adjusted LIBO Rate) or the Issuing Bank; or
(ii) impose on any Lender or the Issuing Bank or the London
interbank market any other condition affecting this
Agreement or Eurodollar Loans made by such Lender or any
Letter of Credit or participation therein;
and the result of any of the foregoing shall be to increase the cost to such
Lender of making or maintaining any Eurodollar Loan (or of maintaining its
obligation to make any such Loan) or to increase the cost to such Lender or
the Issuing Bank of participating in, issuing or maintaining any Letter of
Credit or to reduce the amount of any sum received or receivable by such
Lender or the Issuing Bank hereunder (whether of principal, interest or
otherwise), then the Borrower will pay to such Lender or the Issuing Bank, as
the case may be, such additional amount or amounts as will compensate such
Lender or the Issuing Bank, as the case may be, for such additional costs
incurred or reduction suffered.
(b) If any Lender or the Issuing Bank determines that any Change
in Law regarding capital requirements has or would have the effect of
reducing the rate of return on such Lender's or the Issuing Bank's capital or
on the capital of such Lender's or the Issuing Bank's holding company, if
any, as a consequence of this Agreement or the Loans made by, or
participations in Letters of Credit held by, such Lender, or the Letters of
Credit issued by the Issuing Bank, to a level below that which such Lender or
the Issuing Bank or such Lender's or the Issuing Bank's holding company could
have achieved but for such Change in Law (taking into consideration such
Lender's or the Issuing Bank's policies and the policies of such Lender's or
the Issuing Bank's holding company with respect to capital adequacy), then
from time to time the Borrower will pay to such Lender or the Issuing Bank,
as the case may be, such additional amount or amounts as will compensate such
Lender or the Issuing Bank or such Lender's or the Issuing Bank's holding
company for any such reduction suffered.
(c) A certificate of a Lender or the Issuing Bank setting forth the
amount or amounts necessary to compensate such Lender or the Issuing Bank or
its holding company, as the case may be, as specified in paragraph (a) or (b)
of this Section shall be delivered to the Borrower and shall be conclusive
absent manifest error. The Borrower shall pay such Lender or the Issuing
Bank, as the case may be, the amount shown as due on any such certificate
within 10 days after receipt thereof.
(d) Failure or delay on the part of any Lender or the Issuing Bank
to demand compensation pursuant to this Section shall not constitute a waiver
of such Lender's or the Issuing Bank's right to demand such compensation;
provided that the Borrower shall not be required to compensate a Lender or
the Issuing Bank pursuant to this Section for any increased costs or
reductions incurred more than 270 days prior to the date that such Lender or
the Issuing Bank, as the case may be, notifies the Borrower of the Change in
Law giving rise to such increased costs or reductions and of such Lender's or
the Issuing Bank's intention to claim compensation therefor; provided,
further, that, if the Change in Law giving rise to such increased costs or
reductions is retroactive, then the 270-day period referred to above shall be
extended to include the period of retroactive effect thereof.
SECTION 2.14. Break Funding Payments. In the event of (a) the
payment of any principal of any Eurodollar Loan other than on the last day of
an Interest Period applicable thereto (including as a result of an Event of
Default), (b) the conversion of any Eurodollar Loan other than on the last
day of the Interest Period applicable thereto, (c) the failure to borrow,
convert, continue or prepay any Revolving Loan on the date specified in any
notice delivered pursuant hereto (regardless of whether such notice may be
revoked under Section 2.09(b) and is revoked in accordance therewith) or
(d) the assignment of any Eurodollar Loan other than on the last day of the
Interest Period applicable thereto as a result of a request by the Borrower
pursuant to Section 2.17, then, in any such event, the Borrower shall
compensate each Lender for the loss, cost and expense attributable to such
event. In the case of a Eurodollar Loan, such loss, cost or expense to any
Lender shall be deemed to include an amount determined by such Lender to be
the excess, if any, of (i) the amount of interest which would have accrued on
the principal amount of such Loan had such event not occurred, at the
Adjusted LIBO Rate that would have been applicable to such Loan, for the
period from the date of such event to the last day of the then current
Interest Period therefor (or, in the case of a failure to borrow, convert or
continue, for the period that would have been the Interest Period for such
Loan), over (ii) the amount of interest which would accrue on such principal
amount for such period at the interest rate which such Lender would bid were
it to bid, at the commencement of such period, for dollar deposits of a
comparable amount and period from other banks in the eurodollar market. A
certificate of any Lender setting forth any amount or amounts that such
Lender is entitled to receive pursuant to this Section shall be delivered to
the Borrower and shall be conclusive absent manifest error. The Borrower
shall pay such Lender the amount shown as due on any such certificate within
10 days after receipt thereof.
SECTION 2.15. Taxes. (a) Any and all payments by or on account
of any obligation of the Borrower hereunder shall be made free and clear of
and without deduction for any Indemnified Taxes or Other Taxes; provided that
if the Borrower shall be required to deduct any Indemnified Taxes or Other
Taxes from such payments, then (i) the sum payable shall be increased as
necessary so that after making all required deductions (including deductions
applicable to additional sums payable under this Section) the Administrative
Agent, Lender or Issuing Bank (as the case may be) receives an amount equal
to the sum it would have received had no such deductions been made, (ii) the
Borrower shall make such deductions and (iii) the Borrower shall pay the full
amount deducted to the relevant Governmental Authority in accordance with
applicable law.
(b) In addition, the Borrower shall pay any Other Taxes to the
relevant Governmental Authority in accordance with applicable law.
(c) The Borrower shall indemnify the Administrative Agent, each
Lender and the Issuing Bank, within 10 days after written demand therefor,
for the full amount of any Indemnified Taxes or Other Taxes paid by the
Administrative Agent, such Lender or the Issuing Bank, as the case may be, on
or with respect to any payment by or on account of any obligation of the
Borrower hereunder (including Indemnified Taxes or Other Taxes imposed or
asserted on or attributable to amounts payable under this Section) and any
penalties, interest and reasonable expenses arising therefrom or with respect
thereto, whether or not such Indemnified Taxes or Other Taxes were correctly
or legally imposed or asserted by the relevant Governmental Authority. A
certificate as to the amount of such payment or liability delivered to the
Borrower by a Lender or the Issuing Bank, or by the Administrative Agent on
its own behalf or on behalf of a Lender or the Issuing Bank, shall be
conclusive absent manifest error.
(d) As soon as practicable after any payment of Indemnified Taxes
or Other Taxes by the Borrower to a Governmental Authority, the Borrower
shall deliver to the Administrative Agent the original or a certified copy of
a receipt issued by such Governmental Authority evidencing such payment, a
copy of the return reporting such payment or other evidence of such payment
reasonably satisfactory to the Administrative Agent.
(e) Any Foreign Lender that is entitled to an exemption from or
reduction of withholding tax under the law of the jurisdiction in which the
Borrower is located, or any treaty to which such jurisdiction is a party,
with respect to payments under this Agreement shall deliver to the Borrower
(with a copy to the Administrative Agent), at the time or times prescribed by
applicable law, such properly completed and executed documentation prescribed
by applicable law or reasonably requested by the Borrower as will permit such
payments to be made without withholding or at a reduced rate.
SECTION 2.16. Payments Generally; Pro Rata Treatment; Sharing of
Set-offs. (a) The Borrower shall make each payment required to be made by
it hereunder (whether of principal, interest, fees or reimbursement of LC
Disbursements, or of amounts payable under Section 2.13, 2.14 or 2.15, or
otherwise) prior to 12:00 noon, New York City time, on the date when due, in
immediately available funds, without set-off or counterclaim. Any amounts
received after such time on any date may, in the discretion of the
Administrative Agent, be deemed to have been received on the next succeeding
Business Day for purposes of calculating interest thereon. All such payments
shall be made to the Administrative Agent at its offices at 380 Madison
Avenue, New York, New York, except payments to be made directly to the
Issuing Bank as expressly provided herein and except that payments pursuant
to Sections 2.13, 2.14, 2.15 and 9.03 shall be made directly to the Persons
entitled thereto. The Administrative Agent shall distribute any such
payments received by it for the account of any other Person to the
appropriate recipient promptly following receipt thereof. If any payment
hereunder shall be due on a day that is not a Business Day, the date for
payment shall be extended to the next succeeding Business Day, and, in the
case of any payment accruing interest, interest thereon shall be payable for
the period of such extension. All payments hereunder shall be made in
dollars.
(b) If at any time insufficient funds are received by and available
to the Administrative Agent to pay fully all amounts of principal,
unreimbursed LC Disbursements, interest and fees then due hereunder, such
funds shall be applied (i) first, towards payment of interest and fees then
due hereunder, ratably among the parties entitled thereto in accordance with
the amounts of interest and fees then due to such parties, and (ii) second,
towards payment of principal and unreimbursed LC Disbursements then due
hereunder, ratably among the parties entitled thereto in accordance with the
amounts of principal and unreimbursed LC Disbursements then due to such
parties.
(c) If any Lender shall, by exercising any right of set-off or
counterclaim or otherwise, obtain payment in respect of any principal of or
interest on any of its Loans or participations in LC Disbursements resulting
in such Lender receiving payment of a greater proportion of the aggregate
amount of its Loans and participations in LC Disbursements than the
proportion received by any other Lender, then the Lender receiving such
greater proportion shall purchase (for cash at face value) participations in
the Loans and participations in LC Disbursements of other Lenders to the
extent necessary so that the benefit of all such payments shall be shared by
the Lenders ratably in accordance with the aggregate amount of principal of
and accrued interest on their respective Loans and participations in LC
Disbursements; provided that (i) if any such participations are purchased and
all or any portion of the payment giving rise thereto is recovered, such
participations shall be rescinded and the purchase price restored to the
extent of such recovery, without interest, and (ii) the provisions of this
paragraph shall not be construed to apply to any payment made by the Borrower
pursuant to and in accordance with the express terms of this Agreement or any
payment obtained by a Lender as consideration for the assignment of or sale
of a participation in any of its Loans or participations in LC Disbursements
to any assignee or participant, other than to the Borrower or any Subsidiary
or Affiliate thereof (as to which the provisions of this paragraph shall
apply). The Borrower consents to the foregoing and agrees, to the extent it
may effectively do so under applicable law, that any Lender acquiring a
participation pursuant to the foregoing arrangements may exercise against the
Borrower rights of set-off and counterclaim with respect to such
participation as fully as if such Lender were a direct creditor of the
Borrower in the amount of such participation.
(d) Unless the Administrative Agent shall have received notice from
the Borrower prior to the date on which any payment is due to the
Administrative Agent for the account of the Lenders or the Issuing Bank
hereunder that the Borrower will not make such payment, the Administrative
Agent may assume that the Borrower has made such payment on such date in
accordance herewith and may, in reliance upon such assumption, distribute to
the Lenders or the Issuing Bank, as the case may be, the amount due. In such
event, if the Borrower has not in fact made such payment, then each of the
Lenders or the Issuing Bank, as the case may be, severally agrees to repay to
the Administrative Agent forthwith on demand the amount so distributed to
such Lender or Issuing Bank with interest thereon, for each day from and
including the date such amount is distributed to it to but excluding the date
of payment to the Administrative Agent, at the greater of the Federal Funds
Effective Rate and a rate determined by the Administrative Agent in
accordance with banking industry rules on interbank compensation.
(e) If any Lender shall fail to make any payment required to be
made by it pursuant to Section 2.04(d) or (e), 2.05(b) or 2.16(d), then the
Administrative Agent may, in its discretion (notwithstanding any contrary
provision hereof), apply any amounts thereafter received by the
Administrative Agent for the account of such Lender to satisfy such Lender's
obligations under such Sections until all such unsatisfied obligations are
fully paid.
SECTION 2.17. Mitigation Obligations; Replacement of Lenders. (a)
If any Lender requests compensation under Section 2.13, or if the Borrower is
required to pay any additional amount to any Lender or any Governmental
Authority for the account of any Lender pursuant to Section 2.15, then such
Lender shall use reasonable efforts to designate a different lending office
for funding or booking its Loans hereunder or to assign its rights and
obligations hereunder to another of its offices, branches or affiliates, if,
in the judgment of such Lender, such designation or assignment (i) would
eliminate or reduce amounts payable pursuant to Section 2.13 or 2.15, as the
case may be, in the future and (ii) would not subject such Lender to any
unreimbursed cost or expense and would not otherwise be disadvantageous to
such Lender. The Borrower hereby agrees to pay all reasonable costs and
expenses incurred by any Lender in connection with any such designation or
assignment.
(b) If any Lender requests compensation under Section 2.13, or if
the Borrower is required to pay any additional amount to any Lender or any
Governmental Authority for the account of any Lender pursuant to
Section 2.15, or if any Lender defaults in its obligation to fund Loans
hereunder, then the Borrower may, at its sole expense and effort, upon notice
to such Lender and the Administrative Agent, require such Lender to assign
and delegate, without recourse (in accordance with and subject to the
restrictions contained in Section 9.04), all its interests, rights and
obligations under this Agreement to an assignee that shall assume such
obligations (which assignee may be another Lender, if a Lender accepts such
assignment); provided that (i) the Borrower shall have received the prior
written consent of the Administrative Agent (and, if a Commitment is being
assigned, the Issuing Bank, which consent shall not unreasonably be withheld,
(ii) such Lender shall have received payment of an amount equal to the
outstanding principal of its Loans and participations in LC Disbursements,
accrued interest thereon, accrued fees and all other amounts payable to it
hereunder, from the assignee (to the extent of such outstanding principal and
accrued interest and fees) or the Borrower (in the case of all other amounts)
and (iii) in the case of any such assignment resulting from a claim for
compensation under Section 2.13 or payments required to be made pursuant to
Section 2.15, such assignment will result in a reduction in such compensation
or payments. A Lender shall not be required to make any such assignment and
delegation if, prior thereto, as a result of a waiver by such Lender or
otherwise, the circumstances entitling the Borrower to require such
assignment and delegation cease to apply.
ARTICLE III
Representations and Warranties
The Borrower represents and warrants to the Lenders that:
SECTION 3.01. Organization; Powers. Each of the Borrower, the
Company and their Affiliates is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization, has all
requisite power and authority to carry on its business as now conducted and,
except where the failure to do so, individually or in the aggregate, could
not reasonably be expected to result in a Material Adverse Effect, is
qualified to do business in, and is in good standing in, every jurisdiction
where it owns property or where the conduct of its business or the ownership
of its property or assets (including, without limitation, the Projects)
requires such qualification. Neither the Borrower, the Company nor any of
their Affiliates are "foreign persons" within the meaning of Section 1445 of
the Code.
SECTION 3.02. Authorization; Enforceability. (a) The Transactions
have been duly authorized by all necessary partnership action of the Borrower
and the General Partner has the requisite power and authority to execute,
deliver and perform this Agreement and the other Loan Documents on behalf of
the Borrower. The Guaranty has been duly authorized by all necessary action
of the Company and the Company has the requisite power and authority to
execute, deliver and perform the Guaranty and the other Loan Documents to
which it is a party. This Agreement and each other Loan Document to which it
is a party has been duly executed and delivered by the Borrower and
constitutes a legal, valid and binding obligation of the Borrower,
enforceable in accordance with its terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium or other laws affecting creditors'
rights generally and subject to general principles of equity, regardless of
whether considered in a proceeding in equity or at law. The Guaranty and
each other Loan Document to which it is a party has been duly executed and
delivered by the Company and constitutes a legal, valid and binding
obligation of the Company, enforceable in accordance with its terms, subject
to applicable bankruptcy, insolvency, reorganization, moratorium or other
laws affecting creditors' rights generally and subject to general principles
of equity, regardless of whether considered in a proceeding in equity or at
law.
(b) Schedule 3.02 contains a diagram indicating the ownership
structure of the Company, the Borrower and their respective Subsidiaries,
indicating the nature of such interest with respect to each Person included
in such diagram and accurately sets forth (1) the correct legal name of such
Person, the jurisdiction of its incorporation or organization and the
jurisdictions in which it is qualified to transact business as a foreign
corporation, or otherwise, and (2) the authorized, issued and outstanding
shares or interests of each class of securities of the Company. None of such
issued and outstanding securities is subject to any vesting, redemption, or
repurchase agreement, and there are no warrants or options outstanding with
respect to such securities, except as noted on such Schedule. The
outstanding capital stock of the Company is duly authorized, validly issued,
fully paid and nonassessable. The Company has no Subsidiaries other than as
set forth on such Schedule 3.02.
SECTION 3.03. Governmental Approvals; No Conflicts. Neither the
Transactions nor the execution, delivery and performance of the Loan
Documents by the Borrower or the Company, as the case may be, (a) requires
any consent or approval of, registration or filing with, or any other action
by, any Governmental Authority, except such as have been obtained or made and
are in full force and effect and except as may be required under applicable
federal securities laws, (b) violates any applicable law or regulation or the
charter, by-laws, partnership agreement or other organizational documents of
the Company, the Borrower or any of their Subsidiaries, or any order of any
Governmental Authority, (c) violates or results in a default under any
indenture, agreement or other instrument binding upon the Company, the
Borrower or any of their Subsidiaries or their assets, or give rise to a
right thereunder to require any payment to be made by the Borrower or any of
its Subsidiaries or (d) results in the creation or imposition of any Lien on
any asset of the Borrower or any of its Subsidiaries.
SECTION 3.04. Financial Condition; No Material Adverse Change.
(a) The Borrower has heretofore furnished to the Lenders (i) its annual
audited financial statements for the fiscal year ended December 31, 1996,
reported on by Coopers & Lybrand LLP, independent public accountants, and
(ii) quarterly financial statements for the quarter ended June 30, 1997,
certified by its chief financial officer. Such financial statements present
fairly, in all material respects, the financial position and results of
operations and cash flows of the Borrower and its Subsidiaries as of such
dates and for such periods in accordance with GAAP, subject to year-end audit
adjustments and the absence of footnotes in the case of the statements
referred to in clause (ii) above.
(b) Since June 30, 1997, there has been no change, event or
circumstance which has had or is reasonably likely to have a Material Adverse
Effect.
(c) Neither the Borrower nor any of its Subsidiaries has any
Contingent Obligation or liability for any taxes, long-term leases or commit-
ments, not reflected in its audited financial statements delivered to the
Administrative Agent on or prior to the Effective Date or otherwise disclosed
to the Administrative Agent and the Lenders in writing, which will have or is
reasonably likely to have a Material Adverse Effect.
(d) Schedule 3.04 sets forth, as of the date hereof, all
Indebtedness of the Borrower and its Subsidiaries and there are no defaults
in the payment of principal or interest on any such Indebtedness and no
payments thereunder have been deferred or extended beyond their stated
maturity.
SECTION 3.05. Properties. (a) Each of the Borrower and its
Subsidiaries has good and marketable title to, or valid leasehold interests
in, all its Property material to its business, except for minor defects in
title that do not interfere with its ability to conduct its business as
currently conducted or to utilize such properties for their intended
purposes. Ownership of all wholly owned Projects and other Property of the
Consolidated Businesses is held by the Borrower and its Subsidiaries and is
not held directly by the Company.
(b) There are no pending or, to the best knowledge of the Borrower,
threatened proceedings or actions to revoke, attack, invalidate, rescind or
modify in any material respect (i) the zoning of any Projects, or any part
thereof, or (ii) any building or other permits issued heretofore issued with
respect to any Project, or asserting that any such zoning or permits do not
permit the operation of any such Project or any part thereof or that any
improvements located on such Project cannot be operated in accordance with
its intended use or is in violation of applicable law. There are no pending
or, to the best knowledge of the Borrower, threatened or contemplated
proceedings relating to any (A) taking by eminent domain or other
condemnation of any portion of any Project, (B) condemnation or relocation of
any roadways abutting any Project and (C) denial of access to any Project
from any point of access to such Project. Each Project has adequate and
permanent legal access to water, gas and electrical public utilities, storm,
and sanitary sewerage facilities, other required public utilities (with
respect to each of the aforementioned items by means of either a direct
connection to the source of such utilities or through connections available
on publicly dedicated roadways directly abutting such Project), parking and
means of access between such Project and public highways over recognized curb
cuts; and all of the foregoing comply with all applicable laws, rules and
regulations of Governmental Authorities.
(c) Neither the existence of any Improvements upon a Project or the
present use or condition of any Project violate in any material respect any
applicable laws, rules and regulations of Governmental Authorities. Each
Project may be operated in its current fashion and the Borrower has received
no notices from any Governmental Authority alleging any violation by any
Project of any applicable laws, rules or regulations. All of the
Improvements located on the Projects and the use of such Improvements are
covered by existing valid certificates of occupancy and all other
certificates and permits required by applicable laws, rules, regulations, and
ordinances or in connection with the use, occupancy, and operation thereof.
No material portion of any Projects, nor any Improvements located on such
Projects that are material to the operation, use, or value thereof, have been
damaged in any respect as a result of any fire, explosion, accident, flood,
or other casualty, except to the extent that the same have been restored to
their condition prior thereto. No written notices of violation of any
federal, state, or local law or ordinance or order or requirement have been
received with respect to any Projects.
(d) There are no pending or, to the best of Borrower's knowledge,
proposed special or other assessments for public improvements or otherwise
affecting any Project, nor, to the best of Borrower's knowledge, are there
any contemplated improvements to any Projects that may result in such special
or other assessments.
(e) Each Project is free of material structural defects and all
building systems contained therein are in good working order subject to
ordinary wear and tear.
(f) Each Project is being operated and maintained in accordance
with the Borrower's usual and customary business practices.
SECTION 3.06. Intellectual Property. The Company, the Borrower
and their Subsidiaries owns, or is licensed to use, all trademarks,
tradenames, copyrights, patents and other intellectual property material to
its business, and the use thereof by the Company, the Borrower and their
Subsidiaries does not infringe upon the rights of any other Person, except
for any such infringements that, individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse Effect.
SECTION 3.07. Litigation and Environmental Matters. (a) There are
no actions, suits or proceedings by or before any arbitrator or Governmental
Authority pending against or, to the best knowledge of the Borrower,
threatened against or affecting the Company, the Borrower or any of its
Subsidiaries (i) as to which there is a reasonable possibility of an adverse
determination and that, if adversely determined, could reasonably be
expected, individually or in the aggregate, to result in a Material Adverse
Effect (other than the Disclosed Matters) or (ii) that involve this Agreement
or the Transactions.
(b) Except for the Disclosed Matters and except with respect to any
other matters that, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect, neither the Company, the
Borrower nor any of its Subsidiaries (i) has failed to comply with any
Environmental Law or to obtain, maintain or comply with any permit, license
or other approval required under any Environmental Law, (ii) has become
subject to any Environmental Liability, (iii) has received notice of any
claim with respect to any Environmental Liability or (iv) knows of any basis
for any Environmental Liability.
(c) Since the date of this Agreement, there has been no change in
the status of the Disclosed Matters that, individually or in the aggregate,
has resulted in, or materially increased the likelihood of, a Material
Adverse Effect.
(d) Except as may be disclosed in detail by the Borrower to the
Lenders in writing from time to time, no Hazardous Materials are located on
or about any of the Properties, and the Properties do not contain any
underground tanks for the storage or disposal of Hazardous Materials;
provided that notwithstanding the delivery of any such notice, the Borrower
and each of its Subsidiaries shall at all times be in compliance with all
laws, rules, regulations and orders of any Governmental Authority applicable
to it or its Properties except where the failure to do so, individually or in
the aggregate, could not reasonably be expected to result in a Material
Adverse Effect. Further, (i) the Borrower has not, and to the knowledge of
the Borrower no other Person has, (A) stored or treated Hazardous Materials,
(B) disposed of Hazardous Materials or incorporated Hazardous Materials into,
on or around any of the Properties, and (C) permitted any underground storage
tanks to exist on any of the Properties, (ii) no complaint, order, citation
or notice with regard to air emissions, water discharges, noise emissions, or
Hazardous Materials, if any, or any other environmental, health, or safety
matters affecting any of the Properties or any portion thereof, from any
person, government or entity, has been issued to the Borrower which has not
been remedied or cured, and (iii) the Borrower has complied with all
applicable laws, rules or regulations affecting the Properties.
SECTION 3.08. Compliance with Laws and Agreements. Each of the
Company, the Borrower and its Subsidiaries is in compliance with all laws,
regulations and orders of any Governmental Authority applicable to it or its
property and all indentures, agreements and other instruments binding upon it
or its property, except where the failure to do so, individually or in the
aggregate, could not reasonably be expected to result in a Material Adverse
Effect. No Default has occurred and is continuing.
SECTION 3.09. Investment and Holding Company Status. Neither the
Company, the Borrower nor any of its Subsidiaries is (a) an "investment
company" as defined in, or subject to regulation under, the Investment
Company Act of 1940 or (b) a "holding company" as defined in, or subject to
regulation under, the Public Utility Holding Company Act of 1935.
SECTION 3.10. Taxes. Each of the Company, Borrower and its
Subsidiaries has timely filed or caused to be filed all Tax returns and
reports required to have been filed and has paid or caused to be paid all
Taxes required to have been paid by it, except (a) Taxes that are being
contested in good faith by appropriate proceedings and for which the Borrower
or such Subsidiary, as applicable, has set aside on its books adequate
reserves or (b) to the extent that the failure to do so could not reasonably
be expected to result in a Material Adverse Effect.
SECTION 3.11. ERISA. No ERISA Event has occurred or is reasonably
expected to occur that, when taken together with all other such ERISA Events
for which liability is reasonably expected to occur, could reasonably be
expected to result in a Material Adverse Effect. The present value of all
accumulated benefit obligations under each Plan (based on the assumptions
used for purposes of Statement of Financial Accounting Standards No. 87) did
not, as of the date of the most recent financial statements reflecting such
amounts, exceed by more than $250,000 the fair market value of the assets of
such Plan, and the present value of all accumulated benefit obligations of
all underfunded Plans (based on the assumptions used for purposes of
Statement of Financial Accounting Standards No. 87) did not, as of the date
of the most recent financial statements reflecting such amounts, exceed by
more than $250,000 the fair market value of the assets of all such
underfunded Plans.
SECTION 3.12. Disclosure. The Borrower has disclosed to the
Lenders all agreements, instruments and corporate or other restrictions to
which the Company, the Borrower or any of its Subsidiaries is subject, and
all other matters known to the Borrower, that, individually or in the
aggregate, could reasonably be expected to result in a Material Adverse
Effect. None of the reports, financial statements, certificates or other
information furnished by or on behalf of the Borrower to the Administrative
Agent or any Lender in connection with the negotiation of this Agreement or
delivered hereunder (as modified or supplemented by other information so
furnished) contains any material misstatement of fact or omits to state any
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided that, with
respect to projected financial information, the Borrower represents only that
such information was prepared in good faith based upon assumptions believed
to be reasonable at the time.
SECTION 3.13. Insurance. Schedule 3.13 accurately sets forth as
of the Effective Date all insurance policies and programs currently in effect
with respect to the Properties, assets and business of the Company, the Bor-
rower and its Subsidiaries, specifying for each such policy and program, (i)
the amount thereof, (ii) the risks insured against thereby, (iii) the name of
the insurer and each insured party thereunder, (iv) the policy or other iden-
tification number thereof, and (v) the expiration date thereof. The Borrower
has delivered to the Administrative Agent copies of all insurance policies
set forth on Schedule 3.13. Such insurance policies and programs are
currently in full force and effect, and, together with payment by the insured
of scheduled deductible payments, are in amounts sufficient to cover the re-
placement value of the respective Properties and assets of the Borrower and
its Subsidiaries.
SECTION 3.14. REIT Status. The Company qualifies as a REIT under
the Code.
SECTION 3.15. Solvency. Within the meaning of Section 548 of Title
11 of the United States Code entitled "Bankruptcy" as now or hereafter in
effect, or any successor thereto (the "Bankruptcy Code"), the Uniform
Fraudulent Transfer Act and the Uniform Fraudulent Conveyance Act as in
effect in any relevant jurisdiction, and any similar laws or statutes, and
after giving effect to the transactions contemplated hereby: the fair
saleable value of the Borrower's assets exceeds and will, immediately
following the making of the Loans, exceed the Borrower's total liabilities
including, without limitation, subordinated, unliquidated, disputed, and
contingent liabilities; the fair saleable value of the Borrower's assets is
and will, immediately following the making of each Loan, be greater than the
Borrower's probable liabilities, including the maximum amount of its
contingent liabilities on its debts as such debts become absolute and
matured; the Borrower's assets do not and, immediately following the making
of the Loans will not, constitute unreasonably small capital to carry out its
business as conducted or as proposed to be conducted; and the Borrower does
not intend to, and does not believe that it will, incur debts and liabilities
(including without limitation contingent liabilities and other commitments)
beyond its ability to pay such debts as they mature (taking into account the
timing and amounts of cash to be received by the Borrower and the amounts to
be payable on or in respect of obligations of the Borrower).
SECTION 3.16. Margin Regulations. The Borrower is not engaged in
the business of extending credit for the purpose of purchasing or carrying
any margin stock or margin securities (within the meaning of Regulations G,
T, U and X issued by the Board of Governors of the Federal Reserve System),
and no proceeds of any Loan will be used, directly or indirectly, to purchase
or carry any margin stock or margin securities or to extend credit to others
for the purpose of purchasing or carrying any margin stock or margin
securities. None of the transactions contemplated by this Agreement will
violate or result in a violation of Section 7 of the Securities Exchange Act
of 1934, as amended.
SECTION 3.17. Representations and Warranties in the Loan Documents.
The representations and warranties of the Borrower and the Company, as the
case may be, in each of the Loan Documents are true, complete and correct in
all material respects, and the Borrower hereby confirms each such
representation and warranty as being true, complete and correct in all
material respects as of the relevant dates with the same effect as if set
forth in its entirety herein.
ARTICLE IV
Conditions
SECTION 4.01. Effective Date. The obligations of the Lenders to
make Loans and of the Issuing Bank to issue Letters of Credit hereunder shall
not become effective until the date on which each of the following conditions
is satisfied (or waived in accordance with Section 9.02):
(a) The Administrative Agent (or its counsel) shall have received
from the Company and each party hereto either (i) a counterpart of this
Agreement and all other Loan Documents to which it is a party, signed on
behalf of such party including, without limitation, the Guaranty, or
(ii) written evidence satisfactory to the Administrative Agent (which
may include telecopy transmission of a signed signature page of each
such Loan Document) that such party has signed a counterpart of this
Agreement and all other Loan Documents required to be delivered by the
Administrative Agent.
(b) The Administrative Agent shall have received a favorable
written opinion (addressed to the Administrative Agent and the Lenders
and dated the Effective Date) of Nixon Hargrave Devans & Doyle LLP,
counsel for the Borrower, substantially in the form of Exhibit E, and
covering such other matters relating to the Borrower, the Company, this
Agreement or the Transactions as the Required Lenders shall reasonably
request. The Borrower hereby requests such counsel to deliver such
opinion.
(c) The Administrative Agent shall have received such documents
and certificates as the Administrative Agent or its counsel may
reasonably request relating to the organization, existence and good
standing of the Borrower, the Company and their Affiliates, the
authorization of the Transactions and any other legal matters relating
to the Borrower, the Company and their Affiliates, this Agreement or the
Transactions, all in form and substance satisfactory to the
Administrative Agent and its counsel.
(d) The Administrative Agent shall have received a certificate,
dated the Effective Date and signed by the President, an Executive Vice
President or a Financial Officer of the General Partner, confirming
compliance with the conditions set forth in paragraphs (a) and (b) of
Section 4.02.
(e) No change in the business, assets, management, operations,
financial condition or prospects of the Borrower or any of its
Properties shall have occurred since June 30, 1997 which change, in the
judgment of the Administrative Agent, will have or is reasonably likely
to have a Material Adverse Effect.
(f) Except as disclosed to the Administrative Agent and the Lend-
ers, since June 30, 1997, neither the Borrower nor the Company shall
have (i) entered into any (as determined in good faith by the Admin-
istrative Agent) commitment or transaction, including, without limita-
tion, transactions for borrowings and capital expenditures, which are
not in the ordinary course of the Borrower's or the Company's business,
(ii) declared or paid any dividends or other distributions other than
dividends paid to the shareholders of the Company for the quarter ended
June 30, 1997, (iii) established compensation or employee benefit plans
or (iv) redeemed or issued any equity Securities other than shares of
common stock, par value $.01 per share, of the Company (1) issued from
time to time pursuant to the terms and conditions of the Company's
Dividend Reinvestment and Stock Purchase, Resident Stock Purchase and
Employee Stock Purchase Plan and (2) issued in exchange for limited
partnership interests in the Borrower.
(g) Since June 30, 1997, no agreement or license relating to the
business, operations or employee relations of the Borrower or any of its
Properties shall have been terminated, modified, revoked, breached or
declared to be in default, the termination, modification, revocation,
breach or default under which, in the reasonable judgment of the
Administrative Agent, would result in a Material Adverse Effect.
(h) Since June 30, 1997, no material adverse change shall have
occurred in the conditions in the capital markets or the market for loan
syndications generally.
(i) The Administrative Agent shall have received all fees and
other amounts due and payable on or prior to the Effective Date,
including, to the extent invoiced, reimbursement or payment of all
out-of-pocket expenses required to be reimbursed or paid by the Borrower
hereunder.
The Administrative Agent shall notify the Borrower and the Lenders of the
Effective Date, and such notice shall be conclusive and binding.
SECTION 4.02. Each Credit Event. The obligation of each Lender to
make a Loan on the occasion of any Borrowing, and of the Issuing Bank to
issue, amend, renew or extend any Letter of Credit, is subject to the
satisfaction of the following conditions:
(a) The representations and warranties of the Borrower set forth
in this Agreement shall be true and correct on and as of the date of
such Borrowing or the date of issuance, amendment, renewal or extension
of such Letter of Credit, as applicable.
(b) At the time of and immediately after giving effect to such
Borrowing or the issuance, amendment, renewal or extension of such
Letter of Credit, as applicable, no Default shall have occurred and be
continuing.
(c) The Borrower has not received written notice from the Required
Lenders that an event has occurred since the date of this Agreement
which has had, and continues to have, or is reasonably likely to have,
a Material Adverse Effect.
(d) The Borrower shall have delivered a certificate in the form of
Exhibit D-1 or D-2, as applicable, attached hereto, signed by a
Financial Officer of the Borrower, (1) representing and certifying that
immediately prior to and immediately after the requested Borrowing or
the issuance, amendment or extension of a Letter of Credit, the Company,
the Borrower and their Subsidiaries are in compliance with the
representations, warranties and covenants set forth in this Agreement
and (2) including the calculations set forth therein.
Each Borrowing and each issuance, amendment, renewal or extension of a Letter
of Credit shall be deemed to constitute a representation and warranty by the
Borrower on the date thereof as to the matters specified in paragraphs (a)
through (d) of this Section 4.02.
ARTICLE V
Affirmative Covenants
Until the Commitments have expired or been terminated and the
principal of and interest on each Loan and all fees payable hereunder shall
have been paid in full and all Letters of Credit shall have expired or
terminated and all LC Disbursements shall have been reimbursed, the Borrower
covenants and agrees with the Lenders that:
SECTION 5.01. Financial Statements and Other Information. The
Borrower will furnish to the Administrative Agent and each Lender:
(a) Quarterly Reports.
(i) Borrower Quarterly Financial Reports. As soon as
practicable, and in any event within forty-five (45) days after the end
of each fiscal quarter in each fiscal year (other than the last fiscal
quarter in each fiscal year), a consolidated balance sheet and the
related consolidated statement of operations of the Borrower and its
Subsidiaries (to be prepared and delivered quarterly in conjunction with
the other reports delivered hereunder) for each such fiscal quarter, in
each case in form and substance used in the preparation of the
consolidating financial statements of the Company and, with respect to
the statement of operations, in comparative form, the corresponding
figures for the corresponding periods of the previous fiscal year,
certified by a Financial Officer of the Borrower as fairly presenting
the consolidated financial position of the Borrower as of the dates
indicated and the results of their operations for the months indicated
in accordance with GAAP, subject to normal quarterly adjustments but
without certain footnote disclosures required by GAAP.
(ii) Company Quarterly Financial Reports. As soon as practicable,
and in any event within forty-five (45) days after the end of each
fiscal quarter in each fiscal year (other than the last fiscal quarter
in each fiscal year), a consolidated balance sheet and the related
consolidated statements of operations and cash flow of the Company, the
Borrower and its Subsidiaries on Form 10-Q as at the end of such period
and, with respect to the statements of operations and cash flow, setting
forth in comparative form the corresponding figures for the correspond-
ing period of the previous fiscal year, certified by a Financial Officer
of the Company as fairly presenting the consolidated and consolidating
financial position of the Company, the Borrower and its Subsidiaries as
at the date indicated and the results of their operations and cash flow
for the period indicated in accordance with GAAP, subject to normal
adjustments but without certain footnote disclosures required by GAAP
(as permitted by the requirements for reporting on Form 10-Q).
(iii) Quarterly Compliance Certificates. Together with each
delivery of any quarterly report pursuant to clauses (i) and (ii) of
this Section 5.01(a), the Borrower shall deliver a certificate of the
Borrower and the Company in the form of Exhibit F attached hereto (the
"Quarterly Compliance Certificate"), signed by the Borrower's and the
Company's respective Financial Officers, representing and certifying (1)
that the Financial Officer signatory thereto has reviewed the terms of
the Loan Documents, and has made, or caused to be made under his/her
supervision, a review in reasonable detail of the transactions and
consolidated and consolidating financial condition of the Company, the
Borrower and its Subsidiaries, during the fiscal quarter covered by such
reports, that such review has not disclosed the existence during or at
the end of such fiscal quarter, and that such officer does not have
knowledge of the existence as at the date of such Quarterly Compliance
Certificate, of any condition or event which constitutes an Event of
Default or Default or mandatory prepayment event, or, if any such condi-
tion or event existed or exists, and specifying the nature and period
of existence thereof and what action the Company and/or the Borrower or
any of its Subsidiaries has taken, is taking and proposes to take with
respect thereto; and (2) the calculations evidencing compliance with
each of the financial covenants set forth in Article VI hereof.
(b) Annual Reports.
(i) Borrower Financial Statements. As soon as practicable, and
in any event within ninety (90) days after the end of each fiscal year,
a consolidated balance sheet and the related consolidated statement of
operations of the Borrower and its Subsidiaries as at the end of such
fiscal year, in each case in form and substance used in the preparation
of the consolidating financial statements of the Company and, with
respect to the statement of operations, in comparative form, the corre-
sponding figures for the corresponding periods of the previous fiscal
year, certified by a Financial Officer of the Borrower as fairly pre-
senting the consolidated financial position of the Borrower as of the
dates indicated and the results of their operations for the months
indicated in accordance with GAAP, subject to normal year-end
adjustments but without certain footnote disclosures required by GAAP.
(ii) Company Financial Statements. As soon as practicable, and
in any event within ninety (90) days after the end of each fiscal year,
(i) an audited consolidated balance sheet and the related consolidated
statements of operations and cash flow of the Company and its
Subsidiaries on Form 10-K as at the end of such fiscal year and a report
setting forth in comparative form the corresponding figures from the
consolidated financial statements of the Company and its Subsidiaries
for the prior fiscal year; (ii) a report with respect thereto of Coopers
& Lybrand LLP or other nationally recognized independent certified
public accountants acceptable to the Administrative Agent, which report
shall be unqualified and shall state that such financial statements
fairly present the consolidated financial position of the Company and
its Subsidiaries as at the dates indicated and the consolidated results
of its operations and cash flow for the periods indicated in conformity
with GAAP applied on a basis consistent with prior years (except for
changes with which Coopers & Lybrand LLP or any such other independent
certified public accountants, if applicable, shall concur and which
shall have been disclosed in the notes to the financial statements)
(which report shall be subject to the confidentiality limitations set
forth herein); and (iii) in the event that the report referred to in
clause (ii) above is qualified, a copy of the management letter or any
similar report delivered to the Company or to any officer or employee
thereof by such independent certified public accountants in connection
with such financial statements. The Administrative Agent and each
Lender (through the Administrative Agent) may, with the consent of the
Company (which consent shall not be unreasonably withheld), communicate
directly with such accountants, with any such communication to occur
together with a representative of the Company, at the expense of the
Administrative Agent (or the Lender requesting such communication), upon
reasonable notice and at reasonable times during normal business hours.
(iii) Annual Compliance Certificates. Together with each delivery
of any annual report pursuant to clauses (i) and (ii) of this Section
5.01(b), the Borrower shall deliver a certificate of the Borrower and
the Company in the form of Exhibit F attached hereto (the "Annual Com-
pliance Certificate"), signed by the Borrower's and the Company's re-
spective Financial Officers, representing and certifying (1) that the
officer signatory thereto has reviewed the terms of the Loan Documents,
and has made, or caused to be made under his/her supervision, a review
in reasonable detail of the transactions and consolidated and
consolidating financial condition of the Company, the Borrower and its
Subsidiaries, during the accounting period covered by such reports, that
such review has not disclosed the existence during or at the end of such
accounting period, and that such officer does not have knowledge of the
existence as at the date of such Annual Compliance Certificate, of any
condition or event which constitutes an Event of Default or Default or
mandatory prepayment event, or, if any such condition or event existed
or exists, and specifying the nature and period of existence thereof and
what action the Company and/or the Borrower or any of its Subsidiaries
has taken, is taking and proposes to take with respect thereto; and (2)
the calculations evidencing compliance with each of the financial
covenants set forth in Article VI hereof.
(c) Accountant's Certificate. Concurrently with any delivery of
financial statements under clause (b) above, a certificate of the accounting
firm that reported on such financial statements stating whether they obtained
knowledge during the course of their examination of such financial statements
of any Default (which certificate may be limited to the extent required by
accounting rules or guidelines).
(d) Property Reports. When requested by the Administrative Agent
or the Required Lenders, a rent roll and income statement with respect to any
Project.
(e) Community Reinvestment Act. Promptly following any request
therefor, such other information regarding the Loans and the use thereof,
Qualified Community Reinvestment Projects and the Company, the Borrower and
its Subsidiaries as any Lender may request to determine compliance by the
Projects with the Community Reinvestment Act or other applicable federal or
state law; provided that the Borrower shall have no obligation hereunder to
deliver any such information to any Lender more than one time in any calendar
quarter.
(f) Additional Information. Promptly following any request
therefor, such other information regarding the operations, business affairs
and financial condition of the Company, the Borrower or any Subsidiary of the
Borrower, or compliance with the terms of this Agreement, as the
Administrative Agent or any Lender may reasonably request.
SECTION 5.02. Notices of Material Events. (a) The Borrower will
furnish to the Administrative Agent and each Lender prompt written notice of
the following:
(i) the occurrence of any Default;
(ii) the filing or commencement of any action, suit or proceeding
by or before any arbitrator or Governmental Authority against or
affecting the Borrower or any Affiliate thereof that, if adversely
determined, could reasonably be expected to result in a Material Adverse
Effect;
(iii) the occurrence of any ERISA Event that, alone or together
with any other ERISA Events that have occurred, could reasonably be
expected to result in liability of the Borrower and its Subsidiaries in
an aggregate amount exceeding $250,000; and
(iv) any other development that results in, or could reasonably
be expected to result in, a Material Adverse Effect.
Each notice delivered under this Section shall be accompanied by a
certificate of a Financial Officer or other executive officer of the Borrower
setting forth the details of the event or development requiring such notice
and any action taken or proposed to be taken with respect thereto.
(b) The Borrower shall deliver to the Administrative Agent and the
Lenders written notice of each of the following not less than ten (10)
Business Days prior to the occurrence thereof: (i) a sale, transfer or other
disposition of assets, in a single transaction or series of related transac-
tions, for consideration in excess of an amount equal to 10% of the Total
Value, (ii) an acquisition of assets, in a single transaction or series of
related transactions, for consideration in excess of 10% of the Total Value,
and (iii) the grant of a Lien with respect to assets, in a single transaction
or series of related transactions, in connection with Indebtedness aggre-
gating an amount in excess of 10% of the Total Value. In addition, simulta-
neously with delivery of any such notice, the Borrower shall deliver to the
Administrative Agent a certificate of the Borrower and its financial Officer
certifying that Borrower is in compliance with this Agreement and the other
Loan Documents both on a historical basis and on a pro forma basis, exclusive
of the property sold, transferred and/or encumbered and inclusive of the
property to be acquired or the indebtedness to be incurred, together with
calculations, in the form of Schedule B to Exhibit F attached hereto,
evidencing compliance with each of the financial covenants set forth in
Article VI hereof.
To the extent such proposed transaction, after giving effect to the
prepayment required to be made pursuant to Section 2.09(c), would result in
a failure to comply with the financial covenants set forth herein, the
Borrower shall prepay outstanding Loans in such amount, as determined by the
Administrative Agent, as may be required to reduce the Obligations so that
the Borrower will be in compliance with the covenants set forth herein upon
the consummation of the contemplated transaction.
SECTION 5.03. Existence; Conduct of Business. The Borrower will,
and will cause each of its Subsidiaries to, do or cause to be done all things
necessary to preserve, renew and keep in full force and effect its legal
existence and the rights, licenses, permits, privileges and franchises
material to the conduct of its business.
SECTION 5.04. Payment of Obligations. The Borrower will, and will
cause each of its Subsidiaries to, pay its obligations, including Tax
liabilities, that, if not paid, could result in a Material Adverse Effect
before the same shall become delinquent or in default, except where (a) the
validity or amount thereof is being contested in good faith by appropriate
proceedings, (b) the Borrower or such Subsidiary has set aside on its books
adequate reserves with respect thereto in accordance with GAAP and (c) the
failure to make payment pending such contest could not reasonably be expected
to result in a Material Adverse Effect.
SECTION 5.05. Maintenance of Properties; Insurance; Management.
(a) The Borrower will, and will cause each of its Subsidiaries to, (i) keep
and maintain all Property useful and necessary to the conduct of its business
in good working order and condition, ordinary wear and tear excepted, and
(ii) maintain, with financially sound and reputable insurance companies,
insurance in such amounts and against such risks as are described in Section
3.13 or substantially similar policies and programs as are acceptable to the
Administrative Agent.
(b) The Borrower, its wholly-owned Subsidiaries and either
Management Company, individually or collectively, shall at all times manage
Projects constituting the greater of (i) 80% of Total Value or (ii) 80% of
the total number of apartment units comprising the Projects.
SECTION 5.06. Books and Records; Inspection Rights. The Borrower
will, and will cause each of its Subsidiaries to, keep proper books of record
and account in which full, true and correct entries are made of all dealings
and transactions in relation to its business and activities. The Borrower
will, and will cause each of its Subsidiaries to, permit any representatives
designated by the Administrative Agent or any Lender, upon reasonable prior
notice, to visit and inspect its properties, to examine and make extracts
from its books and records, and to discuss its affairs, finances and
condition with its officers and independent accountants, all at such
reasonable times and as often as reasonably requested.
SECTION 5.07. Compliance with Laws. The Borrower will, and will
cause each of its Subsidiaries to, comply with all laws, rules, regulations
and orders of any Governmental Authority applicable to it or its property,
except where the failure to do so, individually or in the aggregate, could
not reasonably be expected to result in a Material Adverse Effect.
SECTION 5.08. Use of Proceeds and Letters of Credit. No part of
the proceeds of any Loan will be used, whether directly or indirectly, for
any purpose that entails a violation of any of the Regulations of the Board,
including Regulations G, T, U and X. The proceeds of the Loans will be used
only for the purposes of:
(a) acquisition of residential housing Projects similar to and
consistent with the types of Projects owned and/or operated by the
Borrower on the Effective Date (including Qualified Community
Reinvestment Projects), located in the Northeast, Mid-Atlantic and
Midwest regions of the United States;
(b) renovation of Projects owned and operated by the Borrower;
(c) redemptions by the Borrower of interests of limited
partnership units in the Borrower issued in connection with the
acquisition from time to time of Projects;
(d) financing expansions, renovations and new construction related
to Properties owned and operated by the Borrower or its Subsidiaries and
Affiliates; provided, however, that in no event, shall more than 50% of
aggregate amount of the Loans be used for the construction of any new
Projects;
(e) repayment in full, on or before the Effective Date, of the
Borrower's $35,000,000 unsecured revolving credit facility with
Manufacturers and Traders Trust Company;
(f) refinancing of existing Indebtedness for borrowed money
secured by Projects;
(g) payment by the Borrower of distributions to its partners
(including the Company); and
(h) working capital needs of the Borrower, provided, however, in
no event shall the LC Exposure and the amount of the Loans used by the
Borrower for working capital purposes exceed 10% of the Maximum
Availability in the aggregate.
Promptly upon the utilization of any proceeds of the Loans in
connection with the acquisition, expansion, renovation or construction of a
Qualified Community Reinvestment Project, the Borrower shall deliver to the
Administrative Agent a certificate of a Financial Officer or other executive
officer of the Borrower setting for the details of each such utilization.
SECTION 5.09. Company Status. The Company shall at all times (a)
remain a publicly traded company listed on the New York Stock Exchange, (b)
maintain its status as a REIT under Sections 856-860 of the Code and (c)
retain direct or indirect management and control of the Borrower.
SECTION 5.10. Ownership of Projects and Property; Unencumbered
Assets. The ownership of substantially all wholly owned Projects and other
Property of the Consolidated Businesses shall be held by the Borrower and its
Subsidiaries and shall not be held directly by the Company.
SECTION 5.11. Shareholder Communication, Filings, etc. Promptly
upon the mailing or filing thereof, the Borrower shall deliver to the
Administrative Agent copies of all financial statements, reports and proxy
statements mailed to the Company's shareholders, and copies of all of the
Company's final registration statements and other final documents filed with
the Securities and Exchange Commission (or any successor thereto) or any
national securities exchange.
SECTION 5.12. Further Assurances. The Borrower agrees upon demand
of the Administrative Agent to do any act or execute any additional documents
as may be reasonably required by the Administrative Agent to exercise or
enforce its rights under this Agreement, the Notes or the other Loan
Documents and to realize thereon. This covenant shall survive the
termination of this Agreement until payment in full of all amounts due
hereunder or under the Notes and the other Loan Documents, provided that the
covenant shall be reinstated if any payment of all amounts due hereunder or
under the Notes and the other Loan Documents is required to be returned to
the payor or any other party under any applicable bankruptcy law.
ARTICLE VI
Negative Covenants
Until the Commitments have expired or terminated and the principal
of and interest on each Loan and all fees payable hereunder have been paid in
full and all Letters of Credit have expired or terminated and all LC
Disbursements shall have been reimbursed, the Borrower covenants and agrees
with the Lenders that:
SECTION 6.01. (a) Indebtedness and Other Financial Covenants.
Neither the Borrower nor any of its Subsidiaries shall directly or indirectly
create, incur, assume or otherwise become or remain directly or indirectly
liable with respect to any Indebtedness, except that the Borrower and/or its
Subsidiaries may create, incur, assume or otherwise become or remain directly
or indirectly liable with respect to any Indebtedness to the extent that
Total Outstanding Indebtedness, would not exceed (i) 55% of Total Value, or
(ii) in the case of Secured Indebtedness of the Consolidated Businesses, 50%
of Total Value, or (iii) in the case of Recourse Secured Indebtedness of the
Consolidated Businesses, 35% of Total Value, or (iv) in the case of Adjusted
Recourse Secured Indebtedness, 12.5% of Total Value. Notwithstanding
anything to the contrary herein contained, in no event shall (x) the
aggregate amount of completion guarantees with respect to Projects at any
time exceed 15% of Total Value and (y) the aggregate amount of Low Income
Housing Credit Program Guarantees at any time exceed 15% of Total Value.
(b) Minimum Equity Value. The Equity Value shall at no time be
less than $135,400,000, plus an amount equal to 85% of all Net Offering Pro-
ceeds received by the Company after the date hereof.
(c) Minimum Consolidated Interest Coverage Ratio. As of the first
day of each calendar quarter for the immediately preceding four consecutive
calendar quarters, the ratio of Adjusted EBITDA to Total Interest Expense for
such period shall not be less than 2.15 to 1.0.
(d) Minimum Unsecured Interest Coverage Ratio. As of the first day
of each calendar quarter for the immediately preceding four consecutive
calendar quarters, the ratio of Adjusted Unencumbered NOI to Unsecured Inter-
est Expense shall not be less than 1.65 to 1.0.
(e) Minimum Unencumbered Total Property Value. The Total Property
Value of Unencumbered Eligible Projects shall at no time be less than the
greater of (a) 120% of the Revolving Credit Exposure at such time and (b)
$50,000,000. Unencumbered Eligible Projects shall consist at all times of
not less than seven Eligible Projects.
(f) Minimum Fixed Charge Coverage Ratio. As of the first day of
each calendar quarter for the immediately preceding four consecutive calendar
quarters, the ratio of Adjusted NOI to Fixed Charges shall not be less than
1.8 to 1.0.
(g) Maximum Dividend Payout Ratio. The Company shall not make any
Restricted Payment during any of its fiscal quarters, which, when added to
all Restricted Payments made during the three immediately preceding fiscal
quarters, exceeds the greater of (i) 90% of FFO, and 110% of CAD, and (ii)
the amounts required to maintain its status as a REIT under the Code. For
purposes of this provision, "Restricted Payment" means (i) any dividend or
other distribution on any shares of the Company's capital stock (except
dividends payable solely in shares of its capital stock or in rights to
subscribe for or purchase shares of its capital stock), or (ii) any payment
on account of the purchase, redemption, retirement or acquisition of (a) any
shares of the Company's capital stock or (b) any option, warrant or other
right to acquire shares of the Company's capital stock.
(h) Maximum Availability. The Revolving Credit Exposure shall not
at any time exceed the Maximum Availability. If at any time the Revolving
Credit Exposure exceeds the Maximum Availability, the Borrower shall
immediately prepay a portion of the Loan in an amount equal to such excess as
provided for in Section 2.09(d).
SECTION 6.02. Liens. The Borrower will not, and will not permit
any of its Subsidiaries to, create, incur, assume or permit to exist any Lien
on any Property now owned or hereafter acquired by it, or assign or sell any
income or revenues (including accounts receivable) or rights in respect of
any thereof, except:
(a) Permitted Encumbrances; and
(b) Liens securing permitted Secured Indebtedness, provided that
a maximum Secured Indebtedness in an amount equal to not more than 15%
of Total Value may be secured by any one Project or several cross-
collateralized Projects.
SECTION 6.03. Fundamental Changes. (a) The Borrower will not, and
will not permit any of its Subsidiaries to, merge into or consolidate with
any other Person, or permit any other Person to merge into or consolidate
with it, or sell, transfer, lease or otherwise dispose of (in one transaction
or in a series of transactions) all or substantially all of its assets, or
all or substantially all of the stock of any of its Subsidiaries (in each
case, whether now owned or hereafter acquired), or liquidate or dissolve,
except (i) in connection with the issuance transfer, conversion or repurchase
of limited partnership interests in Borrower, and (ii) if at the time
thereof and immediately after giving effect thereto no Default shall have
occurred and be continuing any Person may merge into the Borrower in a
transaction in which the Borrower is the surviving entity and any Subsidiary
of the Borrower may merge into the Borrower in a transaction in which the
Borrower is the surviving entity.
(b) The Borrower will not, and will not permit any of its
Subsidiaries to, engage to any material extent in any business other than
businesses of the type conducted by the Borrower and its Subsidiaries on the
date of execution of this Agreement and businesses reasonably related
thereto.
SECTION 6.04. Investments, Loans, Advances, Guarantees and
Acquisitions. The Borrower will not, and will not permit any of its
Subsidiaries to, purchase, hold or acquire (including pursuant to any merger
with any Person that was not a wholly owned Subsidiary of the Borrower prior
to such merger) any capital stock, evidences of indebtedness or other
securities (including any option, warrant or other right to acquire any of
the foregoing) of, make or permit to exist any loans or advances to,
Guarantee any obligations of, or make or permit to exist any investment or
any other interest in, any other Person, or purchase or otherwise acquire (in
one transaction or a series of transactions) any assets of any other Person
constituting a business unit, except:
(a) Permitted Investments;
(b) investments in Real Property;
(c) investments (including loans) in the Borrower's Subsidiaries,
the Borrower's Affiliates and the Management Company;
(d) loans to directors, officers and employees of the Company, the
Borrower, the Borrower's Subsidiaries, the Borrower's Affiliates and
either Management Company;
(e) investments in notes secured by mortgages on any Real Property
of any Person;
(f) investments in Real Property under development or
construction; and
(g) investments in equity securities issued by a REIT that
primarily owns multi-family properties.
Notwithstanding the foregoing, the investments set forth above shall
be limited in the following manner: (i) the aggregate amount of investments
in land and/or Real Property under development or construction shall not
exceed 10% of Total Value; (ii) the aggregate amount of investments in
partnerships, joint ventures, corporations, limited liability companies or
other entities which are not wholly-owned by the Borrower or its Subsidiaries
shall not exceed 10% of Total Value; (iii) the aggregate amount of invest-
ments by the Borrower and its Subsidiaries in Properties which are not
residential in nature shall not exceed 5% of Total Value; (iv) the aggregate
outstanding principal amount of such loans to directors, officers and
employees shall not exceed $10,000,000; and (v) the aggregate amount of
investments in equity securities issued by REITs that primarily own multi-
family properties shall not exceed 10% of Total Value.
SECTION 6.05. Hedging Agreements. The Borrower will not, and will
not permit any of its Subsidiaries to, enter into any Hedging Agreement,
other than Hedging Agreements entered into in the ordinary course of business
to hedge or mitigate risks to which the Borrower or any Subsidiary of the
Borrower is exposed in the conduct of its business or the management of its
liabilities.
SECTION 6.06. Transactions with Affiliates. Neither the Borrower
nor any of its Subsidiaries shall directly or indirectly enter into or permit
to exist any transaction (including, without limitation, the purchase, sale,
lease or exchange of any property or the rendering of any service) with any
holder or holders of more than 5% of any class of equity securities of the
Borrower, or with any Affiliate of the Borrower which is not its Subsidiary,
on terms that determined by the respective Boards of Directors of the Company
to be less favorable to the Borrower or any of its Subsidiaries, as applica-
ble, than those that might be obtained in an arm's length transaction at the
time from Persons who are not such a holder or Affiliate. Nothing contained
in this Section 6.06 shall prohibit (a) increases in compensation and
benefits for officers and employees of the Borrower or any of its
Subsidiaries which are customary in the industry or consistent with the past
business practice of the Borrower or such Subsidiary, provided that no Event
of Default or Default has occurred and is continuing; (b) payment of
customary partners' indemnities; or (c) performance of any obligations
arising under the Loan Documents.
SECTION 6.07. Restriction on Fundamental Changes. Neither the
Borrower nor any of its Subsidiaries shall enter into any merger or
consolidation, or liquidate, wind-up or dissolve (or suffer any liquidation
or dissolution), or convey, lease, sell, transfer or otherwise dispose of, in
one transaction or series of transactions, all or substantially all of the
Borrower's or any such Subsidiary's business or Property, whether now or
hereafter acquired, except in connection with issuance, transfer, conversion
or repurchase of limited partnership interests in Borrower. Notwithstanding
the foregoing, the Borrower shall be permitted to merge with another Person
so long as the Borrower is the surviving Person following such merger.
SECTION 6.08. Margin Regulations; Securities Laws. Neither the
Borrower nor any of its Subsidiaries, shall use all or any portion of the
proceeds of any credit extended under this Agreement to purchase or carry
Margin Stock.
SECTION 6.09. Negative Covenants of the Company and the QRS
Subsidiary. (a) The Company will not acquire any assets of any nature
whatsoever, other than (i) additional partnership units in the Borrower and
(ii) its interest in the QRS Subsidiary and other Subsidiaries of the
Company. The QRS Subsidiary will not acquire any assets of any nature
whatsoever, other than its limited partnership interests in the Borrower.
(b) From and after the date hereof, the Company will not incur any
Indebtedness or any other obligations or liabilities or any Liens on its
assets or any part thereof except (i) as the general partner of the Borrower
in connection with trade payable incurred in the ordinary course of business,
(ii) Indebtedness, the net proceeds of which are contributed to the QRS
Subsidiary or the Borrower, as the case may be, simultaneously with the
incurrence thereof by the Company, (iii) Guaranties of Indebtedness of any
Affiliate of the Company incurred in the ordinary course of such Affiliate's
business and (iv) the obligation to pay dividends when and if declared by the
Company. From and after the date hereof, the QRS Subsidiary will not incur
any Indebtedness or any other obligations or liabilities or any Liens on its
assets or any part thereof.
(c) From and after the date hereof, (i) the Company will not retain
any Net Offering Proceeds, and the same will be contributed by the Company to
the Borrower, or if the QRS Subsidiary is a limited partner in the Borrower,
to the QRS Subsidiary simultaneously with receipt thereof by the Company and
(ii) the QRS Subsidiary will not retain any Net Offering Proceeds so
contributed to it by the Company, and the same will be contributed by the QRS
Subsidiary to the Borrower simultaneously with receipt thereof by the QRS
Subsidiary.
(d) The Company shall not enter into any merger or consolidation,
or liquidate, wind-up or dissolve (or suffer any liquidation or dissolution),
or convey, lease, sell, transfer or otherwise dispose of, in one transaction
or series of transactions, any of its business or assets, including its
interests in the Borrower or in the QRS Subsidiary. Notwithstanding the
foregoing, the Company shall be permitted to merge with another Person so
long as the Company is the surviving Person following such merger. The QRS
Subsidiary shall not enter into any merger or consolidation, or liquidate,
wind-up or dissolve (or suffer any liquidation or dissolution), or convey,
lease, sell, transfer or otherwise dispose of, in one transaction or series
of transactions, any of its business or assets, including its interests in
the Borrower.
ARTICLE VII
Events of Default
If any of the following events ("Events of Default") shall occur:
(a) the Borrower shall fail to pay (i) any principal of any Loan
when and as the same shall become due and payable, whether at the due
date thereof or at a date fixed for prepayment thereof or otherwise or
(ii) any reimbursement obligation in respect of any LC Disbursement when
and as the same shall become due and payable, whether at the due date
thereof or at a date fixed for prepayment thereof or otherwise, and such
failure shall continue unremedied for a period of three days after
notice;
(b) the Borrower shall fail to pay any interest on any Loan or any
fee or any other amount (other than an amount referred to in clause
(a) of this Article) payable under this Agreement, when and as the same
shall become due and payable, and such failure shall continue unremedied
for a period of five Business Days;
(c) any representation or warranty made or deemed made by or on
behalf of the Borrower or any of its Subsidiaries in or in connection
with this Agreement or any amendment or modification hereof or waiver
hereunder, or in any report, certificate, financial statement or other
document furnished pursuant to or in connection with this Agreement or
any amendment or modification hereof or waiver hereunder, shall prove to
have been incorrect when made or deemed made;
(d) the Borrower shall fail to observe or perform any covenant,
condition or agreement contained in Article V or in Article VI;
(e) the Borrower shall fail to observe or perform any covenant,
condition or agreement contained in this Agreement (other than those
specified in clause (a), (b) or (d) of this Article), and such failure
shall continue unremedied for a period of 15 days after notice thereof
from the Administrative Agent to the Borrower (which notice will be
given at the request of any Lender);
(f) the Company, the Borrower or any Subsidiary of the Borrower
shall fail to make any payment (whether of principal or interest and
regardless of amount) in respect of any Material Indebtedness, when and
as the same shall become due and payable;
(g) any event or condition occurs that results in any Material
Indebtedness becoming due prior to its scheduled maturity or that
enables or permits (with or without the giving of notice, the lapse of
time or both) the holder or holders of any Material Indebtedness or any
trustee or agent on its or their behalf to cause any Material
Indebtedness to become due, or to require the prepayment, repurchase,
redemption or defeasance thereof, prior to its scheduled maturity;
provided that this clause (g) shall not apply to secured Indebtedness
that becomes due as a result of the voluntary sale or transfer of the
property or assets securing such Indebtedness unless prohibited by this
Agreement;
(h) an involuntary proceeding shall be commenced or an involuntary
petition shall be filed seeking (i) liquidation, reorganization or other
relief in respect of the Company, the Borrower or any Subsidiary of the
Borrower or its debts, or of a substantial part of its assets, under any
Federal, state or foreign bankruptcy, insolvency, receivership or
similar law now or hereafter in effect or (ii) the appointment of a
receiver, trustee, custodian, sequestrator, conservator or similar
official for the Company, the Borrower or any Subsidiary of the Borrower
or for a substantial part of its assets, and, in any such case, such
proceeding or petition shall continue undismissed for 60 days or an
order or decree approving or ordering any of the foregoing shall be
entered;
(i) the Company, the Borrower or any Subsidiary of the Borrower
shall (i) voluntarily commence any proceeding or file any petition
seeking liquidation, reorganization or other relief under any Federal,
state or foreign bankruptcy, insolvency, receivership or similar law now
or hereafter in effect, (ii) consent to the institution of, or fail to
contest in a timely and appropriate manner, any proceeding or petition
described in clause (h) of this Article, (iii) apply for or consent to
the appointment of a receiver, trustee, custodian, sequestrator,
conservator or similar official for the Company, the Borrower or any
Subsidiary of the Borrower or for a substantial part of its assets,
(iv) file an answer admitting the material allegations of a petition
filed against it in any such proceeding, (v) make a general assignment
for the benefit of creditors or (vi) take any action for the purpose of
effecting any of the foregoing;
(j) the Company, the Borrower or any Subsidiary of the Borrower
shall become unable, admit in writing or fail generally to pay its debts
as they become due;
(k) one or more judgments for the payment of money in an aggregate
amount in excess of $1,000,000 shall be rendered against the Company,
the Borrower, any Subsidiary of the Borrower or any combination thereof
and the same shall remain undischarged for a period of 30 consecutive
days during which execution shall not be effectively stayed, or any
action shall be legally taken by a judgment creditor to attach or levy
upon any assets of the Company, the Borrower or any Subsidiary of the
Borrower to enforce any such judgment;
(l) an ERISA Event shall have occurred that, in the opinion of the
Required Lenders, when taken together with all other ERISA Events that
have occurred, could reasonably be expected to result in liability of
the Borrower and its Subsidiaries in an aggregate amount exceeding
$250,000;
(m) a Change in Control shall occur;
(n) an event shall occur which has a Material Adverse Effect;
(o) the Company shall fail to (i) maintain its status as a REIT
for federal income tax purposes, or (ii) continue as a general partner
of the Borrower, or (iii) comply with all Requirements of Law applicable
to it and its businesses and Properties, in each case where the failure
to so comply individually or in the aggregate will have or is reasonably
likely to have a Material Adverse Effect, or (iv) remain listed on the
New York Stock Exchange, or (v) file all tax returns and reports re-
quired to be filed by it with any Governmental Authority as and when re-
quired to be filed or to pay any taxes, assessments, fees or other gov-
ernmental charges upon it or its Property, assets, receipts, sales, use,
payroll, employment, licenses, income, or franchises which are shown in
such returns, reports or similar statements to be due and payable as and
when due and payable, except for taxes, assessments, fees and other
governmental charges (A) that are being contested by the Company in good
faith by an appropriate proceeding diligently pursued, (B) for which
adequate reserves have been made on its books and records, and (C) the
amounts the non-payment of which would not, individually or in the
aggregate, result in a Material Adverse Effect;
(p) the Company shall merge or liquidate with or into any other
Person and, as a result thereof and after giving effect thereto, (i) the
Company is not the surviving Person or (ii) such merger or liquidation
would effect an acquisition of or investment in any Person not otherwise
permitted under the terms of this Agreement. The Borrower shall merge
or liquidate with or into any other Person and, as a result thereof and
after giving effect thereto, (i) the Borrower is not the surviving
Person or (ii) such merger or liquidation would effect an acquisition of
or Investment in any Person not otherwise permitted under the terms of
this Agreement; or
(q) the Guaranty shall at any time and for any reason other than
pursuant to the terms thereof, cease to be in full force and effect or
shall be declared null and void, or the validity or enforceability
thereof shall be contested by the Company or the Company shall deny it
has any further liability or obligation thereunder;
then, and in every such event (other than an event with respect to the
Borrower described in clause (h) or (i) of this Article), and at any time
thereafter during the continuance of such event, the Administrative Agent
shall, at the request of the Required Lenders, by notice to the Borrower,
take either or both of the following actions, at the same or different
times: (i) terminate the Commitments, and thereupon the Commitments shall
terminate immediately, and (ii) declare the Loans then outstanding to be due
and payable in whole (or in part, in which case any principal not so declared
to be due and payable may thereafter be declared to be due and payable), and
thereupon the principal of the Loans so declared to be due and payable,
together with accrued interest thereon and all fees and other obligations of
the Borrower accrued hereunder, shall become due and payable immediately,
without presentment, demand, protest or other notice of any kind, all of
which are hereby waived by the Borrower; and in case of any event with
respect to the Borrower described in clause (h) or (i) of this Article, the
Commitments shall automatically terminate and the principal of the Loans then
outstanding, together with accrued interest thereon and all fees and other
obligations of the Borrower accrued hereunder, shall automatically become due
and payable, without presentment, demand, protest or other notice of any
kind, all of which are hereby waived by the Borrower.
ARTICLE VIII
The Administrative Agent
Each of the Lenders and the Issuing Bank hereby irrevocably appoints
the Administrative Agent as its agent and authorizes the Administrative Agent
to take such actions on its behalf and to exercise such powers as are
delegated to the Administrative Agent by the terms hereof, together with such
actions and powers as are reasonably incidental thereto.
The bank serving as the Administrative Agent hereunder shall have
the same rights and powers in its capacity as a Lender as any other Lender
and may exercise the same as though it were not the Administrative Agent, and
such bank and its Affiliates may accept deposits from, lend money to and
generally engage in any kind of business with the Borrower or any Subsidiary
or other Affiliate thereof as if it were not the Administrative Agent
hereunder.
The Administrative Agent shall not have any duties or obligations
except those expressly set forth herein. Without limiting the generality of
the foregoing, (a) the Administrative Agent shall not be subject to any
fiduciary or other implied duties, regardless of whether a Default has
occurred and is continuing, (b) the Administrative Agent shall not have any
duty to take any discretionary action or exercise any discretionary powers,
except discretionary rights and powers expressly contemplated hereby that the
Administrative Agent is required to exercise in writing by the Required
Lenders (or such other number or percentage of the Lenders as shall be
necessary under the circumstances as provided in Section 9.02), and (c)
except as expressly set forth herein, the Administrative Agent shall not have
any duty to disclose, and shall not be liable for the failure to disclose,
any information relating to the Borrower or any of its Subsidiaries that is
communicated to or obtained by the bank serving as Administrative Agent or
any of its Affiliates in any capacity. The Administrative Agent shall not be
liable for any action taken or not taken by it with the consent or at the
request of the Required Lenders (or such other number or percentage of the
Lenders as shall be necessary under the circumstances as provided in
Section 9.02) or in the absence of its own gross negligence or willful
misconduct. The Administrative Agent shall be deemed not to have knowledge
of any Default unless and until written notice thereof is given to the
Administrative Agent by the Borrower or a Lender, and the Administrative
Agent shall not be responsible for or have any duty to ascertain or inquire
into (i) any statement, warranty or representation made in or in connection
with this Agreement by a person other than the Administrative Agent, (ii) the
contents of any certificate, report or other document delivered hereunder or
in connection herewith by a person other than the Administrative Agent,
(iii) the performance or observance of any of the covenants, agreements or
other terms or conditions set forth herein by a person other than the
Administrative Agent, (iv) the validity, enforceability, effectiveness or
genuineness of this Agreement or any other agreement, instrument or document,
or (v) the satisfaction of any condition set forth in Article IV or elsewhere
herein, other than to confirm receipt of items expressly required to be
delivered to the Administrative Agent.
The Administrative Agent shall be entitled to rely upon, and shall
not incur any liability for relying upon, any notice, request, certificate,
consent, statement, instrument, document or other writing believed by it to
be genuine and to have been signed or sent by the proper Person. The
Administrative Agent also may rely upon any statement made to it orally or by
telephone and believed by it to be made by the proper Person, and shall not
incur any liability for relying thereon. The Administrative Agent may
consult with legal counsel, independent accountants and other experts
selected by it, and shall not be liable for any action taken or not taken by
it in accordance with the advice of any such counsel, accountants or experts.
The Administrative Agent may perform any and all its duties and
exercise its rights and powers by or through any one or more sub-agents
appointed by the Administrative Agent. The Administrative Agent and any such
sub-agent may perform any and all its duties and exercise its rights and
powers through their respective Related Parties. The exculpatory provisions
of the preceding paragraphs shall apply to any such sub-agent and to the
Related Parties of the Administrative Agent and any such sub-agent, and shall
apply to their respective activities in connection with the syndication of
the credit facilities provided for herein as well as activities as
Administrative Agent.
Subject to the appointment and acceptance of a successor
Administrative Agent as provided in this paragraph, the Administrative Agent
may resign at any time by notifying the Lenders, the Issuing Bank and the
Borrower. Upon any such resignation, the Required Lenders shall have the
right, in consultation with the Borrower, to appoint a successor. If no
successor shall have been so appointed by the Required Lenders and shall have
accepted such appointment within 30 days after the retiring Administrative
Agent gives notice of its resignation, then the retiring Administrative Agent
may, on behalf of the Lenders and the Issuing Bank, appoint a successor
Administrative Agent which shall be a bank with an office in New York, New
York, or an Affiliate of any such bank. Upon the acceptance of its
appointment as Administrative Agent hereunder by a successor, such successor
shall succeed to and become vested with all the rights, powers, privileges
and duties of the retiring Administrative Agent, and the retiring
Administrative Agent shall be discharged from its duties and obligations
hereunder. The fees payable by the Borrower to a successor Administrative
Agent shall be the same as those payable to its predecessor unless otherwise
agreed between the Borrower and such successor. After the Administrative
Agent's resignation hereunder, the provisions of this Article and
Section 9.03 shall continue in effect for the benefit of such retiring
Administrative Agent, its sub-agents and their respective Related Parties in
respect of any actions taken or omitted to be taken by any of them while it
was acting as Administrative Agent.
Each Lender acknowledges that it has, independently and without
reliance upon the Administrative Agent or any other Lender and based on such
documents and information as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement. Each Lender also
acknowledges that it will, independently and without reliance upon the
Administrative Agent or any other Lender and based on such documents and
information as it shall from time to time deem appropriate, continue to make
its own decisions in taking or not taking action under or based upon this
Agreement, any related agreement or any document furnished hereunder or
thereunder.
Notwithstanding anything to the contrary herein contained, the Co-
Agent, the Administrative Agent, each Lender and the Issuing Bank hereby
agree that the Co-Agent assumes no obligations, duties or rights of the
Administrative Agent under this Agreement, all of which obligations, duties
and rights shall be and remain solely vested in the Administrative Agent.
ARTICLE IX
Miscellaneous
SECTION 9.01. Notices. Except in the case of notices and other
communications expressly permitted to be given by telephone, all notices and
other communications provided for herein shall be in writing and shall be
delivered by hand or overnight courier service, mailed by certified or
registered mail, return receipt requested, or sent by telecopy, as follows:
(a) if to the Borrower, to it at 850 Clinton Square, Rochester,
New York 14604, Attention: David P. Gardner (Telecopy No. 716-546-5433),
with a copy to the Borrower at the same address, Attention: Amy L. Tait
(Telecopy No. 716-546-5433);
(b) if to the Administrative Agent, to The Chase Manhattan Bank,
380 Madison Avenue, New York, New York 10017, Attention: Charles
Hoagland (Telecopy No. 212-622-3395), with a copy to The Chase Manhattan
Bank, 270 Park Avenue, New York 10017, Attention: Jacqueline F. Stein,
Esq., Chase Legal Department (Telecopy No. 212-270-2934);
(c) if to the Issuing Bank, to The Chase Manhattan Bank, 380
Madison Avenue, New York, New York 10017, Attention: Charles Hoagland
(Telecopy No. 212-622-3395); and
(d) if to any other Lender, to it at its address (or telecopy
number) set forth in its Administrative Questionnaire.
Any party hereto may change its address or telecopy number for notices and
other communications hereunder by notice to the other parties hereto. All
notices and other communications given to any party hereto in accordance with
the provisions of this Agreement shall be deemed to have been given on the
date of receipt.
SECTION 9.02. Waivers; Amendments. (a) No failure or delay by the
Administrative Agent, the Issuing Bank or any Lender in exercising any right
or power hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of any such right or power, or any abandonment or
discontinuance of steps to enforce such a right or power, preclude any other
or further exercise thereof or the exercise of any other right or power. The
rights and remedies of the Administrative Agent, the Issuing Bank and the
Lenders hereunder are cumulative and are not exclusive of any rights or
remedies that they would otherwise have. No waiver of any provision of this
Agreement or consent to any departure by the Borrower therefrom shall in any
event be effective unless the same shall be permitted by paragraph (b) of
this Section, and then such waiver or consent shall be effective only in the
specific instance and for the purpose for which given. Without limiting the
generality of the foregoing, the making of a Loan or issuance of a Letter of
Credit shall not be construed as a waiver of any Default, regardless of
whether the Administrative Agent, any Lender or the Issuing Bank may have had
notice or knowledge of such Default at the time.
(b) Neither this Agreement nor any provision hereof may be waived,
amended or modified except pursuant to an agreement or agreements in writing
entered into by the Borrower and the Required Lenders or by the Borrower and
the Administrative Agent with the prior written consent of the Required
Lenders; provided that no such agreement shall (i) increase the Commitment
of any Lender without the written consent of such Lender, (ii) reduce the
principal amount of any Loan or LC Disbursement or reduce the rate of
interest thereon, or reduce any fees payable hereunder, without the written
consent of each Lender affected thereby, (iii) postpone the scheduled date of
payment of the principal amount of any Loan or LC Disbursement, or any
interest thereon, or any fees payable hereunder, or reduce the amount of,
waive or excuse any such payment, or postpone the scheduled date of
expiration of any Commitment, without the written consent of each Lender
affected thereby, (iv) change Section 2.16(b) or (c) in a manner that would
alter the pro rata sharing of payments required thereby, without the written
consent of each Lender, or (v) change any of the provisions of this Section
or the definition of "Required Lenders" or any other provision hereof
specifying the number or percentage of Lenders required to waive, amend or
modify any rights hereunder or make any determination or grant any consent
hereunder, without the written consent of each Lender; provided further that
no such agreement shall amend, modify or otherwise affect the rights or
duties of the Administrative Agent or the Issuing Bank hereunder without the
prior written consent of the Administrative Agent or the Issuing Bank, as the
case may be.
SECTION 9.03. Expenses; Indemnity; Damage Waiver. (a) The
Borrower shall pay (i) all reasonable out-of-pocket expenses incurred by the
Administrative Agent and its Affiliates, including the reasonable fees,
charges and disbursements of outside and in-house counsel for the
Administrative Agent, in connection with the syndication of the credit
facilities provided for herein, the preparation and administration of this
Agreement and the other Loan Documents or any amendments, modifications or
waivers of the provisions hereof or thereof (whether or not the transactions
contemplated hereby or thereby shall be consummated), (ii) all reasonable
out-of-pocket expenses incurred by the Co-Agent, including the reasonable
fees, charges and disbursements of counsel for the Co-Agent, in connection
with the review, negotiation and execution of this Agreement, (iii) all
reasonable out-of-pocket expenses incurred by the Issuing Bank in connection
with the issuance, amendment, renewal or extension of any Letter of Credit or
any demand for payment thereunder and (iv) all out-of-pocket expenses
incurred by the Administrative Agent, the Issuing Bank or any Lender,
including the fees, charges and disbursements of any counsel for the
Administrative Agent, the Issuing Bank or any Lender, in connection with the
enforcement or protection of its rights in connection with this Agreement,
including its rights under this Section, and the other Loan Documents
including, without limitation, the Note, or in connection with the Loans made
or Letters of Credit issued hereunder, including all such out-of-pocket
expenses incurred during any workout, restructuring or negotiations in
respect of such Loans or Letters of Credit.
(b) The Borrower hereby indemnifies the Administrative Agent, the
Issuing Bank and each Lender, and each Related Party of any of the foregoing
Persons (each such Person being called an "Indemnitee") against, and holds
each Indemnitee harmless from, any and all losses, claims, damages,
liabilities and related expenses, including the fees, charges and
disbursements of any counsel for any Indemnitee, incurred by or asserted
against any Indemnitee arising out of, in connection with, or as a result of
(i) the execution or delivery of this Agreement or any agreement or
instrument contemplated hereby, the performance by the parties hereto of
their respective obligations hereunder or the consummation of the
Transactions or any other transactions contemplated hereby, (ii) any Loan or
Letter of Credit or the use of the proceeds therefrom (including any refusal
by the Issuing Bank to honor a demand for payment under a Letter of Credit if
the documents presented in connection with such demand do not strictly comply
with the terms of such Letter of Credit), (iii) any actual or alleged
presence or release of Hazardous Materials on or from any property owned or
operated by the Borrower or any of its Subsidiaries, or any Environmental
Liability related in any way to the Borrower or any of its Subsidiaries, or
(iv) any actual or prospective claim, litigation, investigation or proceeding
relating to any of the foregoing, whether based on contract, tort or any
other theory and regardless of whether any Indemnitee is a party thereto;
provided that such indemnity shall not, as to any Indemnitee, be available to
the extent that such losses, claims, damages, liabilities or related expenses
resulted from the negligence of such Indemnitee proven by clear and
convincing evidence (and not merely a preponderance of the evidence) or
willful misconduct of such Indemnitee.
(c) To the extent that the Borrower fails to pay any amount
required to be paid by it to the Administrative Agent or the Issuing Bank
under paragraph (a) or (b) of this Section, each Lender severally agrees to
pay to the Administrative Agent or the Issuing Bank, as the case may be, such
Lender's Applicable Percentage (determined as of the time that the applicable
unreimbursed expense or indemnity payment is sought) of such unpaid amount;
provided that the unreimbursed expense or indemnified loss, claim, damage,
liability or related expense, as the case may be, was incurred by or asserted
against the Administrative Agent or the Issuing Bank in its capacity as such.
(d) To the extent permitted by applicable law, the Borrower shall
not assert, and hereby waives, any claim against any Indemnitee, on any
theory of liability, for special, indirect, consequential or punitive damages
(as opposed to direct or actual damages) arising out of, in connection with,
or as a result of, this Agreement or any agreement or instrument contemplated
hereby, the Transactions, any Loan or Letter of Credit or the use of the
proceeds thereof.
(e) All amounts due under this Section shall be payable not later
than ten Business Days after written demand therefor.
SECTION 9.04. Successors and Assigns. (a) The provisions of this
Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns permitted hereby
(including any Affiliate of the Issuing Bank that issues any Letter of
Credit), except that the Borrower may not assign or otherwise transfer any of
its rights or obligations hereunder without the prior written consent of each
Lender (and any attempted assignment or transfer by the Borrower without such
consent shall be null and void). Nothing in this Agreement, expressed or
implied, shall be construed to confer upon any Person (other than the parties
hereto, their respective successors and assigns permitted hereby (including
any Affiliate of the Issuing Bank that issues any Letter of Credit) and, to
the extent expressly contemplated hereby, the Related Parties of each of the
Administrative Agent, the Issuing Bank and the Lenders) any legal or
equitable right, remedy or claim under or by reason of this Agreement.
(b) Any Lender may assign to one or more assignees all or a portion
of its rights and obligations under this Agreement (including all or a
portion of its Commitment and the Loans at the time owing to it); provided
that (i) except in the case of an assignment to a Lender or an Affiliate of
a Lender, each of the Borrower and the Administrative Agent (and, in the case
of an assignment of all or a portion of a Commitment or any Lender's
obligations in respect of its LC Exposure, the Issuing Bank must give their
prior written consent to such assignment (which consent shall not be
unreasonably withheld), (ii) except in the case of an assignment to a Lender
or an Affiliate of a Lender or an assignment of the entire remaining amount
of the assigning Lender's Commitment, the amount of the Commitment of the
assigning Lender subject to each such assignment (determined as of the date
the Assignment and Acceptance with respect to such assignment is delivered to
the Administrative Agent) shall not be less than $5,000,000 unless each of
the Borrower and the Administrative Agent otherwise consent, (iii) each
partial assignment shall be made as an assignment of a proportionate part of
all the assigning Lender's rights and obligations under this Agreement, (iv)
the parties to each assignment shall execute and deliver to the
Administrative Agent an Assignment and Acceptance, together with a processing
and recordation fee of $3,500, and (v) the assignee, if it shall not be a
Lender, shall deliver to the Administrative Agent an Administrative
Questionnaire; and provided further that any consent of the Borrower
otherwise required under this paragraph shall not be required if an Event of
Default under clause (h) or (i) of Article VII has occurred and is
continuing. Subject to acceptance and recording thereof pursuant to
paragraph (d) of this Section, from and after the effective date specified in
each Assignment and Acceptance the assignee thereunder shall be a party
hereto and, to the extent of the interest assigned by such Assignment and
Acceptance, have the rights and obligations of a Lender under this Agreement,
and the assigning Lender thereunder shall, to the extent of the interest
assigned by such Assignment and Acceptance, be released from its obligations
under this Agreement (and, in the case of an Assignment and Acceptance
covering all of the assigning Lender's rights and obligations under this
Agreement, such Lender shall cease to be a party hereto but shall continue to
be entitled to the benefits of Sections 2.13, 2.14, 2.15 and 9.03). Any
assignment or transfer by a Lender of rights or obligations under this
Agreement that does not comply with this paragraph shall be treated for
purposes of this Agreement as a sale by such Lender of a participation in
such rights and obligations in accordance with paragraph (e) of this Section.
(c) The Administrative Agent, acting for this purpose as an agent
of the Borrower, shall maintain at one of its offices in The City of New York
a copy of each Assignment and Acceptance delivered to it and a register for
the recordation of the names and addresses of the Lenders, and the Commitment
of, and principal amount of the Loans and LC Disbursements owing to, each
Lender pursuant to the terms hereof from time to time (the "Register"). The
entries in the Register shall be conclusive, and the Borrower, the
Administrative Agent, the Issuing Bank and the Lenders may treat each Person
whose name is recorded in the Register pursuant to the terms hereof as a
Lender hereunder for all purposes of this Agreement, notwithstanding notice
to the contrary. The Register shall be available for inspection by the
Borrower, the Issuing Bank and any Lender, at any reasonable time and from
time to time upon reasonable prior notice.
(d) Upon its receipt of a duly completed Assignment and Acceptance
executed by an assigning Lender and an assignee, the assignee's completed
Administrative Questionnaire (unless the assignee shall already be a Lender
hereunder), the processing and recordation fee referred to in paragraph (b)
of this Section and any written consent to such assignment required by
paragraph (b) of this Section, the Administrative Agent shall accept such
Assignment and Acceptance and record the information contained therein in the
Register. No assignment shall be effective for purposes of this Agreement
unless it has been recorded in the Register as provided in this paragraph.
(e) Any Lender may, without the consent of the Borrower, the
Administrative Agent or the Issuing Bank, sell participations to one or more
banks or other entities (a "Participant") in all or a portion of such
Lender's rights and obligations under this Agreement (including all or a
portion of its Commitment and the Loans owing to it); provided that (i) such
Lender's obligations under this Agreement shall remain unchanged, (ii) such
Lender shall remain solely responsible to the other parties hereto for the
performance of such obligations and (iii) the Borrower, the Administrative
Agent, the Issuing Bank and the other Lenders shall continue to deal solely
and directly with such Lender in connection with such Lender's rights and
obligations under this Agreement. Any agreement or instrument pursuant to
which a Lender sells such a participation shall provide that such Lender
shall retain the sole right to enforce this Agreement and to approve any
amendment, modification or waiver of any provision of this Agreement;
provided that such agreement or instrument may provide that such Lender will
not, without the consent of the Participant, agree to any amendment,
modification or waiver described in the first proviso to Section 9.02(b) that
affects such Participant. Subject to paragraph (f) of this Section, the
Borrower agrees that each Participant shall be entitled to the benefits of
Sections 2.13, 2.14 and 2.15 to the same extent as if it were a Lender and
had acquired its interest by assignment pursuant to paragraph (b) of this
Section. To the extent permitted by law, each Participant also shall be
entitled to the benefits of Section 9.08 as though it were a Lender, provided
such Participant agrees to be subject to Section 2.16(c) as though it were a
Lender.
(f) A Participant shall not be entitled to receive any greater
payment under Section 2.13 or 2.15 than the applicable Lender would have been
entitled to receive with respect to the participation sold to such
Participant, unless the sale of the participation to such Participant is made
with the Borrower's prior written consent. A Participant that would be a
Foreign Lender if it were a Lender shall not be entitled to the benefits of
Section 2.17 unless the Borrower is notified of the participation sold to
such Participant and such Participant agrees, for the benefit of the
Borrower, to comply with Section 2.15(e) as though it were a Lender.
(g) Any Lender may at any time pledge or assign a security interest
in all or any portion of its rights under this Agreement to secure
obligations of such Lender, including any pledge or assignment to secure
obligations to a Federal Reserve Bank, and this Section shall not apply to
any such pledge or assignment of a security interest; provided that no such
pledge or assignment of a security interest shall release a Lender from any
of its obligations hereunder or substitute any such pledgee or assignee for
such Lender as a party hereto.
SECTION 9.05. Survival. All covenants, agreements, representations
and warranties made by the Borrower herein and in the certificates or other
instruments delivered in connection with or pursuant to this Agreement shall
be considered to have been relied upon by the other parties hereto and shall
survive the execution and delivery of this Agreement and the making of any
Loans and issuance of any Letters of Credit, regardless of any investigation
made by any such other party or on its behalf and notwithstanding that the
Administrative Agent, the Issuing Bank or any Lender may have had notice or
knowledge of any Default or incorrect representation or warranty at the time
any credit is extended hereunder, and shall continue in full force and effect
as long as the principal of or any accrued interest on any Loan or any fee or
any other amount payable under this Agreement is outstanding and unpaid or
any Letter of Credit is outstanding and so long as the Commitments have not
expired or terminated. The provisions of Sections 2.13, 2.14, 2.15 and 9.03
and Article VIII shall survive and remain in full force and effect regardless
of the consummation of the transactions contemplated hereby, the repayment of
the Loans, the expiration or termination of the Letters of Credit and the
Commitments or the termination of this Agreement or any provision hereof.
SECTION 9.06. Counterparts; Integration; Effectiveness. This
Agreement may be executed in counterparts (and by different parties hereto on
different counterparts), each of which shall constitute an original, but all
of which when taken together shall constitute a single contract. This
Agreement and any separate letter agreements with respect to fees payable to
the Administrative Agent constitute the entire contract among the parties
relating to the subject matter hereof and supersede any and all previous
agreements and understandings, oral or written, relating to the subject
matter hereof. This Agreement shall become effective when it shall have been
executed by the Administrative Agent and when the Administrative Agent shall
have received counterparts hereof which, when taken together, bear the
signatures of each of the other parties hereto, and thereafter shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns. Delivery of an executed counterpart of a
signature page of this Agreement by telecopy shall be effective as delivery
of a manually executed counterpart of this Agreement.
SECTION 9.07. Severability. Any provision of this Agreement held
to be invalid, illegal or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such invalidity, illegality or
unenforceability without affecting the validity, legality and enforceability
of the remaining provisions hereof; and the invalidity of a particular
provision in a particular jurisdiction shall not invalidate such provision in
any other jurisdiction.
SECTION 9.08. Right of Setoff. If an Event of Default shall have
occurred and be continuing, each Lender and each of its Affiliates is hereby
authorized at any time and from time to time, to the fullest extent permitted
by law, to set off and apply any and all deposits (general or special, time
or demand, provisional or final) at any time held and other obligations at
any time owing by such Lender or Affiliate to or for the credit or the
account of the Borrower against any of and all the obligations of the
Borrower now or hereafter existing under this Agreement held by such Lender,
irrespective of whether or not such Lender shall have made any demand under
this Agreement and although such obligations may be unmatured. The rights of
each Lender under this Section are in addition to other rights and remedies
(including other rights of setoff) which such Lender may have.
SECTION 9.09. Governing Law; Jurisdiction; Consent to Service of
Process. (a) This Agreement and all the other Loan Documents shall be
construed in accordance with and governed by the law of the State of New
York.
(b) The Borrower hereby irrevocably and unconditionally submits,
for itself and its property, to the nonexclusive jurisdiction of the Supreme
Court of the State of New York sitting in New York County and of the United
States District Court of the Southern District of New York, and any appellate
court from any thereof, or such other jurisdiction or venue as the Required
Lenders may determine, in any action or proceeding arising out of or relating
to this Agreement, or for recognition or enforcement of any judgment, and
each of the parties hereto hereby irrevocably and unconditionally agrees that
all claims in respect of any such action or proceeding may be heard and
determined in such New York State or, to the extent permitted by law, in such
Federal court, or in such other jurisdiction or venue as the Required Lenders
may so determine. Each of the parties hereto agrees that a final judgment in
any such action or proceeding shall be conclusive and may be enforced in
other jurisdictions by suit on the judgment or in any other manner provided
by law. Nothing in this Agreement shall affect any right that the
Administrative Agent, the Issuing Bank or any Lender may otherwise have to
bring any action or proceeding relating to this Agreement against the
Borrower or its properties in the courts of any jurisdiction.
(c) The Borrower hereby irrevocably and unconditionally waives, to
the fullest extent it may legally and effectively do so, any objection which
it may now or hereafter have to the laying of venue of any suit, action or
proceeding arising out of or relating to this Agreement in any court referred
to in paragraph (b) of this Section. Each of the parties hereto hereby
irrevocably waives, to the fullest extent permitted by law, the defense of an
inconvenient forum to the maintenance of such action or proceeding in any
such court.
(d) Each party to this Agreement irrevocably consents to service
of process in the manner provided for notices in Section 9.01. Nothing in
this Agreement will affect the right of any party to this Agreement to serve
process in any other manner permitted by law.
SECTION 9.10. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY
HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY
HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER
PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD
NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND
(B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO
ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION.
SECTION 9.11. Headings. Article and Section headings and the Table
of Contents used herein are for convenience of reference only, are not part
of this Agreement and shall not affect the construction of, or be taken into
consideration in interpreting, this Agreement.
SECTION 9.12. Confidentiality. Each of the Administrative Agent,
the Issuing Bank and the Lenders agrees to maintain the confidentiality of
the Information (as defined below), except that Information may be disclosed
(a) to its and its Affiliates' directors, officers, employees and agents,
including accountants, legal counsel and other advisors (it being understood
that the Persons to whom such disclosure is made will be informed of the
confidential nature of such Information and instructed to keep such
Information confidential), (b) to the extent requested by any regulatory
authority, (c) to the extent required by applicable laws or regulations or
by any subpoena or similar legal process, (d) to any other party to this
Agreement, (e) in connection with the exercise of any remedies hereunder or
any suit, action or proceeding relating to this Agreement or the enforcement
of rights hereunder, (f) subject to an agreement containing provisions
substantially the same as those of this Section, to any assignee of or
Participant in, or any prospective assignee of or Participant in, any of its
rights or obligations under this Agreement, (g) with the consent of the
Borrower or (h) to the extent such Information (i) becomes publicly available
other than as a result of a breach of this Section or (ii) becomes available
to the Administrative Agent, the Issuing Bank or any Lender on a
nonconfidential basis from a source other than the Borrower. For the
purposes of this Section, "Information" means all information received from
the Borrower relating to the Borrower or its business, other than any such
information that is available to the Administrative Agent, the Issuing Bank
or any Lender on a nonconfidential basis prior to disclosure by the Borrower;
provided that, in the case of information received from the Borrower after
the date hereof, such information is clearly identified at the time of
delivery as confidential. Any Person required to maintain the
confidentiality of Information as provided in this Section shall be
considered to have complied with its obligation to do so if such Person has
exercised the same degree of care to maintain the confidentiality of such
Information as such Person would accord to its own confidential information.
SECTION 9.13. Interest Rate Limitation. Notwithstanding anything
herein to the contrary, if at any time the interest rate applicable to any
Loan, together with all fees, charges and other amounts which are treated as
interest on such Loan under applicable law (collectively the "Charges"),
shall exceed the maximum lawful rate (the "Maximum Rate") which may be
contracted for, charged, taken, received or reserved by the Lender holding
such Loan in accordance with applicable law, the rate of interest payable in
respect of such Loan hereunder, together with all Charges payable in respect
thereof, shall be limited to the Maximum Rate and, to the extent lawful, the
interest and Charges that would have been payable in respect of such Loan but
were not payable as a result of the operation of this Section shall be
cumulated and the interest and Charges payable to such Lender in respect of
other Loans or periods shall be increased (but not above the Maximum Rate
therefor) until such cumulated amount, together with interest thereon at the
Federal Funds Effective Rate to the date of repayment, shall have been
received by such Lender.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed by their respective authorized officers as of the day and
year first above written.
HOME PROPERTIES OF NEW YORK, L.P.
By: Home Properties of New York, Inc.
By:_____________________________________
Name:
Title:
THE CHASE MANHATTAN BANK, individually
and as Administrative Agent,
By:________________________________________
Name:
Title:
MANUFACTURERS AND TRADERS TRUST COMPANY,
individually and as Co-Agent
By:________________________________________
Name:
Title:
<PAGE>
Schedule 2.01
Commitments
The Chase Manhattan Bank $15,000,000
Manufacturers and Traders Trust Company $35,000,000
<PAGE>
Schedule 3.02
Ownership Structure
See attached
<PAGE>
Schedule 3.04
Existing Indebtedness
See attached
<PAGE>
Schedule 3.07
Disclosed Matters
None
<PAGE>
Schedule 3.13
Insurance
See attached
<PAGE>
Exhibit A
Form of Assignment and Acceptance
See attached
<PAGE>
Exhibit B
Form of Guaranty
See attached
<PAGE>
Exhibit C
Form of Note
See attached
<PAGE>
Exhibit D-1
Form of Borrowing Request and Compliance Certificate
See attached
<PAGE>
Exhibit D-2
Form of Notice of Issuance and Compliance Certificate
See attached
<PAGE>
Exhibit E
Form of Opinion of Borrower's Counsel
See attached
<PAGE>
Exhibit F
Form of Quarterly/Annual Compliance Certificate
AMENDMENT NO. ONE TO CREDIT AGREEMENT
AMENDMENT NO. ONE TO CREDIT AGREEMENT, dated as of September 4,
1997, among HOME PROPERTIES OF NEW YORK, L.P., a New York limited
partnership (the "Borrower"), the LENDERS party hereto, THE CHASE MANHATTAN
BANK, as Administrative Agent, and MANUFACTURERS AND TRADERS TRUST COMPANY,
as Co-Agent.
RECITALS
A. The parties hereto are parties to that certain Credit
Agreement, dated as of the date hereof (the "Credit Agreement").
Capitalized terms not otherwise defined herein shall have the respective
meanings set forth in the Credit Agreement.
B. The Borrower intends to consummate the acquisition of the
1,750 unit Mill Creek apartment portfolio in Philadelphia, Pennsylvania
(the "Acquisition") not later than September 30, 1997 and, in connection
therewith, desires that the Lenders amend, for a limited period of time
following consummation of the Acquisition, a certain financial covenant set
forth in the Credit Agreement.
C. The Lenders have agreed to amend such covenant as provided
herein.
NOW, THEREFORE, for good and valuable consideration, the receipt
of which is hereby acknowledged, the parties hereto hereby agree as
follows:
1. (a) During the Amendment Period (as hereinafter defined),
Section 6.01(a)(i) of the Credit Agreement is hereby amended to read as
follows:
"(i) 60% of Total Value"
(b) Effective immediately upon the termination of the
Amendment Period, Section 6.01(a)(i) of the Credit Agreement shall read as
originally set forth in the Credit Agreement, that is, "55% of Total
Value".
2. For purposes hereof, "Amendment Period" shall mean the
period commencing on the date of consummation of the Acquisition and ending
180 days thereafter. Notwithstanding anything in the foregoing to the
contrary, in the event that the Acquisition is not consummated by September
30, 1997, this Amendment No. One shall be deemed null and void and of no
further force and effect.
<PAGE>
3. The Administrative Agent and the Lenders hereby acknowledge
receipt from the Borrower of adequate notice of the Acquisition pursuant to
Section 5.02(b)(ii) of the Credit Agreement.
4. Except as expressly set forth herein, the Credit Agreement
shall continue in full force and effect in accordance with the provisions
thereof.
5. This Amendment No. One (a) shall be governed by the laws of
the State of New York, without giving effect to the conflict of law
principles thereof, and (b) may be executed in counterparts, each of which
shall be deemed an original and together which shall constitute one and the
same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment
No. One to be duly executed by their respective authorized officers as of
the day and year first above written.
HOME PROPERTIES ON NEW YORK, L.P.
By: Home Properties of New York, Inc.
By:/s/ Amy L. Tait
__________________________________
Name: Amy L. Tait
Title: Executive Vice President
THE CHASE MANHATTAN BANK, individually
and as Administrative Agent
By:/s/ James M. Reilly
__________________________________
Name: James M. Reilly
Title: Vice President
MANUFACTURERS AND TRADERS TRUST COMPANY,
individually and as Co-Agent
By:/s/ Lisa A. Plescia
__________________________________
Name: Lisa A. Plescia
Title: Vice President
-2-
PROMISSORY NOTE
$15,000,000 New York, New York
September 4, 1997
FOR VALUE RECEIVED, Home Properties of New York, L.P., a New York
limited partnership ("Maker"), hereby promises to pay to the order of The Chase
Manhattan Bank ("Payee"), in lawful money of the United States of America in
immediately available funds, at the office of The Chase Manhattan Bank located
at 380 Madison Avenue, New York, New York 10017, on the Maturity Date, the
principal sum of Fifteen Million U.S. Dollars (US $15,000,000) or, if less, the
unpaid principal amount of all Loans made by Payee to Maker pursuant to the
Credit Agreement (hereinafter defined) then outstanding.
Maker promises also to pay interest on the unpaid principal amount
hereof in like money at said office from the date hereof until such principal
amount is paid in full, at such interest rates and at such times as are
provided in the Credit Agreement.
This Promissory Note is one of the Promissory Notes referred to in
the Credit Agreement dated as of September 4, 1997, among Maker, the Lenders
party thereto, The Chase Manhattan Bank, as Administrative Agent, and
Manufacturers and Traders Trust Company, as Co-Agent (as the same may be
amended, restated, supplemented or otherwise modified from time to time, the
"Credit Agreement") and is entitled to the benefits thereof and shall be
subject to the provisions thereof. Capitalized terms used herein but not
otherwise defined herein have the meaning set forth in the Credit Agreement.
This Promissory Note is guaranteed by Home Properties of New York,
Inc., a Maryland corporation, pursuant to the Guaranty. As provided in the
Credit Agreement, this Promissory Note is subject to mandatory and voluntary
prepayments, in whole or in part, from time to time upon the occurrence of the
events specified therein.
In case an Event of Default shall occur and be continuing, the
principal of, and accrued interest on, this Promissory Note shall become or may
be declared to be due and payable in the manner and with the effect provided in
the Credit Agreement.
Maker hereby waives presentment, demand, protest or notice of any
kind in connection with this Promissory Note.
MAKER HEREBY EXPRESSLY ACKNOWLEDGES AND AGREES THAT THIS PROMISSORY
NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE PRINCIPLES OF CONFLICT OF LAWS
THEREOF. TO THE EXTENT PERMITTED BY APPLICABLE LAW, MAKER HEREBY WAIVES ANY
RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING RELATED IN ANY WAY TO THIS
PROMISSORY NOTE. Maker agrees that any such proceeding may, if Payee so
elects, be brought and enforced in the Supreme Court of the State of New York
or the United States District Court for the Southern District of New York, or
such other jurisdiction or venue as the Required Lenders so determine, and
Maker hereby waives any objection
<PAGE>
to jurisdiction or venue in any such proceeding commenced in any of such
courts. Maker further agrees that any process required to be served on it for
purposes of any such proceeding may be served on it, with the same effect as
personal service on it within the State of New York, or such other jurisdiction
or venue as the Required Lenders so determine, by registered mail addressed to
it at its address for purposes of notices as provided in the Credit Agreement.
IN WITNESS WHEREOF, Maker has caused this Promissory Note to be
executed and delivered by its duly authorized general partner, as of the day
and year and the place first above written.
HOME PROPERTIES OF
NEW YORK, L.P.
By: Home Properties of New York, Inc.
By:/s/ Amy L. Tait
Name: Amy L. Tait
Title: Executive Vice President
-2-
PROMISSORY NOTE
$35,000,000 New York, New York
September 4, 1997
FOR VALUE RECEIVED, Home Properties of New York, L.P., a New York
limited partnership ("Maker"), hereby promises to pay to the order of
Manufacturers and Traders Trust Company ("Payee"), in lawful money of the
United States of America in immediately available funds, at the office of
The Chase Manhattan Bank located at 380 Madison Avenue, New York, New York
10017, on the Maturity Date, the principal sum of Thirty Five Million U.S.
Dollars (US $35,000,000) or, if less, the unpaid principal amount of all
Loans made by Payee to Maker pursuant to the Credit Agreement
(hereinafter defined) then outstanding.
Maker promises also to pay interest on the unpaid principal amount
hereof in like money at said office from the date hereof until such principal
amount is paid in full, at such interest rates and at such times as are
provided in the Credit Agreement.
This Promissory Note is one of the Promissory Notes referred to in
the Credit Agreement dated as of September 4, 1997, among Maker, the Lenders
party thereto, The Chase Manhattan Bank, as Administrative Agent, and
Manufacturers and Traders Trust Company, as Co-Agent (as the same may be
amended, restated, supplemented or otherwise modified from time to time, the
"Credit Agreement") and is entitled to the benefits thereof and shall be
subject to the provisions thereof. Capitalized terms used herein but not
otherwise defined herein have the meaning set forth in the Credit Agreement.
This Promissory Note is guaranteed by Home Properties of New York,
Inc., a Maryland corporation, pursuant to the Guaranty. As provided in the
Credit Agreement, this Promissory Note is subject to mandatory and voluntary
prepayments, in whole or in part, from time to time upon the occurrence of the
events specified therein.
In case an Event of Default shall occur and be continuing, the
principal of, and accrued interest on, this Promissory Note shall become or may
be declared to be due and payable in the manner and with the effect provided in
the Credit Agreement.
Maker hereby waives presentment, demand, protest or notice of any
kind in connection with this Promissory Note.
MAKER HEREBY EXPRESSLY ACKNOWLEDGES AND AGREES THAT THIS PROMISSORY
NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE PRINCIPLES OF CONFLICT OF LAWS
THEREOF. TO THE EXTENT PERMITTED BY APPLICABLE LAW, MAKER HEREBY WAIVES ANY
RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING RELATED IN ANY WAY TO THIS
PROMISSORY NOTE. Maker agrees that any such proceeding may, if Payee so
elects, be brought and enforced in the Supreme Court of the State of New York
or the United States District Court for the Southern District of New York, or
such other jurisdiction or venue as the Required Lenders so determine, and
Maker hereby waives any objection
<PAGE>
to jurisdiction or venue in any such proceeding commenced in any of such
courts. Maker further agrees that any process required to be served on it for
purposes of any such proceeding may be served on it, with the same effect as
personal service on it within the State of New York, or such other jurisdiction
or venue as the Required Lenders so determine, by registered mail addressed to
it at its address for purposes of notices as provided in the Credit Agreement.
IN WITNESS WHEREOF, Maker has caused this Promissory Note to be
executed and delivered by its duly authorized general partner, as of the day
and year and the place first above written.
HOME PROPERTIES OF
NEW YORK, L.P.
By: Home Properties of New York, Inc.
By:/s/ Amy L. Tait
Name: Amy L. Tait
Title: Executive Vice President
-2-
PURCHASE AND SALE AGREEMENT
This Purchase and Sale Agreement ("Agreement"), made as of this 25th day of
July, 1997, by and between HOME PROPERTIES OF NEW YORK, L.P., a New York
limited partnership, having its principal office at 850 Clinton Square,
Rochester, New York 14604 (hereinafter sometimes called "Buyer") and LOUIS
S. AND MOLLY B. WOLK FOUNDATION, having an office at 1600 East Avenue,
Rochester, New York 14607 ("Seller").
WITNESSETH:
WHEREAS, Seller is the owner in fee simple of a certain residential
apartment complex located in the City of Rochester, State of New York more
commonly known as 1600 East Avenue Apartments all as more particularly
described below;
WHEREAS, Seller desires to sell said property to Buyer, and Buyer
desires to purchase said property from Seller, upon the happening of
certain events;
NOW THEREFORE, in consideration of the property, mutual covenants
herein contained, and for other good and valuable consideration, the
receipt and sufficiency whereof being hereby acknowledged, the parties
hereby agree as follows:
1. REAL PROPERTY DESCRIPTION: The real property to be conveyed
consists of that certain property known as 1600 East Avenue Apartments with
a street address of 1600 East Avenue, Rochester, New York, County of Monroe
and State of New York and more particularly described on "Exhibit A"
annexed hereto and made a part hereof, together with and including all
buildings and other improvements thereon, including but not limited to, 164
apartments located in an 11 story building, and all rights of Seller in and
to any and all streets, roads, highways, alleys, driveways, easements and
rights-of-way appurtenant thereto (collectively, the "Property").
2. OTHER ITEMS: The following items, if any, now in or on the
Property, are included in this sale and shall become the property of Buyer
at Closing (as hereafter defined): all heating, plumbing and lighting
fixtures, all bathroom fixtures, wall-to-wall carpeting, exhaust fans,
hoods, signs, screens, tool sheds, fences, carpeting and runners, cabinets,
mirrors, shelving, any humidifier and dehumidifier units, mailboxes, and
any fixtures and equipment appurtenant to and used in connection with the
operation of the Property other than property owned by the residents of the
Property (hereinafter collectively the "Other Items").
3. EXCEPTIONS: Buyer agrees to accept title to the Property subject
to the following:
a. restrictive covenants of record common to the tract or
subdivision, provided same have not been violated, unless said violations
have been released under Section 2001 of the Real Property actions and
Proceedings Law;
b. water line, sanitary sewer, drainage, gas line and main,
electrical and telephone easements of record provided that no building or
other improvements are located
<PAGE>
over the area covered by such easement or adversely affected.
c. ad valorem taxes not yet due and payable;
d. zoning and other laws and government regulations of general
application;
e. matters shown on the survey provided pursuant to paragraph 7
hereof, provided that same do not impair the marketability of the Premises;
and
f. any leases affecting the Property entered into by 1600 East
Avenue Associates as landlord as well as the Lease Agreement, dated
November 24, 1987 by and between 1600 East Avenue Associates and Louis S.
Wolk, as subsequently modified (the "Lease Agreement"). The Seller
represents that it shall pay to 1600 East Avenue Associates the sum due to
it pursuant to Section 28.4 of the Lease Agreement, which shall be one-half
of the net sale proceeds (after deduction of the expenses of sale as
described in Section 28.4 of the Lease Agreement) in excess of $7.5
million.
4. STRUCTURE OF PURCHASE AND SALE.
a. Seller agrees that, immediately prior to the Closing, it will
cause the Property to be conveyed to a partnership or to a limited
liability company, at Buyer's option, to be created under the laws of the
State of New York ("New Entity"). Buyer shall pay all legal and filing
expenses relating to the formation of the New Entity and shall make the
arrangements for its formation. The documents relating to the formation of
the New Entity shall be subject to the Seller s approval, which shall not
be unreasonably withheld or delayed. Furthermore, Buyer agrees that it
will indemnify Seller against any and all claims or expenses suffered or
incurred by Buyer as a result of its membership in the New Entity. The
parties hereto agree that the term Seller as used herein shall include the
New Entity, but that, in all events, the Louis S. Wolk and Molly B.
Foundation shall remain responsible for the Seller's obligations hereunder.
b. Buyer agrees that it will, in lieu of accepting a Deed for the
Property, acquire all of the interests in New Entity, without recourse to
the Seller (the "Interests").
5. PRICE, MANNER OF PAYMENT.
a. In consideration for the conveyance of all of the Interests in
the New Entity to the Buyer, Buyer agrees to pay to Seller in the manner
hereinafter provided, the sum of Nine Million Five Hundred Thousand and
00/100 Dollars ($9,500,000.00) (the "Purchase Price"). The Purchase Price
shall be payable on the Closing Date (as hereinafter defined) by certified
check, or at Seller's option, by wire transfer of immediately available
funds.
6. ADJUSTMENTS AT CLOSING. The only adjustment to be made at
Closing shall be with respect to rent pursuant to the Lease Agreement,
which shall be pro-rated between the parties as if the Buyer was the owner
of the Property as of midnight of the night preceding the Closing Date.
7. SEARCH AND SURVEY; EXPENSES. Seller shall furnish and deliver to
the attorney for Buyer as quickly as practicable following execution of
this Agreement by
2
<PAGE>
the parties fully guaranteed tax, title and United States
District Court searches and searches under Uniform Commercial Code of
records in the appropriate offices, dated or redated subsequent hereto.
Seller shall also promptly provide Buyer with an instrument survey dated
or redated subsequent hereto certified to such persons and organizations as
may be designated by Buyer, made by a land surveyor duly licensed by the
State of New York, showing the boundaries of the land conveyed hereunder,
all improvements thereon and the location of all easements, rights-of-way
or similar encroachments affecting same, prepared and certified in
accordance with the code of practice adopted by the New York State
Association of Professional Land Surveyors. Seller shall pay for the
continuation of said tax, title, United States District Court, local tax
and Uniform Commercial Code searches to and including the date of Closing
and for any required transfer tax in connection with the transfer.
8. TITLE DOCUMENTS. At the time of Closing, Seller shall tender to
Buyer an assignment of all of the Interests in the New Entity as well as an
assignment of the Lease Agreement, both free and clear from all liens and
encumbrances and both without recourse to the Seller. In addition, Seller
shall transfer to Buyer the security deposit held by Seller with respect to
the Lease in the amount of $350,000 plus all interest accrued thereon and
not paid to the lessee under the Lease as described in Lease Modification
No. 1, dated as of July 1, 1991.
9. POSSESSION. Buyer shall have possession and occupancy of the
Property from and after the date of delivery of the assignment of the
Interests in the New Entity subject only to the matters herein otherwise
provided for.
10. TITLE EXAMINATION; OBJECTIONS TO TITLE.
a. Buyer agrees, within fifteen (15) days after Buyer receives the
title materials described in paragraph 7 above, to furnish to Seller's
attorneys a specification in writing of any objection to title that Buyer
believes it is not required to take title subject to. Seller may, but
shall not be required to, bring any action or proceedings or take such
other action as may be appropriate to render title to the Property
marketable.
b. If Seller shall be unable to convey good and marketable title to
the Property described above, subject to and in accordance with the
provisions of this contract, then, except as hereinafter provided, Buyer
may elect, by written notice to Seller to either:
(i) terminate this Agreement by notice, in the manner
hereinafter provided, delivered to Seller, in which
event this Agreement shall wholly cease and terminate,
and neither party shall have any further claim against
the other by reason of this Agreement, and the lien, if
any, of the Buyer against the Property shall wholly
cease; or
(ii) proceed with the purchase provided Seller, solely at
Seller's discretion, elects and is able to obtain a
commitment for title insurance and thereafter pays the
premium for said insurance which insures the interest
of the Buyer.
c. Notwithstanding anything to the contrary contained herein, Buyer
may accept
3
<PAGE>
such title as Seller may be able to convey, without reduction of
the consideration hereunder or any credit or allowance against the same and
without any other liability on the part of Seller and if Buyer elects to do
so, Seller shall have no right to terminate this Agreement as hereinabove
provided.
d. If a search of the title discloses judgments, bankruptcies or
other returns against other persons having names the same as or similar to
that of Seller, Seller will on request deliver to Buyer an affidavit
showing that such judgments, bankruptcies or other returns are not against
Seller.
11. CLOSING DATE. The Closing shall occur within 15 days after the
satisfaction or waiver of the contingency set forth in paragraph 24 (the
"Closing" or "Closing Date") at the offices of the Buyer, 850 Clinton
Square, Rochester, New York, or at such other time and place that Buyer and
Seller agree upon.
12. BROKER'S COMMISSION. The parties hereto agree that no broker
brought about this sale; and that each agrees to indemnify the other for
any and all claims and expenses, including reasonable legal fees, if any
commission is determined to be due because of a misrepresentation by such
party. The foregoing indemnification shall survive the Closing.
13. RISK OF LOSS. The risk of loss or damage to the Property by fire
or other casualty, or by taking by eminent domain, until Closing, shall be
assumed by Seller, and upon the happening of such event, Buyer shall have
the election of terminating this Agreement without further liability
thereunder, or of completing this purchase, paying to Seller the full
consideration provided hereunder without adjustment or reduction therein in
accordance with this Agreement, and receiving the insurance monies,
collectible for such loss or damage, or the award for such taking by
eminent domain; provided, however, that if such taking or such damage or
destruction shall occur with respect to only an insignificant part of the
Property, Buyer shall have no right to terminate this Agreement and shall
proceed with the purchase of the portion of the Property then remaining. If
Buyer shall proceed with the purchase of the portion of the Property then
remaining following such taking, damage or destruction in accordance with
this paragraph 13, Buyer shall nevertheless pay to Seller the full
consideration provided hereunder without adjustment or reduction therein in
accordance with this Agreement; but Seller shall, at the Closing, in
addition to its other obligations set forth herein, pay to Buyer all
condemnation, insurance or other awards received by or for the benefit of
Seller as a result of such taking, damage or destruction prior to the
Closing and assign to Buyer all such awards not yet received thereby. For
the purposes hereof, a part of the Property shall be insignificant if the
fair market value of the affected portion of the Property shall not exceed
One Hundred Thousand and 00/100 Dollars ($100,000) in the aggregate.
14. REPRESENTATIONS AND WARRANTIES OF SELLER. Seller represents and
warrants to Buyer as of the date hereof and as of Closing:
a. This Agreement has been duly authorized, executed and delivered
and constitutes a legal and binding obligation of Seller, enforceable in
accordance with its terms, except as may be limited by bankruptcy and other
laws affecting creditors' rights generally.
-4-
<PAGE>
b. Neither the entry into this Agreement, nor the carrying out of
the transactions contemplated herein has resulted or will result in any
violation of, or be in conflict with, or result in the creation of, any
mortgage, lien, encumbrance or change (other than those contemplated
hereby) upon any of the properties or assets of Seller pursuant to, or
constitute a default under, any certificate of incorporation, by-law,
partnership agreement, or mortgage, indenture, contract, agreement,
instrument, franchise, permit, judgment, decree, order, statute, rule or
regulation applicable to Seller or the Property.
c. No consent or approval by, or authorization of, or filing,
registration or qualification with, any federal, state or local
governmental authority, bureau, department or agency, or any corporation,
person or other entity is required as of the Closing either for the
execution, delivery or performance of this Agreement by Seller, or in
connection with the consummation by Seller of the transactions contemplated
by this Agreement, except for such consents, approvals, authorizations,
filings, registrations or qualifications as have been obtained by Seller as
of the date hereof and disclosed and accepted by Buyer.
15. REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer represents and
warrants to Seller as of the date hereof and as of the Closing:
a. Buyer is a limited partnership duly organized, validly existing
and in good standing under the laws of the State of New York and has all
the requisite power and authority to enter into and carry out this
Agreement according to its terms.
b. This Agreement has been duly authorized, executed and delivered
and constitutes a legal and binding obligation of Buyer, enforceable in
accordance with its terms, except as may be limited by bankruptcy and other
laws affecting creditors' rights generally.
c. Compliance by Home Properties with this Agreement and the
consummation of the transactions contemplated hereby do not conflict with,
or result in the breach of, or constitute a default under the partnership
agreement or other document pursuant to which Buyer is organized or any
contract, agreement, indenture or undertaking to which Buyer is a party or
by which it is bound.
d. The partners of 1600 East Avenue Associates are unchanged since
its formation, except that the limited partner changed its name from
Leenhouts Investments to Leenhouts Ventures.
16. CONDITION OF THE PROPERTY. Buyer has previously inspected the
Property and the Other Items and shall purchase the Property and the Other
Items solely in reliance upon the previous inspection thereof. Except as
otherwise provided herein, there have been and shall be no other
representations and warranties made by Seller, express or implied with
respect to the physical condition of the Property and the Other Items or
the compliance of the Property with applicable laws, ordinances,
regulations, codes, licenses and permits. Buyer shall purchase the
Property "AS IS" without any warranty as to the condition of all or any
part thereof or as to fitness for any particular purpose or use.
17. NOTICE. All notices given pursuant to any provisions of this
Agreement shall be in writing, shall be effective only if delivered
personally, sent by registered or certified mail, postage prepaid, or sent
by a nationally recognized overnight delivery service to the
-5-
<PAGE>
addresses set
forth below and shall be deemed given when received as established by
written proof of receipt or upon proof that receipt was actively declined:
To Seller: Louis S. Wolk Foundation
1600 East Avenue
Apartment 701
Rochester, NY 14607
With a copy to: Samuel O. Tilton
Woods, Oviatt, Gilman, Sturman & Clarke, LLP
44 Exchange Street
Rochester, NY 14614
To Buyer: Home Properties of New York, L.P.
Attn: Amy L. Tait, Executive Vice President
850 Clinton Square
Rochester, NY 14604
With a copy to: Ann M. McCormick, Esq.
850 Clinton Square
Rochester, NY 14604
18. GUARANTEES. Seller shall assign to Buyer at Closing any and all
guarantees and warranties it has with respect to the Property, the
improvements thereon and the equipment relating to the Property, if any,
and Buyer shall assume the duties and obligations of Seller with respect
thereto.
19. CONFIDENTIALITY. By execution of this Agreement and except as
otherwise provided herein, Seller agrees to keep any and all information
with respect to the transactions contemplated by this Agreement strictly
confidential and will not disclose any such information without Buyer's
prior written consent.
20. USE OF APARTMENT. Provided that the apartments and parking space
may be used only for the purposes of the Louis S. and Molly S. Wolk
Foundation and no other purposes Seller shall continue to have the use of
Apartments 701 and 702 and one parking space until the last day of the
month in which the first anniversary of the Closing occurs free of charge,
but subject to the rules and regulations applicable to the residents of the
Property.
21. APPLICABLE LAW. This Agreement shall be construed and governed
in accordance with the laws of the State of New York.
22. ENTIRE AGREEMENT. This Agreement shall constitute the entire
agreement between the parties, and any and all prior understandings or
agreements, whether written or oral, are hereby merged into this Agreement.
This Agreement cannot be modified except by a written instrument signed by
the parties hereto.
23. BINDING AGREEMENT. This Agreement shall not be binding or
effective until properly executed by Buyer and by Seller at which time this
Agreement shall be binding upon, and inure to the benefit of, the parties
hereto and their respective heirs, personal
-6-
<PAGE>
representatives, successors and assigns.
24. SELLER'S CONTINGENCY. The Seller s obligation to complete the
transactions herein shall be contingent upon the receipt by the Seller of
an update of the appraisal of the Property (subject to the Lease Agreement)
previously commissioned by the Seller, which update shall show a value of
the Property (subject to the Lease Agreement) not in excess of $9,500,000.
In the event that the appraisal shows a value in excess of $9,500,000,
Seller may terminate this Agreement upon written notice to the Buyer, such
notice to be given on or before August 4, 1997. Failure to provide such a
notice of termination on or before August 4, 1997 shall be deemed to be a
waiver of the contingency set forth in this paragraph 24. Seller agrees
that it will in good faith promptly order the update of the appraisal and
arrange for its completion in a timely basis.
25. INTERPRETATION. As used in this Agreement:
a. Any gender shall include any other gender; the conjunctive
shall include the disjunctive and the disjunctive shall include the
conjunctive, wherever appropriate; and the plural shall include the
singular and the singular shall include the plural, wherever appropriate.
b. The titles of the sections herein have been inserted as a
matter of convenience of reference only and shall not control or affect the
meaning or construction of any of the terms and provisions hereof.
c. Whenever in this Agreement reference is made to "this
Agreement" or to any provision "hereof" or "hereunder" or words to similar
effect, such reference shall be construed to refer to the within instrument
and the attached exhibits and schedules as an integral part thereof, unless
the context clearly requires otherwise.
26. COUNTERPARTS. The parties hereto may execute this Agreement in
any number of counterparts, each of which, when executed and delivered,
shall have the force and effect of an original; but all such counterparts
shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Instrument to
be executed as of the day and date first written above.
LOUIS S. AND MOLLY B. WOLK FOUNDATION
Dated: August 8, 1997
By: /s/ Leon Germanow
________________________________
Title: Chairman of the Board
HOME PROPERTIES OF NEW YORK, L.P.
By: Home Properties of New York, Inc.
General Partner
Dated: July 25, 1997 /S/ Amy L. Tait
_____________________________________
Amy L. Tait
Executive Vice President
ACKNOWLEDGED AND AGREED
1600 EAST AVENUE ASSOCIATES
By: Home Leasing Corporation
Dated: June 25, 1997 /s/ Amy L. Tait
_____________________________________
Amy L. Tait
Executive Vice President
PURCHASE AGREEMENT
AGREEMENT made this 30th day of April, 1997, between HOME
PROPERTIES OF NEW YORK, L.P., 850 Clinton Square, Rochester, New York 14604
("Seller") and BRIGGS WEDGEWOOD ASSOCIATES, L.P., 850 Clinton Square,
Rochester, New York 14604 ("Purchaser").
W I T N E S S E T H:
1. SALE AND PURCHASE PRICE OF PROPERTY. In accordance with and
subject to the terms and conditions of this Agreement, Seller hereby agrees
to sell to Purchaser and Purchaser agrees to purchase from Seller all
Seller's right, title and interest in and to the premises situate in the
City of Columbus and State of Ohio, comprised of 604 apartment units and
related improvements and commonly known as Wedgewood Apartments (the
"Property").
The sale shall include:
(a) The equipment, fixtures, furnishings, inventory
supplies and other personal property located on the Property and relating
to the operation of the buildings.
(b) All of Seller's right under any warranty and service
contracts relating to the Property and equipment, fixtures, furnishings and
other personal property thereon.
(c) All right, title and interest of Seller, if any, in and
to:
(i) Strips or gores of land adjoining or abutting the
Property, if any, and
(ii) Any land lying in the bed of any streets, road,
avenue, or alley, opened or proposed, in front of,
running through or adjoining the Property.
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2. PURCHASE PRICE OF PROPERTY. The purchase price of the
Property shall be the sum of $8,296,100 payable by wire transfer at
closing. Traditional adjustments for real estate taxes and rents shall be
made at closing.
3. CONTINGENCY. This agreement is contingent upon Purchaser
obtaining acceptable financing through the HUD 221(d)(4) Program. In the
event such contingencies are not satisfied within 120 days of the execution
of this Agreement by both parties. This Agreement shall terminate and
neither party shall have any further rights of obligations as to the other.
Purchaser may waive the contingency and close at any time. Purchaser will
use best efforts to obtain the financing referenced above and take all of
the pre-development steps necessary to close the sale described herein.
4. CLOSING DEED. The closing of the sale and purchase of the
Property will take place on or before June 30, 1997, at the office of
Seller. Seller will deliver the deed to Purchaser or Purchaser's designee
or designees against payment of the purchase price. The deed shall be a
bargain and sale deed with covenant against grantors' acts and shall be
duly executed by Seller and in proper form for recording. It shall be
prepared at Seller's expense and shall convey to Purchaser good and
marketable fee simple title to the Property, free and clear of all liens,
except for liens for payment of past due real estate taxes about which
Purchaser has received notice. The Deed shall contain a lien clause in
compliance with Section 13 of the Lien Law.
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5. EVIDENCE OF TITLE. Seller shall furnish Purchaser with all
tax searches and abstracts of title. Other searches and surveys with
respect to the Property and in Seller's possession within ten (10) days of
full execution of this Agreement.
6. RISK OF LOSS. Risk of loss or damage to the Property until
transfer of title shall be assumed by the Seller. If any substantial
damage to the Property occurs prior to transfer, the Purchaser shall have
the options of either: (i) accepting the Property in its then condition,
obtaining the assignment of any claims for insurance and paying the full
purchase price; or (ii) declaring this contract null and void without any
other liability of Seller.
7. WARRANTIES AND REPRESENTATIONS. Seller warrants and
represents to the Purchaser as follows:
(a) Litigation - There are no suits, actions, proceedings,
or other litigation or known investigations of or against the Seller or the
Property, threatened or pending, which would affect title to the Property
or which would affect or delay consummation of the transaction set forth in
this Agreement.
(b) Liabilities - There are no outstanding liabilities or
obligations of Seller of any nature, whether direct or indirect, absolute,
contingent, accrued or otherwise, which would affect title to the Property
or which would delay consummation of the transactions set forth in this
Agreement. Seller agrees to notify Purchaser if any orders, laws,
regulations, restrictions or rulings affecting Property up to the time of
closing. The representations and warranties contained in this Paragraph 7
and elsewhere in this Agreement shall not survive delivery and recording of
the deed and shall merge therein, except Seller shall remain liable for
damages caused by
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any breach of warranty or representation which arises out of an intentional
material misrepresentation made by Seller.
8. RECORDS AND FILES. At the time of closing, Seller will
deliver to Purchaser all records and files pertaining to the Property.
9. OBJECTION TO TITLE TO PROPERTY. In the event that prior to
or at the closing, conditions are disclosed which render Seller incapable
of delivering title to the Property of the character and nature above
described and such conditions constitute a matter subject to which
Purchaser is not obliged under the provisions of this Agreement to take
title, then Seller shall have a reasonable time after receipt of written
notice thereof within which to remove any obligations to title raised by
Purchaser, and Purchaser shall be entitled to a _____ adjournment for that
purpose or may waive such objection and take such title as Seller can
convey. If Seller cannot deliver title as required hereunder, Purchaser's
sole right or remedy shall be to terminate this Agreement or waive such
objection as described above.
10. PURCHASER'S RIGHT TO GO ON TO THE PROPERTY. Purchaser and
Purchaser's designee or designees, at any reasonable time prior to the
transfer of title, may enter upon the Property to make building surveys,
soils and architectural and engineering analysis, and to do such other acts
as may be desired with respect to the Property at the sole expense of
Purchaser, but only acts that do not substantially change the character and
nature of the Property. Purchaser agrees to hold Seller harmless from and
indemnified against any and all claims for personal injury or property
damage arising out of actions of Purchaser or its designees due to such
entry upon the Property.
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11. TESTING. Purchaser shall have the right to examine the
books and records relating to the operation of the Property and to perform
engineering and architectural studies for the purpose of determining
whether or not the Property can be used for its intended purpose.
Purchaser shall have the right to enter upon the Property from and after
the execution of this Agreement by both parties for the sole purpose of
conducting such studies. In the event such examination or such studies
establish that the Property cannot be used as intended by Purchaser, in
Purchaser's reasonable judgment, Purchaser shall have the right to
terminate this Contract. Purchaser agrees to indemnify and hold the Seller
harmless from any and all liability arising from its entry upon the
Property and the performance of such studies.
Purchaser shall have the right to obtain a written environmental
status report by an engineering firm acceptable to the Purchaser relating
to the Property. Upon receipt of such report, Purchaser agrees to deliver
a copy of such status report, and all analytical results upon which it is
based to Seller and furthermore, Purchaser agrees to maintain the
confidentiality of such status report unless otherwise required by law. If
such report establishes that the Property is not free from the release,
threatened release, storage or disposal of any hazardous waste, toxic
substance, or any other regulated substance, then Purchaser may either
waive the condition of this Paragraph or terminate this Contract by giving
written notice of such termination to Seller within thirty (30) days of the
date hereof. Seller hereby warrants and represents to Purchaser that
Seller has delivered to Purchaser a copy of an environmental audit report
that relates to the Property. Seller makes no other environmental
representations.
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12. BROKER'S COMMISSIONS. Purchaser represents to Seller that
it has not dealt with any broker in connection with the negotiations
leading to this Agreement. Seller shall be responsible for all real estate
commissions.
13. NOTICES. Any notice, demand or request required or agreed
to be given hereunder by either party shall be sufficiently given or
served, if in writing, signed by the party giving it, and mailed by
certified mail, or sent by nationally recognized overnight carrier,
addressed to the party for whom it is intended as follows:
Seller: HOME PROPERTIES OF NEW YORK, L.P.
850 Clinton Square
Rochester, New York 14604
or such other address as Seller may from time to
time designate by notice
Purchaser: BRIGGS WEDGEWOOD ASSOCIATES, L.P.
c/o HOME PROPERTIES OF NEW YORK, L.P.
850 Clinton Square
Rochester, New York 14604
Attn: Ann M. McCormick
or such other address as Purchaser may from time to time designate by
notice. Service shall be complete upon such mailing or sending, except in
case of a notice to change in address in which case service shall be
completed when the notice is received by the addressee.
14. CONDITION OF PROPERTY. Purchaser represents that is has
fully investigated the Property and that subject to its rights set forth in
paragraph 9 and 11 hereof. Purchaser agrees to purchase the Property in
its current "AS IS" condition,
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subject to deterioration and wear and tear through and until closing.
15. MISCELLANEOUS. This Agreement constitutes the entire
agreement between the parties relating to the transaction herein set forth
and shall be binding upon and inure to the benefit of and be enforceable by
the parties hereto, their successors and assigns. This Agreement may not
be amended or terminated except by instrument in writing signed by both
parties. This Agreement shall be governed by the laws of the State of New
York.
PURCHASER:
BRIGGS WEDGEWOOD ASSOCIATES, L.P.
By: Home Properties of New York, L.P.
General Partner
By: Home Properties of New York, Inc.
General Partner
SELLER:
HOME PROPERTIES OF NEW YORK, L.P.
By: Home Properties of New York, Inc.
General Partner
By: /s/ Ann M. McCormick
------------------------------------
Ann M. McCormick
Vice President
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT and Plan of Merger (this "Agreement") is dated as of
this 31st day of July, 1997, and is between Home Properties of New York,
L.P., a limited partnership formed under the laws of New York (the
"Surviving Partnership"), and Chesfield Partnership, a limited partnership
formed under the laws of Pennsylvania (the "Merged Partnership").
WITNESSETH:
WHEREAS, the Merged Partnership is governed by the Pennsylvania
Revised Limited Partnership Act (the "Pennsylvania Act") and, subject to
the receipt of the requisite approval of its limited partners, desires to
merge into the Surviving Partnership;
WHEREAS, the Surviving Partnership was formed under the New York
Revised Limited Partnership Act (the "New York Act") and, subject to the
receipt of the requisite approval, desires to merge with the Merged
Partnership.
NOW THEREFORE, the parties hereto agree as follows:
ARTICLE I
THE MERGER
1.1 AGREEMENT TO MERGE. Subject to the terms and conditions of this
Agreement, including but not limited to the satisfaction of the conditions
in Article VI hereof (the "Merger Conditions"), the Merged Partnership
shall be merged into the Surviving Partnership (the "Merger").
1.2 CERTIFICATE OF MERGER. Subject to the satisfaction of the Merger
Conditions, the general partner of each of the Merged Partnership and
Surviving Partnership shall execute a Certificate of Merger in the form
necessary to effect the merger of the Merged Partnership into the Surviving
Partnership pursuant to applicable law (the "Certificate of Merger") and
the Surviving Partnership shall deliver the Certificate of Merger to the
Department of State of the Commonwealth of Pennsylvania and the State of
New York for filing.
1.3 EFFECTIVE TIME. The Merger shall be effective immediately upon
the later to occur of the filing of the Certificate of Merger by the
Department of State of the State of New York or the Commonwealth of
Pennsylvania, but not later than September 30, 1997 (the "Effective Time").
The date during which the Effective Time occurs is referred to hereinafter
as the "Effective Date". The closing for the Merger (the "Closing") shall
be held on the Effective Date at the offices of Wolf, Block, Schorr
and Solis-Cohen, 350 Sentry Parkway, Building 640, Blue Bell, Pennsylvania,
commencing at 10:00 a.m.
1.4 SOLICITATION OF MERGED PARTNERSHIP APPROVAL. By executing this
Agreement, Henry A. Quinn as the general partner of the Merged Partnership
(the "General Partner") agrees that he will, promptly after the execution
of this Agreement, cause the Merged Partnership to solicit the approval of
its partners to the Merger in compliance with the New York Act and the
Pennsylvania Act (the "Acts"). Furthermore, the General Partner agrees
that he will vote his interests in the Merged Partnership in favor of the
Merger. The General Partner further agrees that, between the date of the
execution of this Agreement and the Effective Time or the earlier
termination of this Agreement, he will not offer to sell or negotiate a
sale of the Property, directly or indirectly, including, without
limitation, pursuant to a merger.
1.5 SOLICITATION OF SURVIVING PARTNERSHIP APPROVAL. By executing this
Agreement, Home Properties of New York, Inc. as the general partner of the
Surviving Partnership ("HME") agrees that it will promptly after the
execution of this Agreement, cause the Surviving Partnership to solicit the
approval of its partners to (a) the Merger in compliance with the Acts and
(b) the Surviving Partnership Amendments.
ARTICLE II
EFFECTS OF THE MERGER
2.1 SURVIVING PARTNERSHIP. The Surviving Partnership shall be the
surviving limited partnership. The Agreement of Limited Partnership of the
Surviving Partnership (the "Surviving Partnership Agreement") shall remain in
full force and effect after the Merger in its form immediately prior to the
Merger, except the Surviving Partnership Agreement shall be amended on the
Effective Date to (a) reflect the issuance of the Units pursuant to
subparagraphs 3.3(a) and (c) below and (b) incorporate the provisions set
forth in EXHIBIT B (EXHIBIT A has been reserved) attached hereto (the
"Surviving Partnership Amendments").
2.2 MERGED PARTNERSHIP. At the Effective Time, the separate existence of
the Merged Partnership shall cease.
2.3 TRANSFER OF ASSETS AND ASSUMPTION OF LIABILITIES. At the Effective
Time, all of the real and tangible or intangible personal property rights,
privileges, immunities, powers and all other assets whatsoever of the
Merged Partnership shall vest in the Surviving Partnership without further
act or deed. Thereafter, the Surviving Partnership shall be liable for all
debts, obligations, liabilities and penalties of the Merged Partnership as
though each such debt, obligation, liability or penalty had been originally
incurred by the Surviving Partnership, provided that the Reserves described
in Section 3.2 of this Agreement shall be established to pay, to the extent
thereof, for any liabilities of the Merged Partnership that the Surviving
Partnership has not specifically agreed to assume as provided herein.
ARTICLE III
CONSIDERATION
3.1 TOTAL CONSIDERATION.The aggregate consideration (the "Consideration")
payable by the Surviving Partnership in connection with the merger of the
Merged Partnership with and into the Surviving Partnership shall be
$9,580,000., subject to adjustments at Closing pursuant to Section 3.9 and
costs paid pursuant to Section 3.10(c) and Section 3.11, plus the amount of
any tax or other reserves held by the Existing Lender (hereinafter
defined).
3.2 CONVERSION OF PARTNERSHIP INTERESTS.At the Effective Time each of the
outstanding interests in the Merged Partnership (the "Interests") shall
automatically, by operation of law and without any action by the holders
thereof, be converted into the right to receive the Conversion Price and
the Deferred Consideration Right as provided below. "Conversion Price"
means the Consideration less the principal amount at the Effective Time of
the existing mortgage loans (collectively the "Existing Loan") covering the
Merged Partnership's property in favor of IDS Life Insurance Company of New
York (the "Existing Lender") less the amount specified by the General
Partner as described in Section 3.11 and less the Reserve Amount
multiplied by the percentage interest of the Interest in the Merged
Partnership. "Reserve Amount" means the sum of: (a) an amount equal to
the current liabilities of the Merged Partnership at the Effective Time
(other than the principal amount of the Existing Loan) (the "Liabilities
Reserve") and (b) $180,000. (the "Indemnity Reserve"); provided, however,
that the Reserve Amount shall be reduced in proportion to the Interests of
partners of the Merged Partnership ("Dissenting Partners") who have
properly indicated their intention to seek payment of the fair value of
their interests under Section 121-1102 of the New York Law. The Reserve
Amount shall be held and disbursed by the Disbursing Agent (as defined in
Section 3.3) as described in Sections 3.4 and 3.13. "Deferred
Consideration Right" with respect to each Interest means the right to
receive the Reserve Amount less all amounts used to satisfy the current
liabilities of the Merged Partnership ("Liabilities Claims") and any
amounts paid or subject to claims of the Surviving Partnership by reason of
a material breach or material misrepresentation of any representations,
warranties, covenants or agreements of the Merged Partnership which survive
Closing (but only during the period of such survival) ("Indemnity Claims")
multiplied by the percentage interest of the Interest in the Merged
Partnership . As of the Effective Time, all Interests in the Merged
Partnership shall cease to be outstanding and shall be canceled and each
holder of an Interest shall, by virtue of the Merger, cease to have any
rights with respect to the Merged Partnership or the Interests therein
except the rights to receive the Conversion Price and the Deferred
Consideration Rights with respect thereto, or the right, if any, to receive
payment from the Surviving Partnership of cash equal to the fair value of
his Interest in the Merged Partnership as provided in Section 121-1102 of
the New York Law. The Surviving Partnership hereby agrees to comply, at
its expense, with all payment and all other substantive and procedural
obligations and requirements which must be complied with respect to
Dissenting Partners, including, without limitation, Section 121-1102 of
the New York Law. Notwithstanding anything to the contrary contained in
this Agreement, (i) if and to the extent that the amount required to be
paid to any Dissenting Partner exceeds the portion (the "Dissenting Partner
Portion") of the Conversion Price which would have been paid to such
partner of the Merged Partnership if such partner was not a Dissenting
Partner, such excess amount shall be paid by the Surviving Partnership in
addition to the Consideration, (ii) the Dissenting Partner Portion paid by
the Surviving Partnership to Dissenting Partners shall be credited against
the Conversion Price and (iii) in the event that the holders of more than
10% of the Interests are Dissenting Partners, the Surviving Partnership
shall have the right to terminate this Agreement by giving written notice
thereof to the Merged Partnership within ten (10) days after the Surviving
Partnership receives notification thereof.
3.3 PAYMENT OF THE CONVERSION PRICE.
(a) The Surviving Partnership shall deliver, in immediately available
funds and in Units (hereinafter defined), to Wolf, Block, Schorr and Solis-
Cohen (the "Disbursing Agent") the Reserve Amount.
(b) The "Cash Portion of the Conversion Price shall be the aggregate
amount of the Conversion Price payable to the holders of Interests who have
failed to provide the Surviving Partnership with evidence satisfactory to it
that such holders are "Accredited Investors" as such term is defined in
Regulation D promulgated by the Securities and Exchange Commission under
the Securities Act of 1933, as amended (the "Securities Act").
Notwithstanding anything to the contrary contained in this Agreement if the
total of the Interests held by Dissenting Partners and by partners who are
not Accredited Investors exceeds fifteen percent of all of the Interests,
the Merged Partnership shall have the right, by giving written notice
thereof to the Surviving Partnership at any time prior to the Effective
Date, to terminate this Agreement.
(c) The Conversion Price payable to the holders of Interests other
than those described in (b) above shall be paid by the issuance of Units of
limited partnership in the Surviving Partnership ("Units"). The number of
Units to be issued to each holder of an Interest shall be the Conversion
Price for the Interest of such holder divided by the average of the daily
market price for the ten (10) consecutive trading days immediately
preceding the Effective Date of the shares of common stock of HME (the
"Effective Date Price"). The market price for each such trading day shall
be the closing price of the common stock on the New York Stock Exchange,
regular way, on such day as reported in the Wall Street Journal, Eastern
Edition.
3.4 PAYMENT WITH RESPECT TO DEFERRED CONSIDERATION RIGHTS.
(a) On the 90th day after the Effective Date, the Disbursing Agent
shall distribute pro rata to the holders of Interests immediately prior to the
Effective Time (other than Dissenting Partners) that portion of the
Liabilities Reserve which has not been paid for the liabilities of the
Merged Partnership as provided in this Agreement and one-half of that
portion of the Indemnity Reserve that has not been paid or subject to
Indemnity Claims.
(b) On the 180th day after the Effective Date, the Disbursing Agent
shall distribute pro rata to the holders of Interests immediately prior to the
Effective Time (other than Dissenting Partners), that portion of the
Indemnity Reserve that has not been paid, disbursed or subject to Indemnity
Claims.
(c) At any time, and from time to time, after the 180th day after
the Effective Date that there is a Final Determination (as defined in Schedule
3.13) that any remaining portion, if any, of the Indemnity Reserve is no
longer subject to Indemnity Claims, the Disbursing Agent shall distribute
such remaining portion pro rata to the holders of Interests immediately
prior to the Effective Time (other than Dissenting Partners).
3.5 INTENTIONALLY OMITTED
3.6 INTENTIONALLY OMITTED
3.7 INTENTIONALLY OMITTED
3.8 PRO-RATED DISTRIBUTION. The initial distribution payable with
respect to Units issued as part of the Consideration shall be made on the date
on which HME pays the dividend to the holders of its common stock that relates
to the earnings for the calendar quarter in which the Units were issued and
shall be pro-rated such that the partners receiving Units shall receive a
pro-rata distribution for the period from the date on which the Units were
issued to and including the last day of the calendar quarter in which the
Units were issued.
3.9 ADJUSTMENTS AT CLOSING. With respect to the Property, the following
shall be adjusted and pro-rated between the Surviving Partnership and the
Merged Partnership on the Effective Date as if the Surviving Partnership
was the owner of the Property as of midnight of the night preceding the
Effective Date and shall be paid in cash at Closing:
A. current fiscal year real estate taxes;
B. water and sewer rents and charges;
C. INTENTIONALLY OMITTED
D. fuel;
E. INTENTIONALLY OMITTED
F. INTENTIONALLY OMITTED
G. charges under the service contracts;
H. laundry income;
I. interest with respect to the Existing Loan; and
J. INTENTIONALLY OMITTED
K. rents.
(i) All rent payments collected on or before the Effective Date
for the month in which the Effective Date occurs shall be pro-rated as between
the parties as of the Effective Date.
(ii) All rent collected after the Effective Date shall be applied
first to the rent due for the month in which such rent was collected and shall
then be applied to the next most recent delinquent rent, including any rent
which was not collected for any period prior to the Effective Date.
Delinquent rent amounts collected with respect to any period prior to the
Effective Date shall belong to former partners of the Merged Partnership
and, if paid to the Surviving Partnership, the Surviving Partnership shall
promptly send such rent to the General Partner for distribution to the
former partners of the Merged Partnership pursuant to the agreement
described in paragraph (e) of Section 6.3.
(iii) All rent collected by the Merged Partnership, prior to
the Effective Date, for months subsequent to Effective Date shall be paid to
the Surviving Partnership at the Effective Time.
(iv) All rent collected for rental periods after the Effective
Date shall belong to the Surviving Partnership and, if paid to any of the
former partners of the Merged Partnership shall be promptly sent to the
Surviving Partnership.
Any error in the calculation of adjustments shall be corrected subsequent
to the Effective Date with appropriate credits to be given based upon
corrected adjustments, provided, however, that the adjustments (except if
errors are caused by misrepresentations) shall be final upon expiration of
the 90th day after the Effective Date.
3.10 COSTS.
(a) The Surviving Partnership and the Merged Partnership shall
each be responsible for one half of any assumption fees payable to the Existing
Lender, provided, however, that if as of the Effective Date any Existing
Loan may be prepaid without a penalty of more than 1% of its principal
balance at the time of prepayment, the entire assumption fee, or, if the
Surviving Partnership elects to prepay such Existing Loan, the entire
prepayment fee, shall be the responsibility of the Surviving Partnership.
(b) The Surviving Partnership shall pay all recording fees, its
attorneys' fees, the costs of obtaining a binder or commitment from a title
insurance company, the premium for its title insurance policy, one half of any
Pennsylvania state and local transfer tax, and all other costs and expenses
incidental to or in connection with closing this transaction customarily
paid for by the purchaser of similar property. The Merged Partnership
shall pay its attorneys' fees, one-half of any Pennsylvania state and local
transfer tax, and all other costs and expenses incidental to or in
connection with closing this transaction customarily paid for by the seller
of similar property.
(c) The amounts payable pursuant to Sections 3.10(a) and/or (b)
by the Merged Partnership on account of any assumption fee payable to the
Existing Lender and/or account of one half of any Pennsylvania state and local
transfer tax shall be charged against the Consideration.
3.11 PAYMENT DIRECTED BY GENERAL PARTNER. At the Effective Time, the
General Partner shall be entitled to direct that a portion of the
Consideration, up to a maximum amount equal to 6%of the Consideration, be
paid by the Surviving Partnership to pay certain closing costs of the
Merged Partnership and to satisfy certain liabilities of the Merged
Partnership.
3.12 CASH HELD BY MERGED PARTNERSHIP. Subject to Section 3.13 below,
on, or at any time prior to, the Effective Time, the General Partner shall
have the right to spend on behalf of the Merged Partnership and/or distribute
to the partners of the Merged Partnership any and all cash held by the Merged
Partnership.
3.13 ESCROW AGREEMENT.The Reserve Amount shall be held and disbursed
pursuant to the terms of an escrow agreement that shall be in form and
substance acceptable to the parties hereto, but which provide at least the
following:
(a) The entire Liabilities Reserve shall be applied to pay current
liabilities of the Merged Partnership before application of the Indemnity
Reserve. To the extent that the Liabilities Reserve shall not be
sufficient to pay the current liabilities of the Merged Partnership the
Indemnity Reserve may be used to fund current liabilities.
(b) The claim resolution procedures set forth in SCHEDULE 3.13
hereof.
3.14 INSURANCE REFUND. At the Effective Time, the Surviving Partnership
shall cause the cancellation of all insurance maintained by the Merged
Partnership and thereafter shall diligently seek to obtain such refunds as
may be due on account of such cancellation. Upon receipt of such refunds,
the Surviving Partnership shall pay them over to the General Partner for
distribution to the former partners of the Merged Partnership.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1 BY THE MERGED PARTNERSHIP. The Merged Partnership hereby makes the
following representations and warranties to the Surviving Partnership as of
the date hereof.
(a) REAL PROPERTY DESCRIPTION. The real property owned by the
Merged Partnership and to become the property of the Surviving Partnership at
the Effective Time consists of one or more parcels of land known as
Chesterfield Apartments which includes 247 apartments, (the "Project")
located in the Township of Middletown and Commonwealth of Pennsylvania, the
"Project") more particularly described on EXHIBIT C, attached hereto,
together and including all buildings and other improvements thereon,
including but not limited to, the 247 apartment units, and all rights of
the Merged Partnership in and to any and all streets, roads, highways,
alleys, driveways, easements and rights-of-way appurtenant thereto (the
foregoing are hereafter collectively referred to as the "Property").
(b) OTHER ITEMS. The following items now in or on the Property if
owned by the Merged Partnership and not by tenants of the Property shall
become the property of the Surviving Partnership at the Effective Time:
(1) all heating, plumbing and lighting fixtures,
(2) ranges, refrigerators, disposals and dishwashers,
(3) water heaters,
(4) any and all bathroom fixtures, wall-to-wall carpeting,
traverse rods, exhaust fans, hoods, signs, screens,
maintenance building, model unit furniture (except for model
unit furniture which is rented), fences, carpeting and runners,
cabinets, mirrors, shelving, any humidifier and dehumidifier
units, air conditioning units, mailboxes, office furniture
(except for office furniture which is rented), and related
equipment in connection with the Project, and
(5) any fixtures appurtenant to the Property and any other
furniture or equipment used in connection with the operation and
maintenance of the Property, including any vehicles used in
connection with the operation and maintenance of the Property
(hereinafter with the items listed in (1)-(4) above,
collectively, the "Other Items").
(c) CONDITION OF OTHER ITEMS. To the best knowledge of the General
Partner and the current officers of Mill Creek Realty Co., substantially all
of the Other Items are in reasonable working order or condition. Except with
respect to the Existing Loan, the Merged Partnership has not subjected any
of the Other Property to any security interests, liens, claims, charges or
other encumbrances.
(d) ORGANIZATION AND AUTHORIZATION. The Merged Partnership is a
limited partnership duly organized, validly existing and in good standing
under the laws of the Commonwealth of Pennsylvania and was either formed under,
or by operation of law has become subject to, the Pennsylvania Act. It has all
requisite power and authority to own, lease and operate its properties and
to carry on its business as now being conducted. It is duly qualified or
licensed to do business as a foreign limited partnership and in good
standing in each jurisdiction in which the property owned, leased or
operated by it makes such qualification or license necessary, except in
each case in those jurisdictions where the failure to be so duly qualified
or licensed and in good standing would not have a Material Adverse Effect.
For purposes of this Agreement, "Material Adverse Effect" means a material
adverse effect on the business, assets, financial condition or results of
operation of the party making the representation or warranty to which such
qualification is being applied.
(e) AUTHORITY RELATIVE TO THIS AGREEMENT. Subject to receipt of
the approval described in Section 1.4 of this Agreement: (i) the Merged
Partnership has full power and authority to execute, deliver and perform
this Agreement and to consummate the transactions contemplated hereby; (ii)
all actions necessary to be taken by it or on its behalf to execute,
deliver and perform this Agreement and to consummate the transactions
contemplated hereby, have been duly and validly taken; and (iii) this
Agreement has been duly and validly executed and delivered by it and,
assuming due execution and delivery by the Surviving Partnership,
constitutes a valid and binding agreement enforceable against it in
accordance with its terms, except to the extent that enforceability may be
limited by applicable bankruptcy, reorganization, insolvency, moratorium or
similar laws affecting the enforcement of creditors' rights generally as at
the time in effect and by general principles of equity, regardless of
whether such enforceability is considered in a proceeding in equity or at
law.
(f) OUTSTANDING LIMITED PARTNERSHIP INTERESTS. SCHEDULE 4.1(F)
hereto lists the current holders of all outstanding limited partnership
interests of the Merged Partnership together with the percentage interest
held by each holder. In the event that any holder listed on SCHEDULE 4.1(F)
transfers any interests prior to the Effective Time, the Merged Partnership
shall provide written notice to the Surviving Partnership of such transfer
prior to the Effective Time, and such notice shall include the names of the
transferor and the transferee, the address of the transferee and the number
of units transferred.
(g) CONSENTS AND APPROVALS; NO VIOLATION. To the best of the Merged
Partnership's knowledge, neither the execution, delivery and performance of
this Agreement nor the consummation of the transactions contemplated hereby
will: (i) conflict with or will result in any breach of any provision of
its Agreement of Limited Partnership or Certificate of Limited Partnership;
(ii) require it to obtain any consent, approval, authorization or permit
from, or file with or notify, any governmental or regulatory authority,
except where the failure to obtain such consent, approval, authorization or
permit, or to make such filing or notification, would not have a Material
Adverse Effect; (iii) except to the extent that the consent of the Existing
Lender is required, constitute a breach or will result in a default under
any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, license, contract, agreement or other instrument or obligation
of any kind to which it is a party or by which it is bound, except for any
such breach or default as would not have a Material Adverse Effect; or (iv)
violate any order, writ, injunction, judgment, decree, law, statute, rule,
regulation or governmental permit or license applicable to it, which
violation would have a Material Adverse Effect, unless any waiver, consent,
approval, authorization, permit, filing or notification necessary to
prevent any such conflict, breach, default or violation has been obtained
prior to the Effective Time.
(h) LIABILITIES. Except (i) as disclosed in SCHEDULE 4.1(H) attached
hereto, (ii) for liabilities and obligations incurred in the normal course
of business of the Merged Partnership and (iii) as otherwise disclosed in
this Agreement, the Merged Partnership has no material liability or
obligation of any nature which in any way materially affects or is related
to the Property or the Other Items whether now due or to become due,
absolute, contingent or otherwise, including liabilities for taxes (or any
interest or penalties thereto).
(i) LITIGATION. Except as disclosed in SCHEDULE 4.1(I) attached
hereto, there is no litigation, proceeding or investigation which, to the best
knowledge of the Merged Partnership, is pending, or, to the best knowledge
of the Merged Partnership, threatened, against or affecting the Merged
Partnership or the Property that might affect or relate to the validity of
this Agreement or any action taken or to be taken pursuant hereto, or that
might have a Material Adverse Effect upon the Property or the Other Items
or any part or the operation thereof, unless fully covered by insurance.
(j) COMPLIANCE WITH LAWS. Except as disclosed in SCHEDULE 4.1(J)
attached hereto, neither the General Partner nor any current officer of Mill
Creek Realty Co. has received written notice, addressed to the Merged
Partnership or Mill Creek Realty Co., which remains outstanding that it has not
complied with and is in default under, or in violation of, or received any
written notice which remains outstanding that the Merged Partnership, the
Property or the Other Items may be in violation of, any law, ordinance,
rule, regulation or code or condition in any approval or permit pursuant
thereto (including without limitation, any zoning, sign, environmental,
labor, safety, health or price or wage control, ordinance, rule, regulation
or order of) applicable to the ownership, development, operation or
maintenance of the Property or the Other Items.
(k) LEASES. There are no written leases affecting the Property to
which the Merged Partnership is a party with a term greater than one year.
The rent roll attached hereto as SCHEDULE 4.1(K) is true and correct as of
the date of this Agreement.
(l) CONDEMNATION. The Merged Partnership has not received written
notice of pending condemnation of the Property, or any part thereof, or of any
plans for improvements which might result in a special assessment against the
Property.
(m) INTENTIONALLY OMITTED
(n) SERVICE CONTRACTS. There are no service contracts with respect
to the Property or the Other Items which will continue in effect after the
Closing except as set forth on SCHEDULE 4.1(N) attached hereto.
(o) EXECUTORY CONTRACTS. There are no executory contracts connected
with the Property or the Other Items, except as set forth on SCHEDULE 4.1(O)
attached hereto.
(p) ONGOING PERFORMANCE. Until the Effective Time, the Merged
Partnership shall continue to fulfill all of its obligations under the terms
of the Existing Mortgage, the leases encumbering the Property, the service
contracts and the executory contracts, and the Merged Partnership shall
operate, and perform routine maintenance and repair with respect to, all
landscaping, buildings, fixtures and facilities, including, without
limitation, the Other Items, in accordance its current practices. With
respect to non-routine maintenance or repair, the following shall apply:
(1) Except in the case of emergency, the Merged Partnership
shall not arrange for the making of any non-routine repair or
replacement costing in excess of $10,000 in any one instance
without the prior written consent of the Surviving Partnership
which consent shall not be unreasonably withheld and shall be
deemed given if it is not denied by written notice received by
the Merged Partnership within 3 business days after request
for such consent was received by the Surviving Partnership.
If such consent is given or if such cost is less than $10,000,
in the event that the Merger occurs, the cost of such repair
or replacement shall be the responsibility of the Surviving
Partnership and if any amount on account of such cost is paid
by the Merged Partnership prior to Closing, the Surviving
Partnership shall reimburse that to the Merged Partnership
at Closing.
(2) Any non-routine repairs or replacements arranged by the
Merged Partnership which are not the responsibility of the
Surviving Partnership pursuant to Section 4.1(p)(1) above or
Section 4.1(p)(3) below shall be a liability of the Merged
Partnership which shall not be assumed by the Surviving
Partnership.
(3) In the event that any non-routine repairs or replacements
are required on an emergency basis, which emergency is such as
does not comfortably allow the passage of the time period
specified above for obtaining the approval of the Surviving
Partnership, the Merged Partnership may arrange for such repair
or replacement, and in the event that the Merger occurs,
the cost thereof shall be the responsibility of the Surviving
Partnership and at Closing the Surviving Partnership shall
reimburse the Merged Partnership for any amount paid on account
of such repair or replacement prior to Closing.
(q) APPLIANCES. Except as previously disclosed to the Surviving
Partnership, all of the ranges and refrigerators in the Property are the
property of the Merged Partnership and not of the tenants.
(r) FINANCIAL INFORMATION. The financial information attached hereto
as SCHEDULE 4.1(R) (income and expenses for calendar year 1995 and 1996) is
substantially true and accurate.
(s) ENVIRONMENTAL. Except as identified in SCHEDULE 4.1(S) attached
hereto, the Merged Partnership has received no notice of any violation of any
applicable Environmental Laws (below defined) with respect to the Property.
"Environmental Laws" shall mean all federal, state and local laws,
statutes, ordinances and codes relating to the protection of the
environment and/or governing the use, storage, treatment, generation,
transportation, processing, handling, production or disposal of any
Hazardous Substance and the rules, regulations, and orders with respect
thereto. "Hazardous Substance" means, without limitation, any flammable,
explosive or radioactive material, polychlorinated biphenyl, petroleum or
petroleum product, methane, hazardous materials, hazardous wastes,
hazardous or toxic substances or related materials, as defined in any
applicable Environmental Laws. From the date of acceptance hereof to and
including the Effective Date or the earlier termination of this Agreement,
the Merged Partnership shall promptly provide the Surviving Partnership
with a copy of any notice, citation, complaint or other directive from any
person, entity or governmental authority whereby compliance with
Environmental Laws is called into question with respect to the Property.
(t) TAXES. Except for state and local realty transfer taxes (which
are governed by Section 3.10) and real estate taxes (which are governed by
Section 3.9), the Merged Partnership has filed or will file when due all
notices, reports and returns of Taxes (as defined below) required to be
filed before the Effective Date and has paid or, if due after the date
hereof and prior to the Effective Date, will pay, all Taxes and other
charges for the periods shown to be due on such notices, reports and
returns. "Taxes" shall mean all taxes, charges, fees, levies or other
assessments, including, without limitation, income, excise, property, sale,
gross receipts, employment and franchise taxes imposed by the United
States, or any state, county, local or foreign government, or subdivision
or agency thereof with respect to the assets or the business of the Merged
Partnership, and including any interest, penalties or additions
attributable thereto.
4.2 BY THE SURVIVING PARTNERSHIP. The Surviving Partnership hereby
makes the following representations and warranties to the Merged Partnership
as of the date hereof.
(a) ORGANIZATION AND AUTHORIZATION. The Surviving Partnership is
a limited partnership duly organized, validly existing and in good standing
under the laws of the State of New York and has adopted the New York Act.
It has all requisite power and authority to own, lease and operate its
properties and to carry on its business as now being conducted. It is duly
qualified or licensed to do business as a foreign limited partnership and in
good standing in each jurisdiction in which the property owned, leased or
operated by it makes such qualification or license necessary, except in
each case in those jurisdictions where the failure to be so duly qualified
or licensed and in good standing would not have a Material Adverse Effect.
(b) AUTHORITY RELATIVE TO THIS AGREEMENT. Subject to the receipt
of the approvals described in Section 1.5 and in subparagraph (e) of Section
6.3 of this Agreement: (i) the Surviving Partnership has full power and
authority to execute, deliver and perform this Agreement and to consummate
the transactions contemplated hereby; (ii) all actions necessary to be
taken by it or on its behalf to execute, deliver and perform this Agreement
and to consummate the transactions contemplated hereby, have been duly and
validly taken; and (iii) this Agreement has been duly and validly executed
and delivered by it and, assuming due execution and delivery by the Merged
Partnership, constitutes a valid and binding agreement enforceable against
it in accordance with its terms, except to the extent that enforceability
may be limited by applicable bankruptcy, reorganization, insolvency,
moratorium or similar laws affecting the enforcement of creditors' rights
generally as at the time in effect and by general principles of equity,
regardless or whether such enforceability is considered in a proceeding in
equity or at law.
(c) CONSENTS AND APPROVALS; NO VIOLATIONS. To the best of the
Surviving Partnership's knowledge, as of the Effective Time, neither the
execution, delivery and performance of this Agreement nor the consummation
of the transactions contemplated hereby will: (i) conflict with or will
result in any breach of any provision of its Agreement of Limited Partnership
or Certificate of Limited Partnership; (ii) require it to obtain any consent,
approval, authorization or permit from, or file with or notify, any
governmental or regulatory authority, except where the failure to obtain
such consent, approval, authorization or permit, or to make such filing or
notification, would not have a Material Adverse Effect; (iii) constitute a
breach or will result in a default under any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, license, contract,
agreement or other instrument or obligation of any kind to which it is a
party or by which it is bound, except for any such breach or default as
would not have a Material Adverse Effect; or (iv) violate any order, writ,
injunction, judgment, decree, law, statute, rule, regulation or
governmental permit or license applicable to it, which violation would have
a Material Adverse Effect, unless, any waiver, consent, approval,
authorization, permit, filing or notification necessary to prevent any such
conflict, breach, default or violation has been obtained prior to the
Effective Time.
(d) PARTNERSHIP INTERESTS. On the Effective Date, the Units to be
issued as provided in this Agreement shall be duly issued by the Surviving
Partnership and the recipients will be duly admitted as limited partners of
the Surviving Partnership.
(e) SURVIVING PARTNERSHIP AGREEMENT. A true, correct and complete
copy of the Surviving Partnership Agreement is attached hereto as EXHIBIT "D".
The Surviving Partnership hereby agrees that, with the following exceptions,
the Surviving Partnership Agreement shall not be further amended on or
prior to the Effective Date: (i) the Surviving Partnership Amendments, (ii)
amendments in connection with the issuance of additional shares under HME's
Dividend Reinvestment Stock Purchase, Resident Stock Purchase and Employee
Stock Purchase Plan, (iii) amendments in connection with mergers or other
transactions similar to the Merger which are currently in process wherein
additional Units are issued in connection with the acquisition of real
property or of interests in entities which own real property, the
provisions of which have been disclosed in writing to the Merged
Partnership prior to the execution of this Agreement, and (iv) the
formation of a subsidiary of HME to hold Units owned by HME.
ARTICLE V
COVENANTS OF THE PARTIES
5.1 FURTHER ASSURANCE. Subject to the terms and conditions of this
Agreement, each of the parties hereto will use reasonable efforts to take,
or cause to be taken, all actions, and to do, or cause to be done, all
things necessary under applicable laws and regulations to consummate the
transactions contemplated by this Agreement, including, but not limited to,
taking any actions necessary to cause the Merger Conditions to be
satisfied.
5.2 REPRESENTATIONS AND WARRANTIES. Each of the parties hereto shall
give written notice to the other party promptly upon the occurrence of, or
upon becoming aware of, either: (i) the occurrence of any event which makes
any representation or warranty contained in this Agreement not true in any
material respect; or (ii) any material and adverse development in the
condition (financial or otherwise) or operations of such party.
5.3 REPURCHASE AGREEMENTS. The Surviving Partnership hereby covenants
and agrees that it will, on or prior to the Effective Date, enter into an
agreement with each of the partners of the Merged Partnership other than
Cash Conversion Holders and Dissenting Partners whereby the Surviving
Partnership agrees that:
(a) Upon the written request of any such partner, the Surviving
Partnership will purchase any or all of the Units held by such partner at a
purchase price per Unit equal to the Effective Date Price (as defined in
Section 3.3(c) above). The written notice must be received by the
Surviving Partnership on or before the date which is one hundred eighty (180)
days after the Effective Date.
(b) Upon the written request of any such partner which is made (i)
after the date which is one hundred eighty (180) days after the Effective Date
and (ii) on or before the date which is the later of (A) the last day of any
holding period (which holding period shall not, in any event, exceed one
year after the Effective Date) during which, in order to comply with the
requirements of the SEC, such partners are not permitted to convert Units
into shares of common stock of HME and (B) the date on which the SEC
declares effective the Registration Statement required to be filed with the
SEC pursuant to Section 5.11 hereof, the Surviving Partnership will
purchase any or all of the Units held by such partner at a purchase price
per Unit equal to the average of the daily market price for the ten (10)
consecutive trading days immediately preceding the date of such partner's
request of the shares of common stock of HME.
5.4 ACCESS TO INFORMATION. Between the date of this Agreement and the
Effective Date, the Surviving Partnership, on the one hand, and the Merged
Partnership, on the other hand, will each, during ordinary business hours
and upon reasonable advance notice, give to the other and their authorized
representatives reasonable access to inspect their books, records, offices
and other facilities and properties; provided, however, that: (i) any such
investigation shall be conducted in such a manner as not to interfere
unreasonably with the operation of the other's business; (ii) no party
shall be required to take any action which would constitute a waiver of the
attorney-client privilege; and (iii) no party need supply the other with
any information which it is under a legal obligation not to supply.
5.5 FINANCIAL ACCESS.
(a) Upon the demand of the Surviving Partnership, the General
Partner will provide a signed representation letter substantially in the form
of EXHIBIT "E" attached hereto. The General Partner and the Merged Partnership
will provide access to the Surviving Partnership's representative to all
financial and other information relating to the Merged Partnership and the
Property as is sufficient to enable them to prepare audited and pro-forma
financial statements, in conformity with Regulation S-X of the Securities
and Exchange Commission (the "Commission") and any registration Statement,
report or disclosure statement to be filed with the Commission.
(b) Prior to the Effective Date the Surviving Partnership shall
from time to time, promptly after request, supply to the Merged Partnership,
and certify to the Merged Partnership the accuracy and completeness of, copies
of any financial statements and records and other documents and information
requested by the General Partner regarding the Surviving Partnership and
HME which are available to the public.
(c) The Parties hereto recognize that, at the Effective Date, the
Merged Partnership will be treated for federal income tax purposes as having
contributed all of its assets to the Surviving Partnership in exchange for
the Consideration, which the Merged Partnership will be deemed to have
distributed to its Partners in complete liquidation of the Merged
Partnership. Consequently, the Merged Partnership will terminate for
federal income tax purposes at the Effective Time. The Parties hereto
shall prepare their tax returns for their respective taxable years which
include the Effective Date consistent with that characterization of the
transaction. The Surviving Partnership shall make available to the General
Partner (and its representatives) promptly upon request, all financial and
other information relating to the Merged Partnership which is necessary to
permit the Merged Partnership to file its tax returns for its taxable year
ended on the Effective Date.
5.6 INTENTIONALLY OMITTED
5.7 NEGATIVE COVENANTS. The Merged Partnership agrees that, prior to
the Effective Date, it will not take any of the following actions without first
obtaining the Surviving Partnership's prior written consent, which consent
shall not be unreasonably withheld or delayed.
A. Create, incur or assume any indebtedness for money borrowed,
including obligations in respect of capital leases, except: (i) purchase
money mortgages granted in connection with the acquisition of property in the
ordinary course of business consistent with past practice; and (ii) short-
term indebtedness for borrowed money in accordance with loan agreements and
lines of credit in effect as of the date hereof.
B. Assume, guarantee, endorse or otherwise become liable or
responsible (whether directly, contingently or otherwise) for the obligations
of any other person except in the ordinary course of business consistent with
past practices.
C. Sell or otherwise dispose of or abandon any of its assets except
in the ordinary course of business.
D. Increase the rate or terms of: (i) compensation payable or to
become payable to any of its employees; or (ii) any bonus, insurance, pension
or other employee benefit plan, payment or arrangement made to, for or with
any employee, except salary increases to site employees not exceeding 3%
occurring in the ordinary course of business in accordance with its
customary practices (which shall include normal periodic performance
reviews and related compensation and benefit increases).
E. Enter into any agreement, commitment or transaction (including
without limitation any borrowing, capital expenditure or capital financing),
material to the business, operations or financial condition of its
business, except agreements, commitments or transactions in the ordinary
course of business consistent with past practice.
F. Transfer, mortgage, pledge, grant any security interest in or
permit the imposition of any lien or other encumbrance on any of its assets
other than in the ordinary course of business consistent with past practice.
5.8 MANAGEMENT AGREEMENTS. On or prior to the Effective Date, the
Merged Partnership shall terminate any agreements pertaining to the management
of the Property.
5.9 CLOSING DOCUMENTS. At the Effective Time, the Merged Partnership
shall deliver to the Surviving Partnership a certificate of title and any
necessary transfer documents relating to any vehicles, a current rent roll
("Rent Roll") certified, as of the date of the Effective Date, which shall
include a list of all tenants, all rental obligations of each tenant with
respect to the Property and all security deposits (including all interest
due to tenants pursuant to Pennsylvania or other applicable laws). At the
Closing, the Merged Partnership shall transfer to the Surviving Partnership
an amount equal to the aggregate amount of the security deposits shown on
the Rent Roll. At the Effective Time, the Merged Partnership shall also
deliver to the Surviving Partnership complete originals of each lease
listed on the Rent Roll.
5.10 INSPECTION. Upon and after execution of this Agreement by both
parties, the Merged Partnership agrees that the Surviving Partnership and
its authorized representatives shall have the right and privilege to enter
upon the Property and the Merged Partnership's offices, upon reasonable
notice, during regular business hours, for the purpose of gathering such
information and conducting such environmental and engineering studies or
other tests and reviews as the Surviving Partnership may deem appropriate
and necessary. All such inspections, studies, tests and reviews shall be at
the Surviving Partnership's sole expense. The Merged Partnership agrees to
cooperate with the Surviving Partnership by making available to the
Surviving Partnership such records, plans, drawings or other data as may be
in their or the Merged Partnership's possession or control relating to the
Property and its operation; provided, however, that the Surviving
Partnership agrees to indemnify the Merged Partnership of and from any loss
or damage occasioned by such entry, and agrees further to restore to its
original condition, at the Surviving Partnership's own cost and expense,
any property disturbed by such entry.
5.11 SUFFICIENT REGISTERED SHARES. The Surviving Partnership hereby
represents and warrants to and covenants with the Merged Partnership and
its partners that the Effective Date and thereafter for so long as any
Units issued to the partners of the Merged Partnership are outstanding
there shall be at all times, a sufficient number of reserved shares of HME
to permit the conversion of all outstanding Units into shares of HME
pursuant to the terms of the Surviving Partnership Agreement. Within 10
days after the Effective Date, the Surviving Partnership agrees to file a
registration statement (the "Registration Statement") with the SEC
registering the resale of the shares of common stock of HME into which the
Units may be converted and to use reasonable commercial efforts to have the
registration promptly declared effective by the SEC. Notwithstanding
anything to the contrary contained in this Agreement, in the event that the
Surviving Partnership has not filed the Registration Statement with the SEC
by the date (the "Outside Filing Date") which is the 30th day after the
Effective Date, then for and with respect to each day during the period
between the Outside Filing Date and the date on which the Registration
Statement is filed with the SEC, the Surviving Partnership shall pay to the
former partners of the Merged Partnership which hold Units, as liquidated
damages and not as a penalty, the sum of $10,000, which sum shall be
apportioned pro rata among such former partners of the Merged Partnership.
5.12 TAX PROVISIONS. The Surviving Partnership agrees to observe and
comply with the following:
(a) The Surviving Partnership will use the traditional method
(and not the curative or remedial method), as contemplated by Treasury
Regulations Section 1.704-3(b) to allocate book-tax differences with
respect to the assets which are deemed contributed to the Surviving
Partnership by the Merged Partnership.
(b) Home Properties agrees that for a period of 5 years following
the Effective Time, (i) the Surviving Partnership shall not restructure the
share of the Surviving Partnership's debt of the former partners of the
Merged Partnership who shall have received Units in the Surviving
Partnership (the "Unit Partners") in such manner as to cause a reduction in
the amount of Unit Partners' share of non-recourse debt allocable to and
encumbering the Property without the Unit Partners' prior written consent,
and (ii) the Surviving Partnership will not dispose of any of its interest
in the Real Property, unless such disposition is structured as a tax-
deferred, like-exchange under Section1031 of the Code, or otherwise is
substantially tax-deferred under the Code. Any property or real estate
assets acquired by the Surviving Partnership pursuant to such tax-deferred,
like- exchange shall remain subject to the restriction on disposition
contained hereunder until the end of the aforesaid 5-year period. In the
event that the Surviving Partnership takes any such action during such 5-
year period, the Surviving Partnership shall indemnify and save harmless
the Unit Partners from and against any federal and state income tax
liability, including but not limited to: (i) income taxes suffered as a
result of all payments made under this subsection; and (ii) interest,
penalties and the reasonable fees of attorneys and accountants.
(c) As a partner contributing interests in a partnership in
exchange for a limited partnership interest in the Surviving Partnership,
the Unit Partners will receive annually from the Surviving Partnership Form
1065, Schedule K-1, Partner's Share of Income, Credit, Deductions, etc.
This form will also be part of the tax return, Form 1065, filed by the
Surviving Partnership with the Internal Revenue Service. The Surviving
Partnership represents that the Schedule K-1 submitted to Unit Partners for
use in the preparation of their tax returns will reflect the allocation to Unit
Partners as partners of a share of non-recourse liabilities in accordance
with Reg. Sec. 1.752-3 of the Internal Revenue Code, such that as a result
of the allocation the Unit Partners shall recognize no income upon the
contribution of the Property to the Surviving Partnership, and for a period
of 5 years following the Effective Time except to the extent cash
distributions from the Surviving Partnership to a Unit Partner exceeds such
Unit Partner's basis in his or her Units. The Merged Partnership
represents that as of December 31, 1996: (i) their aggregate built in gain
determined in accordance with the principals set forth in Section 704(c) of
the Internal Revenue Code of 1986 ("Code") is as set forth on SCHEDULE 5.12
assuming that the Property has a fair market value of $9,580,000 as of the
date of the Merger; (ii) the amount of nonrecourse debt encumbering the
Property is $6,919,541; (iii) the capital account of each of the Unit
Partners is as set forth on SCHEDULE 5.12. The Surviving Partnership's
representation contained in this Section 5.12 (c) is conditioned upon the
accuracy of the representations contained in the preceding sentence.
ARTICLE VI
CONDITIONS OF MERGER
6.1 MANDATORY CONDITIONS. Neither the Surviving Partnership nor the
Merged Partnership shall have any obligation to execute or file the
Certificate of Merger as described in Section 2.1 unless, on or before
September 30, 1997:
(a) OTHER CONDITIONS. All of the contingencies and conditions
(including, without limitation, the conditions set forth in Sections 6.2 and
6.3 hereof) contained in this Agreement have been satisfied or waived as
provided herein.
(b) OTHER MERGERS. The conditions to the mergers and other
transactions of the Surviving Partnership with the entities listed on the
attached SCHEDULE 6.1 also shall have been satisfied and the mergers are to
occur simultaneously with the Merger of the Merged Partnership into the
Surviving Partnership.
(c) EXISTING LENDER APPROVAL. The Existing Lender shall have
approved the Merger and shall have agreed to the assumption of the Existing
Loan by the Surviving Partnership (unless the Surviving Partnership elects
to prepay the Existing Loan pursuant to Section 3.10(a) hereof).
6.2 CONDITIONS TO MERGED PARTNERSHIP'S OBLIGATIONS. On the date all of
the requirements set forth in Section 6.1 hereof have been satisfied (the
"Satisfaction Date"), the general partner of the Merged Partnership shall
execute the Certificate of Merger and deliver it to the Surviving
Partnership. The general partner of the Merged Partnership shall have no
obligation to execute and deliver the Certificate of Merger unless:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Surviving Partnership set forth herein shall be true and
correct in all material respects as of the Satisfaction Date, as certified
in writing by the general partner of the Surviving Partnership.
(b) COVENANTS. The Surviving Partnership has complied in all
material respects with the covenants made by it in this Agreement to be
complied with by it from the date hereof through the Satisfaction Date.
(c) APPROVAL. The Merged Partnership shall have obtained the
requisite approval of its limited partners to the Merger and the other
transactions described in this Agreement on the terms and conditions described
herein.
(d) OPINION OF COUNSEL. The Surviving Partnership's independent
counsel shall have delivered an opinion of counsel in the form of EXHIBIT F
attached hereto.
(e) INTENTIONALLY OMITTED
(f) REGISTRATION RIGHTS AGREEMENT. The partners of the Merged
Partnership who receive Units and the Surviving Partnership shall have entered
into a registration rights agreement on customary terms, including, without
limitation, the granting of piggyback registration rights.
(g) MARYLAND ANTI-TAKEOVER STATUTES. The Board of Directors of HME
shall have taken all action necessary so that the transactions contemplated by
this Agreement including, without limitation, the issuance of Units and the
conversion of Units into shares of HME, shall be irrevocably exempt from
the operation of Section3-601 ET SEQ. (the "business combination"
statute) and Section3-701 ET SEQ. (the "control share acquisition"
statute) of the Maryland General Corporation Law (collectively, the
"Maryland Anti-Takeover Statutes") and from any provisions of the Articles
of Incorporation and Bylaws of HME that may have the effect of limiting the
acquisition of Units and shares of HME in connection with the transactions
contemplated in this Agreement, including without limitation, Article 7 of
the Articles of Incorporation of HME. The Surviving Partnership and its
counsel shall have confirmed to the Merged Partnership's satisfaction that
this Agreement, the Merger and the other transactions contemplated hereby
are exempt from the operation of the Maryland Anti-Takeover Statutes.
6.3 CONDITIONS TO SURVIVING PARTNERSHIP'S OBLIGATIONS. On the next day
following the date that the Surviving Partnership receives the Certificate
of Merger executed by the general partner of the Merged Partnership (the
"Delivery Date"), the general partner of the Surviving Partnership shall
execute the Certificate of Merger, deliver it to the Department of State of
the State of New York and the Commonwealth of Pennsylvania for filing and
notify the Merged Partnership of such delivery. The general partner of the
Surviving Partnership shall have no obligation to execute or deliver the
Certificate of Merger unless:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Merged Partnership set forth in this Agreement shall be true
and correct in all material respects as of the Delivery Date, as certified in
writing by the General Partner.
(b) COVENANTS. The Merged Partnership has complied with the
covenants made by it in this Agreement to be complied with by it from the date
hereof through the Delivery Date.
(c) CONDITION OF PROPERTY. There are on the Delivery Date, 247
apartment units in rentable condition and in compliance with federal, state,
county or local laws, ordinances, rules and regulations.
(d) APPROVALS. The Surviving Partnership represents and warrants
that it has obtained the requisite approval of the Board of Directors of HME
to the Merger and the other transactions described in this Agreement on the
terms and conditions described herein, including, without limitation, the
Surviving Partnership Amendments. The Surviving Partnership, on or prior
to the Effective Date shall have obtained the requisite approval of its
limited partners and the State of Michigan Retirement Systems to the Merger
and the other transactions described in this Agreement on the terms and
conditions described herein. The Surviving Partnership agrees to recommend
to the Board of Directors of HME, the limited partners of the Surviving
Partnership and the State of Michigan Retirements Systems that they vote
in favor of the Merger and the other transactions described in this
Agreement.
(e) GENERAL PARTNER AGREEMENT. The General Partner shall have
executed an agreement whereby he agrees that he will be responsible for making
all final distributions to the former partners of the Merged Partnership and
shall indemnify the Surviving Partnership from all claims relating thereto.
(f) OPINION OF COUNSEL. The Merged Partnership's independent
counsel shall have delivered an opinion of counsel in the form of EXHIBIT G
attached hereto.
ARTICLE VII
TERMINATION
7.1 TERMINATION. If the conditions of Section 6.1 of this Agreement are
not satisfied, either party, at its option and upon notice to the other party,
may terminate this Agreement. If the conditions of Section 6.2 of this
Agreement are not satisfied, the Merged Partnership, at its option and upon
written notice to the Surviving Partnership, may terminate this Agreement.
If the condition of Section 6.3 of this Agreement are not satisfied, the
Surviving Partnership, at its option and upon written notice to the Merged
Partnership, may terminate this Agreement. Upon the termination of this
Agreement as provided herein, neither party shall have any further rights
or obligations hereunder and neither party shall take any action to file
the Certificate of Merger.
ARTICLE VIII
TITLE MATTERS
8.1 TITLE POLICIES AND SURVEYS. The Merged Partnership has, prior to the
date of this Agreement, furnished and delivered to the Surviving
Partnership a copy of the most recent title policy issued with respect to
the Property and a copy of the most recent survey of the Property.
8.2 OBJECTIONS TO TITLE.
(a) The obligation of the Surviving Partnership to execute or file
the Certificate of Merger is conditioned upon the ability of the Surviving
Partnership to obtain title insurance with respect to the Property
insuring that, as of the Effective Date, title to the Property is not
subject to any liens, encumbrances or other title objections other than the
lien of the mortgage securing the Existing Loan, any apartment leases for
tenants of the Property and the title exceptions identified in EXHIBIT H
attached hereto.
(b) The Merged Partnership agrees that, upon the request of the
Surviving Partnership, it will provide an affidavit in such customary form as
shall allow the Surviving Partnership to obtain a non-imputation endorsement
to the title policy purchased by the Surviving Partnership.
ARTICLE IX
MISCELLANEOUS
9.1 AMENDMENT. This Agreement may be amended only by a writing executed
by the Surviving Partnership and the Merged Partnership.
9.2 WAIVER OF COMPLIANCE. Except as otherwise provided in this
Agreement, any failure of any party to comply with any obligation, covenant,
agreement or condition herein may be waived by the party entitled to the
benefits thereof only by a written instrument signed by the party granting such
waiver, but such waiver or failure to insist upon strict compliance with
such obligation, covenant, agreement or condition shall not operate as a
waiver of, or estoppel with respect to, any subsequent or other failure.
9.3 ENTIRE AGREEMENT. This Agreement, including the documents,
schedules, certificates and instruments referred to herein, embody the entire
agreement and understanding of the parties hereto in respect of the
transactions contemplated by this Agreement. There are no restrictions,
promises, representations, warranties, covenants or undertakings, other
than those expressly set forth or referred to herein or therein. This
Agreement supersedes all prior agreements and understandings between the
parties with respect to such transactions.
9.4 ASSIGNMENT. This Agreement and all obligations and rights of the
parties hereunder may not be assigned by either party. Commencing with the
Effective Time, the General Partner and the former partners of the Merged
Partnership shall be third-party beneficiaries of this Agreement.
9.5 GOVERNING LAW. This Agreement shall be governed by the laws of the
Commonwealth of Pennsylvania, without reference to its principles of
conflicts of law.
9.6 INTERPRETATION. The article and section headings contained in this
Agreement are solely for the purpose of reference, are not part of the
agreement of the parties and shall not in any way affect the meaning or
interpretation of this Agreement. Article and Section references which do
not otherwise specify, are to the designated Article or Section of this
Agreement.
9.7 SEVERABILITY. The invalidity or unenforceability of any particular
provision of this Agreement shall be construed in all respects as if such
invalid or unenforceable provision were omitted. All provisions of this
Agreement shall be enforced to the full extent permitted by law.
9.8 NOTICES. All notices given pursuant to any provision of this
Agreement shall be in writing and shall be effective only if delivered
personally, or sent by registered or certified mail, postage prepaid or
sent by nationally recognized overnight carrier, to the addresses set forth
below:
To Home Properties:
Home Properties of New York, L.P.
850 Clinton Square
Rochester, New York 14604
Attention: Norman Leenhouts
With a copy to Ann M. McCormick
at the same address
To the Merged Partnership
General Partner:Henry A. Quinn
100 Chetwynd Drive
Rosemont, Pennsylvania 19010
With a copy to:
Bruce R. Lesser, Esq.
Wolf, Block, Schorr and Solis-Cohen
350 Sentry Parkway
Building 640
Blue Bell, Pennsylvania 19422
And a copy to:
John S. Roberts, Jr., Esq.
Wolf, Block Schorr and Solis-Cohen
Twelfth Floor, Packard Building
15th and Chestnut Streets
Philadelphia, Pennsylvania 19102
9.9 CONFIDENTIALITY. By execution of this Agreement and except as
otherwise provided herein, prior to the Effective Time the Surviving
Partnership agrees to keep any and all information obtained in or in
connection with the due diligence process with respect to the Merged
Partnership, its operations, the Real Property and Other Items strictly
confidential, and will not disclose any such information without the Merged
Partnership's prior written consent, except to the extent required by law.
9.10 BROKER'S COMMISSION. The Merged Partnership represents to the
Surviving Partnership that it did not employ any broker in connection with
this sale other than Mill Creek Realty Co., and the Merged Partnership
hereby agrees that, pursuant to Section 3.11 hereof, it will cause the
Surviving Partnership to pay any fees or commissions payable to Mill Creek
Realty Co. in connection with the transaction described in this Agreement.
The Surviving Partnership represents that it employed F.M. Stec &
Associates as broker and agrees that it will pay any fees or commissions
due as a result of the Surviving Partnership's employment of that broker.
The parties each agree to indemnify the other for any and all claims and
expenses, including legal fees if any other fees or commission is
determined to be due by reason of the employment of any other broker by the
indemnifying party.
9.11 CONDITION OF PROPERTY AND OTHER ITEMS
(a) The entire agreement between the parties hereto with respect to
the Property and the Other Items and the sale thereof is expressly set forth in
this Agreement, and the parties are not bound by any agreement,
understandings, provisions, conditions, representations or warranties other
than as are expressly set forth and stipulated herein. Without in any
manner limiting the generality of the foregoing, the Surviving Partnership
acknowledges that it and its representatives have fully inspected the
Property and the Other Items, and are fully familiar with the physical and
financial condition thereof, and that the Property and the Other Items will
be accepted by the Surviving Partnership pursuant to the Merger in an "as
is" and "where is" condition as a result of such inspection and
investigations and not in reliance on any agreement, understanding,
condition, warranty or representation made by the General Partner, the
Merged Partnership or any agent or employee of the Merged Partnership
(except as expressly elsewhere provided in this Agreement) as to the
condition thereof, as to any permitted use thereof, or as to the income or
expense in connection therewith, or as to any other matter in connection
therewith; and the Surviving Partnership further acknowledges that neither
the Merged Partnership nor any party acting on behalf of the Merged
Partnership has made or shall be deemed to have made any such agreement,
condition, representation or warranty (except as expressly elsewhere
provided in this Agreement).
(b) The Surviving Partnership shall accept the Property and the
Other Items at the time of Closing in the same condition as the same are as
of the date of this Agreement as such condition shall have changed by reason
of wear and tear, damage by fire or other casualty and vandalism.
(c) If the Merger occurs, the Merged Partnership shall assign to the
Surviving Partnership any net insurance and/or condemnation proceeds
received by the Merged Partnership with respect to the Property, less any
amount expended by the Merged Partnership for collection, repair,
restoration or related expenses.
9.12 DEFAULT.
(a) If the Surviving Partnership defaults hereunder at or prior to
the Effective Date by failing to complete Closing in accordance with the terms
of this Agreement or in any other respect, then on the Effective Date (or
sooner in the event of an anticipatory breach) the Surviving Partnership
shall pay to the Merged Partnership the sum of $150,000. (the "Liquidated
Damages Amount") as liquidated damages. Notwithstanding anything to the
contrary contained in this Agreement, the failure to satisfy any of the
conditions to the Merger contained in Article VI hereof shall not, in and
of itself, be deemed to be a failure of the Surviving Partnership to
complete Closing or a default by the Surviving Partnership under this
Agreement. If the Surviving Partnership pays the Merged Partnership the
Liquidated Damages Amount as liquidated damages, the payment of such sum
shall be the Merged Partnership's only remedy in the event of the Surviving
Partnership's default at or prior to the Effective Date, and the Merged
Partnership in such event hereby waives any right, unless Closing is
completed, to recover the balance of the Consideration. If the Merged
Partnership shall be paid the Liquidated Damages Amount as liquidated
damages, this Agreement shall be and become null and void and all copies
will be surrendered to the Merged Partnership for cancellation. Nothing in
this Section shall limit the Merged Partnership's rights against the
Surviving Partnership and the Surviving Partnership's liability to the
Merged Partnership by reason of a default by the Surviving Partnership
under this Agreement which survives Closing.
(b) The term "Permitted Event" shall mean the occurrence of the
following on the Effective Date: the Surviving Partnership shall be ready,
willing and able to complete Closing in accordance with the Agreement; the
Surviving Partnership, or its authorized representative, shall have appeared
at the place designated for Closing and shall have tendered the Consideration,
and the Merged Partnership, notwithstanding the foregoing, shall have failed to
complete Closing in accordance with this Agreement or is otherwise in
default under this Agreement. Notwithstanding anything to the contrary
contained in this Agreement, the failure to satisfy any of the conditions
to the Merger contained in Article VI hereof shall not, in and of itself,
be deemed to be a failure of the Merged Partnership to complete Closing or
a default by the Merged Partnership under this Agreement. Except upon the
occurrence of the Permitted Event, the Surviving Partnership agrees that it
shall not (and hereby waives any right to) ever file or assert any LIS
PENDENS against the Property nor commence or maintain any action against
the Merged Partnership for specific performance under this Agreement nor
for a declaratory judgment as to the Surviving Partnership's rights under
this Agreement. Except as expressly provided above and elsewhere in this
Agreement, nothing herein shall be deemed to limit or impair any of the
Surviving Partnership's rights and remedies at law, in equity or by
statute.
9.13 INDEMNITY AGREEMENT. On the Effective Date, as an express condition
to the obligation of the Merged Partnership to complete Closing, the Surviving
Partnership shall execute and deliver to the General Partner an agreement,
in form and substance satisfactory to the General Partner and the General
Partner's counsel, whereby the Surviving Partnership agrees to indemnify
and hold harmless the General Partner, both individually and in his
capacity as the general partner of the Merged Partnership, from and against
any and all liabilities and obligations, including, without limitation,
guaranties and carve-outs from non-recourse, arising in connection with the
Existing Loan.
9.14 NO PERSONAL LIABILITY. Notwithstanding anything to the contrary
contained in this Agreement, neither the General Partner nor any other
partners of the Merged Partnership shall have any personal liability, and
no action of any kind shall be maintained against any of them or their
respective assets, with respect to this Agreement and/or the transactions
described in this Agreement, and the Surviving Partnership, its successors
and assigns, shall look solely to the assets of the Merged Partnership and
the cash or assets held by the Disbursing Agent pursuant to Section 3.2
above, for the payment of any claim against or the performance of any
obligation of the Merged Partnership. The foregoing limitation of
liability shall not apply in the case of fraud or intentional and material
misrepresentation; provided, however, that in connection with any action
involving alleged fraud or intentional and material misrepresentation, if
the Surviving Partnership, its successors or assigns, is not the prevailing
party, it shall be responsible for the payment of all attorneys' fees and
expenses of all parties, but if the Surviving Partnership, its successors
or assigns, is the prevailing party, each party shall bear its own
attorneys' fees and expenses.
9.15 NUMBER OF DAYS. In computing the number of days for purposes of
this Agreement, all days shall be counted, including Saturdays, Sundays and
holidays; provided, however, that if the final day of any time period falls
on a Saturday, Sunday or holiday on which federal banks are or may elect to
be closed, then the final day shall be deemed to be the next day which is
not a Saturday, Sunday or such holiday.
9.16 DEPOSIT.
(a) As security for the payment of the Liquidated Damages Amount,
upon the execution of this Agreement, the Surviving Partnership shall deposit
with the Disbursing Agent in escrow the sum of $150,000. (the "Deposit"). If
the Surviving Partnership shall become obligated to pay to the Merged
Partnership the Liquidated Damages Amount, the Merged Partnership shall
have the right to be paid the Deposit on account of the Liquidated Damages
Amount. If Closing is completed hereunder or if this Agreement is
terminated as provided in Section 7.1 hereof, the Disbursing Agent shall
refund the Deposit to the Surviving Partnership.
(b) Notwithstanding anything contained in this Section 9.16, if
either party terminates this Agreement as a result of the other's
default or pursuant to the exercise of any right of termination conferred by
this Agreement, Disbursing Agent shall not disburse the Deposit until the
earlier to occur of (i) receipt by Disbursing Agent of written instructions
from the Merged Partnership and the Surviving Partnership or (ii) entry of a
final and unappealable adjudication determining which party is entitled to
receive the Deposit, as applicable, at which time the Deposit shall be
distributed in accordance with such written instructions or adjudication.
Except to the extent of any dispute between them, the Merged Partnership and
the Surviving Partnership agree to act in good faith to provide the Disbursing
Agent with the instructions described in (i) above in the event that the
Agreement is terminated.
(c) In the event of a dispute between the Surviving Partnership and
the Merged Partnership with respect to the Deposit, the Disbursing Agent may
deposit the Deposit with a court of proper jurisdiction and commence an
interpleader action. Upon notifying the Merged Partnership and the
Surviving Partnership of the commencement of such action, Disbursing Agent
shall be released from all liability with respect to the Deposit, except to
the extent of accounting for any moneys previously delivered by Disbursing
Agent out of escrow. Disbursing Agent shall not be liable to either the
Merged Partnership or the Surviving Partnership, other than for performance
of its duties under this Agreement or his gross negligence or intentional
wrongdoing. Disbursing Agent may rely upon the genuineness or authenticity
of any document tendered to it by either the Merged Partnership or the
Surviving Partnership, and shall be under no duty of independent inquiry
with respect to any acts or circumstances recited in such document. The
Merged Partnership and the Surviving Partnership shall indemnify, defend
and hold harmless Disbursing Agent from and against all cost, claims or
liabilities arising from the performance by Disbursing Agent of his
obligations under this Agreement, other than for his failure to comply
herewith, gross negligence or intentional wrongdoing.
(d) As used in this Section 9.16, the term "Deposit" shall refer
to the amount set forth at Section 9.16(a), together with all interest thereon.
The Deposit shall be held by the Disbursing Agent in one or more federally-
insured money market accounts acceptable to both the Merged Partnership and
the Surviving Partnership, or in short-term United States government
obligations having a maturity date which is acceptable to the General
Partner and the Surviving Partnership or in one or more interest-bearing
deposit accounts of a bank or other financial institution acceptable to the
General Partner and the Surviving Partnership. The Merged Partnership's
taxpayer identification number is 23-2583549; the Surviving Partnership's
taxpayer identification number is 16-1455130.
(e) Although Disbursing Agent is counsel for the Merged Partnership,
the Disbursing Agent shall not be disqualified or prohibited from representing
Merged Partnership in connection with any matter arising out of this
Agreement by reason of its capacity as Disbursing Agent.
9.17 SURVIVAL.
(a) The representations, warranties, covenants and agreements of
HME and the Surviving Partnership contained in this Agreement will survive
Closing (i) indefinitely with respect to the warranties and representations in
Sections 4.2(a) and 10.2(a), (ii) until 60 calendar days after the expiration
of all applicable statutes of limitation (including all periods of extension,
whether automatic or permissive) with respect to matters covered by Section
10.2(f), (iii) until the fifth anniversary of the Effective Date in the
case of all other representations and warranties and any covenant or
agreement to be performed in whole or part prior to Closing and (iv) with
respect to each other covenant or agreement contained in this Agreement,
for five years following the last date on which such covenant or agreement
is to be observed, performed or complied with, or, if no such date is
specified, indefinitely, except that any representation, warranty, covenant
or agreement that would otherwise terminate in accordance with clauses
(ii), (iii) or (iv) above will continue to survive if notice of claim shall
have been timely given on or prior to such termination date until such
claim has been satisfied or otherwise resolved. This Section shall not
limit in any way the survival and enforceability of any covenant or
agreement of the parties hereto which by its terms contemplates, or is of
such nature that it would require, performance, observance or compliance
after the Effective Date.
(b) The representations, warranties, covenants and agreements of
the Merged Partnership contained in this Agreement will survive Closing for a
period of one hundred eighty (180) days, subject to the limitations on
liability provided in Section 9.14 hereof.
9.18 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original for all
purposes and all of which, when taken together, shall constitute one and
the same instrument.
ARTICLE X
ADDITIONAL REPRESENTATIONS AND WARRANTIES
BY THE SURVIVING PARTNERSHIP
10.1 DEFINITIONS.As used in this Article X, the following defined terms
shall be the meanings indicated below:
"AFFILIATE" means any Person that directly, or indirectly through one or
more intermediaries, controls or is controlled by or is under common
control with the Person specified. For purposes of this definition, control
of a Person means the power, direct or indirect, to direct or cause the
direction of the management and policies of such Person whether by Contract
or otherwise and, in any event and without limitation of the previous
sentence, any Person owning 10% or more of the voting securities of a
second Person shall be deemed to control that second Person.
"BENEFIT PLAN" means any Plan entered into, established, maintained,
contributed to or required to be contributed to, by HME or any Company
ERISA Affiliate providing benefits to employees, former employees,
independent contractors, former independent contractors of the Company or
any Company ERISA Affiliate, or their dependents or beneficiaries.
"CODE" means the Internal Revenue Code of 1986, as amended, and the rules
and regulations promulgated thereunder.
"COMMON STOCK" means shares of Common Stock of HME.
"COMPANY ERISA AFFILIATE" means an entity required (at any relevant time)
to be aggregated with HME under Sections 414(b), (c), (m) or (o) of the
Code or Section 4001 of ERISA.
"COMPANY FINANCIAL STATEMENTS" shall have the meaning set forth at Section
10.2(c) below.
"COMPANY SEC REPORTS" shall have the meaning set forth at Section 10.2(c)
below.
"CONTRACTS" means any agreement or obligation of any kind to which HME or
any of its Subsidiaries is a party or by which HME or any of its
Subsidiaries or any of their respective assets or properties is bound.
"GAAP" means generally accepted accounting principles, consistently applied
throughout the specified period and in the immediately prior comparable
period.
"PERSON" means any natural person, corporation, limited liability company,
general partnership, limited partnership, proprietorship, other business
organization, trust, union, association or Governmental or Regulatory
Authority.
"PLAN" means any employment, bonus, incentive compensation, deferred
compensation, pension, profit sharing, retirement, stock purchase, stock
option, stock ownership, stock appreciation rights, phantom stock, leave of
absence, layoff, vacation, day or dependent care, legal services,
cafeteria, life, health, medical, accident, disability worker's
compensation or other insurance, severance, separation, termination, change
of control or other benefit plan, agreement, practice, policy or
arrangement of any kind, whether written or oral, including, but not
limited to, any "employee benefit plan" within the meaning of Section 3(3)
of ERISA.
"SEC" means the Securities and Exchange Commission.
"SECURITIES" means the shares of Common Stock and the Units to be issued
and sold to partners in the Merged Partnership, including shares of Common
Stock issuable upon conversion of Units to be issued and sold, pursuant to
this Agreement and the Transaction Agreements.
"SUBSIDIARY" means with respect to any party, a corporation, partnership or
other organization, whether incorporated or unincorporated, of which more
than 50% of either the equity interests in, or the voting control of, such
corporation, partnership or other organization is, directly or indirectly
through Subsidiaries or otherwise, beneficially owned by such party.
Notwithstanding the foregoing, "Subsidiary," when used with respect to HME,
includes, without limitation, the Surviving Partnership.
"TRANSACTION AGREEMENTS" means all agreements and documents to be delivered
by HME and the Surviving Partnership in connection with the transactions
contemplated by this Agreement and the Transaction Agreements.
10.2 REPRESENTATIONS AND WARRANTIES. The Surviving Partnership and
HME hereby make the following representations and warranties to the Merged
Partnership, their liability with respect to such representations and
warranties being joint and several:
(a) CAPITAL STOCK. The authorized capital stock of HME consists
solely of (i) 10 million shares of preferred stock, par value $.01 per share,
none of which are issued and outstanding, (ii) 10 million shares of excess
stock, par value $.01 per share, none of which is issued, and (iii) 30 million
shares of Common Stock, 7,166,458.397 of which are issued and outstanding
as of the date hereof and 4,189,824 of which are reserved for issuance upon
exercise of stock options or exchange of Units in the Surviving Partnership
as of the date hereof. SCHEDULE 10.2(A) hereto sets forth a true and
correct list of the number of Units of the Surviving Partnership that are
issued and outstanding and the holders thereof. All of the outstanding
shares of Common Stock have been duly authorized and validly issued and are
fully paid and nonassessable (except, in the case of Units, as contemplated
by the New York Revised Uniform Limited Partnership Act) and have been
offered and sold in compliance with all applicable laws including, without
limitation, federal and state securities laws and none of them was issued
in violation of any preemptive or other similar right. The Securities, when
issued and sold pursuant to this Agreement and the Transaction Agreements,
will be duly authorized and validly issued, fully paid and nonassessable
(except, in the case of Units, as contemplated by the New York Revised
Uniform Limited Partnership Act) and none of them will be issued in
violation of any preemptive or other similar right. Except as identified
on SCHEDULE 10.2(A) attached hereto, there is no outstanding option,
warrant or other right calling for the issuance of, and there is no
commitment, plan or arrangement to issue, any shares of capital stock of
HME or any security convertible into or exercisable or exchangeable for,
such capital stock. The Common Stock and the Securities conform in all
material respects to all statements relating thereto contained in the
Company SEC Reports.
(b) NO VIOLATIONS OR DEFAULTS. Neither HME nor any of its
Subsidiaries is in violation of its certificate or articles of incorporation,
bylaws, certificates of partnership, partnership agreements, limited liability
company agreements or other similar governing documents, as the case may
be, and none of HME or any of its Subsidiaries is in default in the
performance or observance of any obligation, agreement, covenant or
condition contained in any Contracts to which such entity is a party or by
which such entity may be bound, or to which any of its properties or assets
may be bound or subject, except for such violations or defaults that
individually or in the aggregate would not have a Material Adverse Effect.
(c) SEC REPORTS AND FINANCIAL STATEMENTS; PARTNERSHIP AGREEMENT.
HME has filed all forms, reports, schedules, registration statements, and
other documents required to be filed by it with the SEC since the date of its
formation (as such documents have since the time of their filing been
amended or supplemented, the "Company SEC Reports"). As of their
respective dates, the Company SEC Reports (i) compiled as to form in all
material respects with the requirements of the Securities Act, or the
Securities Exchange Act of 1934, as amended, as the case may be, and (ii)
did not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading. The audited consolidated financial statements and
the interim consolidated financial statements (including, in each case, the
notes, if any, thereto) included in the Company SEC Reports (the "Company
Financial Statements") (A) were compiled as to form in all material
respects with the published rules and regulations of the SEC with respect
thereto, (B) were prepared in accordance with GAAP applied on a consistent
basis during the periods involved (except as may be indicated therein or in
the notes thereto and except with respect to unaudited statements as
permitted by Forms 10-Q and 8-K of the SEC) and (C) fairly present in all
material respects (subject, in the case of the unaudited interim financial
statements, to normal, recurring year- end audit adjustments which are not
expected to be, individually or in the aggregate, materially adverse to HME
and its Subsidiaries taken as a whole) the consolidated financial position
of HME and its consolidated subsidiaries as at the respective dates thereof
and the consolidated results of their operations and cash flows for the
respective periods then ended. Except for the Subsidiaries identified on
SCHEDULE 10.2(C) attached hereto, each Subsidiary of HME is treated as a
consolidated subsidiary of HME in the Company Financial Statements for all
periods covered thereby.
(d) ABSENCE OF CHANGES
(1) Except for the execution and delivery of this Agreement
and the Transaction Agreements, and the transactions to take place pursuant
hereto and thereto on the Effective Date, since March 31, 1997 there has not
been any change, event or development having, or that could reasonably be
expected to have, individually or in the aggregate, a Material Adverse
Effect. Without limiting the foregoing, between March 31, 1997 and the
date hereof (A) except with respect to the activities described in the
press releases attached hereto as EXHIBIT I, HME and its Subsidiaries have
conducted their respective businesses only in the ordinary course
consistent with past practice and (B) neither HME nor any of its
Subsidiaries have taken any action which, if taken after the date hereof,
would constitute a breach of any provision of clause (2) of this Section
10.2(d).
(2) Prior to the Effective Date, HME and its Subsidiaries
shall use all commercially reasonable efforts to preserve intact in all
material respects their present business organizations and reputation, to
keep available the services of their key officers and employees, to maintain
their assets and properties in good working order and condition, ordinary
wear and tear excepted, to maintain insurance on their tangible assets and
businesses in at least such amounts and against such risks and losses as are
currently in effect, to preserve their relationships with customers and
suppliers and others having significant business dealings with them and to
comply in all material respects with any statute, law, rule, regulation or
ordinance or any judgment, decree, order, writ, permit or license, of any
court, tribunal, arbitrator, authority, agency, commission, official or other
instrumentality of the United States or any domestic, state, county, city
or other political subdivision, applicable to HME or any of its
Subsidiaries.
(e) ABSENCE OF UNDISCLOSED LIABILITIES. Except for matters
reflected in the consolidated balance sheet of HME as of March 31, 1997
(or the footnotes thereto) included in the Company Financial Statements
and the press releases attached hereto as EXHIBIT I, neither HME nor any of
its Subsidiaries had at such date, or has incurred since that date, any
liabilities or obligations (whether absolute, accrued, contingent, fixed or
otherwise, or whether due or to become due) of any nature, except
liabilities or obligations (i) which were incurred in the ordinary course
of business consistent with past practice since such date, and (ii) which
have not had, and could not be reasonably expected to have, individually or
in the aggregate, a Material Adverse Effect.
(f) REIT QUALIFICATION. At all times since its taxable year ended
December 31, 1996, HME has been, and upon each issuance of any of the
Securities, HME will continue to be, organized and operated in conformity
with the requirements for qualification as a real estate investment trust
under the Code, and its proposed method of operation will enable it to
continue to meet the requirements for taxation as a real estate investment
trust under the Code.
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
executed by a duly executed general partner as of the date first above
written.
CHESFIELD PARTNERSHIP
/s/ Henry A. Quinn
- -------------------------------
Henry A. Quinn, General Partner
HOME PROPERTIES OF NEW YORK, L.P.
By:Home Properties of New York, Inc.
General Partner
By: /s/ Norman Leenhouts
-------------------------------
Norman Leenhouts, Chairman
For purposes of acknowledging and agreeing
to the provisions of Sections 1.4, 5.5 and
6.3(e)
/s/ Henry A. Quinn
- ------------------------
Henry A. Quinn
<PAGE>
JOINDER
Home Properties of New York, Inc. joins in this Agreement for the purpose
of making in its individual capacity, the same representations and
warranties as are made by the Surviving Partnership in Article X of this
Agreement.
HOME PROPERTIES OF NEW YORK, INC.
By:/s/ Norman Leenhouts
-------------------------------
Norman Leenhouts, Chairman
<PAGE>
SCHEDULE 3.13
RESERVE FUNDS CLAIMS PROCEDURE
PROCEDURES WITH RESPECT TO CLAIMS
(a)If any claim (a "Claim") is made by the Surviving Partnership for
payment out of the Reserve Amount of a Liabilities Claim or an Indemnity
Claim, the Surviving Partnership shall thereafter notify the General
Partner and the Disbursing Agent of such Claim. At such time as there is a
Final Determination (as hereinafter defined) with respect to a Claim, the
Surviving Partnership shall notify the Disbursing Agent (with a copy to the
General Partner) of such Final Determination. A Final Determination with
respect to a Claim shall occur when (1) the Surviving Partnership and the
General Partner agree in writing to a payment from a Reserve with respect
to a Claim and each so advises the Disbursing Agent, or (2) the arbitrator
determining the disposition of a Claim pursuant to Section (d) below
renders a final decision with respect to a Claim determining that a payment
is to be made from a Reserve to the Surviving Partnership or (3) provided
that the General Partner (on behalf of all of the former Partners of the
Merged Partnership) shall have been given a reasonable opportunity to
participate in the defense of such third-party claim throughout the course
of such third-party claim, the Claim is made on account of a judgment
rendered by a court of competent jurisdiction requiring, on a third-party's
claim that is an Indemnity Claim, a specified payment on account of such an
Indemnity Claim to the third-party claimant and such judgment has become
final and not subject to further appeal. Upon receipt of a Final
Determination, the Disbursing Agent shall pay the amount of the Claim as
set forth in the Final Determination to the Surviving Partnership.
(b)On each of 90 days from and after the Effective Time and 180 days from
and after the Effective Time, and thereafter, at any time and from time to
time, within 10 days after the written request of the General Partner, the
Surviving Partnership shall send a notice (the "Anniversary Notice") to the
Disbursing Agent and to the General Partner describing each then
outstanding Claim with respect to which a Final Determination has not
theretofore been made and specifying what the Surviving Partnership
believes, acting reasonably and in good faith, to be the aggregate amount
of damages that have been incurred theretofore or are likely to be incurred
thereafter as a result of or arising out of each such Claim (the "Damage
Amount").
(c)If the General Partner believes, acting reasonably and in good faith,
that the Surviving Partnership's estimate of the Damage Amount with respect
to one or more of the Claims as set forth in the Anniversary Notice is
unreasonable (a "Disputed Amount"), the General Partner shall send a notice
(the "Dispute Notice") to the Surviving Partnership and the Disbursing
Agent, within 10 days after receipt of the Anniversary Notice, specifying
the amount that the General Partner believes, acting reasonably and in good
faith, to be the proper Damage Amount with respect to any Claim described
in the Anniversary Notice. Upon the issuance of a Dispute Notice, the
General Partner and representatives of the Surviving Partnership shall
immediately meet and shall use all necessary diligence in a concerted, good
faith effort to resolve all Disputed Amounts within 10 days after issuance
of the Dispute Notice. If the General Partner and the Surviving
Partnership resolve such dispute within the 10-day period as aforesaid,
they shall jointly notify the Disbursing Agent of the agreed-upon Damage
Amount with respect to each Claim, and such joint notice shall constitute a
Final Determination with respect to the relevant Claims.
(d)If the General Partner and the Surviving Partnership do not so agree,
the determination of the Damage Amount with respect to all disputed Claims
shall be immediately submitted to prompt and binding arbitration before an
arbitrator appointed by the Philadelphia, Pennsylvania office of the
American Arbitration Association in accordance with its rules, and acting
in accordance with its rules. If any such Disputed Amount relates to a
third-party claim that is then in litigation or is otherwise unresolved,
the standard to be applied by the arbitrator in determining the Damage
Amount shall be the aggregate amount of damages that have been or are
likely thereafter to be incurred by the Surviving Partnership, including
the Surviving Partnerships' attorneys' fees, court costs and other costs of
defense, arising out of such claim. The award of the arbitrator shall be
communicated to the parties and the Disbursing Agent and shall constitute a
Final Determination, which shall be final, binding and not subject to
appeal, with respect to all the Claims that are the subject of such award,
notwithstanding that an underlying third-party claim still remains
unresolved or is subsequently resolved in a manner inconsistent with the
arbitrator's award.
(e)If the Disbursing Agent in his capacity as such is threatened with
litigation or is sued, he shall have the right to interplead all interested
parties in any court of competent jurisdiction and to deposit the Reserves
(or any portion thereof) with the clerk of that court.
(f)The Disbursing Agent shall not be liable to either the General Partner,
the former Partners of the Merged Partnership or the Surviving
Partnership, other than for performance of his duties under the Reserves
Escrow agreement or his gross negligence or intentional wrongdoing. The
Disbursing Agent may rely upon the genuineness or authenticity of any
document tendered to him by either the General Partner or the Surviving
Partnership, and shall be under no duty of independent inquiry with respect
to any acts or circumstances recited in such document.
(g)As used in this Schedule 3.13, the term "Reserves" shall refer to the
respective amounts set forth at the beginning of this Section 3.13,
together with all interest thereon. The Reserves, which are held in Cash,
shall be held by the Disbursing Agent in one or more federally- insured
money market accounts acceptable to both the General Partner and the
Surviving Partnership, or in short-term United States government
obligations having a maturity date which is acceptable to the General
Partner and the Surviving Partnership or in one or more interest-bearing
deposit accounts at a bank or other financial institution acceptable to the
General Partner and the Surviving Partnership.
(h)All Claims must be made within 180 days of the Effective Time.
(i)No Claim shall be made, other than Liabilities Claims to be paid from
the Liabilities Reserve, until total Claims exceed $25,000.00.
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT and Plan of Merger (this "Agreement") is dated as of
this 31st day of July, 1997, and is between Home Properties of New York,
L.P., a limited partnership formed under the laws of New York (the
"Surviving Partnership"), and Valspring Partnership, a limited partnership
formed under the laws of Pennsylvania (the "Merged Partnership").
WITNESSETH:
WHEREAS, the Merged Partnership is governed by the Pennsylvania
Revised Limited Partnership Act (the "Pennsylvania Act") and, subject to
the receipt of the requisite approval of its limited partners, desires to
merge into the Surviving Partnership;
WHEREAS, the Surviving Partnership was formed under the New York
Revised Limited Partnership Act (the "New York Act") and, subject to the
receipt of the requisite approval, desires to merge with the Merged
Partnership.
NOW THEREFORE, the parties hereto agree as follows:
ARTICLE I
THE MERGER
1.1 AGREEMENT TO MERGE. Subject to the terms and conditions of this
Agreement, including but not limited to the satisfaction of the conditions
in Article VI hereof (the "Merger Conditions"), the Merged Partnership
shall be merged into the Surviving Partnership (the "Merger").
1.2 CERTIFICATE OF MERGER. Subject to the satisfaction of the Merger
Conditions, the general partner of each of the Merged Partnership and
Surviving Partnership shall execute a Certificate of Merger in the form
necessary to effect the merger of the Merged Partnership into the Surviving
Partnership pursuant to applicable law (the "Certificate of Merger") and
the Surviving Partnership shall deliver the Certificate of Merger to the
Department of State of the Commonwealth of Pennsylvania and the State of
New York for filing.
1.3 EFFECTIVE TIME. The Merger shall be effective immediately upon
the later to occur of the filing of the Certificate of Merger by the
Department of State of the State of New York or the Commonwealth of
Pennsylvania, but not later than September 30, 1997 (the "Effective Time").
The date during which the Effective Time occurs is referred to hereinafter
as the "Effective Date". The closing for the Merger (the "Closing") shall
be held on the Effective Date at the offices of Wolf, Block, Schorr
and Solis-Cohen, 350 Sentry Parkway, Building 640, Blue Bell, Pennsylvania,
commencing at 10:00 a.m.
1.4 SOLICITATION OF MERGED PARTNERSHIP APPROVAL. By executing this
Agreement, Henry A. Quinn as the general partner of the Merged Partnership
(the "General Partner") agrees that he will, promptly after the execution
of this Agreement, cause the Merged Partnership to solicit the approval of
its partners to the Merger in compliance with the New York Act and the
Pennsylvania Act (the "Acts"). Furthermore, the General Partner agrees
that he will vote his interests in the Merged Partnership in favor of the
Merger. The General Partner further agrees that, between the date of the
execution of this Agreement and the Effective Time or the earlier
termination of this Agreement, he will not offer to sell or negotiate a
sale of the Property, directly or indirectly, including, without
limitation, pursuant to a merger.
1.5 SOLICITATION OF SURVIVING PARTNERSHIP APPROVAL. By executing this
Agreement, Home Properties of New York, Inc. as the general partner of the
Surviving Partnership ("HME") agrees that it will promptly after the
execution of this Agreement, cause the Surviving Partnership to solicit the
approval of its partners to (a) the Merger in compliance with the Acts and
(b) the Surviving Partnership Amendments.
ARTICLE II
EFFECTS OF THE MERGER
2.1 SURVIVING PARTNERSHIP. The Surviving Partnership shall be the
surviving limited partnership. The Agreement of Limited Partnership of the
Surviving Partnership (the "Surviving Partnership Agreement") shall remain in
full force and effect after the Merger in its form immediately prior to the
Merger, except the Surviving Partnership Agreement shall be amended on the
Effective Date to (a) reflect the issuance of the Units pursuant to
subparagraphs 3.3(a) and (c) below and (b) incorporate the provisions set
forth in EXHIBIT B (EXHIBIT A has been reserved) attached hereto (the
"Surviving Partnership Amendments").
2.2 MERGED PARTNERSHIP. At the Effective Time, the separate existence
of the Merged Partnership shall cease.
2.3 TRANSFER OF ASSETS AND ASSUMPTION OF LIABILITIES. At the Effective
Time, all of the real and tangible or intangible personal property rights,
privileges, immunities, powers and all other assets whatsoever of the
Merged Partnership shall vest in the Surviving Partnership without further
act or deed. Thereafter, the Surviving Partnership shall be liable for all
debts, obligations, liabilities and penalties of the Merged Partnership as
though each such debt, obligation, liability or penalty had been originally
incurred by the Surviving Partnership, provided that the Reserves described
in Section 3.2 of this Agreement shall be established to pay, to the extent
thereof, for any liabilities of the Merged Partnership that the Surviving
Partnership has not specifically agreed to assume as provided herein.
ARTICLE III
CONSIDERATION
3.1 TOTAL CONSIDERATION.The aggregate consideration (the "Consideration")
payable by the Surviving Partnership in connection with the merger of the
Merged Partnership with and into the Surviving Partnership shall be
$8,155,000., subject to adjustments at Closing pursuant to Section 3.9 and
costs paid pursuant to Section 3.10(c) and Section 3.11, plus the amount of
any tax or other reserves held by the Existing Lender (hereinafter
defined).
3.2 CONVERSION OF PARTNERSHIP INTERESTS.At the Effective Time each of the
outstanding interests in the Merged Partnership (the "Interests") shall
automatically, by operation of law and without any action by the holders
thereof, be converted into the right to receive the Conversion Price and
the Deferred Consideration Right as provided below. "Conversion Price"
means the Consideration less the principal amount at the Effective Time of
the existing mortgage loans (collectively the "Existing Loan") covering the
Merged Partnership's property in favor of IDS Life Insurance Company of New
York (the "Existing Lender") less the amount specified by the General
Partner as described in Section 3.11 and less the Reserve Amount
multiplied by the percentage interest of the Interest in the Merged
Partnership. "Reserve Amount" means the sum of: (a) an amount equal to
the current liabilities of the Merged Partnership at the Effective Time
(other than the principal amount of the Existing Loan) (the "Liabilities
Reserve") and (b) $156,000. (the "Indemnity Reserve"); provided, however,
that the Reserve Amount shall be reduced in proportion to the Interests of
partners of the Merged Partnership ("Dissenting Partners") who have
properly indicated their intention to seek payment of the fair value of
their interests under Section 121-1102 of the New York Law. The Reserve
Amount shall be held and disbursed by the Disbursing Agent (as defined in
Section 3.3) as described in Sections 3.4 and 3.13. "Deferred
Consideration Right" with respect to each Interest means the right to
receive the Reserve Amount less all amounts used to satisfy the current
liabilities of the Merged Partnership ("Liabilities Claims") and any
amounts paid or subject to claims of the Surviving Partnership by reason of
a material breach or material misrepresentation of any representations,
warranties, covenants or agreements of the Merged Partnership which survive
Closing (but only during the period of such survival) ("Indemnity Claims")
multiplied by the percentage interest of the Interest in the Merged
Partnership . As of the Effective Time, all Interests in the Merged
Partnership shall cease to be outstanding and shall be canceled and each
holder of an Interest shall, by virtue of the Merger, cease to have any
rights with respect to the Merged Partnership or the Interests therein
except the rights to receive the Conversion Price and the Deferred
Consideration Rights with respect thereto, or the right, if any, to receive
payment from the Surviving Partnership of cash equal to the fair value of
his Interest in the Merged Partnership as provided in Section 121-1102 of
the New York Law. The Surviving Partnership hereby agrees to comply, at
its expense, with all payment and all other substantive and procedural
obligations and requirements which must be complied with respect to
Dissenting Partners, including, without limitation, Section 121-1102 of
the New York Law. Notwithstanding anything to the contrary contained in
this Agreement, (i) if and to the extent that the amount required to be
paid to any Dissenting Partner exceeds the portion (the "Dissenting Partner
Portion") of the Conversion Price which would have been paid to such
partner of the Merged Partnership if such partner was not a Dissenting
Partner, such excess amount shall be paid by the Surviving Partnership in
addition to the Consideration, (ii) the Dissenting Partner Portion paid by
the Surviving Partnership to Dissenting Partners shall be credited against
the Conversion Price and (iii) in the event that the holders of more than
10% of the Interests are Dissenting Partners, the Surviving Partnership
shall have the right to terminate this Agreement by giving written notice
thereof to the Merged Partnership within ten (10) days after the Surviving
Partnership receives notification thereof.
3.3 PAYMENT OF THE CONVERSION PRICE.
(a) The Surviving Partnership shall deliver, in immediately available
funds and in Units (hereinafter defined), to Wolf, Block, Schorr and Solis-
Cohen (the "Disbursing Agent") the Reserve Amount.
(b) The "Cash Portion of the Conversion Price shall be the aggregate
amount of the Conversion Price payable to the holders of Interests who have
failed to provide the Surviving Partnership with evidence satisfactory to it
that such holders are "Accredited Investors" as such term is defined in
Regulation D promulgated by the Securities and Exchange Commission under
the Securities Act of 1933, as amended (the "Securities Act").
Notwithstanding anything to the contrary contained in this Agreement if the
total of the Interests held by Dissenting Partners and by partners who are
not Accredited Investors exceeds fifteen percent of all of the Interests,
the Merged Partnership shall have the right, by giving written notice
thereof to the Surviving Partnership at any time prior to the Effective
Date, to terminate this Agreement.
(c) The Conversion Price payable to the holders of Interests other
than those described in (b) above shall be paid by the issuance of Units of
limited partnership in the Surviving Partnership ("Units"). The number of
Units to be issued to each holder of an Interest shall be the Conversion
Price for the Interest of such holder divided by the average of the daily
market price for the ten (10) consecutive trading days immediately
preceding the Effective Date of the shares of common stock of HME (the
"Effective Date Price"). The market price for each such trading day shall
be the closing price of the common stock on the New York Stock Exchange,
regular way, on such day as reported in the Wall Street Journal, Eastern
Edition.
3.4 PAYMENT WITH RESPECT TO DEFERRED CONSIDERATION RIGHTS.
(a) On the 90th day after the Effective Date, the Disbursing Agent
shall distribute pro rata to the holders of Interests immediately prior to the
Effective Time (other than Dissenting Partners) that portion of the
Liabilities Reserve which has not been paid for the liabilities of the
Merged Partnership as provided in this Agreement and one-half of that
portion of the Indemnity Reserve that has not been paid or subject to
Indemnity Claims.
(b) On the 180th day after the Effective Date, the Disbursing Agent
shall distribute pro rata to the holders of Interests immediately prior to the
Effective Time (other than Dissenting Partners), that portion of the
Indemnity Reserve that has not been paid, disbursed or subject to Indemnity
Claims.
(c) At any time, and from time to time, after the 180th day after
the Effective Date that there is a Final Determination (as defined in Schedule
3.13) that any remaining portion, if any, of the Indemnity Reserve is no
longer subject to Indemnity Claims, the Disbursing Agent shall distribute
such remaining portion pro rata to the holders of Interests immediately
prior to the Effective Time (other than Dissenting Partners).
3.5 INTENTIONALLY OMITTED
3.6 INTENTIONALLY OMITTED
3.7 INTENTIONALLY OMITTED
3.8 PRO-RATED DISTRIBUTION. The initial distribution payable with
respect to Units issued as part of the Consideration shall be made on the date
on which HME pays the dividend to the holders of its common stock that relates
to the earnings for the calendar quarter in which the Units were issued and
shall be pro-rated such that the partners receiving Units shall receive a
pro-rata distribution for the period from the date on which the Units were
issued to and including the last day of the calendar quarter in which the
Units were issued.
3.9 ADJUSTMENTS AT CLOSING. With respect to the Property, the following
shall be adjusted and pro-rated between the Surviving Partnership and the
Merged Partnership on the Effective Date as if the Surviving Partnership
was the owner of the Property as of midnight of the night preceding the
Effective Date and shall be paid in cash at Closing:
A. current fiscal year real estate taxes;
B. water and sewer rents and charges;
C. INTENTIONALLY OMITTED
D. fuel;
E. INTENTIONALLY OMITTED
F. INTENTIONALLY OMITTED
G. charges under the service contracts;
H. laundry income;
I. interest with respect to the Existing Loan; and
J. INTENTIONALLY OMITTED
K. rents.
(i) All rent payments collected on or before the Effective Date
for the month in which the Effective Date occurs shall be pro-
rated as between the parties as of the Effective Date.
(ii) All rent collected after the Effective Date shall be applied
first to the rent due for the month in which such rent was
collected and shall then be applied to the next most recent
delinquent rent, including any rent which was not collected for
any period prior to the Effective Date. Delinquent rent amounts
collected with respect to any period prior to the Effective Date
shall belong to former partners of the Merged Partnership and,
if paid to the Surviving Partnership, the Surviving Partnership
shall promptly send such rent to the General Partner for
distribution to the former partners of the Merged Partnership
pursuant to the agreement described in paragraph (e) of Section
6.3.
(iii) All rent collected by the Merged Partnership, prior to the
Effective Date, for months subsequent to Effective Date shall be
paid to the Surviving Partnership at the Effective Time.
(iv) All rent collected for rental periods after the Effective
Date shall belong to the Surviving Partnership and, if paid to any
of the former partners of the Merged Partnership shall be promptly
sent to the Surviving Partnership.
Any error in the calculation of adjustments shall be corrected subsequent
to the Effective Date with appropriate credits to be given based upon
corrected adjustments, provided, however, that the adjustments (except if
errors are caused by misrepresentations) shall be final upon expiration of
the 90th day after the Effective Date.
3.10 COSTS.
(a) The Surviving Partnership and the Merged Partnership shall
each be responsible for one half of any assumption fees payable to the Existing
Lender, provided, however, that if as of the Effective Date any Existing
Loan may be prepaid without a penalty of more than 1% of its principal
balance at the time of prepayment, the entire assumption fee, or, if the
Surviving Partnership elects to prepay such Existing Loan, the entire
prepayment fee, shall be the responsibility of the Surviving Partnership.
(b) The Surviving Partnership shall pay all recording fees, its
attorneys' fees, the costs of obtaining a binder or commitment from a title
insurance company, the premium for its title insurance policy, one half of
any Pennsylvania state and local transfer tax, and all other costs and expenses
incidental to or in connection with closing this transaction customarily
paid for by the purchaser of similar property. The Merged Partnership
shall pay its attorneys' fees, one-half of any Pennsylvania state and local
transfer tax, and all other costs and expenses incidental to or in
connection with closing this transaction customarily paid for by the seller
of similar property.
(c) The amounts payable pursuant to Sections 3.10(a) and/or (b)
by the Merged Partnership on account of any assumption fee payable to the
Existing Lender and/or account of one half of any Pennsylvania state and local
transfer tax shall be charged against the Consideration.
3.11 PAYMENT DIRECTED BY GENERAL PARTNER. At the Effective Time, the
General Partner shall be entitled to direct that a portion of the
Consideration, up to a maximum amount equal to 6%of the Consideration, be
paid by the Surviving Partnership to pay certain closing costs of the
Merged Partnership and to satisfy certain liabilities of the Merged
Partnership.
3.12 CASH HELD BY MERGED PARTNERSHIP. Subject to Section 3.13 below,
on, or at any time prior to, the Effective Time, the General Partner shall have
the right to spend on behalf of the Merged Partnership and/or distribute to
the partners of the Merged Partnership any and all cash held by the Merged
Partnership.
3.13 ESCROW AGREEMENT.The Reserve Amount shall be held and disbursed
pursuant to the terms of an escrow agreement that shall be in form and
substance acceptable to the parties hereto, but which provide at least the
following:
(a) The entire Liabilities Reserve shall be applied to pay current
liabilities of the Merged Partnership before application of the Indemnity
Reserve. To the extent that the Liabilities Reserve shall not be
sufficient to pay the current liabilities of the Merged Partnership the
Indemnity Reserve may be used to fund current liabilities.
(b) The claim resolution procedures set forth in SCHEDULE 3.13
hereof.
3.14 INSURANCE REFUND. At the Effective Time, the Surviving Partnership
shall cause the cancellation of all insurance maintained by the Merged
Partnership and thereafter shall diligently seek to obtain such refunds as
may be due on account of such cancellation. Upon receipt of such refunds,
the Surviving Partnership shall pay them over to the General Partner for
distribution to the former partners of the Merged Partnership.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1 BY THE MERGED PARTNERSHIP. The Merged Partnership hereby makes the
following representations and warranties to the Surviving Partnership as of
the date hereof.
(a) REAL PROPERTY DESCRIPTION. The real property owned by the
Merged Partnership and to become the property of the Surviving Partnership at
the Effective Time consists of one or more parcels of land known as Springwood
Apartments which includes 77 apartments, located in the Township of Spring
and Commonwealth of Pennsylvania, and Valley View Apartments which includes
176 apartments, located in the Township of North Coventry and Commonwealth
of Pennsylvania (collectively the "Project") more particularly described on
EXHIBIT C, attached hereto, together and including all buildings and other
improvements thereon, including but not limited to, the 77 apartment units
and 176 apartments units, respectively), and all rights of the Merged
Partnership in and to any and all streets, roads, highways, alleys,
driveways, easements and rights-of-way appurtenant thereto (the foregoing
are hereafter collectively referred to as the "Property").
(b) OTHER ITEMS. The following items now in or on the Property if
owned by the Merged Partnership and not by tenants of the Property shall become
the property of the Surviving Partnership at the Effective Time:
(1) all heating, plumbing and lighting fixtures,
(2) ranges, refrigerators, disposals and dishwashers,
(3) water heaters,
(4) any and all bathroom fixtures, wall-to-wall carpeting,
traverse rods, exhaust fans, hoods, signs, screens,
maintenance building, model unit furniture (except for model
unit furniture which is rented), fences, carpeting and runners,
cabinets, mirrors, shelving, any humidifier and dehumidifier
units, air conditioning units, mailboxes, office furniture
(except for office furniture which is rented), and related
equipment in connection with the Project, and
(5) any fixtures appurtenant to the Property and any other
furniture or equipment used in connection with the operation and
maintenance of the Property, including any vehicles used in
connection with the operation and maintenance of the Property
(hereinafter with the items listed in (1)-(4) above,
collectively, the "Other Items").
(c) CONDITION OF OTHER ITEMS. To the best knowledge of the General
Partner and the current officers of Mill Creek Realty Co., substantially all
of the Other Items are in reasonable working order or condition. Except with
respect to the Existing Loan, the Merged Partnership has not subjected any
of the Other Property to any security interests, liens, claims, charges or
other encumbrances.
(d) ORGANIZATION AND AUTHORIZATION. The Merged Partnership is a
limited partnership duly organized, validly existing and in good standing
under the laws of the Commonwealth of Pennsylvania and was either formed under,
or by operation of law has become subject to, the Pennsylvania Act. It has all
requisite power and authority to own, lease and operate its properties and
to carry on its business as now being conducted. It is duly qualified or
licensed to do business as a foreign limited partnership and in good
standing in each jurisdiction in which the property owned, leased or
operated by it makes such qualification or license necessary, except in
each case in those jurisdictions where the failure to be so duly qualified
or licensed and in good standing would not have a Material Adverse Effect.
For purposes of this Agreement, "Material Adverse Effect" means a material
adverse effect on the business, assets, financial condition or results of
operation of the party making the representation or warranty to which such
qualification is being applied.
(e) AUTHORITY RELATIVE TO THIS AGREEMENT. Subject to receipt of
the approval described in Section 1.4 of this Agreement: (i) the Merged
Partnership has full power and authority to execute, deliver and perform
this Agreement and to consummate the transactions contemplated hereby; (ii)
all actions necessary to be taken by it or on its behalf to execute,
deliver and perform this Agreement and to consummate the transactions
contemplated hereby, have been duly and validly taken; and (iii) this
Agreement has been duly and validly executed and delivered by it and,
assuming due execution and delivery by the Surviving Partnership,
constitutes a valid and binding agreement enforceable against it in
accordance with its terms, except to the extent that enforceability may be
limited by applicable bankruptcy, reorganization, insolvency, moratorium or
similar laws affecting the enforcement of creditors' rights generally as at
the time in effect and by general principles of equity, regardless of
whether such enforceability is considered in a proceeding in equity or at
law.
(f) OUTSTANDING LIMITED PARTNERSHIP INTERESTS. SCHEDULE 4.1(F)
hereto lists the current holders of all outstanding limited partnership
interests of the Merged Partnership together with the percentage interest
held by each holder. In the event that any holder listed on SCHEDULE 4.1(F)
transfers any interests prior to the Effective Time, the Merged Partnership
shall provide written notice to the Surviving Partnership of such transfer
prior to the Effective Time, and such notice shall include the names of the
transferor and the transferee, the address of the transferee and the number
of units transferred.
(g) CONSENTS AND APPROVALS; NO VIOLATION. To the best of the
Merged Partnership's knowledge, neither the execution, delivery and performance
of this Agreement nor the consummation of the transactions contemplated hereby
will: (i) conflict with or will result in any breach of any provision of
its Agreement of Limited Partnership or Certificate of Limited Partnership;
(ii) require it to obtain any consent, approval, authorization or permit
from, or file with or notify, any governmental or regulatory authority,
except where the failure to obtain such consent, approval, authorization or
permit, or to make such filing or notification, would not have a Material
Adverse Effect; (iii) except to the extent that the consent of the Existing
Lender is required, constitute a breach or will result in a default under
any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, license, contract, agreement or other instrument or obligation
of any kind to which it is a party or by which it is bound, except for any
such breach or default as would not have a Material Adverse Effect; or (iv)
violate any order, writ, injunction, judgment, decree, law, statute, rule,
regulation or governmental permit or license applicable to it, which
violation would have a Material Adverse Effect, unless any waiver, consent,
approval, authorization, permit, filing or notification necessary to
prevent any such conflict, breach, default or violation has been obtained
prior to the Effective Time.
(h) LIABILITIES. Except (i) as disclosed in SCHEDULE 4.1(H)
attached hereto, (ii) for liabilities and obligations incurred in the normal
course of business of the Merged Partnership and (iii) as otherwise disclosed
in this Agreement, the Merged Partnership has no material liability or
obligation of any nature which in any way materially affects or is related
to the Property or the Other Items whether now due or to become due,
absolute, contingent or otherwise, including liabilities for taxes (or any
interest or penalties thereto).
(i) LITIGATION. Except as disclosed in SCHEDULE 4.1(I) attached
hereto, there is no litigation, proceeding or investigation which, to the best
knowledge of the Merged Partnership, is pending, or, to the best knowledge
of the Merged Partnership, threatened, against or affecting the Merged
Partnership or the Property that might affect or relate to the validity of
this Agreement or any action taken or to be taken pursuant hereto, or that
might have a Material Adverse Effect upon the Property or the Other Items
or any part or the operation thereof, unless fully covered by insurance.
(j) COMPLIANCE WITH LAWS. Except as disclosed in SCHEDULE 4.1(J)
attached hereto, neither the General Partner nor any current officer of Mill
Creek Realty Co. has received written notice, addressed to the Merged
Partnership or Mill Creek Realty Co., which remains outstanding that it has not
complied with and is in default under, or in violation of, or received any
written notice which remains outstanding that the Merged Partnership, the
Property or the Other Items may be in violation of, any law, ordinance,
rule, regulation or code or condition in any approval or permit pursuant
thereto (including without limitation, any zoning, sign, environmental,
labor, safety, health or price or wage control, ordinance, rule, regulation
or order of) applicable to the ownership, development, operation or
maintenance of the Property or the Other Items.
(k) LEASES. There are no written leases affecting the Property to
which the Merged Partnership is a party with a term greater than one year.
The rent roll attached hereto as SCHEDULE 4.1(K) is true and correct as of
the date of this Agreement.
(l) CONDEMNATION. Except for the request for the grant of a temporary
and permanent sewer easement at the Valley View Apartments property from the
North Coventry Municipal Authority, the Merged Partnership has not received
written notice of pending condemnation of the Property, or any part
thereof, or of any plans for improvements which might result in a special
assessment against the Property.
(m) INTENTIONALLY OMITTED
(n) SERVICE CONTRACTS. There are no service contracts with respect
to the Property or the Other Items which will continue in effect after the
Closing except as set forth on SCHEDULE 4.1(N) attached hereto.
(o) EXECUTORY CONTRACTS. There are no executory contracts connected
with the Property or the Other Items, except as set forth on SCHEDULE 4.1(O)
attached hereto.
(p) ONGOING PERFORMANCE. Until the Effective Time, the Merged
Partnership shall continue to fulfill all of its obligations under the terms
of the Existing Mortgage, the leases encumbering the Property, the service
contracts and the executory contracts, and the Merged Partnership shall
operate, and perform routine maintenance and repair with respect to, all
landscaping, buildings, fixtures and facilities, including, without
limitation, the Other Items, in accordance its current practices. With
respect to non-routine maintenance or repair, the following shall apply:
(1) Except in the case of emergency, the Merged Partnership
shall not arrange for the making of any non-routine repair or replacement
costing in excess of $10,000 in any one instance without the prior written
consent of the Surviving Partnership which consent shall not be unreasonably
withheld and shall be deemed given if it is not denied by written notice
received by the Merged Partnership within 3 business days after request for
such consent was received by the Surviving Partnership. If such consent is
given or if such cost is less than $10,000, in the event that the Merger
occurs, the cost of such repair or replacement shall be the responsibility
of the Surviving Partnership and if any amount on account of such cost is
paid by the Merged Partnership prior to Closing, the Surviving Partnership
shall reimburse that to the Merged Partnership at Closing.
(2) Any non-routine repairs or replacements arranged by the
Merged Partnership which are not the responsibility of the Surviving
Partnership pursuant to Section 4.1(p)(1) above or Section 4.1(p)(3) below
shall be a liability of the Merged Partnership which shall not be assumed by
the Surviving Partnership.
(3) In the event that any non-routine repairs or replacements
are required on an emergency basis, which emergency is such as does not
comfortably allow the passage of the time period specified above for obtaining
the approval of the Surviving Partnership, the Merged Partnership may arrange
for such repair or replacement, and in the event that the Merger occurs,
the cost thereof shall be the responsibility of the Surviving Partnership
and at Closing the Surviving Partnership shall reimburse the Merged
Partnership for any amount paid on account of such repair or replacement
prior to Closing.
(q) APPLIANCES. Except as previously disclosed to the Surviving
Partnership, all of the ranges and refrigerators in the Property are the
property of the Merged Partnership and not of the tenants.
(r) FINANCIAL INFORMATION. The financial information attached
hereto as SCHEDULE 4.1(R) (income and expenses for calendar year 1995 and
1996) is substantially true and accurate.
(s) ENVIRONMENTAL. Except as identified in SCHEDULE 4.1(S) attached
hereto, the Merged Partnership has received no notice of any violation of any
applicable Environmental Laws (below defined) with respect to the Property.
"Environmental Laws" shall mean all federal, state and local laws,
statutes, ordinances and codes relating to the protection of the
environment and/or governing the use, storage, treatment, generation,
transportation, processing, handling, production or disposal of any
Hazardous Substance and the rules, regulations, and orders with respect
thereto. "Hazardous Substance" means, without limitation, any flammable,
explosive or radioactive material, polychlorinated biphenyl, petroleum or
petroleum product, methane, hazardous materials, hazardous wastes,
hazardous or toxic substances or related materials, as defined in any
applicable Environmental Laws. From the date of acceptance hereof to and
including the Effective Date or the earlier termination of this Agreement,
the Merged Partnership shall promptly provide the Surviving Partnership
with a copy of any notice, citation, complaint or other directive from any
person, entity or governmental authority whereby compliance with
Environmental Laws is called into question with respect to the Property.
(t) TAXES. Except for state and local realty transfer taxes
(which are governed by Section 3.10) and real estate taxes (which are governed
by Section 3.9), the Merged Partnership has filed or will file when due all
notices, reports and returns of Taxes (as defined below) required to be
filed before the Effective Date and has paid or, if due after the date
hereof and prior to the Effective Date, will pay, all Taxes and other
charges for the periods shown to be due on such notices, reports and
returns. "Taxes" shall mean all taxes, charges, fees, levies or other
assessments, including, without limitation, income, excise, property, sale,
gross receipts, employment and franchise taxes imposed by the United
States, or any state, county, local or foreign government, or subdivision
or agency thereof with respect to the assets or the business of the Merged
Partnership, and including any interest, penalties or additions
attributable thereto.
4.2 BY THE SURVIVING PARTNERSHIP. The Surviving Partnership hereby makes
the following representations and warranties to the Merged Partnership as
of the date hereof.
(a) ORGANIZATION AND AUTHORIZATION. The Surviving Partnership is a
limited partnership duly organized, validly existing and in good standing under
the laws of the State of New York and has adopted the New York Act. It has all
requisite power and authority to own, lease and operate its properties and
to carry on its business as now being conducted. It is duly qualified or
licensed to do business as a foreign limited partnership and in good
standing in each jurisdiction in which the property owned, leased or
operated by it makes such qualification or license necessary, except in
each case in those jurisdictions where the failure to be so duly qualified
or licensed and in good standing would not have a Material Adverse Effect.
(b) AUTHORITY RELATIVE TO THIS AGREEMENT. Subject to the receipt of
the approvals described in Section 1.5 and in subparagraph (e) of Section 6.3
of this Agreement: (i) the Surviving Partnership has full power and
authority to execute, deliver and perform this Agreement and to consummate
the transactions contemplated hereby; (ii) all actions necessary to be
taken by it or on its behalf to execute, deliver and perform this Agreement
and to consummate the transactions contemplated hereby, have been duly and
validly taken; and (iii) this Agreement has been duly and validly executed
and delivered by it and, assuming due execution and delivery by the Merged
Partnership, constitutes a valid and binding agreement enforceable against
it in accordance with its terms, except to the extent that enforceability
may be limited by applicable bankruptcy, reorganization, insolvency,
moratorium or similar laws affecting the enforcement of creditors' rights
generally as at the time in effect and by general principles of equity,
regardless or whether such enforceability is considered in a proceeding in
equity or at law.
(c) CONSENTS AND APPROVALS; NO VIOLATIONS. To the best of the
Surviving Partnership's knowledge, as of the Effective Time, neither the
execution, delivery and performance of this Agreement nor the consummation
of the transactions contemplated hereby will: (i) conflict with or will
result in any breach of any provision of its Agreement of Limited Partnership
or Certificate of Limited Partnership; (ii) require it to obtain any consent,
approval, authorization or permit from, or file with or notify, any
governmental or regulatory authority, except where the failure to obtain
such consent, approval, authorization or permit, or to make such filing or
notification, would not have a Material Adverse Effect; (iii) constitute a
breach or will result in a default under any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, license, contract,
agreement or other instrument or obligation of any kind to which it is a
party or by which it is bound, except for any such breach or default as
would not have a Material Adverse Effect; or (iv) violate any order, writ,
injunction, judgment, decree, law, statute, rule, regulation or
governmental permit or license applicable to it, which violation would have
a Material Adverse Effect, unless, any waiver, consent, approval,
authorization, permit, filing or notification necessary to prevent any such
conflict, breach, default or violation has been obtained prior to the
Effective Time.
(d) PARTNERSHIP INTERESTS. On the Effective Date, the Units to be
issued as provided in this Agreement shall be duly issued by the Surviving
Partnership and the recipients will be duly admitted as limited partners of
the Surviving Partnership.
(e) SURVIVING PARTNERSHIP AGREEMENT. A true, correct and complete
copy of the Surviving Partnership Agreement is attached hereto as EXHIBIT "D".
The Surviving Partnership hereby agrees that, with the following exceptions,
the Surviving Partnership Agreement shall not be further amended on or
prior to the Effective Date: (i) the Surviving Partnership Amendments, (ii)
amendments in connection with the issuance of additional shares under HME's
Dividend Reinvestment Stock Purchase, Resident Stock Purchase and Employee
Stock Purchase Plan, (iii) amendments in connection with mergers or other
transactions similar to the Merger which are currently in process wherein
additional Units are issued in connection with the acquisition of real
property or of interests in entities which own real property, the
provisions of which have been disclosed in writing to the Merged
Partnership prior to the execution of this Agreement, and (iv) the
formation of a subsidiary of HME to hold Units owned by HME.
ARTICLE V
COVENANTS OF THE PARTIES
5.1 FURTHER ASSURANCE. Subject to the terms and conditions of this
Agreement, each of the parties hereto will use reasonable efforts to take,
or cause to be taken, all actions, and to do, or cause to be done, all
things necessary under applicable laws and regulations to consummate the
transactions contemplated by this Agreement, including, but not limited to,
taking any actions necessary to cause the Merger Conditions to be
satisfied.
5.2 REPRESENTATIONS AND WARRANTIES. Each of the parties hereto shall
give written notice to the other party promptly upon the occurrence of, or
upon becoming aware of, either: (i) the occurrence of any event which makes
any representation or warranty contained in this Agreement not true in any
material respect; or (ii) any material and adverse development in the
condition (financial or otherwise) or operations of such party.
5.3 REPURCHASE AGREEMENTS. The Surviving Partnership hereby covenants
and agrees that it will, on or prior to the Effective Date, enter into an
agreement with each of the partners of the Merged Partnership other than
Cash Conversion Holders and Dissenting Partners whereby the Surviving
Partnership agrees that:
(a) Upon the written request of any such partner, the Surviving
Partnership will purchase any or all of the Units held by such partner at a
purchase price per Unit equal to the Effective Date Price (as defined in
Section 3.3(c) above). The written notice must be received by the Surviving
Partnership on or before the date which is one hundred eighty (180) days
after the Effective Date.
(b) Upon the written request of any such partner which is made (i)
after the date which is one hundred eighty (180) days after the Effective Date
and (ii) on or before the date which is the later of (A) the last day of any
holding period (which holding period shall not, in any event, exceed one
year after the Effective Date) during which, in order to comply with the
requirements of the SEC, such partners are not permitted to convert Units
into shares of common stock of HME and (B) the date on which the SEC
declares effective the Registration Statement required to be filed with the
SEC pursuant to Section 5.11 hereof, the Surviving Partnership will
purchase any or all of the Units held by such partner at a purchase price
per Unit equal to the average of the daily market price for the ten (10)
consecutive trading days immediately preceding the date of such partner's
request of the shares of common stock of HME.
5.4 ACCESS TO INFORMATION. Between the date of this Agreement and the
Effective Date, the Surviving Partnership, on the one hand, and the Merged
Partnership, on the other hand, will each, during ordinary business hours
and upon reasonable advance notice, give to the other and their authorized
representatives reasonable access to inspect their books, records, offices
and other facilities and properties; provided, however, that: (i) any such
investigation shall be conducted in such a manner as not to interfere
unreasonably with the operation of the other's business; (ii) no party
shall be required to take any action which would constitute a waiver of the
attorney-client privilege; and (iii) no party need supply the other with
any information which it is under a legal obligation not to supply.
5.5 FINANCIAL ACCESS.
(a) Upon the demand of the Surviving Partnership, the General
Partner will provide a signed representation letter substantially in the form
of EXHIBIT "E" attached hereto. The General Partner and the Merged Partnership
will provide access to the Surviving Partnership's representative to all
financial and other information relating to the Merged Partnership and the
Property as is sufficient to enable them to prepare audited and pro-forma
financial statements, in conformity with Regulation S-X of the Securities
and Exchange Commission (the "Commission") and any registration Statement,
report or disclosure statement to be filed with the Commission.
(b) Prior to the Effective Date the Surviving Partnership shall
from time to time, promptly after request, supply to the Merged Partnership,
and certify to the Merged Partnership the accuracy and completeness of, copies
of any financial statements and records and other documents and information
requested by the General Partner regarding the Surviving Partnership and
HME which are available to the public.
(c) The Parties hereto recognize that, at the Effective Date, the
Merged Partnership will be treated for federal income tax purposes as having
contributed all of its assets to the Surviving Partnership in exchange for
the Consideration, which the Merged Partnership will be deemed to have
distributed to its Partners in complete liquidation of the Merged
Partnership. Consequently, the Merged Partnership will terminate for
federal income tax purposes at the Effective Time. The Parties hereto
shall prepare their tax returns for their respective taxable years which
include the Effective Date consistent with that characterization of the
transaction. The Surviving Partnership shall make available to the General
Partner (and its representatives) promptly upon request, all financial and
other information relating to the Merged Partnership which is necessary to
permit the Merged Partnership to file its tax returns for its taxable year
ended on the Effective Date.
5.6 INTENTIONALLY OMITTED
5.7 NEGATIVE COVENANTS. The Merged Partnership agrees that, prior to
the Effective Date, it will not take any of the following actions without
first obtaining the Surviving Partnership's prior written consent, which
consent shall not be unreasonably withheld or delayed.
A. Create, incur or assume any indebtedness for money borrowed,
including obligations in respect of capital leases, except: (i) purchase
money mortgages granted in connection with the acquisition of property in the
ordinary course of business consistent with past practice; and (ii) short-
term indebtedness for borrowed money in accordance with loan agreements and
lines of credit in effect as of the date hereof.
B. Assume, guarantee, endorse or otherwise become liable or
responsible (whether directly, contingently or otherwise) for the obligations
of any other person except in the ordinary course of business consistent with
past practices.
C. Sell or otherwise dispose of or abandon any of its assets except
in the ordinary course of business.
D. Increase the rate or terms of: (i) compensation payable or to
become payable to any of its employees; or (ii) any bonus, insurance, pension
or other employee benefit plan, payment or arrangement made to, for or with
any employee, except salary increases to site employees not exceeding 3%
occurring in the ordinary course of business in accordance with its
customary practices (which shall include normal periodic performance
reviews and related compensation and benefit increases).
E. Enter into any agreement, commitment or transaction (including
without limitation any borrowing, capital expenditure or capital financing),
material to the business, operations or financial condition of its
business, except agreements, commitments or transactions in the ordinary
course of business consistent with past practice.
F. Transfer, mortgage, pledge, grant any security interest in or
permit the imposition of any lien or other encumbrance on any of its assets
other than in the ordinary course of business consistent with past practice.
5.8 MANAGEMENT AGREEMENTS. On or prior to the Effective Date, the Merged
Partnership shall terminate any agreements pertaining to the management of
the Property.
5.9 CLOSING DOCUMENTS. At the Effective Time, the Merged Partnership
shall deliver to the Surviving Partnership a certificate of title and any
necessary transfer documents relating to any vehicles, a current rent roll
("Rent Roll") certified, as of the date of the Effective Date, which shall
include a list of all tenants, all rental obligations of each tenant with
respect to the Property and all security deposits (including all interest
due to tenants pursuant to Pennsylvania or other applicable laws). At the
Closing, the Merged Partnership shall transfer to the Surviving Partnership
an amount equal to the aggregate amount of the security deposits shown on
the Rent Roll. At the Effective Time, the Merged Partnership shall also
deliver to the Surviving Partnership complete originals of each lease
listed on the Rent Roll.
5.10 INSPECTION. Upon and after execution of this Agreement by both
parties, the Merged Partnership agrees that the Surviving Partnership and
its authorized representatives shall have the right and privilege to enter
upon the Property and the Merged Partnership's offices, upon reasonable
notice, during regular business hours, for the purpose of gathering such
information and conducting such environmental and engineering studies or
other tests and reviews as the Surviving Partnership may deem appropriate
and necessary. All such inspections, studies, tests and reviews shall be at
the Surviving Partnership's sole expense. The Merged Partnership agrees to
cooperate with the Surviving Partnership by making available to the
Surviving Partnership such records, plans, drawings or other data as may be
in their or the Merged Partnership's possession or control relating to the
Property and its operation; provided, however, that the Surviving
Partnership agrees to indemnify the Merged Partnership of and from any loss
or damage occasioned by such entry, and agrees further to restore to its
original condition, at the Surviving Partnership's own cost and expense,
any property disturbed by such entry.
5.11 SUFFICIENT REGISTERED SHARES. The Surviving Partnership hereby
represents and warrants to and covenants with the Merged Partnership and
its partners that the Effective Date and thereafter for so long as any
Units issued to the partners of the Merged Partnership are outstanding
there shall be at all times, a sufficient number of reserved shares of HME
to permit the conversion of all outstanding Units into shares of HME
pursuant to the terms of the Surviving Partnership Agreement. Within 10
days after the Effective Date, the Surviving Partnership agrees to file a
registration statement (the "Registration Statement") with the SEC
registering the resale of the shares of common stock of HME into which the
Units may be converted and to use reasonable commercial efforts to have the
registration promptly declared effective by the SEC. Notwithstanding
anything to the contrary contained in this Agreement, in the event that the
Surviving Partnership has not filed the Registration Statement with the SEC
by the date (the "Outside Filing Date") which is the 30th day after the
Effective Date, then for and with respect to each day during the period
between the Outside Filing Date and the date on which the Registration
Statement is filed with the SEC, the Surviving Partnership shall pay to the
former partners of the Merged Partnership which hold Units, as liquidated
damages and not as a penalty, the sum of $10,000, which sum shall be
apportioned pro rata among such former partners of the Merged Partnership.
5.12 TAX PROVISIONS. The Surviving Partnership agrees to observe and
comply with the following:
(a) The Surviving Partnership will use the traditional method (and
not the curative or remedial method), as contemplated by Treasury Regulations
Section 1.704-3(b) to allocate book-tax differences with respect to the
assets which are deemed contributed to the Surviving Partnership by the
Merged Partnership.
(b) Home Properties agrees that for a period of 5 years following
the Effective Time, (i) the Surviving Partnership shall not restructure the
share of the Surviving Partnership's debt of the former partners of the
Merged Partnership who shall have received Units in the Surviving
Partnership (the "Unit Partners") in such manner as to cause a reduction in
the amount of Unit Partners' share of non-recourse debt allocable to and
encumbering the Property without the Unit Partners' prior written consent,
and (ii) the Surviving Partnership will not dispose of any of its interest
in the Real Property, unless such disposition is structured as a tax-
deferred, like-exchange under Section 1031 of the Code, or otherwise is
substantially tax-deferred under the Code. Any property or real estate
assets acquired by the Surviving Partnership pursuant to such tax-deferred,
like- exchange shall remain subject to the restriction on disposition
contained hereunder until the end of the aforesaid 5-year period. In the
event that the Surviving Partnership takes any such action during such 5-
year period, the Surviving Partnership shall indemnify and save harmless
the Unit Partners from and against any federal and state income tax
liability, including but not limited to: (i) income taxes suffered as a
result of all payments made under this subsection; and (ii) interest,
penalties and the reasonable fees of attorneys and accountants.
(c) As a partner contributing interests in a partnership in exchange
for a limited partnership interest in the Surviving Partnership, the Unit
Partners will receive annually from the Surviving Partnership Form 1065,
Schedule K-1, Partner's Share of Income, Credit, Deductions, etc. This form
will also be part of the tax return, Form 1065, filed by the Surviving
Partnership with the Internal Revenue Service. The Surviving Partnership
represents that the Schedule K-1 submitted to Unit Partners for use in the
preparation of their tax returns will reflect the allocation to Unit
Partners as partners of a share of non-recourse liabilities in accordance
with Reg. Sec. 1.752-3 of the Internal Revenue Code, such that as a result
of the allocation the Unit Partners shall recognize no income upon the
contribution of the Property to the Surviving Partnership, and for a period
of 5 years following the Effective Time except to the extent cash
distributions from the Surviving Partnership to a Unit Partner exceeds such
Unit Partner's basis in his or her Units. The Merged Partnership
represents that as of December 31, 1996: (i) their aggregate built in gain
determined in accordance with the principals set forth in Section 704(c) of
the Internal Revenue Code of 1986 ("Code") is as set forth on SCHEDULE 5.12
assuming that the Property has a fair market value of $8,155,000 as of the
date of the Merger; (ii) the amount of nonrecourse debt encumbering the
Property is $5,050,552; (iii) the capital account of each of the Unit
Partners is as set forth on SCHEDULE 5.12. The Surviving Partnership's
representation contained in this Section 5.12 (c) is conditioned upon the
accuracy of the representations contained in the preceding sentence.
ARTICLE VI
CONDITIONS OF MERGER
6.1 MANDATORY CONDITIONS. Neither the Surviving Partnership nor the
Merged Partnership shall have any obligation to execute or file the Certificate
of Merger as described in Section 2.1 unless, on or before September 30, 1997:
(a) OTHER CONDITIONS. All of the contingencies and conditions
(including, without limitation, the conditions set forth in Sections 6.2 and
6.3 hereof) contained in this Agreement have been satisfied or waived as
provided herein.
(b) OTHER MERGERS. The conditions to the mergers and other
transactions of the Surviving Partnership with the entities listed on the
attached SCHEDULE 6.1 also shall have been satisfied and the mergers are to
occur simultaneously with the Merger of the Merged Partnership into the
Surviving Partnership.
(c) EXISTING LENDER APPROVAL. The Existing Lender shall have
approved the Merger and shall have agreed to the assumption of the Existing
Loan by the Surviving Partnership (unless the Surviving Partnership elects to
prepay the Existing Loan pursuant to Section 3.10(a) hereof).
6.2 CONDITIONS TO MERGED PARTNERSHIP'S OBLIGATIONS. On the date all of
the requirements set forth in Section 6.1 hereof have been satisfied (the
"Satisfaction Date"), the general partner of the Merged Partnership shall
execute the Certificate of Merger and deliver it to the Surviving
Partnership. The general partner of the Merged Partnership shall have no
obligation to execute and deliver the Certificate of Merger unless:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Surviving Partnership set forth herein shall be true and
correct in all material respects as of the Satisfaction Date, as certified in
writing by the general partner of the Surviving Partnership.
(b) COVENANTS. The Surviving Partnership has complied in all
material respects with the covenants made by it in this Agreement to be
complied with by it from the date hereof through the Satisfaction Date.
(c) APPROVAL. The Merged Partnership shall have obtained the
requisite approval of its limited partners to the Merger and the other
transactions described in this Agreement on the terms and conditions
described herein.
(d) OPINION OF COUNSEL. The Surviving Partnership's independent
counsel shall have delivered an opinion of counsel in the form of EXHIBIT F
attached hereto.
(e) INTENTIONALLY OMITTED
(f) REGISTRATION RIGHTS AGREEMENT. The partners of the Merged
Partnership who receive Units and the Surviving Partnership shall have entered
into a registration rights agreement on customary terms, including, without
limitation, the granting of piggyback registration rights.
(g) MARYLAND ANTI-TAKEOVER STATUTES. The Board of Directors of
HME shall have taken all action necessary so that the transactions contemplated
by this Agreement including, without limitation, the issuance of Units and the
conversion of Units into shares of HME, shall be irrevocably exempt from
the operation of Section 3-601 ET SEQ. (the "business combination"
statute) and Section 3-701 ET SEQ. (the "control share acquisition"
statute) of the Maryland General Corporation Law (collectively, the
"Maryland Anti-Takeover Statutes") and from any provisions of the Articles
of Incorporation and Bylaws of HME that may have the effect of limiting the
acquisition of Units and shares of HME in connection with the transactions
contemplated in this Agreement, including without limitation, Article 7 of
the Articles of Incorporation of HME. The Surviving Partnership and its
counsel shall have confirmed to the Merged Partnership's satisfaction that
this Agreement, the Merger and the other transactions contemplated hereby
are exempt from the operation of the Maryland Anti-Takeover Statutes.
6.3 CONDITIONS TO SURVIVING PARTNERSHIP'S OBLIGATIONS. On the next day
following the date that the Surviving Partnership receives the Certificate
of Merger executed by the general partner of the Merged Partnership (the
"Delivery Date"), the general partner of the Surviving Partnership shall
execute the Certificate of Merger, deliver it to the Department of State of
the State of New York and the Commonwealth of Pennsylvania for filing and
notify the Merged Partnership of such delivery. The general partner of the
Surviving Partnership shall have no obligation to execute or deliver the
Certificate of Merger unless:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Merged Partnership set forth in this Agreement shall be true
and correct in all material respects as of the Delivery Date, as certified in
writing by the General Partner.
(b) COVENANTS. The Merged Partnership has complied with the
covenants made by it in this Agreement to be complied with by it from the date
hereof through the Delivery Date.
(c) CONDITION OF PROPERTY. There are on the Delivery Date, 77 and
176 apartment units, respectively, in rentable condition and in compliance with
federal, state, county or local laws, ordinances, rules and regulations.
(d) APPROVALS. The Surviving Partnership represents and warrants
that it has obtained the requisite approval of the Board of Directors of HME
to the Merger and the other transactions described in this Agreement on the
terms and conditions described herein, including, without limitation, the
Surviving Partnership Amendments. The Surviving Partnership, on or prior
to the Effective Date shall have obtained the requisite approval of its
limited partners and the State of Michigan Retirement Systems to the Merger
and the other transactions described in this Agreement on the terms and
conditions described herein. The Surviving Partnership agrees to recommend
to the Board of Directors of HME, the limited partners of the Surviving
Partnership and the State of Michigan Retirements Systems that they vote
in favor of the Merger and the other transactions described in this
Agreement.
(e) GENERAL PARTNER AGREEMENT. The General Partner shall have
executed an agreement whereby he agrees that he will be responsible for making
all final distributions to the former partners of the Merged Partnership and
shall indemnify the Surviving Partnership from all claims relating thereto.
(f) OPINION OF COUNSEL. The Merged Partnership's independent
counsel shall have delivered an opinion of counsel in the form of EXHIBIT G
attached hereto.
ARTICLE VII
TERMINATION
7.1 TERMINATION. If the conditions of Section 6.1 of this Agreement are
not satisfied, either party, at its option and upon notice to the other party,
may terminate this Agreement. If the conditions of Section 6.2 of this
Agreement are not satisfied, the Merged Partnership, at its option and upon
written notice to the Surviving Partnership, may terminate this Agreement.
If the condition of Section 6.3 of this Agreement are not satisfied, the
Surviving Partnership, at its option and upon written notice to the Merged
Partnership, may terminate this Agreement. Upon the termination of this
Agreement as provided herein, neither party shall have any further rights
or obligations hereunder and neither party shall take any action to file
the Certificate of Merger.
ARTICLE VIII
TITLE MATTERS
8.1 TITLE POLICIES AND SURVEYS. The Merged Partnership has, prior to
the date of this Agreement, furnished and delivered to the Surviving
Partnership a copy of the most recent title policy issued with respect to
the Property and a copy of the most recent survey of the Property.
8.2 OBJECTIONS TO TITLE.
(a) The obligation of the Surviving Partnership to execute or file
the Certificate of Merger is conditioned upon the ability of the Surviving
Partnership to obtain title insurance with respect to the Property
insuring that, as of the Effective Date, title to the Property is not
subject to any liens, encumbrances or other title objections other than the
lien of the mortgage securing the Existing Loan, any apartment leases for
tenants of the Property and the title exceptions identified in EXHIBIT H
attached hereto.
(b) The Merged Partnership agrees that, upon the request of the
Surviving Partnership, it will provide an affidavit in such customary form as
shall allow the Surviving Partnership to obtain a non-imputation endorsement
to the title policy purchased by the Surviving Partnership.
ARTICLE IX
MISCELLANEOUS
9.1 AMENDMENT. This Agreement may be amended only by a writing executed
by the Surviving Partnership and the Merged Partnership.
9.2 WAIVER OF COMPLIANCE. Except as otherwise provided in this
Agreement, any failure of any party to comply with any obligation, covenant,
agreement or condition herein may be waived by the party entitled to the
benefits thereof only by a written instrument signed by the party granting
such waiver, but such waiver or failure to insist upon strict compliance with
such obligation, covenant, agreement or condition shall not operate as a
waiver of, or estoppel with respect to, any subsequent or other failure.
9.3 ENTIRE AGREEMENT. This Agreement, including the documents,
schedules, certificates and instruments referred to herein, embody the entire
agreement and understanding of the parties hereto in respect of the
transactions contemplated by this Agreement. There are no restrictions,
promises, representations, warranties, covenants or undertakings, other
than those expressly set forth or referred to herein or therein. This
Agreement supersedes all prior agreements and understandings between the
parties with respect to such transactions.
9.4 ASSIGNMENT. This Agreement and all obligations and rights of the
parties hereunder may not be assigned by either party. Commencing with the
Effective Time, the General Partner and the former partners of the Merged
Partnership shall be third-party beneficiaries of this Agreement.
9.5 GOVERNING LAW. This Agreement shall be governed by the laws of the
Commonwealth of Pennsylvania, without reference to its principles of
conflicts of law.
9.6 INTERPRETATION. The article and section headings contained in this
Agreement are solely for the purpose of reference, are not part of the
agreement of the parties and shall not in any way affect the meaning or
interpretation of this Agreement. Article and Section references which do
not otherwise specify, are to the designated Article or Section of this
Agreement.
9.7 SEVERABILITY. The invalidity or unenforceability of any particular
provision of this Agreement shall be construed in all respects as if such
invalid or unenforceable provision were omitted. All provisions of this
Agreement shall be enforced to the full extent permitted by law.
9.8 NOTICES. All notices given pursuant to any provision of this
Agreement shall be in writing and shall be effective only if delivered
personally, or sent by registered or certified mail, postage prepaid or sent
by nationally recognized overnight carrier, to the addresses set forth below:
To Home Properties:
Home Properties of New York, L.P.
850 Clinton Square
Rochester, New York 14604
Attention: Norman Leenhouts
With a copy to Ann M. McCormick
at the same address
To the Merged Partnership
General Partner:Henry A. Quinn
100 Chetwynd Drive
Rosemont, Pennsylvania 19010
With a copy to:
Bruce R. Lesser, Esq.
Wolf, Block, Schorr and Solis-Cohen
350 Sentry Parkway
Building 640
Blue Bell, Pennsylvania 19422
And a copy to:
John S. Roberts, Jr., Esq.
Wolf, Block Schorr and Solis-Cohen
Twelfth Floor, Packard Building
15th and Chestnut Streets
Philadelphia, Pennsylvania 19102
9.9 CONFIDENTIALITY. By execution of this Agreement and except as
otherwise provided herein, prior to the Effective Time the Surviving
Partnership agrees to keep any and all information obtained in or in
connection with the due diligence process with respect to the Merged
Partnership, its operations, the Real Property and Other Items strictly
confidential, and will not disclose any such information without the
Merged Partnership's prior written consent, except to the extent required by
law.
9.10 BROKER'S COMMISSION. The Merged Partnership represents to the
Surviving Partnership that it did not employ any broker in connection with
this sale other than Mill Creek Realty Co., and the Merged Partnership
hereby agrees that, pursuant to Section 3.11 hereof, it will cause the
Surviving Partnership to pay any fees or commissions payable to Mill Creek
Realty Co. in connection with the transaction described in this Agreement.
The Surviving Partnership represents that it employed F.M. Stec &
Associates as broker and agrees that it will pay any fees or commissions
due as a result of the Surviving Partnership's employment of that broker.
The parties each agree to indemnify the other for any and all claims and
expenses, including legal fees if any other fees or commission is
determined to be due by reason of the employment of any other broker by the
indemnifying party.
9.11 CONDITION OF PROPERTY AND OTHER ITEMS
(a) The entire agreement between the parties hereto with respect to
the Property and the Other Items and the sale thereof is expressly set forth in
this Agreement, and the parties are not bound by any agreement,
understandings, provisions, conditions, representations or warranties other
than as are expressly set forth and stipulated herein. Without in any
manner limiting the generality of the foregoing, the Surviving Partnership
acknowledges that and its representatives will have fully inspected the
Property and the Other Items, and will be fully familiar with the physical
and financial condition thereof, and that the Property and the Other Items
will be accepted by the Surviving Partnership pursuant to the Merger in an
"as is" and "where is" condition as a result of such inspection and
investigations and not in reliance on any agreement, understanding,
condition, warranty or representation made by the General Partner, the
Merged Partnership or any agent or employee of the Merged Partnership
(except as expressly elsewhere provided in this Agreement) as to the
condition thereof, as to any permitted use thereof, or as to the income or
expense in connection therewith, or as to any other matter in connection
therewith; and the Surviving Partnership further acknowledges that neither
the Merged Partnership nor any party acting on behalf of the Merged
Partnership has made or shall be deemed to have made any such agreement,
condition, representation or warranty (except as expressly elsewhere
provided in this Agreement).
(b) The Surviving Partnership shall accept the Property and the
Other Items at the time of Closing in the same condition as the same are as of
the date of this Agreement as such condition shall have changed by reason of
wear and tear, damage by fire or other casualty and vandalism.
(c) If the Merger occurs, the Merged Partnership shall assign to the
Surviving Partnership any net insurance and/or condemnation proceeds
received by the Merged Partnership with respect to the Property, less any
amount expended by the Merged Partnership for collection, repair,
restoration or related expenses.
9.12 DEFAULT.
(a) If the Surviving Partnership defaults hereunder at or prior to
the Effective Date by failing to complete Closing in accordance with the terms
of this Agreement or in any other respect, then on the Effective Date (or
sooner in the event of an anticipatory breach) the Surviving Partnership
shall pay to the Merged Partnership the sum of $130,000. (the "Liquidated
Damages Amount") as liquidated damages. Notwithstanding anything to the
contrary contained in this Agreement, the failure to satisfy any of the
conditions to the Merger contained in Article VI hereof shall not, in and
of itself, be deemed to be a failure of the Surviving Partnership to
complete Closing or a default by the Surviving Partnership under this
Agreement. If the Surviving Partnership pays the Merged Partnership the
Liquidated Damages Amount as liquidated damages, the payment of such sum
shall be the Merged Partnership's only remedy in the event of the Surviving
Partnership's default at or prior to the Effective Date, and the Merged
Partnership in such event hereby waives any right, unless Closing is
completed, to recover the balance of the Consideration. If the Merged
Partnership shall be paid the Liquidated Damages Amount as liquidated
damages, this Agreement shall be and become null and void and all copies
will be surrendered to the Merged Partnership for cancellation. Nothing in
this Section shall limit the Merged Partnership's rights against the
Surviving Partnership and the Surviving Partnership's liability to the
Merged Partnership by reason of a default by the Surviving Partnership
under this Agreement which survives Closing.
(b) The term "Permitted Event" shall mean the occurrence of the
following on the Effective Date: the Surviving Partnership shall be ready,
willing and able to complete Closing in accordance with the Agreement; the
Surviving Partnership, or its authorized representative, shall have appeared
at the place designated for Closing and shall have tendered the Consideration,
and the Merged Partnership, notwithstanding the foregoing, shall have failed
to complete Closing in accordance with this Agreement or is otherwise in
default under this Agreement. Notwithstanding anything to the contrary
contained in this Agreement, the failure to satisfy any of the conditions
to the Merger contained in Article VI hereof shall not, in and of itself,
be deemed to be a failure of the Merged Partnership to complete Closing or
a default by the Merged Partnership under this Agreement. Except upon the
occurrence of the Permitted Event, the Surviving Partnership agrees that it
shall not (and hereby waives any right to) ever file or assert any LIS
PENDENS against the Property nor commence or maintain any action against
the Merged Partnership for specific performance under this Agreement nor
for a declaratory judgment as to the Surviving Partnership's rights under
this Agreement. Except as expressly provided above and elsewhere in this
Agreement, nothing herein shall be deemed to limit or impair any of the
Surviving Partnership's rights and remedies at law, in equity or by
statute.
9.13 INDEMNITY AGREEMENT. On the Effective Date, as an express condition
to the obligation of the Merged Partnership to complete Closing, the Surviving
Partnership shall execute and deliver to the General Partner an agreement,
in form and substance satisfactory to the General Partner and the General
Partner's counsel, whereby the Surviving Partnership agrees to indemnify
and hold harmless the General Partner, both individually and in his
capacity as the general partner of the Merged Partnership, from and against
any and all liabilities and obligations, including, without limitation,
guaranties and carve-outs from non-recourse, arising in connection with the
Existing Loan.
9.14 NO PERSONAL LIABILITY. Notwithstanding anything to the contrary
contained in this Agreement, neither the General Partner nor any other
partners of the Merged Partnership shall have any personal liability, and
no action of any kind shall be maintained against any of them or their
respective assets, with respect to this Agreement and/or the transactions
described in this Agreement, and the Surviving Partnership, its successors
and assigns, shall look solely to the assets of the Merged Partnership and
the cash or assets held by the Disbursing Agent pursuant to Section 3.2
above, for the payment of any claim against or the performance of any
obligation of the Merged Partnership. The foregoing limitation of
liability shall not apply in the case of fraud or intentional and material
misrepresentation; provided, however, that in connection with any action
involving alleged fraud or intentional and material misrepresentation, if
the Surviving Partnership, its successors or assigns, is not the prevailing
party, it shall be responsible for the payment of all attorneys' fees and
expenses of all parties, but if the Surviving Partnership, its successors
or assigns, is the prevailing party, each party shall bear its own
attorneys' fees and expenses.
9.15 NUMBER OF DAYS. In computing the number of days for purposes of
this Agreement, all days shall be counted, including Saturdays, Sundays and
holidays; provided, however, that if the final day of any time period falls
on a Saturday, Sunday or holiday on which federal banks are or may elect to
be closed, then the final day shall be deemed to be the next day which is
not a Saturday, Sunday or such holiday.
9.16 DEPOSIT.
(a) As security for the payment of the Liquidated Damages Amount,
upon the execution of this Agreement, the Surviving Partnership shall deposit
with the Disbursing Agent in escrow the sum of $130,000. (the "Deposit"). If
the Surviving Partnership shall become obligated to pay to the Merged
Partnership the Liquidated Damages Amount, the Merged Partnership shall
have the right to be paid the Deposit on account of the Liquidated Damages
Amount. If Closing is completed hereunder or if this Agreement is
terminated as provided in Section 7.1 hereof, the Disbursing Agent shall
refund the Deposit to the Surviving Partnership.
(b) Notwithstanding anything contained in this Section 9.16, if
either party terminates this Agreement as a result of the other's default or
pursuant to the exercise of any right of termination conferred by this
Agreement, Disbursing Agent shall not disburse the Deposit until the earlier
to occur of (i) receipt by Disbursing Agent of written instructions from the
Merged Partnership and the Surviving Partnership or (ii) entry of a final and
unappealable adjudication determining which party is entitled to receive
the Deposit, as applicable, at which time the Deposit shall be distributed
in accordance with such written instructions or adjudication. Except to
the extent of any dispute between them, the Merged Partnership and the
Surviving Partnership agree to act in good faith to provide the Disbursing
Agent with the instructions described in (i) above in the event that the
Agreement is terminated.
(c) In the event of a dispute between the Surviving Partnership and
the Merged Partnership with respect to the Deposit, the Disbursing Agent may
deposit the Deposit with a court of proper jurisdiction and commence an
interpleader action. Upon notifying the Merged Partnership and the
Surviving Partnership of the commencement of such action, Disbursing Agent
shall be released from all liability with respect to the Deposit, except to
the extent of accounting for any moneys previously delivered by Disbursing
Agent out of escrow. Disbursing Agent shall not be liable to either the
Merged Partnership or the Surviving Partnership, other than for performance
of its duties under this Agreement or his gross negligence or intentional
wrongdoing. Disbursing Agent may rely upon the genuineness or authenticity
of any document tendered to it by either the Merged Partnership or the
Surviving Partnership, and shall be under no duty of independent inquiry
with respect to any acts or circumstances recited in such document. The
Merged Partnership and the Surviving Partnership shall indemnify, defend
and hold harmless Disbursing Agent from and against all cost, claims or
liabilities arising from the performance by Disbursing Agent of his
obligations under this Agreement, other than for his failure to comply
herewith, gross negligence or intentional wrongdoing.
(d) As used in this Section 9.16, the term "Deposit" shall refer to
the amount set forth at Section 9.16(a), together with all interest thereon.
The Deposit shall be held by the Disbursing Agent in one or more federally-
insured money market accounts acceptable to both the Merged Partnership and
the Surviving Partnership, or in short-term United States government
obligations having a maturity date which is acceptable to the General
Partner and the Surviving Partnership or in one or more interest-bearing
deposit accounts of a bank or other financial institution acceptable to the
General Partner and the Surviving Partnership. The Merged Partnership's
taxpayer identification number is 23-2630401; the Surviving Partnership's
taxpayer identification number is 16-1455130.
(e) Although Disbursing Agent is counsel for the Merged Partnership,
the Disbursing Agent shall not be disqualified or prohibited from representing
Merged Partnership in connection with any matter arising out of this
Agreement by reason of its capacity as Disbursing Agent.
9.17 SURVIVAL.
(a) The representations, warranties, covenants and agreements of
HME and the Surviving Partnership contained in this Agreement will survive
Closing (i) indefinitely with respect to the warranties and representations in
Sections 4.2(a) and 10.2(a), (ii) until 60 calendar days after the expiration
of all applicable statutes of limitation (including all periods of extension,
whether automatic or permissive) with respect to matters covered by Section
10.2(f), (iii) until the fifth anniversary of the Effective Date in the
case of all other representations and warranties and any covenant or
agreement to be performed in whole or part prior to Closing and (iv) with
respect to each other covenant or agreement contained in this Agreement,
for five years following the last date on which such covenant or agreement
is to be observed, performed or complied with, or, if no such date is
specified, indefinitely, except that any representation, warranty, covenant
or agreement that would otherwise terminate in accordance with clauses
(ii), (iii) or (iv) above will continue to survive if notice of claim shall
have been timely given on or prior to such termination date until such
claim has been satisfied or otherwise resolved. This Section shall not
limit in any way the survival and enforceability of any covenant or
agreement of the parties hereto which by its terms contemplates, or is of
such nature that it would require, performance, observance or compliance
after the Effective Date.
(b) The representations, warranties, covenants and agreements of
the Merged Partnership contained in this Agreement will survive Closing for a
period of one hundred eighty (180) days, subject to the limitations on
liability provided in Section 9.14 hereof.
9.18 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original for all
purposes and all of which, when taken together, shall constitute one and
the same instrument.
ARTICLE X
ADDITIONAL REPRESENTATIONS AND WARRANTIES
BY THE SURVIVING PARTNERSHIP
10.1 DEFINITIONS.As used in this Article X, the following defined terms
shall be the meanings indicated below:
"AFFILIATE" means any Person that directly, or indirectly through one or
more intermediaries, controls or is controlled by or is under common
control with the Person specified. For purposes of this definition, control
of a Person means the power, direct or indirect, to direct or cause the
direction of the management and policies of such Person whether by Contract
or otherwise and, in any event and without limitation of the previous
sentence, any Person owning 10% or more of the voting securities of a
second Person shall be deemed to control that second Person.
"BENEFIT PLAN" means any Plan entered into, established, maintained,
contributed to or required to be contributed to, by HME or any Company
ERISA Affiliate providing benefits to employees, former employees,
independent contractors, former independent contractors of the Company or
any Company ERISA Affiliate, or their dependents or beneficiaries.
"CODE" means the Internal Revenue Code of 1986, as amended, and the rules
and regulations promulgated thereunder.
"COMMON STOCK" means shares of Common Stock of HME.
"COMPANY ERISA AFFILIATE" means an entity required (at any relevant time)
to be aggregated with HME under Sections 414(b), (c), (m) or (o) of the
Code or Section 4001 of ERISA.
"COMPANY FINANCIAL STATEMENTS" shall have the meaning set forth at Section
10.2(c) below.
"COMPANY SEC REPORTS" shall have the meaning set forth at Section 10.2(c)
below.
"CONTRACTS" means any agreement or obligation of any kind to which HME or
any of its Subsidiaries is a party or by which HME or any of its
Subsidiaries or any of their respective assets or properties is bound.
"GAAP" means generally accepted accounting principles, consistently applied
throughout the specified period and in the immediately prior comparable
period.
"PERSON" means any natural person, corporation, limited liability company,
general partnership, limited partnership, proprietorship, other business
organization, trust, union, association or Governmental or Regulatory
Authority.
"PLAN" means any employment, bonus, incentive compensation, deferred
compensation, pension, profit sharing, retirement, stock purchase, stock
option, stock ownership, stock appreciation rights, phantom stock, leave of
absence, layoff, vacation, day or dependent care, legal services,
cafeteria, life, health, medical, accident, disability worker's
compensation or other insurance, severance, separation, termination, change
of control or other benefit plan, agreement, practice, policy or
arrangement of any kind, whether written or oral, including, but not
limited to, any "employee benefit plan" within the meaning of Section 3(3)
of ERISA.
"SEC" means the Securities and Exchange Commission.
"SECURITIES" means the shares of Common Stock and the Units to be issued
and sold to partners in the Merged Partnership, including shares of Common
Stock issuable upon conversion of Units to be issued and sold, pursuant to
this Agreement and the Transaction Agreements.
"SUBSIDIARY" means with respect to any party, a corporation, partnership or
other organization, whether incorporated or unincorporated, of which more
than 50% of either the equity interests in, or the voting control of, such
corporation, partnership or other organization is, directly or indirectly
through Subsidiaries or otherwise, beneficially owned by such party.
Notwithstanding the foregoing, "Subsidiary," when used with respect to HME,
includes, without limitation, the Surviving Partnership.
"TRANSACTION AGREEMENTS" means all agreements and documents to be delivered
by HME and the Surviving Partnership in connection with the transactions
contemplated by this Agreement and the Transaction Agreements.
10.2 REPRESENTATIONS AND WARRANTIES. The Surviving Partnership and HME
hereby make the following representations and warranties to the Merged
Partnership, their liability with respect to such representations and
warranties being joint and several:
(a) CAPITAL STOCK. The authorized capital stock of HME consists
solely of (i) 10 million shares of preferred stock, par value $.01 per share,
none of which are issued and outstanding, (ii) 10 million shares of excess
stock, par value $.01 per share, none of which is issued, and (iii) 30 million
shares of Common Stock, 7,166,458.397 of which are issued and outstanding
as of the date hereof and 4,189,824 of which are reserved for issuance upon
exercise of stock options or exchange of Units in the Surviving Partnership
as of the date hereof. SCHEDULE 10.2(A) hereto sets forth a true and
correct list of the number of Units of the Surviving Partnership that are
issued and outstanding and the holders thereof. All of the outstanding
shares of Common Stock have been duly authorized and validly issued and are
fully paid and nonassessable (except, in the case of Units, as contemplated
by the New York Revised Uniform Limited Partnership Act) and have been
offered and sold in compliance with all applicable laws including, without
limitation, federal and state securities laws and none of them was issued
in violation of any preemptive or other similar right. The Securities, when
issued and sold pursuant to this Agreement and the Transaction Agreements,
will be duly authorized and validly issued, fully paid and nonassessable
(except, in the case of Units, as contemplated by the New York Revised
Uniform Limited Partnership Act) and none of them will be issued in
violation of any preemptive or other similar right. Except as identified
on SCHEDULE 10.2(A) attached hereto, there is no outstanding option,
warrant or other right calling for the issuance of, and there is no
commitment, plan or arrangement to issue, any shares of capital stock of
HME or any security convertible into or exercisable or exchangeable for,
such capital stock. The Common Stock and the Securities conform in all
material respects to all statements relating thereto contained in the
Company SEC Reports.
(b) NO VIOLATIONS OR DEFAULTS. Neither HME nor any of its
Subsidiaries is in violation of its certificate or articles of incorporation,
bylaws, certificates of partnership, partnership agreements, limited liability
company agreements or other similar governing documents, as the case may
be, and none of HME or any of its Subsidiaries is in default in the
performance or observance of any obligation, agreement, covenant or
condition contained in any Contracts to which such entity is a party or by
which such entity may be bound, or to which any of its properties or assets
may be bound or subject, except for such violations or defaults that
individually or in the aggregate would not have a Material Adverse Effect.
(c) SEC REPORTS AND FINANCIAL STATEMENTS; PARTNERSHIP AGREEMENT.
HME has filed all forms, reports, schedules, registration statements, and
other documents required to be filed by it with the SEC since the date of its
formation (as such documents have since the time of their filing been
amended or supplemented, the "Company SEC Reports"). As of their
respective dates, the Company SEC Reports (i) compiled as to form in all
material respects with the requirements of the Securities Act, or the
Securities Exchange Act of 1934, as amended, as the case may be, and (ii)
did not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading. The audited consolidated financial statements and
the interim consolidated financial statements (including, in each case, the
notes, if any, thereto) included in the Company SEC Reports (the "Company
Financial Statements") (A) were compiled as to form in all material
respects with the published rules and regulations of the SEC with respect
thereto, (B) were prepared in accordance with GAAP applied on a consistent
basis during the periods involved (except as may be indicated therein or in
the notes thereto and except with respect to unaudited statements as
permitted by Forms 10-Q and 8-K of the SEC) and (C) fairly present in all
material respects (subject, in the case of the unaudited interim financial
statements, to normal, recurring year- end audit adjustments which are not
expected to be, individually or in the aggregate, materially adverse to HME
and its Subsidiaries taken as a whole) the consolidated financial position
of HME and its consolidated subsidiaries as at the respective dates thereof
and the consolidated results of their operations and cash flows for the
respective periods then ended. Except for the Subsidiaries identified on
SCHEDULE 10.2(C) attached hereto, each Subsidiary of HME is treated as a
consolidated subsidiary of HME in the Company Financial Statements for all
periods covered thereby.
(d) ABSENCE OF CHANGES
(1) Except for the execution and delivery of this Agreement and
the Transaction Agreements, and the transactions to take place pursuant hereto
and thereto on the Effective Date, since March 31, 1997 there has not been
any change, event or development having, or that could reasonably be
expected to have, individually or in the aggregate, a Material Adverse
Effect. Without limiting the foregoing, between March 31, 1997 and the
date hereof (A) except with respect to the activities described in the
press releases attached hereto as EXHIBIT I, HME and its Subsidiaries have
conducted their respective businesses only in the ordinary course
consistent with past practice and (B) neither HME nor any of its
Subsidiaries have taken any action which, if taken after the date hereof,
would constitute a breach of any provision of clause (2) of this Section
10.2(d).
(2) Prior to the Effective Date, HME and its Subsidiaries shall
use all commercially reasonable efforts to preserve intact in all material
respects their present business organizations and reputation, to keep
available the services of their key officers and employees, to maintain their
assets and properties in good working order and condition, ordinary wear and
tear excepted, to maintain insurance on their tangible assets and businesses in
at least such amounts and against such risks and losses as are currently in
effect, to preserve their relationships with customers and suppliers and
others having significant business dealings with them and to comply in all
material respects with any statute, law, rule, regulation or ordinance or
any judgment, decree, order, writ, permit or license, of any court,
tribunal, arbitrator, authority, agency, commission, official or other
instrumentality of the United States or any domestic, state, county, city
or other political subdivision, applicable to HME or any of its
Subsidiaries.
(e) ABSENCE OF UNDISCLOSED LIABILITIES. Except for matters reflected
in the consolidated balance sheet of HME as of March 31, 1997 (or the footnotes
thereto) included in the Company Financial Statements and the press
releases attached hereto as EXHIBIT I, neither HME nor any of its
Subsidiaries had at such date, or has incurred since that date, any
liabilities or obligations (whether absolute, accrued, contingent, fixed or
otherwise, or whether due or to become due) of any nature, except
liabilities or obligations (i) which were incurred in the ordinary course
of business consistent with past practice since such date, and (ii) which
have not had, and could not be reasonably expected to have, individually or
in the aggregate, a Material Adverse Effect.
(f) REIT QUALIFICATION. At all times since its taxable year ended
December 31, 1996, HME has been, and upon each issuance of any of the
Securities, HME will continue to be, organized and operated in conformity with
the requirements for qualification as a real estate investment trust under the
Code, and its proposed method of operation will enable it to continue to
meet the requirements for taxation as a real estate investment trust under
the Code.
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
executed by a duly executed general partner as of the date first above
written.
VALSPRING PARTNERSHIP
/s/ Henry A. Quinn
- ------------------------------
Henry A. Quinn, General Partner
HOME PROPERTIES OF NEW YORK, L.P.
By:Home Properties of New York, Inc.
General Partner
By: /s/ Norman Leenhouts
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Norman Leenhouts, Chairman
For purposes of acknowledging and agreeing
to the provisions of Sections 1.4, 5.5 and
6.3(e)
/s/ Henry A. Quinn
- --------------------------------
Henry A. Quinn
<PAGE>
JOINDER
Home Properties of New York, Inc. joins in this Agreement for the purpose
of making in its individual capacity, the same representations and
warranties as are made by the Surviving Partnership in Article X of this
Agreement.
HOME PROPERTIES OF NEW YORK, INC.
By:/s/ Norman Leenhouts
-------------------------------
Norman Leenhouts, Chairman
<PAGE>
SCHEDULE 3.13
RESERVE FUNDS CLAIMS PROCEDURE
PROCEDURES WITH RESPECT TO CLAIMS
(a) If any claim (a "Claim") is made by the Surviving Partnership for
payment out of the Reserve Amount of a Liabilities Claim or an Indemnity
Claim, the Surviving Partnership shall thereafter notify the General
Partner and the Disbursing Agent of such Claim. At such time as there is a
Final Determination (as hereinafter defined) with respect to a Claim, the
Surviving Partnership shall notify the Disbursing Agent (with a copy to the
General Partner) of such Final Determination. A Final Determination with
respect to a Claim shall occur when (1) the Surviving Partnership and the
General Partner agree in writing to a payment from a Reserve with respect
to a Claim and each so advises the Disbursing Agent, or (2) the arbitrator
determining the disposition of a Claim pursuant to Section (d) below
renders a final decision with respect to a Claim determining that a payment
is to be made from a Reserve to the Surviving Partnership or (3) provided
that the General Partner (on behalf of all of the former Partners of the
Merged Partnership) shall have been given a reasonable opportunity to
participate in the defense of such third-party claim throughout the course
of such third-party claim, the Claim is made on account of a judgment
rendered by a court of competent jurisdiction requiring, on a third-party's
claim that is an Indemnity Claim, a specified payment on account of such an
Indemnity Claim to the third-party claimant and such judgment has become
final and not subject to further appeal. Upon receipt of a Final
Determination, the Disbursing Agent shall pay the amount of the Claim as
set forth in the Final Determination to the Surviving Partnership.
(b) On each of 90 days from and after the Effective Time and 180 days from
and after the Effective Time, and thereafter, at any time and from time to
time, within 10 days after the written request of the General Partner, the
Surviving Partnership shall send a notice (the "Anniversary Notice") to the
Disbursing Agent and to the General Partner describing each then
outstanding Claim with respect to which a Final Determination has not
theretofore been made and specifying what the Surviving Partnership
believes, acting reasonably and in good faith, to be the aggregate amount
of damages that have been incurred theretofore or are likely to be incurred
thereafter as a result of or arising out of each such Claim (the "Damage
Amount").
(c) If the General Partner believes, acting reasonably and in good faith,
that the Surviving Partnership's estimate of the Damage Amount with respect
to one or more of the Claims as set forth in the Anniversary Notice is
unreasonable (a "Disputed Amount"), the General Partner shall send a notice
(the "Dispute Notice") to the Surviving Partnership and the Disbursing
Agent, within 10 days after receipt of the Anniversary Notice, specifying
the amount that the General Partner believes, acting reasonably and in good
faith, to be the proper Damage Amount with respect to any Claim described
in the Anniversary Notice. Upon the issuance of a Dispute Notice, the
General Partner and representatives of the Surviving Partnership shall
immediately meet and shall use all necessary diligence in a concerted, good
faith effort to resolve all Disputed Amounts within 10 days after issuance
of the Dispute Notice. If the General Partner and the Surviving
Partnership resolve such dispute within the 10-day period as aforesaid,
they shall jointly notify the Disbursing Agent of the agreed-upon Damage
Amount with respect to each Claim, and such joint notice shall constitute a
Final Determination with respect to the relevant Claims.
(d) If the General Partner and the Surviving Partnership do not so agree,
the determination of the Damage Amount with respect to all disputed Claims
shall be immediately submitted to prompt and binding arbitration before an
arbitrator appointed by the Philadelphia, Pennsylvania office of the
American Arbitration Association in accordance with its rules, and acting
in accordance with its rules. If any such Disputed Amount relates to a
third-party claim that is then in litigation or is otherwise unresolved,
the standard to be applied by the arbitrator in determining the Damage
Amount shall be the aggregate amount of damages that have been or are
likely thereafter to be incurred by the Surviving Partnership, including
the Surviving Partnerships' attorneys' fees, court costs and other costs of
defense, arising out of such claim. The award of the arbitrator shall be
communicated to the parties and the Disbursing Agent and shall constitute a
Final Determination, which shall be final, binding and not subject to
appeal, with respect to all the Claims that are the subject of such award,
notwithstanding that an underlying third-party claim still remains
unresolved or is subsequently resolved in a manner inconsistent with the
arbitrator's award.
(e) If the Disbursing Agent in his capacity as such is threatened with
litigation or is sued, he shall have the right to interplead all interested
parties in any court of competent jurisdiction and to deposit the Reserves
(or any portion thereof) with the clerk of that court.
(f) The Disbursing Agent shall not be liable to either the General Partner,
the former Partners of the Merged Partnership or the Surviving
Partnership, other than for performance of his duties under the Reserves
Escrow agreement or his gross negligence or intentional wrongdoing. The
Disbursing Agent may rely upon the genuineness or authenticity of any
document tendered to him by either the General Partner or the Surviving
Partnership, and shall be under no duty of independent inquiry with respect
to any acts or circumstances recited in such document.
(g) As used in this Schedule 3.13, the term "Reserves" shall refer to the
respective amounts set forth at the beginning of this Section 3.13,
together with all interest thereon. The Reserves, which are held in Cash,
shall be held by the Disbursing Agent in one or more federally- insured
money market accounts acceptable to both the General Partner and the
Surviving Partnership, or in short-term United States government
obligations having a maturity date which is acceptable to the General
Partner and the Surviving Partnership or in one or more interest-bearing
deposit accounts at a bank or other financial institution acceptable to the
General Partner and the Surviving Partnership.
(h) All Claims must be made within 180 days of the Effective Time.
(i) No Claim shall be made, other than Liabilities Claims to be paid from
the Liabilities Reserve, until total Claims exceed $25,000.00.
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT and Plan of Merger (this "Agreement") is dated as of
this 31st day of July, 1997, and is between Home Properties of New York,
L.P., a limited partnership formed under the laws of New York (the
"Surviving Partnership"), and Exmark Partnership, a limited partnership
formed under the laws of Pennsylvania (the "Merged Partnership").
WITNESSETH:
WHEREAS, the Merged Partnership is governed by the Pennsylvania
Revised Limited Partnership Act (the "Pennsylvania Act") and, subject to
the receipt of the requisite approval of its limited partners, desires to
merge into the Surviving Partnership;
WHEREAS, the Surviving Partnership was formed under the New York
Revised Limited Partnership Act (the "New York Act") and, subject to the
receipt of the requisite approval, desires to merge with the Merged
Partnership.
NOW THEREFORE, the parties hereto agree as follows:
ARTICLE I
THE MERGER
1.1 AGREEMENT TO MERGE. Subject to the terms and conditions of this
Agreement, including but not limited to the satisfaction of the conditions
in Article VI hereof (the "Merger Conditions"), the Merged Partnership
shall be merged into the Surviving Partnership (the "Merger").
1.2 CERTIFICATE OF MERGER. Subject to the satisfaction of the Merger
Conditions, the general partner of each of the Merged Partnership and
Surviving Partnership shall execute a Certificate of Merger in the form
necessary to effect the merger of the Merged Partnership into the Surviving
Partnership pursuant to applicable law (the "Certificate of Merger") and
the Surviving Partnership shall deliver the Certificate of Merger to the
Department of State of the Commonwealth of Pennsylvania and the State of
New York for filing.
1.3 EFFECTIVE TIME. The Merger shall be effective immediately upon
the later to occur of the filing of the Certificate of Merger by the
Department of State of the State of New York or the Commonwealth of
Pennsylvania, but not later than September 30, 1997 (the "Effective Time").
The date during which the Effective Time occurs is referred to hereinafter
as the "Effective Date". The closing for the Merger (the "Closing") shall
be held on the Effective Date at the offices of Wolf, Block, Schorr
and Solis-Cohen, 350 Sentry Parkway, Building 640, Blue Bell, Pennsylvania,
commencing at 10:00 a.m.
1.4 SOLICITATION OF MERGED PARTNERSHIP APPROVAL. By executing this
Agreement, Henry A. Quinn as the general partner of the Merged Partnership
(the "General Partner") agrees that he will, promptly after the execution
of this Agreement, cause the Merged Partnership to solicit the approval of
its partners to the Merger in compliance with the New York Act and the
Pennsylvania Act (the "Acts"). Furthermore, the General Partner agrees
that he will vote his interests in the Merged Partnership in favor of the
Merger. The General Partner further agrees that, between the date of the
execution of this Agreement and the Effective Time or the earlier
termination of this Agreement, he will not offer to sell or negotiate a
sale of the Property, directly or indirectly, including, without
limitation, pursuant to a merger.
1.5 SOLICITATION OF SURVIVING PARTNERSHIP APPROVAL. By executing this
Agreement, Home Properties of New York, Inc. as the general partner of the
Surviving Partnership ("HME") agrees that it will promptly after the
execution of this Agreement, cause the Surviving Partnership to solicit the
approval of its partners to (a) the Merger in compliance with the Acts and
(b) the Surviving Partnership Amendments.
ARTICLE II
EFFECTS OF THE MERGER
2.1 SURVIVING PARTNERSHIP. The Surviving Partnership shall be the
surviving limited partnership. The Agreement of Limited Partnership of the
Surviving Partnership (the "Surviving Partnership Agreement") shall remain in
full force and effect after the Merger in its form immediately prior to the
Merger, except the Surviving Partnership Agreement shall be amended on the
Effective Date to (a) reflect the issuance of the Units pursuant to
subparagraph (b)(i) of Section 3.1 and Section 3.2 below and (b)
incorporate the provisions set forth in EXHIBIT B (EXHIBIT A has been
reserved) attached hereto (the "Surviving Partnership Amendments").
2.2 MERGED PARTNERSHIP. At the Effective Time, the separate existence
of the Merged Partnership shall cease.
2.3 TRANSFER OF ASSETS AND ASSUMPTION OF LIABILITIES. At the Effective
Time, all of the real and tangible or intangible personal property rights,
privileges, immunities, powers and all other assets whatsoever of the
Merged Partnership shall vest in the Surviving Partnership without further
act or deed. Thereafter, the Surviving Partnership shall be liable for all
debts, obligations, liabilities and penalties of the Merged Partnership as
though each such debt, obligation, liability or penalty had been originally
incurred by the Surviving Partnership, provided that the Reserves described
in Section 3.2 of this Agreement shall be established to pay, to the extent
thereof, for any liabilities of the Merged Partnership that the Surviving
Partnership has not specifically agreed to assume as provided herein.
ARTICLE III
CONSIDERATION
3.1 TOTAL CONSIDERATION.The aggregate consideration (the "Consideration")
payable by the Surviving Partnership in connection with the merger of the
Merged Partnership with and into the Surviving Partnership shall be
$8,275,000, subject to adjustments at Closing pursuant to Section 3.9 and
costs paid pursuant to Section 3.10(c) and Section 3.11, plus the amount of
any tax or other reserves held by the Existing Lender (hereinafter
defined).
3.2 CONVERSION OF PARTNERSHIP INTERESTS.At the Effective Time each of the
outstanding interests in the Merged Partnership (the "Interests") shall
automatically, by operation of law and without any action by the holders
thereof, be converted into the right to receive the Conversion Price and
the Deferred Consideration Right as provided below. "Conversion Price"
means the Consideration less the principal amount at the Effective Time of
the existing mortgage loans (collectively the "Existing Loan") covering the
Merged Partnership's property in favor of American Enterprise Life
Insurance Company (the "Existing Lender") less the amount specified by the
General Partner as described in Section 3.11 and less the Reserve Amount
multiplied by the percentage interest of the Interest in the Merged
Partnership. "Reserve Amount" means the sum of: (a) an amount equal to
the current liabilities of the Merged Partnership at the Effective Time
(other than the principal amount of the Existing Loan) (the "Liabilities
Reserve") and (b) $156,000 (the "Indemnity Reserve"); provided, however,
that the Reserve Amount shall be reduced in proportion to the Interests of
partners of the Merged Partnership ("Dissenting Partners") who have
properly indicated their intention to seek payment of the fair value of
their interests under Section 121-1102 of the New York Law. The Reserve
Amount shall be held and disbursed by the Disbursing Agent (as defined in
Section 3.3) as described in Sections 3.4 and 3.13. "Deferred
Consideration Right" with respect to each Interest means the right to
receive the Reserve Amount less all amounts used to satisfy the current
liabilities of the Merged Partnership ("Liabilities Claims") and any
amounts paid or subject to claims of the Surviving Partnership by reason of
a material breach or material misrepresentation of any representations,
warranties, covenants or agreements of the Merged Partnership which survive
Closing (but only during the period of such survival) ("Indemnity Claims")
multiplied by the percentage interest of the Interest in the Merged
Partnership . As of the Effective Time, all Interests in the Merged
Partnership shall cease to be outstanding and shall be canceled and each
holder of an Interest shall, by virtue of the Merger, cease to have any
rights with respect to the Merged Partnership or the Interests therein
except the rights to receive the Conversion Price and the Deferred
Consideration Rights with respect thereto, or the right, if any, to receive
payment from the Surviving Partnership of cash equal to the fair value of
his Interest in the Merged Partnership as provided in Section 121-1102 of
the New York Law. The Surviving Partnership hereby agrees to comply, at
its expense, with all payment and all other substantive and procedural
obligations and requirements which must be complied with respect to
Dissenting Partners, including, without limitation, Section 121-1102 of
the New York Law. Notwithstanding anything to the contrary contained in
this Agreement, (i) if and to the extent that the amount required to be
paid to any Dissenting Partner exceeds the portion (the "Dissenting Partner
Portion") of the Conversion Price which would have been paid to such
partner of the Merged Partnership if such partner was not a Dissenting
Partner, such excess amount shall be paid by the Surviving Partnership in
addition to the Consideration, (ii) the Dissenting Partner Portion paid by
the Surviving Partnership to Dissenting Partners shall be credited against
the Conversion Price and (iii) in the event that the holders of more than
10% of the Interests are Dissenting Partners, the Surviving Partnership
shall have the right to terminate this Agreement by giving written notice
thereof to the Merged Partnership within ten (10) days after the Surviving
Partnership receives notification thereof.
3.3 PAYMENT OF THE CONVERSION PRICE.
(a) The Surviving Partnership shall deliver, in immediately available
funds and in Units (hereinafter defined), to Wolf, Block, Schorr and Solis-
Cohen (the "Disbursing Agent") the Reserve Amount.
(b) The "Cash Portion of the Conversion Price shall be the aggregate
amount of the Conversion Price payable to the holders of Interests who have
failed to provide the Surviving Partnership with evidence satisfactory to it
that such holders are "Accredited Investors" as such term is defined in
Regulation D promulgated by the Securities and Exchange Commission under
the Securities Act of 1933, as amended (the "Securities Act").
Notwithstanding anything to the contrary contained in this Agreement if the
total of the Interests held by Dissenting Partners and by partners who are
not Accredited Investors exceeds fifteen percent of all of the Interests,
the Merged Partnership shall have the right, by giving written notice
thereof to the Surviving Partnership at any time prior to the Effective
Date, to terminate this Agreement.
(c) The Conversion Price payable to the holders of Interests other
than those described in (b) above shall be paid by the issuance of Units of
limited partnership in the Surviving Partnership ("Units"). The number of
Units to be issued to each holder of an Interest shall be the Conversion
Price for the Interest of such holder divided by the average of the daily
market price for the ten (10) consecutive trading days immediately
preceding the Effective Date of the shares of common stock of HME (the
"Effective Date Price"). The market price for each such trading day shall
be the closing price of the common stock on the New York Stock Exchange,
regular way, on such day as reported in the Wall Street Journal, Eastern
Edition.
3.4 PAYMENT WITH RESPECT TO DEFERRED CONSIDERATION RIGHTS.
(a) On the 90th day after the Effective Date, the Disbursing Agent
shall distribute pro rata to the holders of Interests immediately prior to the
Effective Time (other than Dissenting Partners) that portion of the
Liabilities Reserve which has not been paid for the liabilities of the
Merged Partnership as provided in this Agreement and one-half of that
portion of the Indemnity Reserve that has not been paid or subject to
Indemnity Claims.
(b) On the 180th day after the Effective Date, the Disbursing Agent
shall distribute pro rata to the holders of Interests immediately prior to the
Effective Time (other than Dissenting Partners), that portion of the
Indemnity Reserve that has not been paid, disbursed or subject to Indemnity
Claims.
(c) At any time, and from time to time, after the 180th day after
the Effective Date that there is a Final Determination (as defined in Schedule
3.13) that any remaining portion, if any, of the Indemnity Reserve is no
longer subject to Indemnity Claims, the Disbursing Agent shall distribute
such remaining portion pro rata to the holders of Interests immediately
prior to the Effective Time (other than Dissenting Partners).
3.5 INTENTIONALLY OMITTED
3.6 INTENTIONALLY OMITTED
3.7 INTENTIONALLY OMITTED
3.8 PRO-RATED DISTRIBUTION. The initial distribution payable with respect
to Units issued as part of the Consideration shall be made on the date on
which HME pays the dividend to the holders of its common stock that relates
to the earnings for the calendar quarter in which the Units were issued and
shall be pro-rated such that the partners receiving Units shall receive a
pro-rata distribution for the period from the date on which the Units were
issued to and including the last day of the calendar quarter in which the
Units were issued.
3.9 ADJUSTMENTS AT CLOSING. With respect to the Property, the following
shall be adjusted and pro-rated between the Surviving Partnership and the
Merged Partnership on the Effective Date as if the Surviving Partnership
was the owner of the Property as of midnight of the night preceding the
Effective Date and shall be paid in cash at Closing:
A. current fiscal year real estate taxes;
B. water and sewer rents and charges;
C. INTENTIONALLY OMITTED
D. fuel;
E. INTENTIONALLY OMITTED
F. INTENTIONALLY OMITTED
G. charges under the service contracts;
H. laundry income;
I. interest with respect to the Existing Loan; and
J. INTENTIONALLY OMITTED
K. rents.
(i) All rent payments collected on or before the Effective Date
for the month in which the Effective Date occurs shall be pro-
rated as between the parties as of the Effective Date.
(ii) All rent collected after the Effective Date shall be applied
first to the rent due for the month in which such rent was
collected and shall then be applied to the next most recent
delinquent rent, including any rent which was not collected
for any period prior to the Effective Date. Delinquent rent
amounts collected with respect to any period prior to the
Effective Date shall belong to former partners of the Merged
Partnership and, if paid to the Surviving Partnership, the
Surviving Partnership shall promptly send such rent to the General
Partner for distribution to the former partners of the Merged
Partnership pursuant to the agreement described in paragraph (e)
of Section 6.3.
(iii) All rent collected by the Merged Partnership, prior to the
Effective Date, for months subsequent to Effective Date shall be
paid to the Surviving Partnership at the Effective Time.
(iv) All rent collected for rental periods after the Effective
Date shall belong to the Surviving Partnership and, if paid to any
of the former partners of the Merged Partnership shall be promptly
sent to the Surviving Partnership.
Any error in the calculation of adjustments shall be corrected subsequent
to the Effective Date with appropriate credits to be given based upon
corrected adjustments, provided, however, that the adjustments (except if
errors are caused by misrepresentations) shall be final upon expiration of
the 90th day after the Effective Date.
3.10 COSTS.
(a) The Surviving Partnership and the Merged Partnership shall
each be responsible for one half of any assumption fees payable to the Existing
Lender, provided, however, that if as of the Effective Date any Existing
Loan may be prepaid without a penalty of more than 1% of its principal
balance at the time of prepayment, the entire assumption fee, or, if the
Surviving Partnership elects to prepay such Existing Loan, the entire
prepayment fee, shall be the responsibility of the Surviving Partnership.
(b) The Surviving Partnership shall pay all recording fees, its
attorneys' fees, the costs of obtaining a binder or commitment from a title
insurance company, the premium for its title insurance policy, one half of any
Pennsylvania state and local transfer tax, and all other costs and expenses
incidental to or in connection with closing this transaction customarily
paid for by the purchaser of similar property. The Merged Partnership
shall pay its attorneys' fees, one-half of any Pennsylvania state and local
transfer tax, and all other costs and expenses incidental to or in
connection with closing this transaction customarily paid for by the seller
of similar property.
(c) The amounts payable pursuant to Sections 3.10(a) and/or (b) by
the Merged Partnership on account of any assumption fee payable to the Existing
Lender and/or account of one half of any Pennsylvania state and local
transfer tax shall be charged against the Consideration.
3.11 PAYMENT DIRECTED BY GENERAL PARTNER. At the Effective Time, the
General Partner shall be entitled to direct that a portion of the
Consideration, up to a maximum amount equal to 6%of the Consideration, be
paid by the Surviving Partnership to pay certain closing costs of the
Merged Partnership and to satisfy certain liabilities of the Merged
Partnership.
3.12 CASH HELD BY MERGED PARTNERSHIP. Subject to Section 3.13 below,
on, or at any time prior to, the Effective Time, the General Partner shall have
the right to spend on behalf of the Merged Partnership and/or distribute to
the partners of the Merged Partnership any and all cash held by the Merged
Partnership.
3.13 ESCROW AGREEMENT.The Reserve Amount shall be held and disbursed
pursuant to the terms of an escrow agreement that shall be in form and
substance acceptable to the parties hereto, but which provide at least the
following:
(a) The entire Liabilities Reserve shall be applied to pay current
liabilities of the Merged Partnership before application of the Indemnity
Reserve. To the extent that the Liabilities Reserve shall not be
sufficient to pay the current liabilities of the Merged Partnership the
Indemnity Reserve may be used to fund current liabilities.
(b) The claim resolution procedures set forth in SCHEDULE 3.13
hereof.
3.14 INSURANCE REFUND. At the Effective Time, the Surviving Partnership
shall cause the cancellation of all insurance maintained by the Merged
Partnership and thereafter shall diligently seek to obtain such refunds as
may be due on account of such cancellation. Upon receipt of such refunds,
the Surviving Partnership shall pay them over to the General Partner for
distribution to the former partners of the Merged Partnership.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1 BY THE MERGED PARTNERSHIP. The Merged Partnership hereby makes the
following representations and warranties to the Surviving Partnership as of
the date hereof.
(a) REAL PROPERTY DESCRIPTION. The real property owned by the Merged
Partnership and to become the property of the Surviving Partnership at the
Effective Time consists of one or more parcels of land known as Executive
House Apartments which includes 100 apartments, located in the Borough of
Lansdale and Commonwealth of Pennsylvania and Harmark Village Square
Apartments which includes 128 apartments located in the Township of Lower
Salford and Commonwealth of Pennsylvania (collectively the "Project"), more
particularly described on EXHIBIT C, attached hereto, together and
including all buildings and other improvements thereon, including but not
limited to, the 100 apartment units and the 128 apartment units,
respectively, and all rights of the Merged Partnership in and to any and
all streets, roads, highways, alleys, driveways, easements and rights-of-
way appurtenant thereto (the foregoing are hereafter collectively referred
to as the "Property").
(b) OTHER ITEMS. The following items now in or on the Property if
owned by the Merged Partnership and not by tenants of the Property shall
become the property of the Surviving Partnership at the Effective Time:
(1) all heating, plumbing and lighting fixtures,
(2) ranges, refrigerators, disposals and dishwashers,
(3) water heaters,
(4) any and all bathroom fixtures, wall-to-wall carpeting,
traverse rods, exhaust fans, hoods, signs, screens, maintenance
building, model unit furniture (except for model unit furniture
which is rented), fences, carpeting and runners, cabinets,
mirrors, shelving, any humidifier and dehumidifier units, air
conditioning units, mailboxes, office furniture (except for
office furniture which is rented), and related equipment in
connection with the Project, and
(5) any fixtures appurtenant to the Property and any other
furniture or equipment used in connection with the operation
and maintenance of the Property, including any vehicles used
in connection with the operation and maintenance of the Property
(hereinafter with the items listed in (1)-(4) above,
collectively, the "Other Items").
(c) CONDITION OF OTHER ITEMS. To the best knowledge of the General
Partner and the current officers of Mill Creek Realty Co., substantially all
of the Other Items are in reasonable working order or condition. Except with
respect to the Existing Loan, the Merged Partnership has not subjected any
of the Other Property to any security interests, liens, claims, charges or
other encumbrances.
(d) ORGANIZATION AND AUTHORIZATION. The Merged Partnership is a
limited partnership duly organized, validly existing and in good standing
under the laws of the Commonwealth of Pennsylvania and was either formed
under, or by operation of law has become subject to, the Pennsylvania Act.
It has all requisite power and authority to own, lease and operate its
properties and to carry on its business as now being conducted. It is duly
qualified or licensed to do business as a foreign limited partnership and in
good standing in each jurisdiction in which the property owned, leased or
operated by it makes such qualification or license necessary, except in
each case in those jurisdictions where the failure to be so duly qualified
or licensed and in good standing would not have a Material Adverse Effect.
For purposes of this Agreement, "Material Adverse Effect" means a material
adverse effect on the business, assets, financial condition or results of
operation of the party making the representation or warranty to which such
qualification is being applied.
(e) AUTHORITY RELATIVE TO THIS AGREEMENT. Subject to receipt of the
approval described in Section 1.4 of this Agreement: (i) the Merged
Partnership has full power and authority to execute, deliver and perform
this Agreement and to consummate the transactions contemplated hereby; (ii)
all actions necessary to be taken by it or on its behalf to execute,
deliver and perform this Agreement and to consummate the transactions
contemplated hereby, have been duly and validly taken; and (iii) this
Agreement has been duly and validly executed and delivered by it and,
assuming due execution and delivery by the Surviving Partnership,
constitutes a valid and binding agreement enforceable against it in
accordance with its terms, except to the extent that enforceability may be
limited by applicable bankruptcy, reorganization, insolvency, moratorium or
similar laws affecting the enforcement of creditors' rights generally as at
the time in effect and by general principles of equity, regardless of
whether such enforceability is considered in a proceeding in equity or at
law.
(f) OUTSTANDING LIMITED PARTNERSHIP INTERESTS. SCHEDULE 4.1(F)
hereto lists the current holders of all outstanding limited partnership
interests of the Merged Partnership together with the percentage interest
held by each holder. In the event that any holder listed on SCHEDULE 4.1(F)
transfers any interests prior to the Effective Time, the Merged Partnership
shall provide written notice to the Surviving Partnership of such transfer
prior to the Effective Time, and such notice shall include the names of the
transferor and the transferee, the address of the transferee and the number
of units transferred.
(g) CONSENTS AND APPROVALS; NO VIOLATION. To the best of the Merged
Partnership's knowledge, neither the execution, delivery and performance of
this Agreement nor the consummation of the transactions contemplated hereby
will: (i) conflict with or will result in any breach of any provision of
its Agreement of Limited Partnership or Certificate of Limited Partnership;
(ii) require it to obtain any consent, approval, authorization or permit
from, or file with or notify, any governmental or regulatory authority,
except where the failure to obtain such consent, approval, authorization or
permit, or to make such filing or notification, would not have a Material
Adverse Effect; (iii) except to the extent that the consent of the Existing
Lender is required, constitute a breach or will result in a default under
any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, license, contract, agreement or other instrument or obligation
of any kind to which it is a party or by which it is bound, except for any
such breach or default as would not have a Material Adverse Effect; or (iv)
violate any order, writ, injunction, judgment, decree, law, statute, rule,
regulation or governmental permit or license applicable to it, which
violation would have a Material Adverse Effect, unless any waiver, consent,
approval, authorization, permit, filing or notification necessary to
prevent any such conflict, breach, default or violation has been obtained
prior to the Effective Time.
(h) LIABILITIES. Except (i) as disclosed in SCHEDULE 4.1(H)
attached hereto, (ii) for liabilities and obligations incurred in the normal
course of business of the Merged Partnership and (iii) as otherwise disclosed
in this Agreement, the Merged Partnership has no material liability or
obligation of any nature which in any way materially affects or is related
to the Property or the Other Items whether now due or to become due,
absolute, contingent or otherwise, including liabilities for taxes (or any
interest or penalties thereto).
(i) LITIGATION. Except as disclosed in SCHEDULE 4.1(I) attached
hereto, there is no litigation, proceeding or investigation which, to the best
knowledge of the Merged Partnership, is pending, or, to the best knowledge
of the Merged Partnership, threatened, against or affecting the Merged
Partnership or the Property that might affect or relate to the validity of
this Agreement or any action taken or to be taken pursuant hereto, or that
might have a Material Adverse Effect upon the Property or the Other Items
or any part or the operation thereof, unless fully covered by insurance.
(j) COMPLIANCE WITH LAWS. Except as disclosed in SCHEDULE 4.1(J)
attached hereto, neither the General Partner nor any current officer of Mill
Creek Realty Co. has received written notice, addressed to the Merged
Partnership or Mill Creek Realty Co., which remains outstanding that it has not
complied with and is in default under, or in violation of, or received any
written notice which remains outstanding that the Merged Partnership, the
Property or the Other Items may be in violation of, any law, ordinance,
rule, regulation or code or condition in any approval or permit pursuant
thereto (including without limitation, any zoning, sign, environmental,
labor, safety, health or price or wage control, ordinance, rule, regulation
or order of) applicable to the ownership, development, operation or
maintenance of the Property or the Other Items.
(k) LEASES. There are no written leases affecting the Property to
which the Merged Partnership is a party with a term greater than one year.
The rent roll attached hereto as SCHEDULE 4.1(K) is true and correct as of
the date of this Agreement.
(l) CONDEMNATION. The Merged Partnership has not received written
notice of pending condemnation of the Property, or any part thereof, or of any
plans for improvements which might result in a special assessment against the
Property.
(m) INTENTIONALLY OMITTED
(n) SERVICE CONTRACTS. There are no service contracts with respect
to the Property or the Other Items which will continue in effect after the
Closing except as set forth on SCHEDULE 4.1(N) attached hereto.
(o) EXECUTORY CONTRACTS. There are no executory contracts connected
with the Property or the Other Items, except as set forth on SCHEDULE 4.1(O)
attached hereto.
(p) ONGOING PERFORMANCE. Until the Effective Time, the Merged
Partnership shall continue to fulfill all of its obligations under the terms
of the Existing Mortgage, the leases encumbering the Property, the service
contracts and the executory contracts, and the Merged Partnership shall
operate, and perform routine maintenance and repair with respect to, all
landscaping, buildings, fixtures and facilities, including, without
limitation, the Other Items, in accordance its current practices. With
respect to non-routine maintenance or repair, the following shall apply:
(1) Except in the case of emergency, the Merged Partnership
shall not arrange for the making of any non-routine repair or
replacement costing in excess of $10,000 in any one instance
without the prior written consent of the Surviving Partnership
which consent shall not be unreasonably withheld and shall be
deemed given if it is not denied by written notice received by
the Merged Partnership within 3 business days after request for
such consent was received by the Surviving Partnership. If such
consent is given or if such cost is less than $10,000, in the
event that the Merger occurs, the cost of such repair or
replacement shall be the responsibility of the Surviving
Partnership and if any amount on account of such cost is
paid by the Merged Partnership prior to Closing, the Surviving
Partnership shall reimburse that to the Merged Partnership at
Closing.
(2) Any non-routine repairs or replacements arranged by the
Merged Partnership which are not the responsibility of the
Surviving Partnership pursuant to Section 4.1(p)(1) above or
Section 4.1(p)(3) below shall be a liability of the Merged
Partnership which shall not be assumed by the Surviving
Partnership.
(3) In the event that any non-routine repairs or replacements
are required on an emergency basis, which emergency is such as
does not comfortably allow the passage of the time period
specified above for obtaining the approval of the Surviving
Partnership, the Merged Partnership may arrange for such repair
or replacement, and in the event that the Merger occurs,
the cost thereof shall be the responsibility of the Surviving
Partnership and at Closing the Surviving Partnership shall
reimburse the Merged Partnership for any amount paid on account
of such repair or replacement prior to Closing.
(q) APPLIANCES. Except as previously disclosed to the Surviving
Partnership, all of the ranges and refrigerators in the Property are the
property of the Merged Partnership and not of the tenants.
(r) FINANCIAL INFORMATION. The financial information attached
hereto as SCHEDULE 4.1(R) (income and expenses for calendar year 1995 and
1996) is substantially true and accurate.
(s) ENVIRONMENTAL. Except as identified in SCHEDULE 4.1(S) attached
hereto, the Merged Partnership has received no notice of any violation of any
applicable Environmental Laws (below defined) with respect to the Property.
"Environmental Laws" shall mean all federal, state and local laws,
statutes, ordinances and codes relating to the protection of the
environment and/or governing the use, storage, treatment, generation,
transportation, processing, handling, production or disposal of any
Hazardous Substance and the rules, regulations, and orders with respect
thereto. "Hazardous Substance" means, without limitation, any flammable,
explosive or radioactive material, polychlorinated biphenyl, petroleum or
petroleum product, methane, hazardous materials, hazardous wastes,
hazardous or toxic substances or related materials, as defined in any
applicable Environmental Laws. From the date of acceptance hereof to and
including the Effective Date or the earlier termination of this Agreement,
the Merged Partnership shall promptly provide the Surviving Partnership
with a copy of any notice, citation, complaint or other directive from any
person, entity or governmental authority whereby compliance with
Environmental Laws is called into question with respect to the Property.
(t) TAXES. Except for state and local realty transfer taxes
(which are governed by Section 3.10) and real estate taxes (which are governed
by Section 3.9), the Merged Partnership has filed or will file when due all
notices, reports and returns of Taxes (as defined below) required to be
filed before the Effective Date and has paid or, if due after the date
hereof and prior to the Effective Date, will pay, all Taxes and other
charges for the periods shown to be due on such notices, reports and
returns. "Taxes" shall mean all taxes, charges, fees, levies or other
assessments, including, without limitation, income, excise, property, sale,
gross receipts, employment and franchise taxes imposed by the United
States, or any state, county, local or foreign government, or subdivision
or agency thereof with respect to the assets or the business of the Merged
Partnership, and including any interest, penalties or additions
attributable thereto.
4.2 BY THE SURVIVING PARTNERSHIP. The Surviving Partnership hereby makes
the following representations and warranties to the Merged Partnership as
of the date hereof.
(a) ORGANIZATION AND AUTHORIZATION. The Surviving Partnership is a
limited partnership duly organized, validly existing and in good standing under
the laws of the State of New York and has adopted the New York Act. It has all
requisite power and authority to own, lease and operate its properties and
to carry on its business as now being conducted. It is duly qualified or
licensed to do business as a foreign limited partnership and in good
standing in each jurisdiction in which the property owned, leased or
operated by it makes such qualification or license necessary, except in
each case in those jurisdictions where the failure to be so duly qualified
or licensed and in good standing would not have a Material Adverse Effect.
(b) AUTHORITY RELATIVE TO THIS AGREEMENT. Subject to the receipt
of the approvals described in Section 1.5 and in subparagraph (e) of Section
6.3 of this Agreement: (i) the Surviving Partnership has full power and
authority to execute, deliver and perform this Agreement and to consummate
the transactions contemplated hereby; (ii) all actions necessary to be
taken by it or on its behalf to execute, deliver and perform this Agreement
and to consummate the transactions contemplated hereby, have been duly and
validly taken; and (iii) this Agreement has been duly and validly executed
and delivered by it and, assuming due execution and delivery by the Merged
Partnership, constitutes a valid and binding agreement enforceable against
it in accordance with its terms, except to the extent that enforceability
may be limited by applicable bankruptcy, reorganization, insolvency,
moratorium or similar laws affecting the enforcement of creditors' rights
generally as at the time in effect and by general principles of equity,
regardless or whether such enforceability is considered in a proceeding in
equity or at law.
(c) CONSENTS AND APPROVALS; NO VIOLATIONS. To the best of the
Surviving Partnership's knowledge, as of the Effective Time, neither the
execution, delivery and performance of this Agreement nor the consummation
of the transactions contemplated hereby will: (i) conflict with or will result
in any breach of any provision of its Agreement of Limited Partnership or
Certificate of Limited Partnership; (ii) require it to obtain any consent,
approval, authorization or permit from, or file with or notify, any
governmental or regulatory authority, except where the failure to obtain
such consent, approval, authorization or permit, or to make such filing or
notification, would not have a Material Adverse Effect; (iii) constitute a
breach or will result in a default under any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, license, contract,
agreement or other instrument or obligation of any kind to which it is a
party or by which it is bound, except for any such breach or default as
would not have a Material Adverse Effect; or (iv) violate any order, writ,
injunction, judgment, decree, law, statute, rule, regulation or
governmental permit or license applicable to it, which violation would have
a Material Adverse Effect, unless, any waiver, consent, approval,
authorization, permit, filing or notification necessary to prevent any such
conflict, breach, default or violation has been obtained prior to the
Effective Time.
(d) PARTNERSHIP INTERESTS. On the Effective Date, the Units to be
issued as provided in this Agreement shall be duly issued by the Surviving
Partnership and the recipients will be duly admitted as limited partners of
the Surviving Partnership.
(e) SURVIVING PARTNERSHIP AGREEMENT. A true, correct and complete
copy of the Surviving Partnership Agreement is attached hereto as EXHIBIT "D".
The Surviving Partnership hereby agrees that, with the following exceptions,
the Surviving Partnership Agreement shall not be further amended on or
prior to the Effective Date: (i) the Surviving Partnership Amendments, (ii)
amendments in connection with the issuance of additional shares under HME's
Dividend Reinvestment Stock Purchase, Resident Stock Purchase and Employee
Stock Purchase Plan, (iii) amendments in connection with mergers or other
transactions similar to the Merger which are currently in process wherein
additional Units are issued in connection with the acquisition of real
property or of interests in entities which own real property, the
provisions of which have been disclosed in writing to the Merged
Partnership prior to the execution of this Agreement, and (iv) the
formation of a subsidiary of HME to hold Units owned by HME.
ARTICLE V
COVENANTS OF THE PARTIES
5.1 FURTHER ASSURANCE. Subject to the terms and conditions of this
Agreement, each of the parties hereto will use reasonable efforts to take,
or cause to be taken, all actions, and to do, or cause to be done, all
things necessary under applicable laws and regulations to consummate the
transactions contemplated by this Agreement, including, but not limited to,
taking any actions necessary to cause the Merger Conditions to be
satisfied.
5.2 REPRESENTATIONS AND WARRANTIES. Each of the parties hereto shall
give written notice to the other party promptly upon the occurrence of, or
upon becoming aware of, either: (i) the occurrence of any event which makes
any representation or warranty contained in this Agreement not true in any
material respect; or (ii) any material and adverse development in the
condition (financial or otherwise) or operations of such party.
5.3 REPURCHASE AGREEMENTS. The Surviving Partnership hereby covenants
and agrees that it will, on or prior to the Effective Date, enter into an
agreement with each of the partners of the Merged Partnership other than
Cash Conversion Holders and Dissenting Partners whereby the Surviving
Partnership agrees that:
(a) Upon the written request of any such partner, the Surviving
Partnership will purchase any or all of the Units held by such partner at a
purchase price per Unit equal to the Effective Date Price (as defined in
Section 3.3(c) above). The written notice must be received by the Surviving
Partnership on or before the date which is one hundred eighty (180) days
after the Effective Date.
(b) Upon the written request of any such partner which is made (i)
after the date which is one hundred eighty (180) days after the Effective Date
and (ii) on or before the date which is the later of (A) the last day of any
holding period (which holding period shall not, in any event, exceed one
year after the Effective Date) during which, in order to comply with the
requirements of the SEC, such partners are not permitted to convert Units
into shares of common stock of HME and (B) the date on which the SEC
declares effective the Registration Statement required to be filed with the
SEC pursuant to Section 5.11 hereof, the Surviving Partnership will
purchase any or all of the Units held by such partner at a purchase price
per Unit equal to the average of the daily market price for the ten (10)
consecutive trading days immediately preceding the date of such partner's
request of the shares of common stock of HME.
5.4 ACCESS TO INFORMATION. Between the date of this Agreement and the
Effective Date, the Surviving Partnership, on the one hand, and the Merged
Partnership, on the other hand, will each, during ordinary business hours
and upon reasonable advance notice, give to the other and their authorized
representatives reasonable access to inspect their books, records, offices
and other facilities and properties; provided, however, that: (i) any such
investigation shall be conducted in such a manner as not to interfere
unreasonably with the operation of the other's business; (ii) no party
shall be required to take any action which would constitute a waiver of the
attorney-client privilege; and (iii) no party need supply the other with
any information which it is under a legal obligation not to supply.
5.5 FINANCIAL ACCESS.
(a) Upon the demand of the Surviving Partnership, the General
Partner will provide a signed representation letter substantially in the form
of EXHIBIT "E" attached hereto. The General Partner and the Merged Partnership
will provide access to the Surviving Partnership's representative to all
financial and other information relating to the Merged Partnership and the
Property as is sufficient to enable them to prepare audited and pro-forma
financial statements, in conformity with Regulation S-X of the Securities
and Exchange Commission (the "Commission") and any registration Statement,
report or disclosure statement to be filed with the Commission.
(b) Prior to the Effective Date the Surviving Partnership shall from
time to time, promptly after request, supply to the Merged Partnership, and
certify to the Merged Partnership the accuracy and completeness of, copies of
any financial statements and records and other documents and information
requested by the General Partner regarding the Surviving Partnership and
HME which are available to the public.
(c) The Parties hereto recognize that, at the Effective Date, the
Merged Partnership will be treated for federal income tax purposes as having
contributed all of its assets to the Surviving Partnership in exchange for
the Consideration, which the Merged Partnership will be deemed to have
distributed to its Partners in complete liquidation of the Merged
Partnership. Consequently, the Merged Partnership will terminate for
federal income tax purposes at the Effective Time. The Parties hereto
shall prepare their tax returns for their respective taxable years which
include the Effective Date consistent with that characterization of the
transaction. The Surviving Partnership shall make available to the General
Partner (and its representatives) promptly upon request, all financial and
other information relating to the Merged Partnership which is necessary to
permit the Merged Partnership to file its tax returns for its taxable year
ended on the Effective Date.
5.6 INTENTIONALLY OMITTED
5.7 NEGATIVE COVENANTS. The Merged Partnership agrees that, prior to the
Effective Date, it will not take any of the following actions without first
obtaining the Surviving Partnership's prior written consent, which consent
shall not be unreasonably withheld or delayed.
A. Create, incur or assume any indebtedness for money borrowed,
including obligations in respect of capital leases, except: (i) purchase money
mortgages granted in connection with the acquisition of property in the
ordinary course of business consistent with past practice; and (ii) short-
term indebtedness for borrowed money in accordance with loan agreements and
lines of credit in effect as of the date hereof.
B. Assume, guarantee, endorse or otherwise become liable or
responsible (whether directly, contingently or otherwise) for the obligations
of any other person except in the ordinary course of business consistent with
past practices.
C. Sell or otherwise dispose of or abandon any of its assets except
in the ordinary course of business.
D. Increase the rate or terms of: (i) compensation payable or to
become payable to any of its employees; or (ii) any bonus, insurance, pension
or other employee benefit plan, payment or arrangement made to, for or with
any employee, except salary increases to site employees not exceeding 3%
occurring in the ordinary course of business in accordance with its
customary practices (which shall include normal periodic performance
reviews and related compensation and benefit increases).
E. Enter into any agreement, commitment or transaction (including
without limitation any borrowing, capital expenditure or capital financing),
material to the business, operations or financial condition of its
business, except agreements, commitments or transactions in the ordinary
course of business consistent with past practice.
F. Transfer, mortgage, pledge, grant any security interest in or
permit the imposition of any lien or other encumbrance on any of its assets
other than in the ordinary course of business consistent with past practice.
5.8 MANAGEMENT AGREEMENTS. On or prior to the Effective Date, the Merged
Partnership shall terminate any agreements pertaining to the management of
the Property.
5.9 CLOSING DOCUMENTS. At the Effective Time, the Merged Partnership
shall deliver to the Surviving Partnership a certificate of title and any
necessary transfer documents relating to any vehicles, a current rent roll
("Rent Roll") certified, as of the date of the Effective Date, which shall
include a list of all tenants, all rental obligations of each tenant with
respect to the Property and all security deposits (including all interest
due to tenants pursuant to Pennsylvania or other applicable laws). At the
Closing, the Merged Partnership shall transfer to the Surviving Partnership
an amount equal to the aggregate amount of the security deposits shown on
the Rent Roll. At the Effective Time, the Merged Partnership shall also
deliver to the Surviving Partnership complete originals of each lease
listed on the Rent Roll.
5.10 INSPECTION. Upon and after execution of this Agreement by both
parties, the Merged Partnership agrees that the Surviving Partnership and
its authorized representatives shall have the right and privilege to enter
upon the Property and the Merged Partnership's offices, upon reasonable
notice, during regular business hours, for the purpose of gathering such
information and conducting such environmental and engineering studies or
other tests and reviews as the Surviving Partnership may deem appropriate
and necessary. All such inspections, studies, tests and reviews shall be at
the Surviving Partnership's sole expense. The Merged Partnership agrees to
cooperate with the Surviving Partnership by making available to the
Surviving Partnership such records, plans, drawings or other data as may be
in their or the Merged Partnership's possession or control relating to the
Property and its operation; provided, however, that the Surviving
Partnership agrees to indemnify the Merged Partnership of and from any loss
or damage occasioned by such entry, and agrees further to restore to its
original condition, at the Surviving Partnership's own cost and expense,
any property disturbed by such entry.
5.11 SUFFICIENT REGISTERED SHARES. The Surviving Partnership hereby
represents and warrants to and covenants with the Merged Partnership and
its partners that the Effective Date and thereafter for so long as any
Units issued to the partners of the Merged Partnership are outstanding
there shall be at all times, a sufficient number of reserved shares of HME
to permit the conversion of all outstanding Units into shares of HME
pursuant to the terms of the Surviving Partnership Agreement. Within 10
days after the Effective Date, the Surviving Partnership agrees to file a
registration statement (the "Registration Statement") with the SEC
registering the resale of the shares of common stock of HME into which the
Units may be converted and to use reasonable commercial efforts to have the
registration promptly declared effective by the SEC. Notwithstanding
anything to the contrary contained in this Agreement, in the event that the
Surviving Partnership has not filed the Registration Statement with the SEC
by the date (the "Outside Filing Date") which is the 30th day after the
Effective Date, then for and with respect to each day during the period
between the Outside Filing Date and the date on which the Registration
Statement is filed with the SEC, the Surviving Partnership shall pay to the
former partners of the Merged Partnership which hold Units, as liquidated
damages and not as a penalty, the sum of $10,000, which sum shall be
apportioned pro rata among such former partners of the Merged Partnership.
5.12 TAX PROVISIONS. The Surviving Partnership agrees to observe and
comply with the following:
(a) The Surviving Partnership will use the traditional method
(and not the curative or remedial method), as contemplated by Treasury
Regulations Section 1.704-3(b) to allocate book-tax differences with respect
to the assets which are deemed contributed to the Surviving Partnership by the
Merged Partnership.
(b) Home Properties agrees that for a period of 5 years following
the Effective Time, (i) the Surviving Partnership shall not restructure the
share of the Surviving Partnership's debt of the former partners of the
Merged Partnership who shall have received Units in the Surviving
Partnership (the "Unit Partners") in such manner as to cause a reduction in
the amount of Unit Partners' share of non-recourse debt allocable to and
encumbering the Property without the Unit Partners' prior written consent,
and (ii) the Surviving Partnership will not dispose of any of its interest
in the Real Property, unless such disposition is structured as a tax-
deferred, like-exchange under <section>1031 of the Code, or otherwise is
substantially tax-deferred under the Code. Any property or real estate
assets acquired by the Surviving Partnership pursuant to such tax-deferred,
like- exchange shall remain subject to the restriction on disposition
contained hereunder until the end of the aforesaid 5-year period. In the
event that the Surviving Partnership takes any such action during such 5-
year period, the Surviving Partnership shall indemnify and save harmless
the Unit Partners from and against any federal and state income tax
liability, including but not limited to: (i) income taxes suffered as a
result of all payments made under this subsection; and (ii) interest,
penalties and the reasonable fees of attorneys and accountants.
(c) As a partner contributing interests in a partnership in exchange
for a limited partnership interest in the Surviving Partnership, the Unit
Partners will receive annually from the Surviving Partnership Form 1065,
Schedule K-1, Partner's Share of Income, Credit, Deductions, etc. This form
will also be part of the tax return, Form 1065, filed by the Surviving
Partnership with the Internal Revenue Service. The Surviving Partnership
represents that the Schedule K-1 submitted to Unit Partners for use in the
preparation of their tax returns will reflect the allocation to Unit
Partners as partners of a share of non-recourse liabilities in accordance
with Reg. Sec. 1.752-3 of the Internal Revenue Code, such that as a result
of the allocation the Unit Partners shall recognize no income upon the
contribution of the Property to the Surviving Partnership, and for a period
of 5 years following the Effective Time except to the extent cash
distributions from the Surviving Partnership to a Unit Partner exceeds such
Unit Partner's basis in his or her Units. The Merged Partnership
represents that as of December 31, 1996: (i) their aggregate built in gain
determined in accordance with the principals set forth in Section 704(c) of
the Internal Revenue Code of 1986 ("Code") is as set forth on SCHEDULE 5.12
assuming that the Property has a fair market value of $8,275,000 as of the
date of the Merger; (ii) the amount of nonrecourse debt encumbering the
Property is $5,634,042; (iii) the capital account of each of the Unit
Partners is as set forth on SCHEDULE 5.12. The Surviving Partnership's
representation contained in this Section 5.12 (c) is conditioned upon the
accuracy of the representations contained in the preceding sentence.
ARTICLE VI
CONDITIONS OF MERGER
6.1 MANDATORY CONDITIONS. Neither the Surviving Partnership nor the
Merged Partnership shall have any obligation to execute or file the Certificate
of Merger as described in Section 2.1 unless, on or before September 30, 1997:
(a) OTHER CONDITIONS. All of the contingencies and conditions
(including, without limitation, the conditions set forth in Sections 6.2 and
6.3 hereof) contained in this Agreement have been satisfied or waived as
provided herein.
(b) OTHER MERGERS. The conditions to the mergers and other
transactions of the Surviving Partnership with the entities listed on the
attached SCHEDULE 6.1 also shall have been satisfied and the mergers are to
occur simultaneously with the Merger of the Merged Partnership into the
Surviving Partnership.
(c) EXISTING LENDER APPROVAL. The Existing Lender shall have
approved the Merger and shall have agreed to the assumption of the Existing
Loan by the Surviving Partnership (unless the Surviving Partnership elects to
prepay the Existing Loan pursuant to Section 3.10(a) hereof).
6.2 CONDITIONS TO MERGED PARTNERSHIP'S OBLIGATIONS. On the date all of
the requirements set forth in Section 6.1 hereof have been satisfied (the
"Satisfaction Date"), the general partner of the Merged Partnership shall
execute the Certificate of Merger and deliver it to the Surviving
Partnership. The general partner of the Merged Partnership shall have no
obligation to execute and deliver the Certificate of Merger unless:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Surviving Partnership set forth herein shall be true and
correct in all material respects as of the Satisfaction Date, as certified in
writing by the general partner of the Surviving Partnership.
(b) COVENANTS. The Surviving Partnership has complied in all
material respects with the covenants made by it in this Agreement to be
complied with by it from the date hereof through the Satisfaction Date.
(c) APPROVAL. The Merged Partnership shall have obtained the
requisite approval of its limited partners to the Merger and the other
transactions described in this Agreement on the terms and conditions described
herein.
(d) OPINION OF COUNSEL. The Surviving Partnership's independent
counsel shall have delivered an opinion of counsel in the form of EXHIBIT F
attached hereto.
(e) INTENTIONALLY OMITTED
(f) REGISTRATION RIGHTS AGREEMENT. The partners of the Merged
Partnership who receive Units and the Surviving Partnership shall have entered
into a registration rights agreement on customary terms, including, without
limitation, the granting of piggyback registration rights.
(g) MARYLAND ANTI-TAKEOVER STATUTES. The Board of Directors of HME
shall have taken all action necessary so that the transactions contemplated by
this Agreement including, without limitation, the issuance of Units and the
conversion of Units into shares of HME, shall be irrevocably exempt from
the operation of Section 3-601 ET SEQ. (the "business combination"
statute) and Section 3-701 ET SEQ. (the "control share acquisition"
statute) of the Maryland General Corporation Law (collectively, the
"Maryland Anti-Takeover Statutes") and from any provisions of the Articles
of Incorporation and Bylaws of HME that may have the effect of limiting the
acquisition of Units and shares of HME in connection with the transactions
contemplated in this Agreement, including without limitation, Article 7 of
the Articles of Incorporation of HME. The Surviving Partnership and its
counsel shall have confirmed to the Merged Partnership's satisfaction that
this Agreement, the Merger and the other transactions contemplated hereby
are exempt from the operation of the Maryland Anti-Takeover Statutes.
6.3 CONDITIONS TO SURVIVING PARTNERSHIP'S OBLIGATIONS. On the next day
following the date that the Surviving Partnership receives the Certificate
of Merger executed by the general partner of the Merged Partnership (the
"Delivery Date"), the general partner of the Surviving Partnership shall
execute the Certificate of Merger, deliver it to the Department of State of
the State of New York and the Commonwealth of Pennsylvania for filing and
notify the Merged Partnership of such delivery. The general partner of the
Surviving Partnership shall have no obligation to execute or deliver the
Certificate of Merger unless:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Merged Partnership set forth in this Agreement shall be true
and correct in all material respects as of the Delivery Date, as certified in
writing by the General Partner.
(b) COVENANTS. The Merged Partnership has complied with the covenants
made by it in this Agreement to be complied with by it from the date hereof
through the Delivery Date.
(c) CONDITION OF PROPERTY. There are on the Delivery Date, 100 and
128 apartment units, respectively, in rentable condition and in compliance with
federal, state, county or local laws, ordinances, rules and regulations.
(d) APPROVALS. The Surviving Partnership represents and warrants that
it has obtained the requisite approval of the Board of Directors of HME to the
Merger and the other transactions described in this Agreement on the terms
and conditions described herein, including, without limitation, the
Surviving Partnership Amendments. The Surviving Partnership, on or prior
to the Effective Date shall have obtained the requisite approval of its
limited partners and the State of Michigan Retirement Systems to the Merger
and the other transactions described in this Agreement on the terms and
conditions described herein. The Surviving Partnership agrees to recommend
to the Board of Directors of HME, the limited partners of the Surviving
Partnership and the State of Michigan Retirements Systems that they vote
in favor of the Merger and the other transactions described in this
Agreement.
(e) GENERAL PARTNER AGREEMENT. The General Partner shall have
executed an agreement whereby he agrees that he will be responsible for
making all final distributions to the former partners of the Merged Partnership
and shall indemnify the Surviving Partnership from all claims relating thereto.
(f) OPINION OF COUNSEL. The Merged Partnership's independent counsel
shall have delivered an opinion of counsel in the form of EXHIBIT G attached
hereto.
ARTICLE VII
TERMINATION
7.1 TERMINATION. If the conditions of Section 6.1 of this Agreement
are not satisfied, either party, at its option and upon notice to the other
party, may terminate this Agreement. If the conditions of Section 6.2 of this
Agreement are not satisfied, the Merged Partnership, at its option and upon
written notice to the Surviving Partnership, may terminate this Agreement.
If the condition of Section 6.3 of this Agreement are not satisfied, the
Surviving Partnership, at its option and upon written notice to the Merged
Partnership, may terminate this Agreement. Upon the termination of this
Agreement as provided herein, neither party shall have any further rights
or obligations hereunder and neither party shall take any action to file
the Certificate of Merger.
ARTICLE VIII
TITLE MATTERS
8.1 TITLE POLICIES AND SURVEYS. The Merged Partnership has, prior to
the date of this Agreement, furnished and delivered to the Surviving
Partnership a copy of the most recent title policy issued with respect to
the Property and a copy of the most recent survey of the Property.
8.2 OBJECTIONS TO TITLE.
(a) The obligation of the Surviving Partnership to execute or file
the Certificate of Merger is conditioned upon the ability of the Surviving
Partnership to obtain title insurance with respect to the Property
insuring that, as of the Effective Date, title to the Property is not
subject to any liens, encumbrances or other title objections other than the
lien of the mortgage securing the Existing Loan, any apartment leases for
tenants of the Property and the title exceptions identified in EXHIBIT H
attached hereto.
(b) The Merged Partnership agrees that, upon the request of the
Surviving Partnership, it will provide an affidavit in such customary form as
shall allow the Surviving Partnership to obtain a non-imputation endorsement
to the title policy purchased by the Surviving Partnership.
ARTICLE IX
MISCELLANEOUS
9.1 AMENDMENT. This Agreement may be amended only by a writing executed
by the Surviving Partnership and the Merged Partnership.
9.2 WAIVER OF COMPLIANCE. Except as otherwise provided in this
Agreement, any failure of any party to comply with any obligation, covenant,
agreement or condition herein may be waived by the party entitled to the
benefits thereof only by a written instrument signed by the party granting
such waiver, but such waiver or failure to insist upon strict compliance with
such obligation, covenant, agreement or condition shall not operate as a
waiver of, or estoppel with respect to, any subsequent or other failure.
9.3 ENTIRE AGREEMENT. This Agreement, including the documents,
schedules, certificates and instruments referred to herein, embody the entire
agreement and understanding of the parties hereto in respect of the
transactions contemplated by this Agreement. There are no restrictions,
promises, representations, warranties, covenants or undertakings, other
than those expressly set forth or referred to herein or therein. This
Agreement supersedes all prior agreements and understandings between the
parties with respect to such transactions.
9.4 ASSIGNMENT. This Agreement and all obligations and rights of the
parties hereunder may not be assigned by either party. Commencing with the
Effective Time, the General Partner and the former partners of the Merged
Partnership shall be third-party beneficiaries of this Agreement.
9.5 GOVERNING LAW. This Agreement shall be governed by the laws of the
Commonwealth of Pennsylvania, without reference to its principles of
conflicts of law.
9.6 INTERPRETATION. The article and section headings contained in this
Agreement are solely for the purpose of reference, are not part of the
agreement of the parties and shall not in any way affect the meaning or
interpretation of this Agreement. Article and Section references which do
not otherwise specify, are to the designated Article or Section of this
Agreement.
9.7 SEVERABILITY. The invalidity or unenforceability of any particular
provision of this Agreement shall be construed in all respects as if such
invalid or unenforceable provision were omitted. All provisions of this
Agreement shall be enforced to the full extent permitted by law.
9.8 NOTICES. All notices given pursuant to any provision of this
Agreement shall be in writing and shall be effective only if delivered
personally, or sent by registered or certified mail, postage prepaid or sent by
nationally recognized overnight carrier, to the addresses set forth below:
To Home Properties:
Home Properties of New York, L.P.
850 Clinton Square
Rochester, New York 14604
Attention: Norman Leenhouts
With a copy to Ann M. McCormick
at the same address
To the Merged Partnership
General Partner:Henry A. Quinn
100 Chetwynd Drive
Rosemont, Pennsylvania 19010
With a copy to:
Bruce R. Lesser, Esq.
Wolf, Block, Schorr and Solis-Cohen
350 Sentry Parkway
Building 640
Blue Bell, Pennsylvania 19422
And a copy to:
John S. Roberts, Jr., Esq.
Wolf, Block Schorr and Solis-Cohen
Twelfth Floor, Packard Building
15th and Chestnut Streets
Philadelphia, Pennsylvania 19102
9.9 CONFIDENTIALITY. By execution of this Agreement and except as
otherwise provided herein, prior to the Effective Time the Surviving
Partnership agrees to keep any and all information obtained in or in
connection with the due diligence process with respect to the Merged
Partnership, its operations, the Real Property and Other Items strictly
confidential, and will not disclose any such information without the Merged
Partnership's prior written consent, except to the extent required by law.
9.10 BROKER'S COMMISSION. The Merged Partnership represents to the
Surviving Partnership that it did not employ any broker in connection with
this sale other than Mill Creek Realty Co., and the Merged Partnership
hereby agrees that, pursuant to Section 3.11 hereof, it will cause the
Surviving Partnership to pay any fees or commissions payable to Mill Creek
Realty Co. in connection with the transaction described in this Agreement.
The Surviving Partnership represents that it employed F.M. Stec &
Associates as broker and agrees that it will pay any fees or commissions
due as a result of the Surviving Partnership's employment of that broker.
The parties each agree to indemnify the other for any and all claims and
expenses, including legal fees if any other fees or commission is
determined to be due by reason of the employment of any other broker by the
indemnifying party.
9.11 CONDITION OF PROPERTY AND OTHER ITEMS
(a) The entire agreement between the parties hereto with respect
to the Property and the Other Items and the sale thereof is expressly set
forth in this Agreement, and the parties are not bound by any agreement,
understandings, provisions, conditions, representations or warranties other
than as are expressly set forth and stipulated herein. Without in any
manner limiting the generality of the foregoing, the Surviving Partnership
acknowledges that it and its representatives have fully inspected the
Property and the Other Items, and are fully familiar with the physical and
financial condition thereof, and that the Property and the Other Items will
be accepted by the Surviving Partnership pursuant to the Merger in an "as
is" and "where is" condition as a result of such inspection and
investigations and not in reliance on any agreement, understanding,
condition, warranty or representation made by the General Partner, the
Merged Partnership or any agent or employee of the Merged Partnership
(except as expressly elsewhere provided in this Agreement) as to the
condition thereof, as to any permitted use thereof, or as to the income or
expense in connection therewith, or as to any other matter in connection
therewith; and the Surviving Partnership further acknowledges that neither
the Merged Partnership nor any party acting on behalf of the Merged
Partnership has made or shall be deemed to have made any such agreement,
condition, representation or warranty (except as expressly elsewhere
provided in this Agreement).
(b) The Surviving Partnership shall accept the Property and the
Other Items at the time of Closing in the same condition as the same are as of
the date of this Agreement as such condition shall have changed by reason of
wear and tear, damage by fire or other casualty and vandalism.
(c) If the Merger occurs, the Merged Partnership shall assign to
the Surviving Partnership any net insurance and/or condemnation proceeds
received by the Merged Partnership with respect to the Property, less any
amount expended by the Merged Partnership for collection, repair,
restoration or related expenses.
9.12 DEFAULT.
(a) If the Surviving Partnership defaults hereunder at or prior to
the Effective Date by failing to complete Closing in accordance with the terms
of this Agreement or in any other respect, then on the Effective Date (or
sooner in the event of an anticipatory breach) the Surviving Partnership
shall pay to the Merged Partnership the sum of $130,000 (the "Liquidated
Damages Amount") as liquidated damages. Notwithstanding anything to the
contrary contained in this Agreement, the failure to satisfy any of the
conditions to the Merger contained in Article VI hereof shall not, in and
of itself, be deemed to be a failure of the Surviving Partnership to
complete Closing or a default by the Surviving Partnership under this
Agreement. If the Surviving Partnership pays the Merged Partnership the
Liquidated Damages Amount as liquidated damages, the payment of such sum
shall be the Merged Partnership's only remedy in the event of the Surviving
Partnership's default at or prior to the Effective Date, and the Merged
Partnership in such event hereby waives any right, unless Closing is
completed, to recover the balance of the Consideration. If the Merged
Partnership shall be paid the Liquidated Damages Amount as liquidated
damages, this Agreement shall be and become null and void and all copies
will be surrendered to the Merged Partnership for cancellation. Nothing in
this Section shall limit the Merged Partnership's rights against the
Surviving Partnership and the Surviving Partnership's liability to the
Merged Partnership by reason of a default by the Surviving Partnership
under this Agreement which survives Closing.
(b) The term "Permitted Event" shall mean the occurrence of the
following on the Effective Date: the Surviving Partnership shall be ready,
willing and able to complete Closing in accordance with the Agreement; the
Surviving Partnership, or its authorized representative, shall have appeared
at the place designated for Closing and shall have tendered the Consideration,
and the Merged Partnership, notwithstanding the foregoing, shall have failed
to complete Closing in accordance with this Agreement or is otherwise in
default under this Agreement. Notwithstanding anything to the contrary
contained in this Agreement, the failure to satisfy any of the conditions
to the Merger contained in Article VI hereof shall not, in and of itself,
be deemed to be a failure of the Merged Partnership to complete Closing or
a default by the Merged Partnership under this Agreement. Except upon the
occurrence of the Permitted Event, the Surviving Partnership agrees that it
shall not (and hereby waives any right to) ever file or assert any LIS
PENDENS against the Property nor commence or maintain any action against
the Merged Partnership for specific performance under this Agreement nor
for a declaratory judgment as to the Surviving Partnership's rights under
this Agreement. Except as expressly provided above and elsewhere in this
Agreement, nothing herein shall be deemed to limit or impair any of the
Surviving Partnership's rights and remedies at law, in equity or by
statute.
9.13 INDEMNITY AGREEMENT. On the Effective Date, as an express condition
to the obligation of the Merged Partnership to complete Closing, the Surviving
Partnership shall execute and deliver to the General Partner an agreement,
in form and substance satisfactory to the General Partner and the General
Partner's counsel, whereby the Surviving Partnership agrees to indemnify
and hold harmless the General Partner, both individually and in his
capacity as the general partner of the Merged Partnership, from and against
any and all liabilities and obligations, including, without limitation,
guaranties and carve-outs from non-recourse, arising in connection with the
Existing Loan.
9.14 NO PERSONAL LIABILITY. Notwithstanding anything to the contrary
contained in this Agreement, neither the General Partner nor any other
partners of the Merged Partnership shall have any personal liability, and
no action of any kind shall be maintained against any of them or their
respective assets, with respect to this Agreement and/or the transactions
described in this Agreement, and the Surviving Partnership, its successors
and assigns, shall look solely to the assets of the Merged Partnership and
the cash or assets held by the Disbursing Agent pursuant to Section 3.2
above, for the payment of any claim against or the performance of any
obligation of the Merged Partnership. The foregoing limitation of
liability shall not apply in the case of fraud or intentional and material
misrepresentation; provided, however, that in connection with any action
involving alleged fraud or intentional and material misrepresentation, if
the Surviving Partnership, its successors or assigns, is not the prevailing
party, it shall be responsible for the payment of all attorneys' fees and
expenses of all parties, but if the Surviving Partnership, its successors
or assigns, is the prevailing party, each party shall bear its own
attorneys' fees and expenses.
9.15 NUMBER OF DAYS. In computing the number of days for purposes of
this Agreement, all days shall be counted, including Saturdays, Sundays and
holidays; provided, however, that if the final day of any time period falls
on a Saturday, Sunday or holiday on which federal banks are or may elect to
be closed, then the final day shall be deemed to be the next day which is
not a Saturday, Sunday or such holiday.
9.16 DEPOSIT.
(a) As security for the payment of the Liquidated Damages Amount,
upon the execution of this Agreement, the Surviving Partnership shall deposit
with the Disbursing Agent in escrow the sum of $130,000 (the "Deposit").
If the Surviving Partnership shall become obligated to pay to the Merged
Partnership the Liquidated Damages Amount, the Merged Partnership shall
have the right to be paid the Deposit on account of the Liquidated Damages
Amount. If Closing is completed hereunder or if this Agreement is
terminated as provided in Section 7.1 hereof, the Disbursing Agent shall
refund the Deposit to the Surviving Partnership.
(b) Notwithstanding anything contained in this Section 9.16, if
either party terminates this Agreement as a result of the other's default or
pursuant to the exercise of any right of termination conferred by this
Agreement, Disbursing Agent shall not disburse the Deposit until the earlier
to occur of (i) receipt by Disbursing Agent of written instructions from the
Merged Partnership and the Surviving Partnership or (ii) entry of a final and
unappealable adjudication determining which party is entitled to receive
the Deposit, as applicable, at which time the Deposit shall be distributed
in accordance with such written instructions or adjudication. Except to
the extent of any dispute between them, the Merged Partnership and the
Surviving Partnership agree to act in good faith to provide the Disbursing
Agent with the instructions described in (i) above in the event that the
Agreement is terminated.
(c) In the event of a dispute between the Surviving Partnership and
the Merged Partnership with respect to the Deposit, the Disbursing Agent may
deposit the Deposit with a court of proper jurisdiction and commence an
interpleader action. Upon notifying the Merged Partnership and the
Surviving Partnership of the commencement of such action, Disbursing Agent
shall be released from all liability with respect to the Deposit, except to
the extent of accounting for any moneys previously delivered by Disbursing
Agent out of escrow. Disbursing Agent shall not be liable to either the
Merged Partnership or the Surviving Partnership, other than for performance
of its duties under this Agreement or his gross negligence or intentional
wrongdoing. Disbursing Agent may rely upon the genuineness or authenticity
of any document tendered to it by either the Merged Partnership or the
Surviving Partnership, and shall be under no duty of independent inquiry
with respect to any acts or circumstances recited in such document. The
Merged Partnership and the Surviving Partnership shall indemnify, defend
and hold harmless Disbursing Agent from and against all cost, claims or
liabilities arising from the performance by Disbursing Agent of his
obligations under this Agreement, other than for his failure to comply
herewith, gross negligence or intentional wrongdoing.
(d) As used in this Section 9.16, the term "Deposit" shall refer
to the amount set forth at Section 9.16(a), together with all interest thereon.
The Deposit shall be held by the Disbursing Agent in one or more federally-
insured money market accounts acceptable to both the Merged Partnership and
the Surviving Partnership, or in short-term United States government
obligations having a maturity date which is acceptable to the General
Partner and the Surviving Partnership or in one or more interest-bearing
deposit accounts of a bank or other financial institution acceptable to the
General Partner and the Surviving Partnership. The Merged Partnership's
taxpayer identification number is 23-2392034; the Surviving Partnership's
taxpayer identification number is 16-1455130.
(e) Although Disbursing Agent is counsel for the Merged Partnership,
the Disbursing Agent shall not be disqualified or prohibited from representing
Merged Partnership in connection with any matter arising out of this
Agreement by reason of its capacity as Disbursing Agent.
9.17 SURVIVAL.
(a) The representations, warranties, covenants and agreements of
HME and the Surviving Partnership contained in this Agreement will survive
Closing (i) indefinitely with respect to the warranties and representations
in Sections 4.2(a) and 10.2(a), (ii) until 60 calendar days after the
expiration of all applicable statutes of limitation (including all periods of
extension, whether automatic or permissive) with respect to matters covered by
Section 10.2(f), (iii) until the fifth anniversary of the Effective Date in the
case of all other representations and warranties and any covenant or
agreement to be performed in whole or part prior to Closing and (iv) with
respect to each other covenant or agreement contained in this Agreement,
for five years following the last date on which such covenant or agreement
is to be observed, performed or complied with, or, if no such date is
specified, indefinitely, except that any representation, warranty, covenant
or agreement that would otherwise terminate in accordance with clauses
(ii), (iii) or (iv) above will continue to survive if notice of claim shall
have been timely given on or prior to such termination date until such
claim has been satisfied or otherwise resolved. This Section shall not
limit in any way the survival and enforceability of any covenant or
agreement of the parties hereto which by its terms contemplates, or is of
such nature that it would require, performance, observance or compliance
after the Effective Date.
(b) The representations, warranties, covenants and agreements of
the Merged Partnership contained in this Agreement will survive Closing for a
period of one hundred eighty (180) days, subject to the limitations on
liability provided in Section 9.14 hereof.
9.18 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original for all
purposes and all of which, when taken together, shall constitute one and
the same instrument.
ARTICLE X
ADDITIONAL REPRESENTATIONS AND WARRANTIES
BY THE SURVIVING PARTNERSHIP
10.1 DEFINITIONS.As used in this Article X, the following defined terms
shall be the meanings indicated below:
"AFFILIATE" means any Person that directly, or indirectly through one or
more intermediaries, controls or is controlled by or is under common
control with the Person specified. For purposes of this definition, control
of a Person means the power, direct or indirect, to direct or cause the
direction of the management and policies of such Person whether by Contract
or otherwise and, in any event and without limitation of the previous
sentence, any Person owning 10% or more of the voting securities of a
second Person shall be deemed to control that second Person.
"BENEFIT PLAN" means any Plan entered into, established, maintained,
contributed to or required to be contributed to, by HME or any Company
ERISA Affiliate providing benefits to employees, former employees,
independent contractors, former independent contractors of the Company or
any Company ERISA Affiliate, or their dependents or beneficiaries.
"CODE" means the Internal Revenue Code of 1986, as amended, and the rules
and regulations promulgated thereunder.
"COMMON STOCK" means shares of Common Stock of HME.
"COMPANY ERISA AFFILIATE" means an entity required (at any relevant time)
to be aggregated with HME under Sections 414(b), (c), (m) or (o) of the
Code or Section 4001 of ERISA.
"COMPANY FINANCIAL STATEMENTS" shall have the meaning set forth at Section
10.2(c) below.
"COMPANY SEC REPORTS" shall have the meaning set forth at Section 10.2(c)
below.
"CONTRACTS" means any agreement or obligation of any kind to which HME or
any of its Subsidiaries is a party or by which HME or any of its
Subsidiaries or any of their respective assets or properties is bound.
"GAAP" means generally accepted accounting principles, consistently applied
throughout the specified period and in the immediately prior comparable
period.
"PERSON" means any natural person, corporation, limited liability company,
general partnership, limited partnership, proprietorship, other business
organization, trust, union, association or Governmental or Regulatory
Authority.
"PLAN" means any employment, bonus, incentive compensation, deferred
compensation, pension, profit sharing, retirement, stock purchase, stock
option, stock ownership, stock appreciation rights, phantom stock, leave of
absence, layoff, vacation, day or dependent care, legal services,
cafeteria, life, health, medical, accident, disability worker's
compensation or other insurance, severance, separation, termination, change
of control or other benefit plan, agreement, practice, policy or
arrangement of any kind, whether written or oral, including, but not
limited to, any "employee benefit plan" within the meaning of Section 3(3)
of ERISA.
"SEC" means the Securities and Exchange Commission.
"SECURITIES" means the shares of Common Stock and the Units to be issued
and sold to partners in the Merged Partnership, including shares of Common
Stock issuable upon conversion of Units to be issued and sold, pursuant to
this Agreement and the Transaction Agreements.
"SUBSIDIARY" means with respect to any party, a corporation, partnership or
other organization, whether incorporated or unincorporated, of which more
than 50% of either the equity interests in, or the voting control of, such
corporation, partnership or other organization is, directly or indirectly
through Subsidiaries or otherwise, beneficially owned by such party.
Notwithstanding the foregoing, "Subsidiary," when used with respect to HME,
includes, without limitation, the Surviving Partnership.
"TRANSACTION AGREEMENTS" means all agreements and documents to be delivered
by HME and the Surviving Partnership in connection with the transactions
contemplated by this Agreement and the Transaction Agreements.
10.2 REPRESENTATIONS AND WARRANTIES. The Surviving Partnership and HME
hereby make the following representations and warranties to the Merged
Partnership, their liability with respect to such representations and
warranties being joint and several:
(a) CAPITAL STOCK. The authorized capital stock of HME consists
solely of (i) 10 million shares of preferred stock, par value $.01 per share,
none of which are issued and outstanding, (ii) 10 million shares of excess
stock, par value $.01 per share, none of which is issued, and (iii) 30 million
shares of Common Stock, 7,166,458.397 of which are issued and outstanding
as of the date hereof and 4,189,824 of which are reserved for issuance upon
exercise of stock options or exchange of Units in the Surviving Partnership
as of the date hereof. SCHEDULE 10.2(A) hereto sets forth a true and
correct list of the number of Units of the Surviving Partnership that are
issued and outstanding and the holders thereof. All of the outstanding
shares of Common Stock have been duly authorized and validly issued and are
fully paid and nonassessable (except, in the case of Units, as contemplated
by the New York Revised Uniform Limited Partnership Act) and have been
offered and sold in compliance with all applicable laws including, without
limitation, federal and state securities laws and none of them was issued
in violation of any preemptive or other similar right. The Securities, when
issued and sold pursuant to this Agreement and the Transaction Agreements,
will be duly authorized and validly issued, fully paid and nonassessable
(except, in the case of Units, as contemplated by the New York Revised
Uniform Limited Partnership Act) and none of them will be issued in
violation of any preemptive or other similar right. Except as identified
on SCHEDULE 10.2(A) attached hereto, there is no outstanding option,
warrant or other right calling for the issuance of, and there is no
commitment, plan or arrangement to issue, any shares of capital stock of
HME or any security convertible into or exercisable or exchangeable for,
such capital stock. The Common Stock and the Securities conform in all
material respects to all statements relating thereto contained in the
Company SEC Reports.
(b) NO VIOLATIONS OR DEFAULTS. Neither HME nor any of its
Subsidiaries is in violation of its certificate or articles of incorporation,
bylaws, certificates of partnership, partnership agreements, limited liability
company agreements or other similar governing documents, as the case may
be, and none of HME or any of its Subsidiaries is in default in the
performance or observance of any obligation, agreement, covenant or
condition contained in any Contracts to which such entity is a party or by
which such entity may be bound, or to which any of its properties or assets
may be bound or subject, except for such violations or defaults that
individually or in the aggregate would not have a Material Adverse Effect.
(c) SEC REPORTS AND FINANCIAL STATEMENTS; PARTNERSHIP AGREEMENT.
HME has filed all forms, reports, schedules, registration statements, and other
documents required to be filed by it with the SEC since the date of its
formation (as such documents have since the time of their filing been
amended or supplemented, the "Company SEC Reports"). As of their
respective dates, the Company SEC Reports (i) compiled as to form in all
material respects with the requirements of the Securities Act, or the
Securities Exchange Act of 1934, as amended, as the case may be, and (ii)
did not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading. The audited consolidated financial statements and
the interim consolidated financial statements (including, in each case, the
notes, if any, thereto) included in the Company SEC Reports (the "Company
Financial Statements") (A) were compiled as to form in all material
respects with the published rules and regulations of the SEC with respect
thereto, (B) were prepared in accordance with GAAP applied on a consistent
basis during the periods involved (except as may be indicated therein or in
the notes thereto and except with respect to unaudited statements as
permitted by Forms 10-Q and 8-K of the SEC) and (C) fairly present in all
material respects (subject, in the case of the unaudited interim financial
statements, to normal, recurring year- end audit adjustments which are not
expected to be, individually or in the aggregate, materially adverse to HME
and its Subsidiaries taken as a whole) the consolidated financial position
of HME and its consolidated subsidiaries as at the respective dates thereof
and the consolidated results of their operations and cash flows for the
respective periods then ended. Except for the Subsidiaries identified on
SCHEDULE 10.2(C) attached hereto, each Subsidiary of HME is treated as a
consolidated subsidiary of HME in the Company Financial Statements for all
periods covered thereby.
(d) ABSENCE OF CHANGES
(1) Except for the execution and delivery of this Agreement
and the Transaction Agreements, and the transactions to take place pursuant
hereto and thereto on the Effective Date, since March 31, 1997 there has not
been any change, event or development having, or that could reasonably be
expected to have, individually or in the aggregate, a Material Adverse
Effect. Without limiting the foregoing, between March 31, 1997 and the
date hereof (A) except with respect to the activities described in the
press releases attached hereto as EXHIBIT I, HME and its Subsidiaries have
conducted their respective businesses only in the ordinary course
consistent with past practice and (B) neither HME nor any of its
Subsidiaries have taken any action which, if taken after the date hereof,
would constitute a breach of any provision of clause (2) of this Section
10.2(d).
(2) Prior to the Effective Date, HME and its Subsidiaries shall
use all commercially reasonable efforts to preserve intact in all material
respects their present business organizations and reputation, to keep
available the services of their key officers and employees, to maintain their
assets and properties in good working order and condition, ordinary wear and
tear excepted, to maintain insurance on their tangible assets and businesses
in at least such amounts and against such risks and losses as are currently in
effect, to preserve their relationships with customers and suppliers and
others having significant business dealings with them and to comply in all
material respects with any statute, law, rule, regulation or ordinance or
any judgment, decree, order, writ, permit or license, of any court,
tribunal, arbitrator, authority, agency, commission, official or other
instrumentality of the United States or any domestic, state, county, city
or other political subdivision, applicable to HME or any of its
Subsidiaries.
(e) ABSENCE OF UNDISCLOSED LIABILITIES. Except for matters
reflected in the consolidated balance sheet of HME as of March 31, 1997
(or the footnotes thereto) included in the Company Financial Statements and
the press releases attached hereto as EXHIBIT I, neither HME nor any of its
Subsidiaries had at such date, or has incurred since that date, any
liabilities or obligations (whether absolute, accrued, contingent, fixed or
otherwise, or whether due or to become due) of any nature, except
liabilities or obligations (i) which were incurred in the ordinary course
of business consistent with past practice since such date, and (ii) which
have not had, and could not be reasonably expected to have, individually or
in the aggregate, a Material Adverse Effect.
(f) REIT QUALIFICATION. At all times since its taxable year ended
December 31, 1996, HME has been, and upon each issuance of any of the
Securities,
HME will continue to be, organized and operated in conformity with the
requirements for qualification as a real estate investment trust under the
Code, and its proposed method of operation will enable it to continue to
meet the requirements for taxation as a real estate investment trust under
the Code.
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
executed by a duly executed general partner as of the date first above
written.
EXMARK PARTNERSHIP
/s/ Henry A. Quinn
- --------------------------------
Henry A. Quinn, General Partner
HOME PROPERTIES OF NEW YORK, L.P.
By:Home Properties of New York, Inc.
General Partner
By: /s/ Norman Leenhouts
---------------------------------
Norman Leenhouts, Chairman
For purposes of acknowledging and agreeing
to the provisions of Sections 1.4, 5.5 and
6.3(e)
/s/ Henry A. Quinn
- ------------------------------
Henry A. Quinn
<PAGE>
JOINDER
Home Properties of New York, Inc. joins in this Agreement for the purpose
of making in its individual capacity, the same representations and
warranties as are made by the Surviving Partnership in Article X of this
Agreement.
HOME PROPERTIES OF NEW YORK, INC.
By:/s/ Norman Leenhouts
-------------------------------
Norman Leenhouts, Chairman
<PAGE>
SCHEDULE 3.13
RESERVE FUNDS CLAIMS PROCEDURE
PROCEDURES WITH RESPECT TO CLAIMS
(a) If any claim (a "Claim") is made by the Surviving Partnership for
payment out of the Reserve Amount of a Liabilities Claim or an Indemnity
Claim, the Surviving Partnership shall thereafter notify the General
Partner and the Disbursing Agent of such Claim. At such time as there is a
Final Determination (as hereinafter defined) with respect to a Claim, the
Surviving Partnership shall notify the Disbursing Agent (with a copy to the
General Partner) of such Final Determination. A Final Determination with
respect to a Claim shall occur when (1) the Surviving Partnership and the
General Partner agree in writing to a payment from a Reserve with respect
to a Claim and each so advises the Disbursing Agent, or (2) the arbitrator
determining the disposition of a Claim pursuant to Section (d) below
renders a final decision with respect to a Claim determining that a payment
is to be made from a Reserve to the Surviving Partnership or (3) provided
that the General Partner (on behalf of all of the former Partners of the
Merged Partnership) shall have been given a reasonable opportunity to
participate in the defense of such third-party claim throughout the course
of such third-party claim, the Claim is made on account of a judgment
rendered by a court of competent jurisdiction requiring, on a third-party's
claim that is an Indemnity Claim, a specified payment on account of such an
Indemnity Claim to the third-party claimant and such judgment has become
final and not subject to further appeal. Upon receipt of a Final
Determination, the Disbursing Agent shall pay the amount of the Claim as
set forth in the Final Determination to the Surviving Partnership.
(b) On each of 90 days from and after the Effective Time and 180 days from
and after the Effective Time, and thereafter, at any time and from time to
time, within 10 days after the written request of the General Partner, the
Surviving Partnership shall send a notice (the "Anniversary Notice") to the
Disbursing Agent and to the General Partner describing each then
outstanding Claim with respect to which a Final Determination has not
theretofore been made and specifying what the Surviving Partnership
believes, acting reasonably and in good faith, to be the aggregate amount
of damages that have been incurred theretofore or are likely to be incurred
thereafter as a result of or arising out of each such Claim (the "Damage
Amount").
(c) If the General Partner believes, acting reasonably and in good faith,
that the Surviving Partnership's estimate of the Damage Amount with respect
to one or more of the Claims as set forth in the Anniversary Notice is
unreasonable (a "Disputed Amount"), the General Partner shall send a notice
(the "Dispute Notice") to the Surviving Partnership and the Disbursing
Agent, within 10 days after receipt of the Anniversary Notice, specifying
the amount that the General Partner believes, acting reasonably and in good
faith, to be the proper Damage Amount with respect to any Claim described
in the Anniversary Notice. Upon the issuance of a Dispute Notice, the
General Partner and representatives of the Surviving Partnership shall
immediately meet and shall use all necessary diligence in a concerted, good
faith effort to resolve all Disputed Amounts within 10 days after issuance
of the Dispute Notice. If the General Partner and the Surviving
Partnership resolve such dispute within the 10-day period as aforesaid,
they shall jointly notify the Disbursing Agent of the agreed-upon Damage
Amount with respect to each Claim, and such joint notice shall constitute a
Final Determination with respect to the relevant Claims.
(d) If the General Partner and the Surviving Partnership do not so agree,
the determination of the Damage Amount with respect to all disputed Claims
shall be immediately submitted to prompt and binding arbitration before an
arbitrator appointed by the Philadelphia, Pennsylvania office of the
American Arbitration Association in accordance with its rules, and acting
in accordance with its rules. If any such Disputed Amount relates to a
third-party claim that is then in litigation or is otherwise unresolved,
the standard to be applied by the arbitrator in determining the Damage
Amount shall be the aggregate amount of damages that have been or are
likely thereafter to be incurred by the Surviving Partnership, including
the Surviving Partnerships' attorneys' fees, court costs and other costs of
defense, arising out of such claim. The award of the arbitrator shall be
communicated to the parties and the Disbursing Agent and shall constitute a
Final Determination, which shall be final, binding and not subject to
appeal, with respect to all the Claims that are the subject of such award,
notwithstanding that an underlying third-party claim still remains
unresolved or is subsequently resolved in a manner inconsistent with the
arbitrator's award.
(e) If the Disbursing Agent in his capacity as such is threatened with
litigation or is sued, he shall have the right to interplead all interested
parties in any court of competent jurisdiction and to deposit the Reserves
(or any portion thereof) with the clerk of that court.
(f) The Disbursing Agent shall not be liable to either the General Partner,
the former Partners of the Merged Partnership or the Surviving
Partnership, other than for performance of his duties under the Reserves
Escrow agreement or his gross negligence or intentional wrongdoing. The
Disbursing Agent may rely upon the genuineness or authenticity of any
document tendered to him by either the General Partner or the Surviving
Partnership, and shall be under no duty of independent inquiry with respect
to any acts or circumstances recited in such document.
(g) As used in this Schedule 3.13, the term "Reserves" shall refer to the
respective amounts set forth at the beginning of this Section 3.13,
together with all interest thereon. The Reserves, which are held in Cash,
shall be held by the Disbursing Agent in one or more federally- insured
money market accounts acceptable to both the General Partner and the
Surviving Partnership, or in short-term United States government
obligations having a maturity date which is acceptable to the General
Partner and the Surviving Partnership or in one or more interest-bearing
deposit accounts at a bank or other financial institution acceptable to the
General Partner and the Surviving Partnership.
(h) All Claims must be made within 180 days of the Effective Time.
(i) No Claim shall be made, other than Liabilities Claims to be paid from
the Liabilities Reserve, until total Claims exceed $25,000.00.
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT and Plan of Merger (this "Agreement") is dated as of
this 31st day of July, 1997, and is between Home Properties of New York,
L.P., a limited partnership formed under the laws of New York (the
"Surviving Partnership"), and New Orleans East Limited, a limited
partnership formed under the laws of New Jersey (the "Merged Partnership").
WITNESSETH:
WHEREAS, the Merged Partnership is governed by the New Jersey Revised
Limited Partnership Act (the "New Jersey Act") and, subject to the receipt
of the requisite approval of its limited partners, desires to merge into
the Surviving Partnership;
WHEREAS, the Surviving Partnership was formed under the New York
Revised Limited Partnership Act (the "New York Act") and, subject to the
receipt of the requisite approval, desires to merge with the Merged
Partnership.
NOW THEREFORE, the parties hereto agree as follows:
ARTICLE I
THE MERGER
1.1 AGREEMENT TO MERGE. Subject to the terms and conditions of this
Agreement, including but not limited to the satisfaction of the conditions
in Article VI hereof (the "Merger Conditions"), the Merged Partnership
shall be merged into the Surviving Partnership (the "Merger").
1.2 CERTIFICATE OF MERGER. Subject to the satisfaction of the Merger
Conditions, the general partner of each of the Merged Partnership and
Surviving Partnership shall execute a Certificate of Merger in the form
necessary to effect the merger of the Merged Partnership into the Surviving
Partnership pursuant to applicable law (the "Certificate of Merger") and
the Surviving Partnership shall deliver the Certificate of Merger to the
Department of State of the State of New Jersey and the State of New York
for filing.
1.3 EFFECTIVE TIME. The Merger shall be effective immediately upon
the later to occur of the filing of the Certificate of Merger by the
Department of State of the State of New York or the State of New Jersey,
but not later than September 30, 1997 (the "Effective Time"). The date
during which the Effective Time occurs is referred to hereinafter as the
"Effective Date". The closing for the Merger (the "Closing") shall be held
on the Effective Date at the offices of Wolf, Block, Schorr and Solis-
Cohen, 350 Sentry Parkway, Building 640, Blue Bell, Pennsylvania,
commencing at 10:00 a.m.
1.4 SOLICITATION OF MERGED PARTNERSHIP APPROVAL. By executing this
Agreement, Nop Corp., a Pennsylvania corporation, as the general partner
of the Merged Partnership (the "General Partner") agrees that it will,
promptly after the execution of this Agreement, cause the Merged
Partnership to solicit the approval of its partners to the Merger in
compliance with the New York Act and the New Jersey Act (the "Acts").
Furthermore, the General Partner agrees that it will vote its interests in
the Merged Partnership in favor of the Merger. The General Partner further
agrees that, between the date of the execution of this Agreement and the
Effective Time or the earlier termination of this Agreement, it will not
offer to sell or negotiate a sale of the Property, directly or indirectly,
including, without limitation, pursuant to a merger.
1.5 SOLICITATION OF SURVIVING PARTNERSHIP APPROVAL. By executing this
Agreement, Home Properties of New York, Inc. as the general partner of the
Surviving Partnership ("HME") agrees that it will promptly after the
execution of this Agreement, cause the Surviving Partnership to solicit the
approval of its partners to (a) the Merger in compliance with the Acts and
(b) the Surviving Partnership Amendments.
ARTICLE II
EFFECTS OF THE MERGER
2.1 SURVIVING PARTNERSHIP. The Surviving Partnership shall be the
surviving limited partnership. The Agreement of Limited Partnership of the
Surviving Partnership (the "Surviving Partnership Agreement") shall remain in
full force and effect after the Merger in its form immediately prior to the
Merger, except the Surviving Partnership Agreement shall be amended on the
Effective Date to (a) reflect the issuance of the Units pursuant to
subparagraphs (a) and (c) of Section 3.3 below and (b) incorporate the
provisions set forth in EXHIBIT B (EXHIBIT A has been reserved) attached
hereto (the "Surviving Partnership Amendments").
2.2 MERGED PARTNERSHIP. At the Effective Time, the separate existence of
the Merged Partnership shall cease.
2.3 TRANSFER OF ASSETS AND ASSUMPTION OF LIABILITIES. At the Effective
Time, all of the real and tangible or intangible personal property rights,
privileges, immunities, powers and all other assets whatsoever of the
Merged Partnership shall vest in the Surviving Partnership without further
act or deed. Thereafter, the Surviving Partnership shall be liable for all
debts, obligations, liabilities and penalties of the Merged Partnership as
though each such debt, obligation, liability or penalty had been originally
incurred by the Surviving Partnership, provided that the Reserves described
in Section 3.2 of this Agreement shall be established to pay, to the extent
thereof, for any liabilities of the Merged Partnership that the Surviving
Partnership has not specifically agreed to assume as provided herein.
ARTICLE III
CONSIDERATION
3.1 TOTAL CONSIDERATION.The aggregate consideration (the "Consideration")
payable by the Surviving Partnership in connection with the merger of the
Merged Partnership with and into the Surviving Partnership shall be
$10,650,000, subject to adjustments at Closing pursuant to Section 3.9 and
costs paid pursuant to Section 3.10(c) and Section 3.11, plus the amount of
any tax or other reserves held by the Existing Lender (hereinafter
defined).
3.2 CONVERSION OF PARTNERSHIP INTERESTS.At the Effective Time each of the
outstanding interests in the Merged Partnership (the "Interests") shall
automatically, by operation of law and without any action by the holders
thereof, be converted into the right to receive the Conversion Price and
the Deferred Consideration Right as provided below. "Conversion Price"
means the Consideration less the principal amount at the Effective Time of
the existing mortgage loan (the "Existing Mortgage Loan") and four other
unsecured loans (the "Existing Unsecured Loans") (the Existing Mortgage
Loan and the Existing Unsecured Loans are hereinafter collectively called
the "Existing Loan"), the Existing Mortgage Loan covering the Merged
Partnership's property in favor of GE Capital and the Existing Unsecured
Loans in favor of Henry A. Quinn and F. M. Ferrari (GE Capital, Henry A.
Quinn and F.M. Ferrari are hereinafter called the "Existing Lender") less
the amount specified by the General Partner as described in Section 3.11
and less the Reserve Amount multiplied by the percentage interest of the
Interest in the Merged Partnership. "Reserve Amount" means the sum of:
(a) an amount equal to the current liabilities of the Merged Partnership at
the Effective Time (other than the principal amount of the Existing Loan)
(the "Liabilities Reserve") and (b) $204,000 (the "Indemnity Reserve");
provided, however, that the Reserve Amount shall be reduced in proportion
to the Interests of partners of the Merged Partnership ("Dissenting
Partners") who have properly indicated their intention to seek payment of
the fair value of their interests under Section 121-1102 of the New York
Law. The Reserve Amount shall be held and disbursed by the Disbursing
Agent (as defined in Section 3.3) as described in Sections 3.4 and 3.13.
"Deferred Consideration Right" with respect to each Interest means the
right to receive the Reserve Amount less all amounts used to satisfy the
current liabilities of the Merged Partnership ("Liabilities Claims") and
any amounts paid or subject to claims of the Surviving Partnership by
reason of a material breach or material misrepresentation of any
representations, warranties, covenants or agreements of the Merged
Partnership which survive Closing (but only during the period of such
survival) ("Indemnity Claims") multiplied by the percentage interest of the
Interest in the Merged Partnership . As of the Effective Time, all
Interests in the Merged Partnership shall cease to be outstanding and shall
be canceled and each holder of an Interest shall, by virtue of the Merger,
cease to have any rights with respect to the Merged Partnership or the
Interests therein except the rights to receive the Conversion Price and the
Deferred Consideration Rights with respect thereto, or the right, if any,
to receive payment from the Surviving Partnership of cash equal to the fair
value of his Interest in the Merged Partnership as provided in Section 121-
1102 of the New York Law. The Surviving Partnership hereby agrees to
comply, at its expense, with all payment and all other substantive and
procedural obligations and requirements which must be complied with respect
to Dissenting Partners, including, without limitation, Section 121-1102 of
the New York Law. Notwithstanding anything to the contrary contained in
this Agreement, (i) if and to the extent that the amount required to be
paid to any Dissenting Partner exceeds the portion (the "Dissenting Partner
Portion") of the Conversion Price which would have been paid to such
partner of the Merged Partnership if such partner was not a Dissenting
Partner, such excess amount shall be paid by the Surviving Partnership in
addition to the Consideration, (ii) the Dissenting Partner Portion paid by
the Surviving Partnership to Dissenting Partners shall be credited against
the Conversion Price and (iii) in the event that the holders of more than
10% of the Interests are Dissenting Partners, the Surviving Partnership
shall have the right to terminate this Agreement by giving written notice
thereof to the Merged Partnership within ten (10) days after the Surviving
Partnership receives notification thereof.
3.3 PAYMENT OF THE CONVERSION PRICE.
(a) The Surviving Partnership shall deliver, in immediately available
funds and in Units (hereinafter defined), to Wolf, Block, Schorr and Solis-
Cohen (the "Disbursing Agent") the Reserve Amount.
(b) The "Cash Portion of the Conversion Price shall be the aggregate
amount of the Conversion Price payable to the holders of the outstanding
interests (the "Norpark Interests") in Norpark Partnership, a Pennsylvania
limited partnership ("Norpark"), who have failed to provide the Surviving
Partnership with evidence satisfactory to it that such holders are
"Accredited Investors" as such term is defined in Regulation D promulgated
by the Securities and Exchange Commission under the Securities Act of 1933,
as amended (the "Securities Act"). Notwithstanding anything to the
contrary contained in this Agreement if the total of the Interests held by
Dissenting Partners and by partners who are not Accredited Investors
exceeds fifteen percent of all of the Interests, the Merged Partnership
shall have the right, by giving written notice thereof to the Surviving
Partnership at any time prior to the Effective Date, to terminate this
Agreement.
(c) The Conversion Price payable to the holders of Interests other
than those described in (b) above shall be paid by the issuance of Units of
limited partnership in the Surviving Partnership ("Units"). The number of
Units to be issued to each holder of an Interest shall be the Conversion
Price for the Interest of such holder divided by the average of the daily
market price for the ten (10) consecutive trading days immediately
preceding the Effective Date of the shares of common stock of HME (the
"Effective Date Price"). The market price for each such trading day shall
be the closing price of the common stock on the New York Stock Exchange,
regular way, on such day as reported in the Wall Street Journal, Eastern
Edition.
3.4 PAYMENT WITH RESPECT TO DEFERRED CONSIDERATION RIGHTS.
(a) On the 90th day after the Effective Date, the Disbursing Agent
shall distribute pro rata to the holders of Interests immediately prior to the
Effective Time (other than Dissenting Partners) that portion of the
Liabilities Reserve which has not been paid for the liabilities of the
Merged Partnership as provided in this Agreement and one-half of that
portion of the Indemnity Reserve that has not been paid or subject to
Indemnity Claims.
(b) On the 180th day after the Effective Date, the Disbursing Agent
shall distribute pro rata to the holders of Interests immediately prior to the
Effective Time (other than Dissenting Partners), that portion of the
Indemnity Reserve that has not been paid, disbursed or subject to Indemnity
Claims.
(c) At any time, and from time to time, after the 180th day after
the Effective Date that there is a Final Determination (as defined in Schedule
3.13) that any remaining portion, if any, of the Indemnity Reserve is no
longer subject to Indemnity Claims, the Disbursing Agent shall distribute
such remaining portion pro rata to the holders of Interests immediately
prior to the Effective Time (other than Dissenting Partners).
3.5 INTENTIONALLY OMITTED
3.6 INTENTIONALLY OMITTED
3.7 INTENTIONALLY OMITTED
3.8 PRO-RATED DISTRIBUTION. The initial distribution payable with
respect to Units issued as part of the Consideration shall be made on the date
on which HME pays the dividend to the holders of its common stock that relates
to the earnings for the calendar quarter in which the Units were issued and
shall be pro-rated such that the partners receiving Units shall receive a
pro-rata distribution for the period from the date on which the Units were
issued to and including the last day of the calendar quarter in which the
Units were issued.
3.9 ADJUSTMENTS AT CLOSING. With respect to the Property, the following
shall be adjusted and pro-rated between the Surviving Partnership and the
Merged Partnership on the Effective Date as if the Surviving Partnership
was the owner of the Property as of midnight of the night preceding the
Effective Date and shall be paid in cash at Closing:
A. current fiscal year real estate taxes;
B. water and sewer rents and charges;
C. INTENTIONALLY OMITTED
D. fuel;
E. INTENTIONALLY OMITTED
F. INTENTIONALLY OMITTED
G. charges under the service contracts;
H. laundry income;
I. interest with respect to the Existing Loan; and
J. INTENTIONALLY OMITTED
K. rents.
(i) All rent payments collected on or before the Effective Date
for the month in which the Effective Date occurs shall be pro-rated as between
the parties as of the Effective Date.
(ii) All rent collected after the Effective Date shall be applied
first to the rent due for the month in which such rent was collected and shall
then be applied to the next most recent delinquent rent, including any rent
which was not collected for any period prior to the Effective Date.
Delinquent rent amounts collected with respect to any period prior to the
Effective Date shall belong to former partners of the Merged Partnership
and, if paid to the Surviving Partnership, the Surviving Partnership shall
promptly send such rent to the General Partner for distribution to the
former partners of the Merged Partnership pursuant to the agreement
described in paragraph (e) of Section 6.3.
(iii) All rent collected by the Merged Partnership, prior to the
Effective Date, for months subsequent to Effective Date shall be paid to the
Surviving Partnership at the Effective Time.
(iv) All rent collected for rental periods after the Effective
Date shall belong to the Surviving Partnership and, if paid to any of the
former partners of the Merged Partnership shall be promptly sent to the
Surviving Partnership.
Any error in the calculation of adjustments shall be corrected subsequent
to the Effective Date with appropriate credits to be given based upon
corrected adjustments, provided, however, that the adjustments (except if
errors are caused by misrepresentations) shall be final upon expiration of
the 90th day after the Effective Date.
3.10 COSTS.
(a) The Surviving Partnership and the Merged Partnership shall
each be responsible for one half of any assumption fees payable to the Existing
Lender, provided, however, that if as of the Effective Date any Existing
Loan may be prepaid without a penalty of more than 1% of its principal
balance at the time of prepayment, the entire assumption fee, or, if the
Surviving Partnership elects to prepay such Existing Loan, the entire
prepayment fee, shall be the responsibility of the Surviving Partnership.
(b) The Surviving Partnership shall pay all recording fees, its
attorneys' fees, the costs of obtaining a binder or commitment from a title
insurance company, the premium for its title insurance policy, one half of any
Pennsylvania state and local transfer tax, and all other costs and expenses
incidental to or in connection with closing this transaction customarily
paid for by the purchaser of similar property. The Merged Partnership
shall pay its attorneys' fees, one-half of any Pennsylvania state and local
transfer tax, and all other costs and expenses incidental to or in
connection with closing this transaction customarily paid for by the seller
of similar property.
(c) The amounts payable pursuant to Sections 3.10(a) and/or (b) by
the Merged Partnership on account of any assumption fee payable to the Existing
Lender and/or on account of one half of any Pennsylvania state and local
transfer tax shall be charged against the Consideration.
3.11 PAYMENT DIRECTED BY GENERAL PARTNER. At the Effective Time, the
General Partner shall be entitled to direct that a portion of the
Consideration, up to a maximum amount equal to 6%of the Consideration, be
paid by the Surviving Partnership to pay certain closing costs of the
Merged Partnership and to satisfy certain liabilities of the Merged
Partnership.
3.12 CASH HELD BY MERGED PARTNERSHIP. Subject to Section 3.13 below,
on, or at any time prior to, the Effective Time, the General Partner shall have
the right to spend on behalf of the Merged Partnership and/or distribute to
the partners of the Merged Partnership any and all cash held by the Merged
Partnership.
3.13 ESCROW AGREEMENT.The Reserve Amount shall be held and disbursed
pursuant to the terms of an escrow agreement that shall be in form and
substance acceptable to the parties hereto, but which provide at least the
following:
(a) The entire Liabilities Reserve shall be applied to pay current
liabilities of the Merged Partnership before application of the Indemnity
Reserve. To the extent that the Liabilities Reserve shall not be
sufficient to pay the current liabilities of the Merged Partnership the
Indemnity Reserve may be used to fund current liabilities.
(b) The claim resolution procedures set forth in SCHEDULE 3.13
hereof.
3.14 INSURANCE REFUND. At the Effective Time, the Surviving Partnership
shall cause the cancellation of all insurance maintained by the Merged
Partnership and thereafter shall diligently seek to obtain such refunds as
may be due on account of such cancellation. Upon receipt of such refunds,
the Surviving Partnership shall pay them over to the General Partner for
distribution to the former partners of the Merged Partnership.
3.15 REPAYMENT OF EXISTING LOAN. Immediately after the completion of the
Closing, the Surviving Partnership shall pay in full to the Existing Lender
the outstanding balances of principal and accrued interest with respect to
the Existing Loan.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1 BY THE MERGED PARTNERSHIP. The Merged Partnership hereby makes the
following representations and warranties to the Surviving Partnership as of
the date hereof.
(a) REAL PROPERTY DESCRIPTION. The real property owned by the
Merged Partnership and to become the property of the Surviving Partnership
at the Effective Time consists of one or more parcels of land known as New
Orleans Park Apartments which includes 308 apartments (the "Project"),
located in the Township of Upper Darby and Commonwealth of Pennsylvania, more
particularly described on EXHIBIT C, attached hereto, together and
including all buildings and other improvements thereon, including but not
limited to, the 308 apartment units, and all rights of the Merged
Partnership in and to any and all streets, roads, highways, alleys,
driveways, easements and rights-of-way appurtenant thereto (the foregoing
are hereafter collectively referred to as the "Property").
(b) OTHER ITEMS. The following items now in or on the Property if
owned by the Merged Partnership and not by tenants of the Property shall
become the property of the Surviving Partnership at the Effective Time:
(1) all heating, plumbing and lighting fixtures,
(2) ranges, refrigerators, disposals and dishwashers,
(3) water heaters,
(4) any and all bathroom fixtures, wall-to-wall carpeting,
traverse rods, exhaust fans, hoods, signs, screens,
maintenance building, model unit furniture (except for model
unit furniture which is rented), fences, carpeting and runners,
cabinets, mirrors, shelving, any humidifier and dehumidifier
units, air conditioning units, mailboxes, office furniture
(except for office furniture which is rented), and related
equipment in connection with the Project, and
(5) any fixtures appurtenant to the Property and any other
furniture or equipment used in connection with the operation
and maintenance of the Property, including any vehicles used
in connection with the operation and maintenance of the Property
(hereinafter with the items listed in (1)-(4) above,
collectively, the "Other Items").
(c) CONDITION OF OTHER ITEMS. To the best knowledge of the General
Partner and the current officers of Mill Creek Realty Co., substantially all
of the Other Items are in reasonable working order or condition. Except with
respect to the Existing Loan, the Merged Partnership has not subjected any
of the Other Property to any security interests, liens, claims, charges or
other encumbrances.
(d) ORGANIZATION AND AUTHORIZATION. The Merged Partnership is a
limited partnership duly organized, validly existing and in good standing
under the laws of the State of New Jersey and was either formed under, or by
operation of law has become subject to, the New Jersey Act. It has all
requisite power and authority to own, lease and operate its properties and
to carry on its business as now being conducted. It is duly qualified or
licensed to do business as a foreign limited partnership and in good
standing in each jurisdiction in which the property owned, leased or
operated by it makes such qualification or license necessary, except in
each case in those jurisdictions where the failure to be so duly qualified
or licensed and in good standing would not have a Material Adverse Effect.
For purposes of this Agreement, "Material Adverse Effect" means a material
adverse effect on the business, assets, financial condition or results of
operation of the party making the representation or warranty to which such
qualification is being applied.
(e) AUTHORITY RELATIVE TO THIS AGREEMENT. Subject to receipt of
the approval described in Section 1.4 of this Agreement: (i) the Merged
Partnership has full power and authority to execute, deliver and perform
this Agreement and to consummate the transactions contemplated hereby; (ii)
all actions necessary to be taken by it or on its behalf to execute,
deliver and perform this Agreement and to consummate the transactions
contemplated hereby, have been duly and validly taken; and (iii) this
Agreement has been duly and validly executed and delivered by it and,
assuming due execution and delivery by the Surviving Partnership,
constitutes a valid and binding agreement enforceable against it in
accordance with its terms, except to the extent that enforceability may be
limited by applicable bankruptcy, reorganization, insolvency, moratorium or
similar laws affecting the enforcement of creditors' rights generally as at
the time in effect and by general principles of equity, regardless of
whether such enforceability is considered in a proceeding in equity or at
law.
(f) OUTSTANDING LIMITED PARTNERSHIP INTERESTS. SCHEDULE 4.1(F)
hereto lists the current holders of all outstanding limited partnership
interests of the Merged Partnership together with the percentage interest held
by each holder. In the event that any holder listed on SCHEDULE 4.1(F)
transfers any interests prior to the Effective Time, the Merged Partnership
shall provide written notice to the Surviving Partnership of such transfer
prior to the Effective Time, and such notice shall include the names of the
transferor and the transferee, the address of the transferee and the number
of units transferred.
(g) CONSENTS AND APPROVALS; NO VIOLATION. To the best of the Merged
Partnership's knowledge, neither the execution, delivery and performance of
this Agreement nor the consummation of the transactions contemplated hereby
will: (i) conflict with or will result in any breach of any provision of
its Agreement of Limited Partnership or Certificate of Limited Partnership;
(ii) require it to obtain any consent, approval, authorization or permit
from, or file with or notify, any governmental or regulatory authority,
except where the failure to obtain such consent, approval, authorization or
permit, or to make such filing or notification, would not have a Material
Adverse Effect; (iii) except to the extent that the consent of the Existing
Lender is required, constitute a breach or will result in a default under
any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, license, contract, agreement or other instrument or obligation
of any kind to which it is a party or by which it is bound, except for any
such breach or default as would not have a Material Adverse Effect; or (iv)
violate any order, writ, injunction, judgment, decree, law, statute, rule,
regulation or governmental permit or license applicable to it, which
violation would have a Material Adverse Effect, unless any waiver, consent,
approval, authorization, permit, filing or notification necessary to
prevent any such conflict, breach, default or violation has been obtained
prior to the Effective Time.
(h) LIABILITIES. Except (i) as disclosed in SCHEDULE 4.1(H) attached
hereto, (ii) for liabilities and obligations incurred in the normal course
of business of the Merged Partnership and (iii) as otherwise disclosed in
this Agreement, the Merged Partnership has no material liability or
obligation of any nature which in any way materially affects or is related
to the Property or the Other Items whether now due or to become due,
absolute, contingent or otherwise, including liabilities for taxes (or any
interest or penalties thereto).
(i) LITIGATION. Except as disclosed in SCHEDULE 4.1(I) attached
hereto, there is no litigation, proceeding or investigation which, to the best
knowledge of the Merged Partnership, is pending, or, to the best knowledge
of the Merged Partnership, threatened, against or affecting the Merged
Partnership or the Property that might affect or relate to the validity of
this Agreement or any action taken or to be taken pursuant hereto, or that
might have a Material Adverse Effect upon the Property or the Other Items
or any part or the operation thereof, unless fully covered by insurance.
(j) COMPLIANCE WITH LAWS. Except as disclosed in SCHEDULE 4.1(J)
attached hereto, neither the General Partner nor any current officer of Mill
Creek Realty Co. has received written notice, addressed to the Merged
Partnership or Mill Creek Realty Co., which remains outstanding that it has not
complied with and is in default under, or in violation of, or received any
written notice which remains outstanding that the Merged Partnership, the
Property or the Other Items may be in violation of, any law, ordinance,
rule, regulation or code or condition in any approval or permit pursuant
thereto (including without limitation, any zoning, sign, environmental,
labor, safety, health or price or wage control, ordinance, rule, regulation
or order of) applicable to the ownership, development, operation or
maintenance of the Property or the Other Items.
(k) LEASES. There are no written leases affecting the Property to
which the Merged Partnership is a party with a term greater than one year.
The rent roll attached hereto as SCHEDULE 4.1(K) is true and correct as of
the date of this Agreement.
(l) CONDEMNATION. The Merged Partnership has not received written
notice of pending condemnation of the Property, or any part thereof, or of
any plans for improvements which might result in a special assessment against
the Property.
(m) INTENTIONALLY OMITTED
(n) SERVICE CONTRACTS. There are no service contracts with respect
to the Property or the Other Items which will continue in effect after the
Closing except as set forth on SCHEDULE 4.1(N) attached hereto.
(o) EXECUTORY CONTRACTS. There are no executory contracts connected
with the Property or the Other Items, except as set forth on SCHEDULE 4.1(O)
attached hereto.
(p) ONGOING PERFORMANCE. The Existing Mortgage Loan has matured.
Until the Effective Time, the Merged Partnership will continue to make payments
with respect to the Existing Mortgage Loan which would have been required
to be made if the Existing Mortgage Loan had not matured. Until the
Effective Time, the Merged Partnership will continue to fulfill its
obligations under the terms of the Existing Unsecured Loans, the leases
encumbering the Property, the service contracts and the executory
contracts, and the Merged Partnership shall operate, and perform routine
maintenance and repair with respect to, all landscaping, buildings,
fixtures and facilities, including, without limitation, the Other Items, in
accordance its current practices. With respect to non-routine maintenance
or repair, the following shall apply:
(1) Except in the case of emergency, the Merged Partnership
shall not arrange for the making of any non-routine repair or replacement
costing in excess of $10,000 in any one instance without the prior written
consent of the Surviving Partnership which consent shall not be unreasonably
withheld and shall be deemed given if it is not denied by written notice
received by the Merged Partnership within 3 business days after request for
such consent was received by the Surviving Partnership. If such consent is
given or if such cost is less than $10,000, in the event that the Merger
occurs, the cost of such repair or replacement shall be the responsibility
of the Surviving Partnership and if any amount on account of such cost is
paid by the Merged Partnership prior to Closing, the Surviving Partnership
shall reimburse that to the Merged Partnership at Closing.
(2) Any non-routine repairs or replacements arranged by the
Merged Partnership which are not the responsibility of the Surviving
Partnership pursuant to Section 4.1(p)(1) above or Section 4.1(p)(3) below
shall be a liability of the Merged Partnership which shall not be assumed
by the Surviving Partnership.
(3) In the event that any non-routine repairs or replacements
are required on an emergency basis, which emergency is such as does not
comfortably allow the passage of the time period specified above for obtaining
the approval of the Surviving Partnership, the Merged Partnership may arrange
for such repair or replacement, and in the event that the Merger occurs,
the cost thereof shall be the responsibility of the Surviving Partnership
and at Closing the Surviving Partnership shall reimburse the Merged
Partnership for any amount paid on account of such repair or replacement
prior to Closing.
(q) APPLIANCES. Except as previously disclosed to the Surviving
Partnership, all of the ranges and refrigerators in the Property are the
property of the Merged Partnership and not of the tenants.
(r) FINANCIAL INFORMATION. The financial information attached
hereto as SCHEDULE 4.1(R) (income and expenses for calendar year 1995 and 1996)
is substantially true and accurate.
(s) ENVIRONMENTAL. Except as identified in SCHEDULE 4.1(S)
attached hereto, the Merged Partnership has received no notice of any
violation of any applicable Environmental Laws (below defined) with respect
to the Property. "Environmental Laws" shall mean all federal, state and
local laws, statutes, ordinances and codes relating to the protection of the
environment and/or governing the use, storage, treatment, generation,
transportation, processing, handling, production or disposal of any
Hazardous Substance and the rules, regulations, and orders with respect
thereto. "Hazardous Substance" means, without limitation, any flammable,
explosive or radioactive material, polychlorinated biphenyl, petroleum or
petroleum product, methane, hazardous materials, hazardous wastes,
hazardous or toxic substances or related materials, as defined in any
applicable Environmental Laws. From the date of acceptance hereof to and
including the Effective Date or the earlier termination of this Agreement,
the Merged Partnership shall promptly provide the Surviving Partnership
with a copy of any notice, citation, complaint or other directive from any
person, entity or governmental authority whereby compliance with
Environmental Laws is called into question with respect to the Property.
(t) TAXES. Except for state and local realty transfer taxes
(which are governed by Section 3.10) and real estate taxes (which are
governed by Section 3.9), the Merged Partnership has filed or will file
when due all notices, reports and returns of Taxes (as defined below)
required to be filed before the Effective Date and has paid or, if due
after the date hereof and prior to the Effective Date, will pay, all Taxes and
other charges for the periods shown to be due on such notices, reports and
returns. "Taxes" shall mean all taxes, charges, fees, levies or other
assessments, including, without limitation, income, excise, property, sale,
gross receipts, employment and franchise taxes imposed by the United
States, or any state, county, local or foreign government, or subdivision
or agency thereof with respect to the assets or the business of the Merged
Partnership, and including any interest, penalties or additions
attributable thereto.
4.2 BY THE SURVIVING PARTNERSHIP. The Surviving Partnership hereby makes
the following representations and warranties to the Merged Partnership as
of the date hereof.
(a) ORGANIZATION AND AUTHORIZATION. The Surviving Partnership is
a limited partnership duly organized, validly existing and in good standing
under the laws of the State of New York and has adopted the New York Act.
It has all requisite power and authority to own, lease and operate its
properties and to carry on its business as now being conducted. It is duly
qualified or licensed to do business as a foreign limited partnership and in
good standing in each jurisdiction in which the property owned, leased or
operated by it makes such qualification or license necessary, except in
each case in those jurisdictions where the failure to be so duly qualified
or licensed and in good standing would not have a Material Adverse Effect.
(b) AUTHORITY RELATIVE TO THIS AGREEMENT. Subject to the receipt
of the approvals described in Section 1.5 and in subparagraph (e) of Section
6.3 of this Agreement: (i) the Surviving Partnership has full power and
authority to execute, deliver and perform this Agreement and to consummate
the transactions contemplated hereby; (ii) all actions necessary to be
taken by it or on its behalf to execute, deliver and perform this Agreement
and to consummate the transactions contemplated hereby, have been duly and
validly taken; and (iii) this Agreement has been duly and validly executed
and delivered by it and, assuming due execution and delivery by the Merged
Partnership, constitutes a valid and binding agreement enforceable against
it in accordance with its terms, except to the extent that enforceability
may be limited by applicable bankruptcy, reorganization, insolvency,
moratorium or similar laws affecting the enforcement of creditors' rights
generally as at the time in effect and by general principles of equity,
regardless or whether such enforceability is considered in a proceeding in
equity or at law.
(c) CONSENTS AND APPROVALS; NO VIOLATIONS. To the best of the
Surviving Partnership's knowledge, as of the Effective Time, neither the
execution, delivery and performance of this Agreement nor the consummation
of the transactions contemplated hereby will: (i) conflict with or will
result in any breach of any provision of its Agreement of Limited Partnership
or Certificate of Limited Partnership; (ii) require it to obtain any consent,
approval, authorization or permit from, or file with or notify, any
governmental or regulatory authority, except where the failure to obtain
such consent, approval, authorization or permit, or to make such filing or
notification, would not have a Material Adverse Effect; (iii) constitute a
breach or will result in a default under any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, license, contract,
agreement or other instrument or obligation of any kind to which it is a
party or by which it is bound, except for any such breach or default as
would not have a Material Adverse Effect; or (iv) violate any order, writ,
injunction, judgment, decree, law, statute, rule, regulation or
governmental permit or license applicable to it, which violation would have
a Material Adverse Effect, unless, any waiver, consent, approval,
authorization, permit, filing or notification necessary to prevent any such
conflict, breach, default or violation has been obtained prior to the
Effective Time.
(d) PARTNERSHIP INTERESTS. On the Effective Date, the Units to
be issued as provided in this Agreement shall be duly issued by the Surviving
Partnership and the recipients will be duly admitted as limited partners of
the Surviving Partnership.
(e) SURVIVING PARTNERSHIP AGREEMENT. A true, correct and complete
copy of the Surviving Partnership Agreement is attached hereto as EXHIBIT "D".
The Surviving Partnership hereby agrees that, with the following exceptions,
the Surviving Partnership Agreement shall not be further amended on or
prior to the Effective Date: (i) the Surviving Partnership Amendments, (ii)
amendments in connection with the issuance of additional shares under HME's
Dividend Reinvestment Stock Purchase, Resident Stock Purchase and Employee
Stock Purchase Plan, (iii) amendments in connection with mergers or other
transactions similar to the Merger which are currently in process wherein
additional Units are issued in connection with the acquisition of real
property or of interests in entities which own real property, the
provisions of which have been disclosed in writing to the Merged
Partnership prior to the execution of this Agreement, and (iv) the
formation of a subsidiary of HME to hold Units owned by HME.
ARTICLE V
COVENANTS OF THE PARTIES
5.1 FURTHER ASSURANCE. Subject to the terms and conditions of this
Agreement, each of the parties hereto will use reasonable efforts to take,
or cause to be taken, all actions, and to do, or cause to be done, all
things necessary under applicable laws and regulations to consummate the
transactions contemplated by this Agreement, including, but not limited to,
taking any actions necessary to cause the Merger Conditions to be
satisfied.
5.2 REPRESENTATIONS AND WARRANTIES. Each of the parties hereto shall
give written notice to the other party promptly upon the occurrence of, or upon
becoming aware of, either: (i) the occurrence of any event which makes any
representation or warranty contained in this Agreement not true in any
material respect; or (ii) any material and adverse development in the
condition (financial or otherwise) or operations of such party.
5.3 REPURCHASE AGREEMENTS. The Surviving Partnership hereby covenants and
agrees that it will, on or prior to the Effective Date, enter into an
agreement with each of the partners of the Merged Partnership other than
Cash Conversion Holders and Dissenting Partners whereby the Surviving
Partnership agrees that:
(a) Upon the written request of any such partner, the Surviving
Partnership will purchase any or all of the Units held by such partner at a
purchase price per Unit equal to the Effective Date Price (as defined in
Section 3.3(c) above). The written notice must be received by the Surviving
Partnership on or before the date which is one hundred eighty (180) days
after the Effective Date.
(b) Upon the written request of any such partner which is made (i)
after the date which is one hundred eighty (180) days after the Effective Date
and (ii) on or before the date which is the later of (A) the last day of any
holding period (which holding period shall not, in any event, exceed one
year after the Effective Date) during which, in order to comply with the
requirements of the SEC, such partners are not permitted to convert Units
into shares of common stock of HME and (B) the date on which the SEC
declares effective the Registration Statement required to be filed with the
SEC pursuant to Section 5.11 hereof, the Surviving Partnership will
purchase any or all of the Units held by such partner at a purchase price
per Unit equal to the average of the daily market price for the ten (10)
consecutive trading days immediately preceding the date of such partner's
request of the shares of common stock of HME.
5.4 ACCESS TO INFORMATION. Between the date of this Agreement and the
Effective Date, the Surviving Partnership, on the one hand, and the Merged
Partnership, on the other hand, will each, during ordinary business hours
and upon reasonable advance notice, give to the other and their authorized
representatives reasonable access to inspect their books, records, offices
and other facilities and properties; provided, however, that: (i) any such
investigation shall be conducted in such a manner as not to interfere
unreasonably with the operation of the other's business; (ii) no party
shall be required to take any action which would constitute a waiver of the
attorney-client privilege; and (iii) no party need supply the other with
any information which it is under a legal obligation not to supply.
5.5 FINANCIAL ACCESS.
(a) Upon the demand of the Surviving Partnership, the General
Partner will provide a signed representation letter substantially in the form
of EXHIBIT "E" attached hereto. The General Partner and the Merged Partnership
will provide access to the Surviving Partnership's representative to all
financial and other information relating to the Merged Partnership and the
Property as is sufficient to enable them to prepare audited and pro-forma
financial statements, in conformity with Regulation S-X of the Securities
and Exchange Commission (the "Commission") and any registration Statement,
report or disclosure statement to be filed with the Commission.
(b) Prior to the Effective Date the Surviving Partnership shall from
time to time, promptly after request, supply to the Merged Partnership, and
certify to the Merged Partnership the accuracy and completeness of, copies of
any financial statements and records and other documents and information
requested by the General Partner regarding the Surviving Partnership and
HME which are available to the public.
(c) The Parties hereto recognize that, at the Effective Date, the
Merged Partnership will be treated for federal income tax purposes as having
contributed all of its assets to the Surviving Partnership in exchange for
the Consideration, which the Merged Partnership will be deemed to have
distributed to its Partners in complete liquidation of the Merged
Partnership. Consequently, the Merged Partnership will terminate for
federal income tax purposes at the Effective Time. The Parties hereto
shall prepare their tax returns for their respective taxable years which
include the Effective Date consistent with that characterization of the
transaction. The Surviving Partnership shall make available to the General
Partner (and its representatives) promptly upon request, all financial and
other information relating to the Merged Partnership which is necessary to
permit the Merged Partnership to file its tax returns for its taxable year
ended on the Effective Date.
5.6 INTENTIONALLY OMITTED
5.7 NEGATIVE COVENANTS. The Merged Partnership agrees that, prior to
the Effective Date, it will not take any of the following actions without first
obtaining the Surviving Partnership's prior written consent, which consent
shall not be unreasonably withheld or delayed.
A. Create, incur or assume any indebtedness for money borrowed,
including obligations in respect of capital leases, except: (i) purchase money
mortgages granted in connection with the acquisition of property in the
ordinary course of business consistent with past practice; and (ii) short-
term indebtedness for borrowed money in accordance with loan agreements and
lines of credit in effect as of the date hereof.
B. Assume, guarantee, endorse or otherwise become liable or
responsible (whether directly, contingently or otherwise) for the obligations
of any other person except in the ordinary course of business consistent
with past practices.
C. Sell or otherwise dispose of or abandon any of its assets except
in the ordinary course of business.
D. Increase the rate or terms of: (i) compensation payable or to
become payable to any of its employees; or (ii) any bonus, insurance, pension
or other employee benefit plan, payment or arrangement made to, for or with
any employee, except salary increases to site employees not exceeding 3%
occurring in the ordinary course of business in accordance with its
customary practices (which shall include normal periodic performance
reviews and related compensation and benefit increases).
E. Enter into any agreement, commitment or transaction (including
without limitation any borrowing, capital expenditure or capital financing),
material to the business, operations or financial condition of its
business, except agreements, commitments or transactions in the ordinary
course of business consistent with past practice.
F. Transfer, mortgage, pledge, grant any security interest in or
permit the imposition of any lien or other encumbrance on any of its assets
other than in the ordinary course of business consistent with past practice.
5.8 MANAGEMENT AGREEMENTS. On or prior to the Effective Date, the Merged
Partnership shall terminate any agreements pertaining to the management of
the Property.
5.9 CLOSING DOCUMENTS. At the Effective Time, the Merged Partnership
shall deliver to the Surviving Partnership a certificate of title and any
necessary transfer documents relating to any vehicles, a current rent roll
("Rent Roll") certified, as of the date of the Effective Date, which shall
include a list of all tenants, all rental obligations of each tenant with
respect to the Property and all security deposits (including all interest
due to tenants pursuant to Pennsylvania or other applicable laws). At the
Closing, the Merged Partnership shall transfer to the Surviving Partnership
an amount equal to the aggregate amount of the security deposits shown on
the Rent Roll. At the Effective Time, the Merged Partnership shall also
deliver to the Surviving Partnership complete originals of each lease
listed on the Rent Roll.
5.10 INSPECTION. Upon and after execution of this Agreement by both
parties, the Merged Partnership agrees that the Surviving Partnership and
its authorized representatives shall have the right and privilege to enter
upon the Property and the Merged Partnership's offices, upon reasonable
notice, during regular business hours, for the purpose of gathering such
information and conducting such environmental and engineering studies or
other tests and reviews as the Surviving Partnership may deem appropriate
and necessary. All such inspections, studies, tests and reviews shall be at
the Surviving Partnership's sole expense. The Merged Partnership agrees to
cooperate with the Surviving Partnership by making available to the
Surviving Partnership such records, plans, drawings or other data as may be
in their or the Merged Partnership's possession or control relating to the
Property and its operation; provided, however, that the Surviving
Partnership agrees to indemnify the Merged Partnership of and from any loss
or damage occasioned by such entry, and agrees further to restore to its
original condition, at the Surviving Partnership's own cost and expense,
any property disturbed by such entry.
5.11 SUFFICIENT REGISTERED SHARES. The Surviving Partnership hereby
represents and warrants to and covenants with the Merged Partnership and
its partners that the Effective Date and thereafter for so long as any
Units issued to the partners of the Merged Partnership are outstanding
there shall be at all times, a sufficient number of reserved shares of HME
to permit the conversion of all outstanding Units into shares of HME
pursuant to the terms of the Surviving Partnership Agreement. Within 10
days after the Effective Date, the Surviving Partnership agrees to file a
registration statement (the "Registration Statement") with the SEC
registering the resale of the shares of common stock of HME into which the
Units may be converted and to use reasonable commercial efforts to have the
registration promptly declared effective by the SEC. Notwithstanding
anything to the contrary contained in this Agreement, in the event that the
Surviving Partnership has not filed the Registration Statement with the SEC
by the date (the "Outside Filing Date") which is the 30th day after the
Effective Date, then for and with respect to each day during the period
between the Outside Filing Date and the date on which the Registration
Statement is filed with the SEC, the Surviving Partnership shall pay to the
former partners of the Merged Partnership which hold Units, as liquidated
damages and not as a penalty, the sum of $10,000, which sum shall be
apportioned pro rata among such former partners of the Merged Partnership.
5.12 TAX PROVISIONS. The Surviving Partnership agrees to observe and
comply with the following:
(a) The Surviving Partnership will use the traditional method (and
not the curative or remedial method), as contemplated by Treasury Regulations
Section 1.704-3(b) to allocate book-tax differences with respect to the
assets which are deemed contributed to the Surviving Partnership by the
Merged Partnership.
(b) Home Properties agrees that for a period of 5 years following
the Effective Time,(i) the Surviving Partnership shall not restructure the
share of the Surviving Partnership's debt of the former partners of the
Merged Partnership who shall have received Units in the Surviving
Partnership (the "Unit Partners") in such manner as to cause a reduction in
the amount of Unit Partners' share of non-recourse debt allocable to and
encumbering the Property without the Unit Partners' prior written consent,
and (ii) the Surviving Partnership will not dispose of any of its interest
in the Real Property, unless such disposition is structured as a tax-
deferred, like-exchange under <section>1031 of the Code, or otherwise is
substantially tax-deferred under the Code. Any property or real estate
assets acquired by the Surviving Partnership pursuant to such tax-deferred,
like- exchange shall remain subject to the restriction on disposition
contained hereunder until the end of the aforesaid 5-year period. In the
event that the Surviving Partnership takes any such action during such 5-
year period, the Surviving Partnership shall indemnify and save harmless
the Unit Partners from and against any federal and state income tax
liability, including but not limited to: (i) income taxes suffered as a
result of all payments made under this subsection; and (ii) interest,
penalties and the reasonable fees of attorneys and accountants.
(c) As a partner contributing interests in a partnership in exchange
for a limited partnership interest in the Surviving Partnership, the Unit
Partners will receive annually from the Surviving Partnership Form 1065,
Schedule K-1, Partner's Share of Income, Credit, Deductions, etc. This form
will also be part of the tax return, Form 1065, filed by the Surviving
Partnership with the Internal Revenue Service. The Surviving Partnership
represents that the Schedule K-1 submitted to Unit Partners for use in the
preparation of their tax returns will reflect the allocation to Unit
Partners as partners of a share of non-recourse liabilities in accordance
with Reg. Sec. 1.752-3 of the Internal Revenue Code, such that as a result
of the allocation the Unit Partners shall recognize no income upon the
contribution of the Property to the Surviving Partnership, and for a period
of 5 years following the Effective Time except to the extent cash
distributions from the Surviving Partnership to a Unit Partner exceeds such
Unit Partner's basis in his or her Units. The Merged Partnership
represents that as of December 31, 1996: (i) their aggregate built in gain
determined in accordance with the principals set forth in Section 704(c) of
the Internal Revenue Code of 1986 ("Code") is as set forth on SCHEDULE 5.12
assuming that the Property has a fair market value of $10,650,000 as of the
date of the Merger; (ii) the amount of nonrecourse debt encumbering the
Property is $8,098,620; (iii) the capital account of each of the Unit
Partners is as set forth on SCHEDULE 5.12. The Surviving Partnership's
representation contained in this Section 5.12 (c) is conditioned upon the
accuracy of the representations contained in the preceding sentence.
ARTICLE VI
CONDITIONS OF MERGER
6.1 MANDATORY CONDITIONS. Neither the Surviving Partnership nor the
Merged Partnership shall have any obligation to execute or file the Certificate
of Merger as described in Section 2.1 unless, on or before September 30, 1997:
(a) OTHER CONDITIONS. All of the contingencies and conditions
(including, without limitation, the conditions set forth in Sections 6.2 and
6.3 hereof) contained in this Agreement have been satisfied or waived as
provided herein.
(b) OTHER MERGERS. The conditions to the mergers and other
transactions of the Surviving Partnership with the entities listed on the
attached SCHEDULE 6.1 also shall have been satisfied and the mergers are to
occur simultaneously with the Merger of the Merged Partnership into the
Surviving Partnership.
6.2 CONDITIONS TO MERGED PARTNERSHIP'S OBLIGATIONS. On the date all of
the requirements set forth in Section 6.1 hereof have been satisfied (the
"Satisfaction Date"), the general partner of the Merged Partnership shall
execute the Certificate of Merger and deliver it to the Surviving
Partnership. The general partner of the Merged Partnership shall have no
obligation to execute and deliver the Certificate of Merger unless:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Surviving Partnership set forth herein shall be true and
correct in all material respects as of the Satisfaction Date, as certified in
writing by the general partner of the Surviving Partnership.
(b) COVENANTS. The Surviving Partnership has complied in all
material respects with the covenants made by it in this Agreement to be
complied with by it from the date hereof through the Satisfaction Date.
(c) APPROVAL. The Merged Partnership shall have obtained the
requisite approval of its limited partners to the Merger and the other
transactions described in this Agreement on the terms and conditions described
herein.
(d) OPINION OF COUNSEL. The Surviving Partnership's independent
counsel shall have delivered an opinion of counsel in the form of EXHIBIT F
attached hereto.
(e) INTENTIONALLY OMITTED
(f) REGISTRATION RIGHTS AGREEMENT. The partners of the Merged
Partnership who receive Units and the Surviving Partnership shall have entered
into a registration rights agreement on customary terms, including, without
limitation, the granting of piggyback registration rights.
(g) MARYLAND ANTI-TAKEOVER STATUTES. The Board of Directors of HME
shall have taken all action necessary so that the transactions contemplated by
this Agreement including, without limitation, the issuance of Units and the
conversion of Units into shares of HME, shall be irrevocably exempt from
the operation of <section>3-601 ET SEQ. (the "business combination"
statute) and <section>3-701 ET SEQ. (the "control share acquisition"
statute) of the Maryland General Corporation Law (collectively, the
"Maryland Anti-Takeover Statutes") and from any provisions of the Articles
of Incorporation and Bylaws of HME that may have the effect of limiting the
acquisition of Units and shares of HME in connection with the transactions
contemplated in this Agreement, including without limitation, Article 7 of
the Articles of Incorporation of HME. The Surviving Partnership and its
counsel shall have confirmed to the Merged Partnership's satisfaction that
this Agreement, the Merger and the other transactions contemplated hereby
are exempt from the operation of the Maryland Anti-Takeover Statutes.
6.3 CONDITIONS TO SURVIVING PARTNERSHIP'S OBLIGATIONS. On the next day
following the date that the Surviving Partnership receives the Certificate
of Merger executed by the general partner of the Merged Partnership (the
"Delivery Date"), the general partner of the Surviving Partnership shall
execute the Certificate of Merger, deliver it to the Department of State of
the State of New York and the State of New Jersey for filing and notify the
Merged Partnership of such delivery. The general partner of the Surviving
Partnership shall have no obligation to execute or deliver the Certificate
of Merger unless:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Merged Partnership set forth in this Agreement shall be
true and correct in all material respects as of the Delivery Date, as certified
in writing by the General Partner.
(b) COVENANTS. The Merged Partnership has complied with the
covenants made by it in this Agreement to be complied with by it from the date
hereof through the Delivery Date.
(c) CONDITION OF PROPERTY. There are on the Delivery Date, 308
apartment units in rentable condition and in compliance with federal, state,
county or local laws, ordinances, rules and regulations.
(d) APPROVALS. The Surviving Partnership represents and warrants
that it has obtained the requisite approval of the Board of Directors of HME
to the Merger and the other transactions described in this Agreement on the
terms and conditions described herein, including, without limitation, the
Surviving Partnership Amendments. The Surviving Partnership, on or prior
to the Effective Date shall have obtained the requisite approval of its
limited partners and the State of Michigan Retirement Systems to the Merger
and the other transactions described in this Agreement on the terms and
conditions described herein. The Surviving Partnership agrees to recommend
to the Board of Directors of HME, the limited partners of the Surviving
Partnership and the State of Michigan Retirements Systems that they vote
in favor of the Merger and the other transactions described in this
Agreement.
(e) GENERAL PARTNER AGREEMENT. The General Partner shall have
executed an agreement whereby he agrees that it will be responsible for making
all final distributions to the former partners of the Merged Partnership and
shall indemnify the Surviving Partnership from all claims relating thereto.
(f) OPINION OF COUNSEL. The Merged Partnership's independent
counsel shall have delivered an opinion of counsel in the form of EXHIBIT G
attached hereto.
ARTICLE VII
TERMINATION
7.1 TERMINATION. If the conditions of Section 6.1 of this Agreement are
not satisfied, either party, at its option and upon notice to the other party,
may terminate this Agreement. If the conditions of Section 6.2 of this
Agreement are not satisfied, the Merged Partnership, at its option and upon
written notice to the Surviving Partnership, may terminate this Agreement.
If the condition of Section 6.3 of this Agreement are not satisfied, the
Surviving Partnership, at its option and upon written notice to the Merged
Partnership, may terminate this Agreement. Upon the termination of this
Agreement as provided herein, neither party shall have any further rights
or obligations hereunder and neither party shall take any action to file
the Certificate of Merger.
ARTICLE VIII
TITLE MATTERS
8.1 TITLE POLICIES AND SURVEYS. The Merged Partnership has, prior to
the date of this Agreement, furnished and delivered to the Surviving
Partnership a copy of the most recent title policy issued with respect to
the Property and a copy of the most recent survey of the Property.
8.2 OBJECTIONS TO TITLE.
(a) The obligation of the Surviving Partnership to execute or file
the Certificate of Merger is conditioned upon the ability of the Surviving
Partnership to obtain title insurance with respect to the Property
insuring that, as of the Effective Date, title to the Property is not
subject to any liens, encumbrances or other title objections other than the
lien of the mortgage securing the Existing Loan, any apartment leases for
tenants of the Property and the title exceptions identified in EXHIBIT H
attached hereto.
(b) The Merged Partnership agrees that, upon the request of the
Surviving Partnership, it will provide an affidavit in such customary form as
shall allow the Surviving Partnership to obtain a non-imputation endorsement
to the title policy purchased by the Surviving Partnership.
ARTICLE IX
MISCELLANEOUS
9.1 AMENDMENT. This Agreement may be amended only by a writing executed
by the Surviving Partnership and the Merged Partnership.
9.2 WAIVER OF COMPLIANCE. Except as otherwise provided in this Agreement,
any failure of any party to comply with any obligation, covenant, agreement
or condition herein may be waived by the party entitled to the benefits
thereof only by a written instrument signed by the party granting such
waiver, but such waiver or failure to insist upon strict compliance with
such obligation, covenant, agreement or condition shall not operate as a
waiver of, or estoppel with respect to, any subsequent or other failure.
9.3 ENTIRE AGREEMENT. This Agreement, including the documents,
schedules, certificates and instruments referred to herein, embody the entire
agreement and understanding of the parties hereto in respect of the
transactions contemplated by this Agreement. There are no restrictions,
promises, representations, warranties, covenants or undertakings, other
than those expressly set forth or referred to herein or therein. This
Agreement supersedes all prior agreements and understandings between the
parties with respect to such transactions.
9.4 ASSIGNMENT. This Agreement and all obligations and rights of the
parties hereunder may not be assigned by either party. Commencing with the
Effective Time, the General Partner and the former partners of the Merged
Partnership shall be third-party beneficiaries of this Agreement.
9.5 GOVERNING LAW. This Agreement shall be governed by the laws of the
State of New Jersey, without reference to its principles of conflicts of
law.
9.6 INTERPRETATION. The article and section headings contained in this
Agreement are solely for the purpose of reference, are not part of the
agreement of the parties and shall not in any way affect the meaning or
interpretation of this Agreement. Article and Section references which do
not otherwise specify, are to the designated Article or Section of this
Agreement.
9.7 SEVERABILITY. The invalidity or unenforceability of any particular
provision of this Agreement shall be construed in all respects as if such
invalid or unenforceable provision were omitted. All provisions of this
Agreement shall be enforced to the full extent permitted by law.
9.8 NOTICES. All notices given pursuant to any provision of this
Agreement shall be in writing and shall be effective only if delivered
personally, or sent by registered or certified mail, postage prepaid or sent
by nationally recognized overnight carrier, to the addresses set forth below:
To Home Properties:
Home Properties of New York, L.P.
850 Clinton Square
Rochester, New York 14604
Attention: Norman Leenhouts
With a copy to Ann M. McCormick
at the same address
To the Merged Partnership
General Partner: c/o Henry A. Quinn
100 Chetwynd Drive
Rosemont, Pennsylvania 19010
With a copy to:
Bruce R. Lesser, Esq.
Wolf, Block, Schorr and Solis-Cohen
350 Sentry Parkway
Building 640
Blue Bell, Pennsylvania 19422
And a copy to:
John S. Roberts, Jr., Esq.
Wolf, Block Schorr and Solis-Cohen
Twelfth Floor, Packard Building
15th and Chestnut Streets
Philadelphia, Pennsylvania 19102
9.9 CONFIDENTIALITY. By execution of this Agreement and except as
otherwise provided herein, prior to the Effective Time the Surviving
Partnership agrees to keep any and all information obtained in or in
connection with the due diligence process with respect to the Merged
Partnership, its operations, the Real Property and Other Items strictly
confidential, and will not disclose any such information without the
Merged Partnership's prior written consent, except to the extent required
by law.
9.10 BROKER'S COMMISSION. The Merged Partnership represents to the
Surviving Partnership that it did not employ any broker in connection with
this sale other than Mill Creek Realty Co., and the Merged Partnership
hereby agrees that, pursuant to Section 3.11 hereof, it will cause the
Surviving Partnership to pay any fees or commissions payable to Mill Creek
Realty Co. in connection with the transaction described in this Agreement.
The Surviving Partnership represents that it employed F.M. Stec &
Associates as broker and agrees that it will pay any fees or commissions
due as a result of the Surviving Partnership's employment of that broker.
The parties each agree to indemnify the other for any and all claims and
expenses, including legal fees if any other fees or commission is
determined to be due by reason of the employment of any other broker by the
indemnifying party.
9.11 CONDITION OF PROPERTY AND OTHER ITEMS
(a) The entire agreement between the parties hereto with respect
to the Property and the Other Items and the sale thereof is expressly set
forth in this Agreement, and the parties are not bound by any agreement,
understandings, provisions, conditions, representations or warranties other
than as are expressly set forth and stipulated herein. Without in any
manner limiting the generality of the foregoing, the Surviving Partnership
acknowledges that and its representatives will have fully inspected the
Property and the Other Items, and will be fully familiar with the physical
and financial condition thereof, and that the Property and the Other Items
will be accepted by the Surviving Partnership pursuant to the Merger in an
"as is" and "where is" condition as a result of such inspection and
investigations and not in reliance on any agreement, understanding,
condition, warranty or representation made by the General Partner, the
Merged Partnership or any agent or employee of the Merged Partnership
(except as expressly elsewhere provided in this Agreement) as to the
condition thereof, as to any permitted use thereof, or as to the income or
expense in connection therewith, or as to any other matter in connection
therewith; and the Surviving Partnership further acknowledges that neither
the Merged Partnership nor any party acting on behalf of the Merged
Partnership has made or shall be deemed to have made any such agreement,
condition, representation or warranty (except as expressly elsewhere
provided in this Agreement).
(b) The Surviving Partnership shall accept the Property and the
Other Items at the time of Closing in the same condition as the same are as of
the date of this Agreement as such condition shall have changed by reason of
wear and tear, damage by fire or other casualty and vandalism.
(c) If the Merger occurs, the Merged Partnership shall assign to the
Surviving Partnership any net insurance and/or condemnation proceeds
received by the Merged Partnership with respect to the Property, less any
amount expended by the Merged Partnership for collection, repair,
restoration or related expenses.
9.12 DEFAULT.
(a) If the Surviving Partnership defaults hereunder at or prior to
the Effective Date by failing to complete Closing in accordance with the terms
of this Agreement or in any other respect, then on the Effective Date (or
sooner in the event of an anticipatory breach) the Surviving Partnership
shall pay to the Merged Partnership the sum of $170,000 (the "Liquidated
Damages Amount") as liquidated damages. Notwithstanding anything to the
contrary contained in this Agreement, the failure to satisfy any of the
conditions to the Merger contained in Article VI hereof shall not, in and
of itself, be deemed to be a failure of the Surviving Partnership to
complete Closing or a default by the Surviving Partnership under this
Agreement. If the Surviving Partnership pays the Merged Partnership the
Liquidated Damages Amount as liquidated damages, the payment of such sum
shall be the Merged Partnership's only remedy in the event of the Surviving
Partnership's default at or prior to the Effective Date, and the Merged
Partnership in such event hereby waives any right, unless Closing is
completed, to recover the balance of the Consideration. If the Merged
Partnership shall be paid the Liquidated Damages Amount as liquidated
damages, this Agreement shall be and become null and void and all copies
will be surrendered to the Merged Partnership for cancellation. Nothing in
this Section shall limit the Merged Partnership's rights against the
Surviving Partnership and the Surviving Partnership's liability to the
Merged Partnership by reason of a default by the Surviving Partnership
under this Agreement which survives Closing.
(b) The term "Permitted Event" shall mean the occurrence of the
following on the Effective Date: the Surviving Partnership shall be ready,
willing and able to complete Closing in accordance with the Agreement; the
Surviving Partnership, or its authorized representative, shall have appeared
at the place designated for Closing and shall have tendered the Consideration,
and the Merged Partnership, notwithstanding the foregoing, shall have failed to
complete Closing in accordance with this Agreement or is otherwise in
default under this Agreement. Notwithstanding anything to the contrary
contained in this Agreement, the failure to satisfy any of the conditions
to the Merger contained in Article VI hereof shall not, in and of itself,
be deemed to be a failure of the Merged Partnership to complete Closing or
a default by the Merged Partnership under this Agreement. Except upon the
occurrence of the Permitted Event, the Surviving Partnership agrees that it
shall not (and hereby waives any right to) ever file or assert any LIS
PENDENS against the Property nor commence or maintain any action against
the Merged Partnership for specific performance under this Agreement nor
for a declaratory judgment as to the Surviving Partnership's rights under
this Agreement. Except as expressly provided above and elsewhere in this
Agreement, nothing herein shall be deemed to limit or impair any of the
Surviving Partnership's rights and remedies at law, in equity or by
statute.
9.13 INDEMNITY AGREEMENT. On the Effective Date, as an express condition
to the obligation of the Merged Partnership to complete Closing, the Surviving
Partnership shall execute and deliver to the General Partner an agreement,
in form and substance satisfactory to the General Partner and the General
Partner's counsel, whereby the Surviving Partnership agrees to indemnify
and hold harmless the General Partner, both individually and in his
capacity as the general partner of the Merged Partnership, from and against
any and all liabilities and obligations, including, without limitation,
guaranties and carve-outs from non-recourse, arising in connection with the
Existing Loan.
9.14 NO PERSONAL LIABILITY. Notwithstanding anything to the contrary
contained in this Agreement, none of the General Partner or any other
partners of the Merged Partnership or any partners of any partner of the
Merged Partnership shall have any personal liability, and no action of any
kind shall be maintained against any of them or their respective assets,
with respect to this Agreement and/or the transactions described in this
Agreement, and the Surviving Partnership, its successors and assigns, shall
look solely to the assets of the Merged Partnership and the cash or assets
held by the Disbursing Agent pursuant to Section 3.2 above, for the payment
of any claim against or the performance of any obligation of the Merged
Partnership. The foregoing limitation of liability shall not apply in the
case of fraud or intentional and material misrepresentation; provided,
however, that in connection with any action involving alleged fraud or
intentional and material misrepresentation, if the Surviving Partnership,
its successors or assigns, is not the prevailing party, it shall be
responsible for the payment of all attorneys' fees and expenses of all
parties, but if the Surviving Partnership, its successors or assigns, is
the prevailing party, each party shall bear its own attorneys' fees and
expenses.
9.15 NUMBER OF DAYS. In computing the number of days for purposes of
this Agreement, all days shall be counted, including Saturdays, Sundays and
holidays; provided, however, that if the final day of any time period falls
on a Saturday, Sunday or holiday on which federal banks are or may elect to
be closed, then the final day shall be deemed to be the next day which is
not a Saturday, Sunday or such holiday.
9.16 DEPOSIT.
(a) As security for the payment of the Liquidated Damages Amount,
upon the execution of this Agreement, the Surviving Partnership shall deposit
with the Disbursing Agent in escrow the sum of $170,000 (the "Deposit"). If
the Surviving Partnership shall become obligated to pay to the Merged
Partnership the Liquidated Damages Amount, the Merged Partnership shall
have the right to be paid the Deposit on account of the Liquidated Damages
Amount. If Closing is completed hereunder or if this Agreement is
terminated as provided in Section 7.1 hereof, the Disbursing Agent shall
refund the Deposit to the Surviving Partnership.
(b) Notwithstanding anything contained in this Section 9.16, if
either party terminates this Agreement as a result of the other's default or
pursuant to the exercise of any right of termination conferred by this
Agreement, Disbursing Agent shall not disburse the Deposit until the earlier
to occur of (i) receipt by Disbursing Agent of written instructions from the
Merged Partnership and the Surviving Partnership or (ii) entry of a final and
unappealable adjudication determining which party is entitled to receive
the Deposit, as applicable, at which time the Deposit shall be distributed
in accordance with such written instructions or adjudication. Except to
the extent of any dispute between them, the Merged Partnership and the
Surviving Partnership agree to act in good faith to provide the Disbursing
Agent with the instructions described in (i) above in the event that the
Agreement is terminated.
(c) In the event of a dispute between the Surviving Partnership and
the Merged Partnership with respect to the Deposit, the Disbursing Agent may
deposit the Deposit with a court of proper jurisdiction and commence an
interpleader action. Upon notifying the Merged Partnership and the
Surviving Partnership of the commencement of such action, Disbursing Agent
shall be released from all liability with respect to the Deposit, except to
the extent of accounting for any moneys previously delivered by Disbursing
Agent out of escrow. Disbursing Agent shall not be liable to either the
Merged Partnership or the Surviving Partnership, other than for performance
of its duties under this Agreement or his gross negligence or intentional
wrongdoing. Disbursing Agent may rely upon the genuineness or authenticity
of any document tendered to it by either the Merged Partnership or the
Surviving Partnership, and shall be under no duty of independent inquiry
with respect to any acts or circumstances recited in such document. The
Merged Partnership and the Surviving Partnership shall indemnify, defend
and hold harmless Disbursing Agent from and against all cost, claims or
liabilities arising from the performance by Disbursing Agent of his
obligations under this Agreement, other than for his failure to comply
herewith, gross negligence or intentional wrongdoing.
(d) As used in this Section 9.16, the term "Deposit" shall refer
to the amount set forth at Section 9.16(a), together with all interest thereon.
The Deposit shall be held by the Disbursing Agent in one or more federally-
insured money market accounts acceptable to both the Merged Partnership and
the Surviving Partnership, or in short-term United States government
obligations having a maturity date which is acceptable to the General
Partner and the Surviving Partnership or in one or more interest-bearing
deposit accounts at a bank or other financial institution acceptable to the
General Partner and the Surviving Partnership. The Merged Partnership's
taxpayer identification number is 23-2538147; the Surviving Partnership's
taxpayer identification number is 16-1455130.
(e) Although Disbursing Agent is counsel for the Merged Partnership,
the Disbursing Agent shall not be disqualified or prohibited from representing
Merged Partnership in connection with any matter arising out of this
Agreement by reason of its capacity as Disbursing Agent.
9.17 SURVIVAL.
(a) The representations, warranties, covenants and agreements of HME
and the Surviving Partnership contained in this Agreement will survive Closing
(i) indefinitely with respect to the warranties and representations in Sections
4.2(a) and 10.2(a), (ii) until 60 calendar days after the expiration of all
applicable statutes of limitation (including all periods of extension,
whether automatic or permissive) with respect to matters covered by Section
10.2(f), (iii) until the fifth anniversary of the Effective Date in the
case of all other representations and warranties and any covenant or
agreement to be performed in whole or part prior to Closing and (iv) with
respect to each other covenant or agreement contained in this Agreement,
for five years following the last date on which such covenant or agreement
is to be observed, performed or complied with, or, if no such date is
specified, indefinitely, except that any representation, warranty, covenant
or agreement that would otherwise terminate in accordance with clauses
(ii), (iii) or (iv) above will continue to survive if notice of claim shall
have been timely given on or prior to such termination date until such
claim has been satisfied or otherwise resolved. This Section shall not
limit in any way the survival and enforceability of any covenant or
agreement of the parties hereto which by its terms contemplates, or is of
such nature that it would require, performance, observance or compliance
after the Effective Date.
(b) The representations, warranties, covenants and agreements of the
Merged Partnership contained in this Agreement will survive Closing for a
period of one hundred eighty (180) days, subject to the limitations on
liability provided in Section 9.14 hereof.
9.18 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original for all
purposes and all of which, when taken together, shall constitute one and
the same instrument.
ARTICLE X
ADDITIONAL REPRESENTATIONS AND WARRANTIES
BY THE SURVIVING PARTNERSHIP
10.1 DEFINITIONS.As used in this Article X, the following defined terms
shall be the meanings indicated below:
"AFFILIATE" means any Person that directly, or indirectly through one or
more intermediaries, controls or is controlled by or is under common
control with the Person specified. For purposes of this definition, control
of a Person means the power, direct or indirect, to direct or cause the
direction of the management and policies of such Person whether by Contract
or otherwise and, in any event and without limitation of the previous
sentence, any Person owning 10% or more of the voting securities of a
second Person shall be deemed to control that second Person.
"BENEFIT PLAN" means any Plan entered into, established, maintained,
contributed to or required to be contributed to, by HME or any Company
ERISA Affiliate providing benefits to employees, former employees,
independent contractors, former independent contractors of the Company or
any Company ERISA Affiliate, or their dependents or beneficiaries.
"CODE" means the Internal Revenue Code of 1986, as amended, and the rules
and regulations promulgated thereunder.
"COMMON STOCK" means shares of Common Stock of HME.
"COMPANY ERISA AFFILIATE" means an entity required (at any relevant time)
to be aggregated with HME under Sections 414(b), (c), (m) or (o) of the
Code or Section 4001 of ERISA.
"COMPANY FINANCIAL STATEMENTS" shall have the meaning set forth at Section
10.2(c) below.
"COMPANY SEC REPORTS" shall have the meaning set forth at Section 10.2(c)
below.
"CONTRACTS" means any agreement or obligation of any kind to which HME or
any of its Subsidiaries is a party or by which HME or any of its
Subsidiaries or any of their respective assets or properties is bound.
"GAAP" means generally accepted accounting principles, consistently applied
throughout the specified period and in the immediately prior comparable
period.
"PERSON" means any natural person, corporation, limited liability company,
general partnership, limited partnership, proprietorship, other business
organization, trust, union, association or Governmental or Regulatory
Authority.
"PLAN" means any employment, bonus, incentive compensation, deferred
compensation, pension, profit sharing, retirement, stock purchase, stock
option, stock ownership, stock appreciation rights, phantom stock, leave of
absence, layoff, vacation, day or dependent care, legal services,
cafeteria, life, health, medical, accident, disability worker's
compensation or other insurance, severance, separation, termination, change
of control or other benefit plan, agreement, practice, policy or
arrangement of any kind, whether written or oral, including, but not
limited to, any "employee benefit plan" within the meaning of Section 3(3)
of ERISA.
"SEC" means the Securities and Exchange Commission.
"SECURITIES" means the shares of Common Stock and the Units to be issued
and sold to partners in the Merged Partnership, including shares of Common
Stock issuable upon conversion of Units to be issued and sold, pursuant to
this Agreement and the Transaction Agreements.
"SUBSIDIARY" means with respect to any party, a corporation, partnership or
other organization, whether incorporated or unincorporated, of which more
than 50% of either the equity interests in, or the voting control of, such
corporation, partnership or other organization is, directly or indirectly
through Subsidiaries or otherwise, beneficially owned by such party.
Notwithstanding the foregoing, "Subsidiary," when used with respect to HME,
includes, without limitation, the Surviving Partnership.
"TRANSACTION AGREEMENTS" means all agreements and documents to be delivered
by HME and the Surviving Partnership in connection with the transactions
contemplated by this Agreement and the Transaction Agreements.
10.2 REPRESENTATIONS AND WARRANTIES. The Surviving Partnership and HME
hereby make the following representations and warranties to the Merged
Partnership, their liability with respect to such representations and
warranties being joint and several:
(a) CAPITAL STOCK. The authorized capital stock of HME consists
solely of (i) 10 million shares of preferred stock, par value $.01 per share,
none of which are issued and outstanding, (ii) 10 million shares of excess
stock, par value $.01 per share, none of which is issued, and (iii) 30 million
shares of Common Stock, 7,166,458.397 of which are issued and outstanding
as of the date hereof and 4,189,824 of which are reserved for issuance upon
exercise of stock options or exchange of Units in the Surviving Partnership
as of the date hereof. SCHEDULE 10.2(A) hereto sets forth a true and
correct list of the number of Units of the Surviving Partnership that are
issued and outstanding and the holders thereof. All of the outstanding
shares of Common Stock have been duly authorized and validly issued and are
fully paid and nonassessable (except, in the case of Units, as contemplated
by the New York Revised Uniform Limited Partnership Act) and have been
offered and sold in compliance with all applicable laws including, without
limitation, federal and state securities laws and none of them was issued
in violation of any preemptive or other similar right. The Securities, when
issued and sold pursuant to this Agreement and the Transaction Agreements,
will be duly authorized and validly issued, fully paid and nonassessable
(except, in the case of Units, as contemplated by the New York Revised
Uniform Limited Partnership Act) and none of them will be issued in
violation of any preemptive or other similar right. Except as identified
on SCHEDULE 10.2(A) attached hereto, there is no outstanding option,
warrant or other right calling for the issuance of, and there is no
commitment, plan or arrangement to issue, any shares of capital stock of
HME or any security convertible into or exercisable or exchangeable for,
such capital stock. The Common Stock and the Securities conform in all
material respects to all statements relating thereto contained in the
Company SEC Reports.
(b) NO VIOLATIONS OR DEFAULTS. Neither HME nor any of its
Subsidiaries is in violation of its certificate or articles of incorporation,
bylaws, certificates of partnership, partnership agreements, limited liability
company agreements or other similar governing documents, as the case may
be, and none of HME or any of its Subsidiaries is in default in the
performance or observance of any obligation, agreement, covenant or
condition contained in any Contracts to which such entity is a party or by
which such entity may be bound, or to which any of its properties or assets
may be bound or subject, except for such violations or defaults that
individually or in the aggregate would not have a Material Adverse Effect.
(c) SEC REPORTS AND FINANCIAL STATEMENTS; PARTNERSHIP AGREEMENT.
HME has filed all forms, reports, schedules, registration statements, and other
documents required to be filed by it with the SEC since the date of its
formation (as such documents have since the time of their filing been
amended or supplemented, the "Company SEC Reports"). As of their
respective dates, the Company SEC Reports (i) compiled as to form in all
material respects with the requirements of the Securities Act, or the
Securities Exchange Act of 1934, as amended, as the case may be, and (ii)
did not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading. The audited consolidated financial statements and
the interim consolidated financial statements (including, in each case, the
notes, if any, thereto) included in the Company SEC Reports (the "Company
Financial Statements") (A) were compiled as to form in all material
respects with the published rules and regulations of the SEC with respect
thereto, (B) were prepared in accordance with GAAP applied on a consistent
basis during the periods involved (except as may be indicated therein or in
the notes thereto and except with respect to unaudited statements as
permitted by Forms 10-Q and 8-K of the SEC) and (C) fairly present in all
material respects (subject, in the case of the unaudited interim financial
statements, to normal, recurring year- end audit adjustments which are not
expected to be, individually or in the aggregate, materially adverse to HME
and its Subsidiaries taken as a whole) the consolidated financial position
of HME and its consolidated subsidiaries as at the respective dates thereof
and the consolidated results of their operations and cash flows for the
respective periods then ended. Except for the Subsidiaries identified on
SCHEDULE 10.2(C) attached hereto, each Subsidiary of HME is treated as a
consolidated subsidiary of HME in the Company Financial Statements for all
periods covered thereby.
(d) ABSENCE OF CHANGES
(1) Except for the execution and delivery of this Agreement
and the Transaction Agreements, and the transactions to take place pursuant
hereto and thereto on the Effective Date, since March 31, 1997 there has not
been any change, event or development having, or that could reasonably be
expected to have, individually or in the aggregate, a Material Adverse
Effect. Without limiting the foregoing, between March 31, 1997 and the
date hereof (A) except with respect to the activities described in the
press releases attached hereto as EXHIBIT I, HME and its Subsidiaries have
conducted their respective businesses only in the ordinary course
consistent with past practice and (B) neither HME nor any of its
Subsidiaries have taken any action which, if taken after the date hereof,
would constitute a breach of any provision of clause (2) of this Section
10.2(d).
(2) Prior to the Effective Date, HME and its Subsidiaries
shall use all commercially reasonable efforts to preserve intact in all
material respects their present business organizations and reputation, to keep
available the services of their key officers and employees, to maintain their
assets and properties in good working order and condition, ordinary wear and
tear excepted, to maintain insurance on their tangible assets and businesses in
at least such amounts and against such risks and losses as are currently in
effect, to preserve their relationships with customers and suppliers and
others having significant business dealings with them and to comply in all
material respects with any statute, law, rule, regulation or ordinance or
any judgment, decree, order, writ, permit or license, of any court,
tribunal, arbitrator, authority, agency, commission, official or other
instrumentality of the United States or any domestic, state, county, city
or other political subdivision, applicable to HME or any of its
Subsidiaries.
(e) ABSENCE OF UNDISCLOSED LIABILITIES. Except for matters
reflected in the consolidated balance sheet of HME as of March 31, 1997
(or the footnotes thereto) included in the Company Financial Statements and
the press releases attached hereto as EXHIBIT I, neither HME nor any of its
Subsidiaries had at such date, or has incurred since that date, any
liabilities or obligations (whether absolute, accrued, contingent, fixed or
otherwise, or whether due or to become due) of any nature, except
liabilities or obligations (i) which were incurred in the ordinary course
of business consistent with past practice since such date, and (ii) which
have not had, and could not be reasonably expected to have, individually or
in the aggregate, a Material Adverse Effect.
(f) REIT QUALIFICATION. At all times since its taxable year ended
December 31, 1996, HME has been, and upon each issuance of any of the
Securities, HME will continue to be, organized and operated in conformity with
the requirements for qualification as a real estate investment trust under the
Code, and its proposed method of operation will enable it to continue to
meet the requirements for taxation as a real estate investment trust under
the Code.
ARTICLE XI
DISSOLUTION OF MERGED PARTNERSHIP
11.1 DISSOLUTION OF MERGED PARTNERSHIP.
(a) Notwithstanding anything to the contrary contained in this
Agreement, the General Partner agrees to effect a dissolution of the Merged
Partnership on or prior to the Effective Date, whereupon the General
Partner and Norpark shall become the fee owners of the Property, as tenants
in common, in proportion to their respective Interests in the Merged
Partnership.
(b) Upon the dissolution of the Merged Partnership pursuant to
subparagraph (a) of this Section:
(i) Norpark, rather than the Merged Partnership, shall be merged
into the Surviving Partnership substantially in accordance with the terms of
this Agreement.
(ii) At the Closing, the General Partner shall contribute its
interest in the Property to the Surviving Partnership.
(iii) Promptly after the dissolution of the Merged Partnership,
the General Partner, Norpark and the Surviving Partnership shall enter into an
agreement to reflect the changes in the structure of the transaction,
whereupon this Agreement shall be terminated.
<PAGE>
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
executed by a duly executed general partner as of the date first above
written.
NEW ORLEANS EAST LIMITED
By: Nop Corp.
By: /s/ Henry A. Quinn
--------------------------
Henry A. Quinn, President
HOME PROPERTIES OF NEW YORK, L.P.
By:Home Properties of New York, Inc.
General Partner
By: /s/ Norman Leenhouts
---------------------------
Norman Leenhouts, Chairman
For purposes of acknowledging and agreeing
to the provisions of Sections 1.4, 5.5,
6.3(e) and 11.1
Nop Corp.
By: /s/ Henry A. Quinn
--------------------------
Henry A. Quinn, President
<PAGE>
JOINDER
Home Properties of New York, Inc. joins in this Agreement for the purpose
of making in its individual capacity, the same representations and
warranties as are made by the Surviving Partnership in Article X of this
Agreement.
HOME PROPERTIES OF NEW YORK, INC.
By:/s/ Norman Leenhouts
-------------------------------
Norman Leenhouts, Chairman
<PAGE>
SCHEDULE 3.13
RESERVE FUNDS CLAIMS PROCEDURE
PROCEDURES WITH RESPECT TO CLAIMS
(a) If any claim (a "Claim") is made by the Surviving Partnership for
payment out of the Reserve Amount of a Liabilities Claim or an Indemnity
Claim, the Surviving Partnership shall thereafter notify the General
Partner and the Disbursing Agent of such Claim. At such time as there is a
Final Determination (as hereinafter defined) with respect to a Claim, the
Surviving Partnership shall notify the Disbursing Agent (with a copy to the
General Partner) of such Final Determination. A Final Determination with
respect to a Claim shall occur when (1) the Surviving Partnership and the
General Partner agree in writing to a payment from a Reserve with respect
to a Claim and each so advises the Disbursing Agent, or (2) the arbitrator
determining the disposition of a Claim pursuant to Section (d) below
renders a final decision with respect to a Claim determining that a payment
is to be made from a Reserve to the Surviving Partnership or (3) provided
that the General Partner (on behalf of all of the former Partners of the
Merged Partnership) shall have been given a reasonable opportunity to
participate in the defense of such third-party claim throughout the course
of such third-party claim, the Claim is made on account of a judgment
rendered by a court of competent jurisdiction requiring, on a third-party's
claim that is an Indemnity Claim, a specified payment on account of such an
Indemnity Claim to the third-party claimant and such judgment has become
final and not subject to further appeal. Upon receipt of a Final
Determination, the Disbursing Agent shall pay the amount of the Claim as
set forth in the Final Determination to the Surviving Partnership.
(b) On each of 90 days from and after the Effective Time and 180 days from
and after the Effective Time, and thereafter, at any time and from time to
time, within 10 days after the written request of the General Partner, the
Surviving Partnership shall send a notice (the "Anniversary Notice") to the
Disbursing Agent and to the General Partner describing each then
outstanding Claim with respect to which a Final Determination has not
theretofore been made and specifying what the Surviving Partnership
believes, acting reasonably and in good faith, to be the aggregate amount
of damages that have been incurred theretofore or are likely to be incurred
thereafter as a result of or arising out of each such Claim (the "Damage
Amount").
(c) If the General Partner believes, acting reasonably and in good faith,
that the Surviving Partnership's estimate of the Damage Amount with respect
to one or more of the Claims as set forth in the Anniversary Notice is
unreasonable (a "Disputed Amount"), the General Partner shall send a notice
(the "Dispute Notice") to the Surviving Partnership and the Disbursing
Agent, within 10 days after receipt of the Anniversary Notice, specifying
the amount that the General Partner believes, acting reasonably and in good
faith, to be the proper Damage Amount with respect to any Claim described
in the Anniversary Notice. Upon the issuance of a Dispute Notice, the
General Partner and representatives of the Surviving Partnership shall
immediately meet and shall use all necessary diligence in a concerted, good
faith effort to resolve all Disputed Amounts within 10 days after issuance
of the Dispute Notice. If the General Partner and the Surviving
Partnership resolve such dispute within the 10-day period as aforesaid,
they shall jointly notify the Disbursing Agent of the agreed-upon Damage
Amount with respect to each Claim, and such joint notice shall constitute a
Final Determination with respect to the relevant Claims.
(d) If the General Partner and the Surviving Partnership do not so agree,
the determination of the Damage Amount with respect to all disputed Claims
shall be immediately submitted to prompt and binding arbitration before an
arbitrator appointed by the Philadelphia, Pennsylvania office of the
American Arbitration Association in accordance with its rules, and acting
in accordance with its rules. If any such Disputed Amount relates to a
third-party claim that is then in litigation or is otherwise unresolved,
the standard to be applied by the arbitrator in determining the Damage
Amount shall be the aggregate amount of damages that have been or are
likely thereafter to be incurred by the Surviving Partnership, including
the Surviving Partnerships' attorneys' fees, court costs and other costs of
defense, arising out of such claim. The award of the arbitrator shall be
communicated to the parties and the Disbursing Agent and shall constitute a
Final Determination, which shall be final, binding and not subject to
appeal, with respect to all the Claims that are the subject of such award,
notwithstanding that an underlying third-party claim still remains
unresolved or is subsequently resolved in a manner inconsistent with the
arbitrator's award.
(e) If the Disbursing Agent in his capacity as such is threatened with
litigation or is sued, he shall have the right to interplead all interested
parties in any court of competent jurisdiction and to deposit the Reserves
(or any portion thereof) with the clerk of that court.
(f) The Disbursing Agent shall not be liable to either the General Partner,
the former Partners of the Merged Partnership or the Surviving
Partnership, other than for performance of his duties under the Reserves
Escrow agreement or his gross negligence or intentional wrongdoing. The
Disbursing Agent may rely upon the genuineness or authenticity of any
document tendered to him by either the General Partner or the Surviving
Partnership, and shall be under no duty of independent inquiry with respect
to any acts or circumstances recited in such document.
(g) As used in this Schedule 3.13, the term "Reserves" shall refer to the
respective amounts set forth at the beginning of this Section 3.13,
together with all interest thereon. The Reserves, which are held in Cash,
shall be held by the Disbursing Agent in one or more federally- insured
money market accounts acceptable to both the General Partner and the
Surviving Partnership, or in short-term United States government
obligations having a maturity date which is acceptable to the General
Partner and the Surviving Partnership or in one or more interest-bearing
deposit accounts at a bank or other financial institution acceptable to the
General Partner and the Surviving Partnership.
(h) All Claims must be made within 180 days of the Effective Time.
(i) No Claim shall be made, other than Liabilities Claims to be paid from
the Liabilities Reserve, until total Claims exceed $25,000.00.
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT and Plan of Merger (this "Agreement") is dated as of
this 31st day of July, 1997, and is between Home Properties of New York,
L.P., a limited partnership formed under the laws of New York (the
"Surviving Partnership"), and Glenvwk Partnership, a limited partnership
formed under the laws of Pennsylvania (the "Merged Partnership").
WITNESSETH:
WHEREAS, the Merged Partnership is governed by the Pennsylvania
Revised Limited Partnership Act (the "Pennsylvania Act") and, subject to
the receipt of the requisite approval of its limited partners, desires to
merge into the Surviving Partnership;
WHEREAS, the Surviving Partnership was formed under the New York
Revised Limited Partnership Act (the "New York Act") and, subject to the
receipt of the requisite approval, desires to merge with the Merged
Partnership.
NOW THEREFORE, the parties hereto agree as follows:
ARTICLE I
THE MERGER
1.1 AGREEMENT TO MERGE. Subject to the terms and conditions of this
Agreement, including but not limited to the satisfaction of the conditions
in Article VI hereof (the "Merger Conditions"), the Merged Partnership
shall be merged into the Surviving Partnership (the "Merger").
1.2 CERTIFICATE OF MERGER. Subject to the satisfaction of the Merger
Conditions, the general partner of each of the Merged Partnership and
Surviving Partnership shall execute a Certificate of Merger in the form
necessary to effect the merger of the Merged Partnership into the Surviving
Partnership pursuant to applicable law (the "Certificate of Merger") and
the Surviving Partnership shall deliver the Certificate of Merger to the
Department of State of the Commonwealth of Pennsylvania and the State of
New York for filing.
1.3 EFFECTIVE TIME. The Merger shall be effective immediately upon
the later to occur of the filing of the Certificate of Merger by the
Department of State of the State of New York or the Commonwealth of
Pennsylvania, but not later than September 30, 1997 (the "Effective Time").
The date during which the Effective Time occurs is referred to hereinafter
as the "Effective Date". The closing for the Merger (the "Closing") shall
be held on the Effective Date at the offices of Wolf, Block, Schorr and
Solis-Cohen, 350 Sentry Parkway, Building 640, Blue Bell, Pennsylvania,
commencing at 10:00 a.m.
1.4 SOLICITATION OF MERGED PARTNERSHIP APPROVAL. By executing this
Agreement, Henry A. Quinn as the general partner of the Merged Partnership
(the "General Partner") agrees that he will, promptly after the execution
of this Agreement, cause the Merged Partnership to solicit the approval of
its partners to the Merger in compliance with the New York Act and the
Pennsylvania Act (the "Acts"). Furthermore, the General Partner agrees
that he will vote his interests in the Merged Partnership in favor of the
Merger. The General Partner further agrees that, between the date of the
execution of this Agreement and the Effective Time or the earlier
termination of this Agreement, he will not offer to sell or negotiate a
sale of the Property, directly or indirectly, including, without
limitation, pursuant to a merger.
1.5 SOLICITATION OF SURVIVING PARTNERSHIP APPROVAL. By executing this
Agreement, Home Properties of New York, Inc. as the general partner of the
Surviving Partnership ("HME") agrees that it will promptly after the
execution of this Agreement, cause the Surviving Partnership to solicit the
approval of its partners to (a) the Merger in compliance with the Acts and
(b) the Surviving Partnership Amendments.
ARTICLE II
EFFECTS OF THE MERGER
2.1 SURVIVING PARTNERSHIP. The Surviving Partnership shall be the
surviving limited partnership. The Agreement of Limited Partnership of the
Surviving Partnership (the "Surviving Partnership Agreement") shall remain
in full force and effect after the Merger in its form immediately prior to the
Merger, except the Surviving Partnership Agreement shall be amended on the
Effective Date to (a) reflect the issuance of the Units pursuant to
subparagraphs 3.3(a) and (c) below and (b) incorporate the provisions set
forth in EXHIBIT B (EXHIBIT A has been reserved) attached hereto (the
"Surviving Partnership Amendments").
2.2 MERGED PARTNERSHIP. At the Effective Time, the separate existence of
the Merged Partnership shall cease.
2.3 TRANSFER OF ASSETS AND ASSUMPTION OF LIABILITIES. At the Effective
Time, all of the real and tangible or intangible personal property rights,
privileges, immunities, powers and all other assets whatsoever of the
Merged Partnership shall vest in the Surviving Partnership without further
act or deed. Thereafter, the Surviving Partnership shall be liable for all
debts, obligations, liabilities and penalties of the Merged Partnership as
though each such debt, obligation, liability or penalty had been originally
incurred by the Surviving Partnership, provided that the Reserves described
in Section 3.2 of this Agreement shall be established to pay, to the extent
thereof, for any liabilities of the Merged Partnership that the Surviving
Partnership has not specifically agreed to assume as provided herein.
ARTICLE III
CONSIDERATION
3.1 TOTAL CONSIDERATION.The aggregate consideration (the "Consideration")
payable by the Surviving Partnership in connection with the merger of the
Merged Partnership with and into the Surviving Partnership shall be
$5,475,000., subject to adjustments at Closing pursuant to Section 3.9 and
costs paid pursuant to Section 3.10(c) and Section 3.11, plus the amount of
any tax or other reserves held by the Existing Lender (hereinafter
defined).
3.2 CONVERSION OF PARTNERSHIP INTERESTS.At the Effective Time each of the
outstanding interests in the Merged Partnership (the "Interests") shall
automatically, by operation of law and without any action by the holders
thereof, be converted into the right to receive the Conversion Price and
the Deferred Consideration Right as provided below. "Conversion Price"
means the Consideration less the principal amount at the Effective Time of
the existing mortgage loans (collectively the "Existing Loan") covering the
Merged Partnership's property in favor of IDS Life Insurance Company of New
York (the "Existing Lender") less the amount specified by the General
Partner as described in Section 3.11 and less the Reserve Amount
multiplied by the percentage interest of the Interest in the Merged
Partnership. "Reserve Amount" means the sum of: (a) an amount equal to
the current liabilities of the Merged Partnership at the Effective Time
(other than the principal amount of the Existing Loan) (the "Liabilities
Reserve") and (b) $108,000. (the "Indemnity Reserve"); provided, however,
that the Reserve Amount shall be reduced in proportion to the Interests of
partners of the Merged Partnership ("Dissenting Partners") who have
properly indicated their intention to seek payment of the fair value of
their interests under Section 121-1102 of the New York Law. The Reserve
Amount shall be held and disbursed by the Disbursing Agent (as defined in
Section 3.3) as described in Sections 3.4 and 3.13. "Deferred
Consideration Right" with respect to each Interest means the right to
receive the Reserve Amount less all amounts used to satisfy the current
liabilities of the Merged Partnership ("Liabilities Claims") and any
amounts paid or subject to claims of the Surviving Partnership by reason of
a material breach or material misrepresentation of any representations,
warranties, covenants or agreements of the Merged Partnership which survive
Closing (but only during the period of such survival) ("Indemnity Claims")
multiplied by the percentage interest of the Interest in the Merged
Partnership . As of the Effective Time, all Interests in the Merged
Partnership shall cease to be outstanding and shall be canceled and each
holder of an Interest shall, by virtue of the Merger, cease to have any
rights with respect to the Merged Partnership or the Interests therein
except the rights to receive the Conversion Price and the Deferred
Consideration Rights with respect thereto, or the right, if any, to receive
payment from the Surviving Partnership of cash equal to the fair value of
his Interest in the Merged Partnership as provided in Section 121-1102 of
the New York Law. The Surviving Partnership hereby agrees to comply, at
its expense, with all payment and all other substantive and procedural
obligations and requirements which must be complied with respect to
Dissenting Partners, including, without limitation, Section 121-1102 of
the New York Law. Notwithstanding anything to the contrary contained in
this Agreement, (i) if and to the extent that the amount required to be
paid to any Dissenting Partner exceeds the portion (the "Dissenting Partner
Portion") of the Conversion Price which would have been paid to such
partner of the Merged Partnership if such partner was not a Dissenting
Partner, such excess amount shall be paid by the Surviving Partnership in
addition to the Consideration, (ii) the Dissenting Partner Portion paid by
the Surviving Partnership to Dissenting Partners shall be credited against
the Conversion Price and (iii) in the event that the holders of more than
10% of the Interests are Dissenting Partners, the Surviving Partnership
shall have the right to terminate this Agreement by giving written notice
thereof to the Merged Partnership within ten (10) days after the Surviving
Partnership receives notification thereof.
3.3 PAYMENT OF THE CONVERSION PRICE.
(a) The Surviving Partnership shall deliver, in immediately available funds
and in Units (hereinafter defined), to Wolf, Block, Schorr and Solis-Cohen
(the "Disbursing Agent") the Reserve Amount.
(b) The "Cash Portion of the Conversion Price shall be the aggregate amount
of the Conversion Price payable to the holders of Interests who have failed
to provide the Surviving Partnership with evidence satisfactory to it that
such holders are "Accredited Investors" as such term is defined in
Regulation D promulgated by the Securities and Exchange Commission under
the Securities Act of 1933, as amended (the "Securities Act").
Notwithstanding anything to the contrary contained in this Agreement if the
total of the Interests held by Dissenting Partners and by partners who are
not Accredited Investors exceeds fifteen percent of all of the Interests,
the Merged Partnership shall have the right, by giving written notice
thereof to the Surviving Partnership at any time prior to the Effective
Date, to terminate this Agreement.
(c) The Conversion Price payable to the holders of Interests other than
those described in (b) above shall be paid by the issuance of Units of
limited partnership in the Surviving Partnership ("Units"). The number of
Units to be issued to each holder of an Interest shall be the Conversion
Price for the Interest of such holder divided by the average of the daily
market price for the ten (10) consecutive trading days immediately
preceding the Effective Date of the shares of common stock of HME (the
"Effective Date Price"). The market price for each such trading day shall
be the closing price of the common stock on the New York Stock Exchange,
regular way, on such day as reported in the Wall Street Journal, Eastern
Edition.
3.4 PAYMENT WITH RESPECT TO DEFERRED CONSIDERATION RIGHTS.
(a) On the 90th day after the Effective Date, the Disbursing Agent shall
distribute pro rata to the holders of Interests immediately prior to the
Effective Time (other than Dissenting Partners) that portion of the
Liabilities Reserve which has not been paid for the liabilities of the
Merged Partnership as provided in this Agreement and one-half of that
portion of the Indemnity Reserve that has not been paid or subject to
Indemnity Claims.
(b) On the 180th day after the Effective Date, the Disbursing Agent shall
distribute pro rata to the holders of Interests immediately prior to the
Effective Time (other than Dissenting Partners), that portion of the
Indemnity Reserve that has not been paid, disbursed or subject to Indemnity
Claims.
(c) At any time, and from time to time, after the 180th day after the
Effective Date that there is a Final Determination (as defined in Schedule
3.13) that any remaining portion, if any, of the Indemnity Reserve is no
longer subject to Indemnity Claims, the Disbursing Agent shall distribute
such remaining portion pro rata to the holders of Interests immediately
prior to the Effective Time (other than Dissenting Partners).
3.5 INTENTIONALLY OMITTED
3.6 INTENTIONALLY OMITTED
3.7 INTENTIONALLY OMITTED
3.8 PRO-RATED DISTRIBUTION. The initial distribution payable with respect
to Units issued as part of the Consideration shall be made on the date on
which HME pays the dividend to the holders of its common stock that relates
to the earnings for the calendar quarter in which the Units were issued and
shall be pro-rated such that the partners receiving Units shall receive a
pro-rata distribution for the period from the date on which the Units were
issued to and including the last day of the calendar quarter in which the
Units were issued.
3.9 ADJUSTMENTS AT CLOSING. With respect to the Property, the following
shall be adjusted and pro-rated between the Surviving Partnership and the
Merged Partnership on the Effective Date as if the Surviving Partnership
was the owner of the Property as of midnight of the night preceding the
Effective Date and shall be paid in cash at Closing:
A. current fiscal year real estate taxes;
B. water and sewer rents and charges;
C. INTENTIONALLY OMITTED
D. fuel;
E. INTENTIONALLY OMITTED
F. INTENTIONALLY OMITTED
G. charges under the service contracts;
H. laundry income;
I. interest with respect to the Existing Loan; and
J. INTENTIONALLY OMITTED
K. rents.
(i) All rent payments collected on or before the Effective Date for
the month in which the Effective Date occurs shall be pro-rated as
between the parties as of the Effective Date.
(ii) All rent collected after the Effective Date shall be applied
first to the rent due for the month in which such rent was collected
and shall then be applied to the next most recent delinquent rent,
including any rent which was not collected for any period prior to
the Effective Date. Delinquent rent amounts collected with respect
to any period prior to the Effective Date shall belong to former
partners of the Merged Partnership and, if paid to the Surviving
Partnership, the Surviving Partnership shall promptly send such rent
to the General Partner for distribution to the former partners of the
Merged Partnership pursuant to the agreement described in paragraph
(e) of Section 6.3.
(iii) All rent collected by the Merged Partnership, prior to the
Effective Date, for months subsequent to Effective Date shall be paid
to the Surviving Partnership at the Effective Time.
(iv) All rent collected for rental periods after the Effective Date
shall belong to the Surviving Partnership and, if paid to any of the
former partners of the Merged Partnership shall be promptly sent to
the Surviving Partnership.
Any error in the calculation of adjustments shall be corrected subsequent
to the Effective Date with appropriate credits to be given based upon
corrected adjustments, provided, however, that the adjustments (except if
errors are caused by misrepresentations) shall be final upon expiration of
the 90th day after the Effective Date.
3.10 COSTS.
(a) The Surviving Partnership and the Merged Partnership shall each be
responsible for one half of any assumption fees payable to the Existing
Lender, provided, however, that if as of the Effective Date any Existing
Loan may be prepaid without a penalty of more than 1% of its principal
balance at the time of prepayment, the entire assumption fee, or, if the
Surviving Partnership elects to prepay such Existing Loan, the entire
prepayment fee, shall be the responsibility of the Surviving Partnership.
(b) The Surviving Partnership shall pay all recording fees, its attorneys'
fees, the costs of obtaining a binder or commitment from a title insurance
company, the premium for its title insurance policy, one half of any
Pennsylvania state and local transfer tax, and all other costs and expenses
incidental to or in connection with closing this transaction customarily
paid for by the purchaser of similar property. The Merged Partnership
shall pay its attorneys' fees, one-half of any Pennsylvania state and local
transfer tax, and all other costs and expenses incidental to or in
connection with closing this transaction customarily paid for by the seller
of similar property.
(c) The amounts payable pursuant to Sections 3.10(a) and/or (b) by the
Merged Partnership on account of any assumption fee payable to the Existing
Lender and/or account of one half of any Pennsylvania state and local
transfer tax shall be charged against the Consideration.
3.11 PAYMENT DIRECTED BY GENERAL PARTNER. At the Effective Time, the
General Partner shall be entitled to direct that a portion of the
Consideration, up to a maximum amount equal to 6%of the Consideration, be
paid by the Surviving Partnership to pay certain closing costs of the
Merged Partnership and to satisfy certain liabilities of the Merged
Partnership.
3.12 CASH HELD BY MERGED PARTNERSHIP. Subject to Section 3.13 below, on, or
at any time prior to, the Effective Time, the General Partner shall have
the right to spend on behalf of the Merged Partnership and/or distribute to
the partners of the Merged Partnership any and all cash held by the Merged
Partnership.
3.13 ESCROW AGREEMENT.The Reserve Amount shall be held and disbursed
pursuant to the terms of an escrow agreement that shall be in form and
substance acceptable to the parties hereto, but which provide at least the
following:
(a) The entire Liabilities Reserve shall be applied to pay current
liabilities of the Merged Partnership before application of the Indemnity
Reserve. To the extent that the Liabilities Reserve shall not be
sufficient to pay the current liabilities of the Merged Partnership the
Indemnity Reserve may be used to fund current liabilities.
(b) The claim resolution procedures set forth in SCHEDULE 3.13 hereof.
3.14 INSURANCE REFUND. At the Effective Time, the Surviving Partnership
shall cause the cancellation of all insurance maintained by the Merged
Partnership and thereafter shall diligently seek to obtain such refunds as
may be due on account of such cancellation. Upon receipt of such refunds,
the Surviving Partnership shall pay them over to the General Partner for
distribution to the former partners of the Merged Partnership.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1 BY THE MERGED PARTNERSHIP. The Merged Partnership hereby makes the
following representations and warranties to the Surviving Partnership as of
the date hereof.
(a) REAL PROPERTY DESCRIPTION. The real property owned by the Merged
Partnership and to become the property of the Surviving Partnership at the
Effective Time consists of one or more parcels of land known as Glen Manor
Apartments which includes 174 apartments (the "Project"), located in the
Borough of Glenolden and Commonwealth of Pennsylvania, more particularly
described on EXHIBIT C, attached hereto, together and including all
buildings and other improvements thereon, including but not limited to, the
174 apartment units, and all rights of the Merged Partnership in and to any
and all streets, roads, highways, alleys, driveways, easements and rights-
of-way appurtenant thereto (the foregoing are hereafter collectively
referred to as the "Property").
(b) OTHER ITEMS. The following items now in or on the Property if owned by
the Merged Partnership and not by tenants of the Property shall become the
property of the Surviving Partnership at the Effective Time:
(1) all heating, plumbing and lighting fixtures,
(2) ranges, refrigerators, disposals and dishwashers,
(3) water heaters,
(4) any and all bathroom fixtures, wall-to-wall carpeting,
traverse rods, exhaust fans, hoods, signs, screens, maintenance building,
model unit furniture (except for model unit furniture which is rented),
fences, carpeting and runners, cabinets, mirrors, shelving, any humidifier
and dehumidifier units, air conditioning units, mailboxes, office furniture
(except for office furniture which is rented), and related equipment in
connection with the Project, and
(5) any fixtures appurtenant to the Property and any other
furniture or equipment used in connection with the operation and maintenance
of the Property, including any vehicles used in connection with the operation
and maintenance of the Property (hereinafter with the items listed in (1)-(4)
above, collectively, the "Other Items").
(c) CONDITION OF OTHER ITEMS. To the best knowledge of the General Partner
and the current officers of Mill Creek Realty Co., substantially all of the
Other Items are in reasonable working order or condition. Except with
respect to the Existing Loan, the Merged Partnership has not subjected any
of the Other Property to any security interests, liens, claims, charges or
other encumbrances.
(d) ORGANIZATION AND AUTHORIZATION. The Merged Partnership is a limited
partnership duly organized, validly existing and in good standing under the
laws of the Commonwealth of Pennsylvania and was either formed under, or by
operation of law has become subject to, the Pennsylvania Act. It has all
requisite power and authority to own, lease and operate its properties and
to carry on its business as now being conducted. It is duly qualified or
licensed to do business as a foreign limited partnership and in good
standing in each jurisdiction in which the property owned, leased or
operated by it makes such qualification or license necessary, except in
each case in those jurisdictions where the failure to be so duly qualified
or licensed and in good standing would not have a Material Adverse Effect.
For purposes of this Agreement, "Material Adverse Effect" means a material
adverse effect on the business, assets, financial condition or results of
operation of the party making the representation or warranty to which such
qualification is being applied.
(e) AUTHORITY RELATIVE TO THIS AGREEMENT. Subject to receipt of the
approval described in Section 1.4 of this Agreement: (i) the Merged
Partnership has full power and authority to execute, deliver and perform
this Agreement and to consummate the transactions contemplated hereby; (ii)
all actions necessary to be taken by it or on its behalf to execute,
deliver and perform this Agreement and to consummate the transactions
contemplated hereby, have been duly and validly taken; and (iii) this
Agreement has been duly and validly executed and delivered by it and,
assuming due execution and delivery by the Surviving Partnership,
constitutes a valid and binding agreement enforceable against it in
accordance with its terms, except to the extent that enforceability may be
limited by applicable bankruptcy, reorganization, insolvency, moratorium or
similar laws affecting the enforcement of creditors' rights generally as at
the time in effect and by general principles of equity, regardless of
whether such enforceability is considered in a proceeding in equity or at
law.
(f) OUTSTANDING LIMITED PARTNERSHIP INTERESTS. SCHEDULE 4.1(F) hereto
lists the current holders of all outstanding limited partnership interests
of the Merged Partnership together with the percentage interest held by
each holder. In the event that any holder listed on SCHEDULE 4.1(F)
transfers any interests prior to the Effective Time, the Merged Partnership
shall provide written notice to the Surviving Partnership of such transfer
prior to the Effective Time, and such notice shall include the names of the
transferor and the transferee, the address of the transferee and the number
of units transferred.
(g) CONSENTS AND APPROVALS; NO VIOLATION. To the best of the Merged
Partnership's knowledge, neither the execution, delivery and performance of
this Agreement nor the consummation of the transactions contemplated hereby
will: (i) conflict with or will result in any breach of any provision of
its Agreement of Limited Partnership or Certificate of Limited Partnership;
(ii) require it to obtain any consent, approval, authorization or permit
from, or file with or notify, any governmental or regulatory authority,
except where the failure to obtain such consent, approval, authorization or
permit, or to make such filing or notification, would not have a Material
Adverse Effect; (iii) except to the extent that the consent of the Existing
Lender is required, constitute a breach or will result in a default under
any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, license, contract, agreement or other instrument or obligation
of any kind to which it is a party or by which it is bound, except for any
such breach or default as would not have a Material Adverse Effect; or (iv)
violate any order, writ, injunction, judgment, decree, law, statute, rule,
regulation or governmental permit or license applicable to it, which
violation would have a Material Adverse Effect, unless any waiver, consent,
approval, authorization, permit, filing or notification necessary to
prevent any such conflict, breach, default or violation has been obtained
prior to the Effective Time.
(h) LIABILITIES. Except (i) as disclosed in SCHEDULE 4.1(H) attached
hereto, (ii) for liabilities and obligations incurred in the normal course
of business of the Merged Partnership and (iii) as otherwise disclosed in
this Agreement, the Merged Partnership has no material liability or
obligation of any nature which in any way materially affects or is related
to the Property or the Other Items whether now due or to become due,
absolute, contingent or otherwise, including liabilities for taxes (or any
interest or penalties thereto).
(i) LITIGATION. Except as disclosed in SCHEDULE 4.1(I) attached hereto,
there is no litigation, proceeding or investigation which, to the best
knowledge of the Merged Partnership, is pending, or, to the best knowledge
of the Merged Partnership, threatened, against or affecting the Merged
Partnership or the Property that might affect or relate to the validity of
this Agreement or any action taken or to be taken pursuant hereto, or that
might have a Material Adverse Effect upon the Property or the Other Items
or any part or the operation thereof, unless fully covered by insurance.
(j) COMPLIANCE WITH LAWS. Except as disclosed in SCHEDULE 4.1(J) attached
hereto, neither the General Partner nor any current officer of Mill Creek
Realty Co. has received written notice, addressed to the Merged Partnership
or Mill Creek Realty Co., which remains outstanding that it has not
complied with and is in default under, or in violation of, or received any
written notice which remains outstanding that the Merged Partnership, the
Property or the Other Items may be in violation of, any law, ordinance,
rule, regulation or code or condition in any approval or permit pursuant
thereto (including without limitation, any zoning, sign, environmental,
labor, safety, health or price or wage control, ordinance, rule, regulation
or order of) applicable to the ownership, development, operation or
maintenance of the Property or the Other Items.
(k) LEASES. There are no written leases affecting the Property to which the
Merged Partnership is a party with a term greater than one year. The rent
roll attached hereto as SCHEDULE 4.1(K) is true and correct as of the date
of this Agreement.
(l) CONDEMNATION. The Merged Partnership has not received written notice of
pending condemnation of the Property, or any part thereof, or of any plans
for improvements which might result in a special assessment against the
Property.
(m) INTENTIONALLY OMITTED
(n) SERVICE CONTRACTS. There are no service contracts with respect to the
Property or the Other Items which will continue in effect after the Closing
except as set forth on SCHEDULE 4.1(N) attached hereto.
(o) EXECUTORY CONTRACTS. There are no executory contracts connected with
the Property or the Other Items, except as set forth on SCHEDULE 4.1(O)
attached hereto.
(p) ONGOING PERFORMANCE. Until the Effective Time, the Merged Partnership
shall continue to fulfill all of its obligations under the terms of the
Existing Mortgage, the leases encumbering the Property, the service
contracts and the executory contracts, and the Merged Partnership shall
operate, and perform routine maintenance and repair with respect to, all
landscaping, buildings, fixtures and facilities, including, without
limitation, the Other Items, in accordance its current practices. With
respect to non-routine maintenance or repair, the following shall apply:
(1) Except in the case of emergency, the Merged Partnership shall not
arrange for the making of any non-routine repair or replacement costing in
excess of $10,000 in any one instance without the prior written consent of
the Surviving Partnership which consent shall not be unreasonably withheld
and shall be deemed given if it is not denied by written notice received by
the Merged Partnership within 3 business days after request for such
consent was received by the Surviving Partnership. If such consent is
given or if such cost is less than $10,000, in the event that the Merger
occurs, the cost of such repair or replacement shall be the responsibility
of the Surviving Partnership and if any amount on account of such cost is
paid by the Merged Partnership prior to Closing, the Surviving Partnership
shall reimburse that to the Merged Partnership at Closing.
(2) Any non-routine repairs or replacements arranged by the Merged
Partnership which are not the responsibility of the Surviving Partnership
pursuant to Section 4.1(p)(1) above or Section 4.1(p)(3) below shall be a
liability of the Merged Partnership which shall not be assumed by the
Surviving Partnership.
(3) In the event that any non-routine repairs or replacements are required
on an emergency basis, which emergency is such as does not comfortably
allow the passage of the time period specified above for obtaining the
approval of the Surviving Partnership, the Merged Partnership may arrange
for such repair or replacement, and in the event that the Merger occurs,
the cost thereof shall be the responsibility of the Surviving Partnership
and at Closing the Surviving Partnership shall reimburse the Merged
Partnership for any amount paid on account of such repair or replacement
prior to Closing.
(q) APPLIANCES. Except as previously disclosed to the Surviving
Partnership, all of the ranges and refrigerators in the Property are the
property of the Merged Partnership and not of the tenants.
(r) FINANCIAL INFORMATION. The financial information attached hereto as
SCHEDULE 4.1(R) (income and expenses for calendar year 1995 and 1996) is
substantially true and accurate.
(s) ENVIRONMENTAL. Except as identified in SCHEDULE 4.1(S) attached hereto,
the Merged Partnership has received no notice of any violation of any
applicable Environmental Laws (below defined) with respect to the Property.
"Environmental Laws" shall mean all federal, state and local laws,
statutes, ordinances and codes relating to the protection of the
environment and/or governing the use, storage, treatment, generation,
transportation, processing, handling, production or disposal of any
Hazardous Substance and the rules, regulations, and orders with respect
thereto. "Hazardous Substance" means, without limitation, any flammable,
explosive or radioactive material, polychlorinated biphenyl, petroleum or
petroleum product, methane, hazardous materials, hazardous wastes,
hazardous or toxic substances or related materials, as defined in any
applicable Environmental Laws. From the date of acceptance hereof to and
including the Effective Date or the earlier termination of this Agreement,
the Merged Partnership shall promptly provide the Surviving Partnership
with a copy of any notice, citation, complaint or other directive from any
person, entity or governmental authority whereby compliance with
Environmental Laws is called into question with respect to the Property.
(t) TAXES. Except for state and local realty transfer taxes (which are
governed by Section 3.10) and real estate taxes (which are governed by
Section 3.9), the Merged Partnership has filed or will file when due all
notices, reports and returns of Taxes (as defined below) required to be
filed before the Effective Date and has paid or, if due after the date
hereof and prior to the Effective Date, will pay, all Taxes and other
charges for the periods shown to be due on such notices, reports and
returns. "Taxes" shall mean all taxes, charges, fees, levies or other
assessments, including, without limitation, income, excise, property, sale,
gross receipts, employment and franchise taxes imposed by the United
States, or any state, county, local or foreign government, or subdivision
or agency thereof with respect to the assets or the business of the Merged
Partnership, and including any interest, penalties or additions
attributable thereto.
4.2 BY THE SURVIVING PARTNERSHIP. The Surviving Partnership hereby makes
the following representations and warranties to the Merged Partnership as
of the date hereof.
(a) ORGANIZATION AND AUTHORIZATION. The Surviving Partnership is a limited
partnership duly organized, validly existing and in good standing under the
laws of the State of New York and has adopted the New York Act. It has all
requisite power and authority to own, lease and operate its properties and
to carry on its business as now being conducted. It is duly qualified or
licensed to do business as a foreign limited partnership and in good
standing in each jurisdiction in which the property owned, leased or
operated by it makes such qualification or license necessary, except in
each case in those jurisdictions where the failure to be so duly qualified
or licensed and in good standing would not have a Material Adverse Effect.
(b) AUTHORITY RELATIVE TO THIS AGREEMENT. Subject to the receipt of the
approvals described in Section 1.5 and in subparagraph (e) of Section 6.3
of this Agreement: (i) the Surviving Partnership has full power and
authority to execute, deliver and perform this Agreement and to consummate
the transactions contemplated hereby; (ii) all actions necessary to be
taken by it or on its behalf to execute, deliver and perform this Agreement
and to consummate the transactions contemplated hereby, have been duly and
validly taken; and (iii) this Agreement has been duly and validly executed
and delivered by it and, assuming due execution and delivery by the Merged
Partnership, constitutes a valid and binding agreement enforceable against
it in accordance with its terms, except to the extent that enforceability
may be limited by applicable bankruptcy, reorganization, insolvency,
moratorium or similar laws affecting the enforcement of creditors' rights
generally as at the time in effect and by general principles of equity,
regardless or whether such enforceability is considered in a proceeding in
equity or at law.
(c) CONSENTS AND APPROVALS; NO VIOLATIONS. To the best of the Surviving
Partnership's knowledge, as of the Effective Time, neither the execution,
delivery and performance of this Agreement nor the consummation of the
transactions contemplated hereby will: (i) conflict with or will result in
any breach of any provision of its Agreement of Limited Partnership or
Certificate of Limited Partnership; (ii) require it to obtain any consent,
approval, authorization or permit from, or file with or notify, any
governmental or regulatory authority, except where the failure to obtain
such consent, approval, authorization or permit, or to make such filing or
notification, would not have a Material Adverse Effect; (iii) constitute a
breach or will result in a default under any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, license, contract,
agreement or other instrument or obligation of any kind to which it is a
party or by which it is bound, except for any such breach or default as
would not have a Material Adverse Effect; or (iv) violate any order, writ,
injunction, judgment, decree, law, statute, rule, regulation or
governmental permit or license applicable to it, which violation would have
a Material Adverse Effect, unless, any waiver, consent, approval,
authorization, permit, filing or notification necessary to prevent any such
conflict, breach, default or violation has been obtained prior to the
Effective Time.
(d) PARTNERSHIP INTERESTS. On the Effective Date, the Units to be issued
as provided in this Agreement shall be duly issued by the Surviving
Partnership and the recipients will be duly admitted as limited partners of
the Surviving Partnership.
(e) SURVIVING PARTNERSHIP AGREEMENT. A true, correct and complete copy of
the Surviving Partnership Agreement is attached hereto as EXHIBIT "D". The
Surviving Partnership hereby agrees that, with the following exceptions,
the Surviving Partnership Agreement shall not be further amended on or
prior to the Effective Date: (i) the Surviving Partnership Amendments, (ii)
amendments in connection with the issuance of additional shares under HME's
Dividend Reinvestment Stock Purchase, Resident Stock Purchase and Employee
Stock Purchase Plan, (iii) amendments in connection with mergers or other
transactions similar to the Merger which are currently in process wherein
additional Units are issued in connection with the acquisition of real
property or of interests in entities which own real property, the
provisions of which have been disclosed in writing to the Merged
Partnership prior to the execution of this Agreement, and (iv) the
formation of a subsidiary of HME to hold Units owned by HME.
ARTICLE V
COVENANTS OF THE PARTIES
5.1 FURTHER ASSURANCE. Subject to the terms and conditions of this
Agreement, each of the parties hereto will use reasonable efforts to take,
or cause to be taken, all actions, and to do, or cause to be done, all
things necessary under applicable laws and regulations to consummate the
transactions contemplated by this Agreement, including, but not limited to,
taking any actions necessary to cause the Merger Conditions to be
satisfied.
5.2 REPRESENTATIONS AND WARRANTIES. Each of the parties hereto shall give
written notice to the other party promptly upon the occurrence of, or upon
becoming aware of, either: (i) the occurrence of any event which makes any
representation or warranty contained in this Agreement not true in any
material respect; or (ii) any material and adverse development in the
condition (financial or otherwise) or operations of such party.
5.3 REPURCHASE AGREEMENTS. The Surviving Partnership hereby covenants and
agrees that it will, on or prior to the Effective Date, enter into an
agreement with each of the partners of the Merged Partnership other than
Cash Conversion Holders and Dissenting Partners whereby the Surviving
Partnership agrees that:
(a) Upon the written request of any such partner, the Surviving Partnership
will purchase any or all of the Units held by such partner at a purchase
price per Unit equal to the Effective Date Price (as defined in Section
3.3(c) above). The written notice must be received by the Surviving
Partnership on or before the date which is one hundred eighty (180) days
after the Effective Date.
(b) Upon the written request of any such partner which is made (i) after the
date which is one hundred eighty (180) days after the Effective Date and
(ii) on or before the date which is the later of (A) the last day of any
holding period (which holding period shall not, in any event, exceed one
year after the Effective Date) during which, in order to comply with the
requirements of the SEC, such partners are not permitted to convert Units
into shares of common stock of HME and (B) the date on which the SEC
declares effective the Registration Statement required to be filed with the
SEC pursuant to Section 5.11 hereof, the Surviving Partnership will
purchase any or all of the Units held by such partner at a purchase price
per Unit equal to the average of the daily market price for the ten (10)
consecutive trading days immediately preceding the date of such partner's
request of the shares of common stock of HME.
5.4 ACCESS TO INFORMATION. Between the date of this Agreement and the
Effective Date, the Surviving Partnership, on the one hand, and the Merged
Partnership, on the other hand, will each, during ordinary business hours
and upon reasonable advance notice, give to the other and their authorized
representatives reasonable access to inspect their books, records, offices
and other facilities and properties; provided, however, that: (i) any such
investigation shall be conducted in such a manner as not to interfere
unreasonably with the operation of the other's business; (ii) no party
shall be required to take any action which would constitute a waiver of the
attorney-client privilege; and (iii) no party need supply the other with
any information which it is under a legal obligation not to supply.
5.5 FINANCIAL ACCESS.
(a) Upon the demand of the Surviving Partnership, the General Partner will
provide a signed representation letter substantially in the form of EXHIBIT
"E" attached hereto. The General Partner and the Merged Partnership will
provide access to the Surviving Partnership's representative to all
financial and other information relating to the Merged Partnership and the
Property as is sufficient to enable them to prepare audited and pro-forma
financial statements, in conformity with Regulation S-X of the Securities
and Exchange Commission (the "Commission") and any registration Statement,
report or disclosure statement to be filed with the Commission.
(b) Prior to the Effective Date the Surviving Partnership shall from time to
time, promptly after request, supply to the Merged Partnership, and certify
to the Merged Partnership the accuracy and completeness of, copies of any
financial statements and records and other documents and information
requested by the General Partner regarding the Surviving Partnership and
HME which are available to the public.
(c) The Parties hereto recognize that, at the Effective Date, the Merged
Partnership will be treated for federal income tax purposes as having
contributed all of its assets to the Surviving Partnership in exchange for
the Consideration, which the Merged Partnership will be deemed to have
distributed to its Partners in complete liquidation of the Merged
Partnership. Consequently, the Merged Partnership will terminate for
federal income tax purposes at the Effective Time. The Parties hereto
shall prepare their tax returns for their respective taxable years which
include the Effective Date consistent with that characterization of the
transaction. The Surviving Partnership shall make available to the General
Partner (and its representatives) promptly upon request, all financial and
other information relating to the Merged Partnership which is necessary to
permit the Merged Partnership to file its tax returns for its taxable year
ended on the Effective Date.
5.6 INTENTIONALLY OMITTED
5.7 NEGATIVE COVENANTS. The Merged Partnership agrees that, prior to the
Effective Date, it will not take any of the following actions without first
obtaining the Surviving Partnership's prior written consent, which consent
shall not be unreasonably withheld or delayed.
A. Create, incur or assume any indebtedness for money borrowed, including
obligations in respect of capital leases, except: (i) purchase money
mortgages granted in connection with the acquisition of property in the
ordinary course of business consistent with past practice; and (ii) short-
term indebtedness for borrowed money in accordance with loan agreements and
lines of credit in effect as of the date hereof.
B. Assume, guarantee, endorse or otherwise become liable or responsible
(whether directly, contingently or otherwise) for the obligations of any
other person except in the ordinary course of business consistent with past
practices.
C. Sell or otherwise dispose of or abandon any of its assets except in the
ordinary course of business.
D. Increase the rate or terms of: (i) compensation payable or to become
payable to any of its employees; or (ii) any bonus, insurance, pension or
other employee benefit plan, payment or arrangement made to, for or with
any employee, except salary increases to site employees not exceeding 3%
occurring in the ordinary course of business in accordance with its
customary practices (which shall include normal periodic performance
reviews and related compensation and benefit increases).
E. Enter into any agreement, commitment or transaction (including without
limitation any borrowing, capital expenditure or capital financing),
material to the business, operations or financial condition of its
business, except agreements, commitments or transactions in the ordinary
course of business consistent with past practice.
F. Transfer, mortgage, pledge, grant any security interest in or permit the
imposition of any lien or other encumbrance on any of its assets other than
in the ordinary course of business consistent with past practice.
5.8 MANAGEMENT AGREEMENTS. On or prior to the Effective Date, the Merged
Partnership shall terminate any agreements pertaining to the management of
the Property.
5.9 CLOSING DOCUMENTS. At the Effective Time, the Merged Partnership shall
deliver to the Surviving Partnership a certificate of title and any
necessary transfer documents relating to any vehicles, a current rent roll
("Rent Roll") certified, as of the date of the Effective Date, which shall
include a list of all tenants, all rental obligations of each tenant with
respect to the Property and all security deposits (including all interest
due to tenants pursuant to Pennsylvania or other applicable laws). At the
Closing, the Merged Partnership shall transfer to the Surviving Partnership
an amount equal to the aggregate amount of the security deposits shown on
the Rent Roll. At the Effective Time, the Merged Partnership shall also
deliver to the Surviving Partnership complete originals of each lease
listed on the Rent Roll.
5.10 INSPECTION. Upon and after execution of this Agreement by both
parties, the Merged Partnership agrees that the Surviving Partnership and
its authorized representatives shall have the right and privilege to enter
upon the Property and the Merged Partnership's offices, upon reasonable
notice, during regular business hours, for the purpose of gathering such
information and conducting such environmental and engineering studies or
other tests and reviews as the Surviving Partnership may deem appropriate
and necessary. All such inspections, studies, tests and reviews shall be at
the Surviving Partnership's sole expense. The Merged Partnership agrees to
cooperate with the Surviving Partnership by making available to the
Surviving Partnership such records, plans, drawings or other data as may be
in their or the Merged Partnership's possession or control relating to the
Property and its operation; provided, however, that the Surviving
Partnership agrees to indemnify the Merged Partnership of and from any loss
or damage occasioned by such entry, and agrees further to restore to its
original condition, at the Surviving Partnership's own cost and expense,
any property disturbed by such entry.
5.11 SUFFICIENT REGISTERED SHARES. The Surviving Partnership hereby
represents and warrants to and covenants with the Merged Partnership and
its partners that the Effective Date and thereafter for so long as any
Units issued to the partners of the Merged Partnership are outstanding
there shall be at all times, a sufficient number of reserved shares of HME
to permit the conversion of all outstanding Units into shares of HME
pursuant to the terms of the Surviving Partnership Agreement. Within 10
days after the Effective Date, the Surviving Partnership agrees to file a
registration statement (the "Registration Statement") with the SEC
registering the resale of the shares of common stock of HME into which the
Units may be converted and to use reasonable commercial efforts to have the
registration promptly declared effective by the SEC. Notwithstanding
anything to the contrary contained in this Agreement, in the event that the
Surviving Partnership has not filed the Registration Statement with the SEC
by the date (the "Outside Filing Date") which is the 30th day after the
Effective Date, then for and with respect to each day during the period
between the Outside Filing Date and the date on which the Registration
Statement is filed with the SEC, the Surviving Partnership shall pay to the
former partners of the Merged Partnership which hold Units, as liquidated
damages and not as a penalty, the sum of $10,000, which sum shall be
apportioned pro rata among such former partners of the Merged Partnership.
5.12 TAX PROVISIONS. The Surviving Partnership agrees to observe and comply
with the following:
(a) The Surviving Partnership will use the traditional method (and not the
curative or remedial method), as contemplated by Treasury Regulations
<section>1.704-3(b) to allocate book-tax differences with respect to the
assets which are deemed contributed to the Surviving Partnership by the
Merged Partnership.
(b) Home Properties agrees that for a period of 5 years following the
Effective Time, (i) the Surviving Partnership shall not restructure the
share of the Surviving Partnership's debt of the former partners of the
Merged Partnership who shall have received Units in the Surviving
Partnership (the "Unit Partners") in such manner as to cause a reduction in
the amount of Unit Partners' share of non-recourse debt allocable to and
encumbering the Property without the Unit Partners' prior written consent,
and (ii) the Surviving Partnership will not dispose of any of its interest
in the Real Property, unless such disposition is structured as a tax-
deferred, like-exchange under <section>1031 of the Code, or otherwise is
substantially tax-deferred under the Code. Any property or real estate
assets acquired by the Surviving Partnership pursuant to such tax-deferred,
like- exchange shall remain subject to the restriction on disposition
contained hereunder until the end of the aforesaid 5-year period. In the
event that the Surviving Partnership takes any such action during such 5-
year period, the Surviving Partnership shall indemnify and save harmless
the Unit Partners from and against any federal and state income tax
liability, including but not limited to: (i) income taxes suffered as a
result of all payments made under this subsection; and (ii) interest,
penalties and the reasonable fees of attorneys and accountants.
(c) As a partner contributing interests in a partnership in exchange for a
limited partnership interest in the Surviving Partnership, the Unit
Partners will receive annually from the Surviving Partnership Form 1065,
Schedule K-1, Partner's Share of Income, Credit, Deductions, etc. This form
will also be part of the tax return, Form 1065, filed by the Surviving
Partnership with the Internal Revenue Service. The Surviving Partnership
represents that the Schedule K-1 submitted to Unit Partners for use in the
preparation of their tax returns will reflect the allocation to Unit
Partners as partners of a share of non-recourse liabilities in accordance
with Reg. Sec. 1.752-3 of the Internal Revenue Code, such that as a result
of the allocation the Unit Partners shall recognize no income upon the
contribution of the Property to the Surviving Partnership, and for a period
of 5 years following the Effective Time except to the extent cash
distributions from the Surviving Partnership to a Unit Partner exceeds such
Unit Partner's basis in his or her Units. The Merged Partnership
represents that as of December 31, 1996: (i) their aggregate built in gain
determined in accordance with the principals set forth in Section 704(c) of
the Internal Revenue Code of 1986 ("Code") is as set forth on SCHEDULE 5.12
assuming that the Property has a fair market value of $5,475,000 as of the
date of the Merger; (ii) the amount of nonrecourse debt encumbering the
Property is $3,793,516; (iii) the capital account of each of the Unit
Partners is as set forth on SCHEDULE 5.12. The Surviving Partnership's
representation contained in this Section 5.12 (c) is conditioned upon the
accuracy of the representations contained in the preceding sentence.
ARTICLE VI
CONDITIONS OF MERGER
6.1 MANDATORY CONDITIONS. Neither the Surviving Partnership nor the Merged
Partnership shall have any obligation to execute or file the Certificate of
Merger as described in Section 2.1 unless, on or before September 30, 1997:
(a) OTHER CONDITIONS. All of the contingencies and conditions (including,
without limitation, the conditions set forth in Sections 6.2 and 6.3
hereof) contained in this Agreement have been satisfied or waived as
provided herein.
(b) OTHER MERGERS. The conditions to the mergers and other transactions of
the Surviving Partnership with the entities listed on the attached SCHEDULE
6.1 also shall have been satisfied and the mergers are to occur
simultaneously with the Merger of the Merged Partnership into the Surviving
Partnership.
(c) EXISTING LENDER APPROVAL. The Existing Lender shall have approved the
Merger and shall have agreed to the assumption of the Existing Loan by the
Surviving Partnership (unless the Surviving Partnership elects to prepay
the Existing Loan pursuant to Section 3.10(a) hereof).
6.2 CONDITIONS TO MERGED PARTNERSHIP'S OBLIGATIONS. On the date all of the
requirements set forth in Section 6.1 hereof have been satisfied (the
"Satisfaction Date"), the general partner of the Merged Partnership shall
execute the Certificate of Merger and deliver it to the Surviving
Partnership. The general partner of the Merged Partnership shall have no
obligation to execute and deliver the Certificate of Merger unless:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties of
the Surviving Partnership set forth herein shall be true and correct in all
material respects as of the Satisfaction Date, as certified in writing by
the general partner of the Surviving Partnership.
(b) COVENANTS. The Surviving Partnership has complied in all material
respects with the covenants made by it in this Agreement to be complied
with by it from the date hereof through the Satisfaction Date.
(c) APPROVAL. The Merged Partnership shall have obtained the requisite
approval of its limited partners to the Merger and the other transactions
described in this Agreement on the terms and conditions described herein.
(d) OPINION OF COUNSEL. The Surviving Partnership's independent counsel
shall have delivered an opinion of counsel in the form of EXHIBIT F
attached hereto.
(e) INTENTIONALLY OMITTED
(f) REGISTRATION RIGHTS AGREEMENT. The partners of the Merged Partnership
who receive Units and the Surviving Partnership shall have entered into a
registration rights agreement on customary terms, including, without
limitation, the granting of piggyback registration rights.
(g) MARYLAND ANTI-TAKEOVER STATUTES. The Board of Directors of HME shall
have taken all action necessary so that the transactions contemplated by
this Agreement including, without limitation, the issuance of Units and the
conversion of Units into shares of HME, shall be irrevocably exempt from
the operation of <section>3-601 ET SEQ. (the "business combination"
statute) and <section>3-701 ET SEQ. (the "control share acquisition"
statute) of the Maryland General Corporation Law (collectively, the
"Maryland Anti-Takeover Statutes") and from any provisions of the Articles
of Incorporation and Bylaws of HME that may have the effect of limiting the
acquisition of Units and shares of HME in connection with the transactions
contemplated in this Agreement, including without limitation, Article 7 of
the Articles of Incorporation of HME. The Surviving Partnership and its
counsel shall have confirmed to the Merged Partnership's satisfaction that
this Agreement, the Merger and the other transactions contemplated hereby
are exempt from the operation of the Maryland Anti-Takeover Statutes.
6.3 CONDITIONS TO SURVIVING PARTNERSHIP'S OBLIGATIONS. On the next day
following the date that the Surviving Partnership receives the Certificate
of Merger executed by the general partner of the Merged Partnership (the
"Delivery Date"), the general partner of the Surviving Partnership shall
execute the Certificate of Merger, deliver it to the Department of State of
the State of New York and the Commonwealth of Pennsylvania for filing and
notify the Merged Partnership of such delivery. The general partner of the
Surviving Partnership shall have no obligation to execute or deliver the
Certificate of Merger unless:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties of
the Merged Partnership set forth in this Agreement shall be true and
correct in all material respects as of the Delivery Date, as certified in
writing by the General Partner.
(b) COVENANTS. The Merged Partnership has complied with the covenants made
by it in this Agreement to be complied with by it from the date hereof
through the Delivery Date.
(c) CONDITION OF PROPERTY. There are on the Delivery Date, 174 apartment
units in rentable condition and in compliance with federal, state, county
or local laws, ordinances, rules and regulations.
(d) APPROVALS. The Surviving Partnership represents and warrants that it
has obtained the requisite approval of the Board of Directors of HME to the
Merger and the other transactions described in this Agreement on the terms
and conditions described herein, including, without limitation, the
Surviving Partnership Amendments. The Surviving Partnership, on or prior
to the Effective Date shall have obtained the requisite approval of its
limited partners and the State of Michigan Retirement Systems to the Merger
and the other transactions described in this Agreement on the terms and
conditions described herein. The Surviving Partnership agrees to recommend
to the Board of Directors of HME, the limited partners of the Surviving
Partnership and the State of Michigan Retirements Systems that they vote
in favor of the Merger and the other transactions described in this
Agreement.
(e) GENERAL PARTNER AGREEMENT. The General Partner shall have executed an
agreement whereby he agrees that he will be responsible for making all
final distributions to the former partners of the Merged Partnership and
shall indemnify the Surviving Partnership from all claims relating thereto.
(f) OPINION OF COUNSEL. The Merged Partnership's independent counsel shall
have delivered an opinion of counsel in the form of EXHIBIT G attached
hereto.
ARTICLE VII
TERMINATION
7.1 TERMINATION. If the conditions of Section 6.1 of this Agreement are not
satisfied, either party, at its option and upon notice to the other party,
may terminate this Agreement. If the conditions of Section 6.2 of this
Agreement are not satisfied, the Merged Partnership, at its option and upon
written notice to the Surviving Partnership, may terminate this Agreement.
If the condition of Section 6.3 of this Agreement are not satisfied, the
Surviving Partnership, at its option and upon written notice to the Merged
Partnership, may terminate this Agreement. Upon the termination of this
Agreement as provided herein, neither party shall have any further rights
or obligations hereunder and neither party shall take any action to file
the Certificate of Merger.
ARTICLE VIII
TITLE MATTERS
8.1 TITLE POLICIES AND SURVEYS. The Merged Partnership has, prior to the
date of this Agreement, furnished and delivered to the Surviving
Partnership a copy of the most recent title policy issued with respect to
the Property and a copy of the most recent survey of the Property.
8.2 OBJECTIONS TO TITLE.
(a) The obligation of the Surviving Partnership to execute or file the
Certificate of Merger is conditioned upon the ability of the Surviving
Partnership to obtain title insurance with respect to the Property
insuring that, as of the Effective Date, title to the Property is not
subject to any liens, encumbrances or other title objections other than the
lien of the mortgage securing the Existing Loan, any apartment leases for
tenants of the Property and the title exceptions identified in EXHIBIT H
attached hereto.
(b) The Merged Partnership agrees that, upon the request of the Surviving
Partnership, it will provide an affidavit in such customary form as shall
allow the Surviving Partnership to obtain a non-imputation endorsement to
the title policy purchased by the Surviving Partnership.
ARTICLE IX
MISCELLANEOUS
9.1 AMENDMENT. This Agreement may be amended only by a writing executed by
the Surviving Partnership and the Merged Partnership.
9.2 WAIVER OF COMPLIANCE. Except as otherwise provided in this Agreement,
any failure of any party to comply with any obligation, covenant, agreement
or condition herein may be waived by the party entitled to the benefits
thereof only by a written instrument signed by the party granting such
waiver, but such waiver or failure to insist upon strict compliance with
such obligation, covenant, agreement or condition shall not operate as a
waiver of, or estoppel with respect to, any subsequent or other failure.
9.3 ENTIRE AGREEMENT. This Agreement, including the documents, schedules,
certificates and instruments referred to herein, embody the entire
agreement and understanding of the parties hereto in respect of the
transactions contemplated by this Agreement. There are no restrictions,
promises, representations, warranties, covenants or undertakings, other
than those expressly set forth or referred to herein or therein. This
Agreement supersedes all prior agreements and understandings between the
parties with respect to such transactions.
9.4 ASSIGNMENT. This Agreement and all obligations and rights of the
parties hereunder may not be assigned by either party. Commencing with the
Effective Time, the General Partner and the former partners of the Merged
Partnership shall be third-party beneficiaries of this Agreement.
9.5 GOVERNING LAW. This Agreement shall be governed by the laws of the
Commonwealth of Pennsylvania, without reference to its principles of
conflicts of law.
9.6 INTERPRETATION. The article and section headings contained in this
Agreement are solely for the purpose of reference, are not part of the
agreement of the parties and shall not in any way affect the meaning or
interpretation of this Agreement. Article and Section references which do
not otherwise specify, are to the designated Article or Section of this
Agreement.
9.7 SEVERABILITY. The invalidity or unenforceability of any particular
provision of this Agreement shall be construed in all respects as if such
invalid or unenforceable provision were omitted. All provisions of this
Agreement shall be enforced to the full extent permitted by law.
9.8 NOTICES. All notices given pursuant to any provision of this Agreement
shall be in writing and shall be effective only if delivered personally, or
sent by registered or certified mail, postage prepaid or sent by nationally
recognized overnight carrier, to the addresses set forth below:
To Home Properties:
Home Properties of New York, L.P.
850 Clinton Square
Rochester, New York 14604
Attention: Norman Leenhouts
With a copy to Ann M. McCormick
at the same address
To the Merged Partnership
General Partner:
Henry A. Quinn
100 Chetwynd Drive
Rosemont, Pennsylvania 19010
With a copy to:
Bruce R. Lesser, Esq.
Wolf, Block, Schorr and Solis-Cohen
350 Sentry Parkway
Building 640
Blue Bell, Pennsylvania 19422
And a copy to:
John S. Roberts, Jr., Esq.
Wolf, Block Schorr and Solis-Cohen
Twelfth Floor, Packard Building
15th and Chestnut Streets
Philadelphia, Pennsylvania 19102
9.9 CONFIDENTIALITY. By execution of this Agreement and except as otherwise
provided herein, prior to the Effective Time the Surviving Partnership
agrees to keep any and all information obtained in or in connection with
the due diligence process with respect to the Merged Partnership, its
operations, the Real Property and Other Items strictly confidential, and
will not disclose any such information without the Merged Partnership's
prior written consent, except to the extent required by law.
9.10 BROKER'S COMMISSION. The Merged Partnership represents to the
Surviving Partnership that it did not employ any broker in connection with
this sale other than Mill Creek Realty Co., and the Merged Partnership
hereby agrees that, pursuant to Section 3.11 hereof, it will cause the
Surviving Partnership to pay any fees or commissions payable to Mill Creek
Realty Co. in connection with the transaction described in this Agreement.
The Surviving Partnership represents that it employed F.M. Stec &
Associates as broker and agrees that it will pay any fees or commissions
due as a result of the Surviving Partnership's employment of that broker.
The parties each agree to indemnify the other for any and all claims and
expenses, including legal fees if any other fees or commission is
determined to be due by reason of the employment of any other broker by the
indemnifying party.
9.11 CONDITION OF PROPERTY AND OTHER ITEMS
(a) The entire agreement between the parties hereto with respect to the
Property and the Other Items and the sale thereof is expressly set forth in
this Agreement, and the parties are not bound by any agreement,
understandings, provisions, conditions, representations or warranties other
than as are expressly set forth and stipulated herein. Without in any
manner limiting the generality of the foregoing, the Surviving Partnership
acknowledges that and it and its representatives have fully inspected the
Property and the Other Items, and are fully familiar with the physical and
financial condition thereof, and that the Property and the Other Items will
be accepted by the Surviving Partnership pursuant to the Merger in an "as
is" and "where is" condition as a result of such inspection and
investigations and not in reliance on any agreement, understanding,
condition, warranty or representation made by the General Partner, the
Merged Partnership or any agent or employee of the Merged Partnership
(except as expressly elsewhere provided in this Agreement) as to the
condition thereof, as to any permitted use thereof, or as to the income or
expense in connection therewith, or as to any other matter in connection
therewith; and the Surviving Partnership further acknowledges that neither
the Merged Partnership nor any party acting on behalf of the Merged
Partnership has made or shall be deemed to have made any such agreement,
condition, representation or warranty (except as expressly elsewhere
provided in this Agreement).
(b) The Surviving Partnership shall accept the Property and the Other Items
at the time of Closing in the same condition as the same are as of the date
of this Agreement as such condition shall have changed by reason of wear
and tear, damage by fire or other casualty and vandalism.
(c) If the Merger occurs, the Merged Partnership shall assign to the
Surviving Partnership any net insurance and/or condemnation proceeds
received by the Merged Partnership with respect to the Property, less any
amount expended by the Merged Partnership for collection, repair,
restoration or related expenses.
9.12 DEFAULT.
(a) If the Surviving Partnership defaults hereunder at or prior to the
Effective Date by failing to complete Closing in accordance with the terms
of this Agreement or in any other respect, then on the Effective Date (or
sooner in the event of an anticipatory breach) the Surviving Partnership
shall pay to the Merged Partnership the sum of $90,000. (the "Liquidated
Damages Amount") as liquidated damages. Notwithstanding anything to the
contrary contained in this Agreement, the failure to satisfy any of the
conditions to the Merger contained in Article VI hereof shall not, in and
of itself, be deemed to be a failure of the Surviving Partnership to
complete Closing or a default by the Surviving Partnership under this
Agreement. If the Surviving Partnership pays the Merged Partnership the
Liquidated Damages Amount as liquidated damages, the payment of such sum
shall be the Merged Partnership's only remedy in the event of the Surviving
Partnership's default at or prior to the Effective Date, and the Merged
Partnership in such event hereby waives any right, unless Closing is
completed, to recover the balance of the Consideration. If the Merged
Partnership shall be paid the Liquidated Damages Amount as liquidated
damages, this Agreement shall be and become null and void and all copies
will be surrendered to the Merged Partnership for cancellation. Nothing in
this Section shall limit the Merged Partnership's rights against the
Surviving Partnership and the Surviving Partnership's liability to the
Merged Partnership by reason of a default by the Surviving Partnership
under this Agreement which survives Closing.
(b) The term "Permitted Event" shall mean the occurrence of the following on
the Effective Date: the Surviving Partnership shall be ready, willing and
able to complete Closing in accordance with the Agreement; the Surviving
Partnership, or its authorized representative, shall have appeared at the
place designated for Closing and shall have tendered the Consideration, and
the Merged Partnership, notwithstanding the foregoing, shall have failed to
complete Closing in accordance with this Agreement or is otherwise in
default under this Agreement. Notwithstanding anything to the contrary
contained in this Agreement, the failure to satisfy any of the conditions
to the Merger contained in Article VI hereof shall not, in and of itself,
be deemed to be a failure of the Merged Partnership to complete Closing or
a default by the Merged Partnership under this Agreement. Except upon the
occurrence of the Permitted Event, the Surviving Partnership agrees that it
shall not (and hereby waives any right to) ever file or assert any LIS
PENDENS against the Property nor commence or maintain any action against
the Merged Partnership for specific performance under this Agreement nor
for a declaratory judgment as to the Surviving Partnership's rights under
this Agreement. Except as expressly provided above and elsewhere in this
Agreement, nothing herein shall be deemed to limit or impair any of the
Surviving Partnership's rights and remedies at law, in equity or by
statute.
9.13 INDEMNITY AGREEMENT. On the Effective Date, as an express condition to
the obligation of the Merged Partnership to complete Closing, the Surviving
Partnership shall execute and deliver to the General Partner an agreement,
in form and substance satisfactory to the General Partner and the General
Partner's counsel, whereby the Surviving Partnership agrees to indemnify
and hold harmless the General Partner, both individually and in his
capacity as the general partner of the Merged Partnership, from and against
any and all liabilities and obligations, including, without limitation,
guaranties and carve-outs from non-recourse, arising in connection with the
Existing Loan.
9.14 NO PERSONAL LIABILITY. Notwithstanding anything to the contrary
contained in this Agreement, neither the General Partner nor any other
partners of the Merged Partnership shall have any personal liability, and
no action of any kind shall be maintained against any of them or their
respective assets, with respect to this Agreement and/or the transactions
described in this Agreement, and the Surviving Partnership, its successors
and assigns, shall look solely to the assets of the Merged Partnership and
the cash or assets held by the Disbursing Agent pursuant to Section 3.2
above, for the payment of any claim against or the performance of any
obligation of the Merged Partnership. The foregoing limitation of
liability shall not apply in the case of fraud or intentional and material
misrepresentation; provided, however, that in connection with any action
involving alleged fraud or intentional and material misrepresentation, if
the Surviving Partnership, its successors or assigns, is not the prevailing
party, it shall be responsible for the payment of all attorneys' fees and
expenses of all parties, but if the Surviving Partnership, its successors
or assigns, is the prevailing party, each party shall bear its own
attorneys' fees and expenses.
9.15 NUMBER OF DAYS. In computing the number of days for purposes of this
Agreement, all days shall be counted, including Saturdays, Sundays and
holidays; provided, however, that if the final day of any time period falls
on a Saturday, Sunday or holiday on which federal banks are or may elect to
be closed, then the final day shall be deemed to be the next day which is
not a Saturday, Sunday or such holiday.
9.16 DEPOSIT.
(a) As security for the payment of the Liquidated Damages Amount, upon the
execution of this Agreement, the Surviving Partnership shall deposit with
the Disbursing Agent in escrow the sum of $90,000. (the "Deposit"). If the
Surviving Partnership shall become obligated to pay to the Merged
Partnership the Liquidated Damages Amount, the Merged Partnership shall
have the right to be paid the Deposit on account of the Liquidated Damages
Amount. If Closing is completed hereunder or if this Agreement is
terminated as provided in Section 7.1 hereof, the Disbursing Agent shall
refund the Deposit to the Surviving Partnership.
(b) Notwithstanding anything contained in this Section 9.16, if either party
terminates this Agreement as a result of the other's default or pursuant to
the exercise of any right of termination conferred by this Agreement,
Disbursing Agent shall not disburse the Deposit until the earlier to occur
of (i) receipt by Disbursing Agent of written instructions from the Merged
Partnership and the Surviving Partnership or (ii) entry of a final and
unappealable adjudication determining which party is entitled to receive
the Deposit, as applicable, at which time the Deposit shall be distributed
in accordance with such written instructions or adjudication. Except to
the extent of any dispute between them, the Merged Partnership and the
Surviving Partnership agree to act in good faith to provide the Disbursing
Agent with the instructions described in (i) above in the event that the
Agreement is terminated.
(c) In the event of a dispute between the Surviving Partnership and the
Merged Partnership with respect to the Deposit, the Disbursing Agent may
deposit the Deposit with a court of proper jurisdiction and commence an
interpleader action. Upon notifying the Merged Partnership and the
Surviving Partnership of the commencement of such action, Disbursing Agent
shall be released from all liability with respect to the Deposit, except to
the extent of accounting for any moneys previously delivered by Disbursing
Agent out of escrow. Disbursing Agent shall not be liable to either the
Merged Partnership or the Surviving Partnership, other than for performance
of its duties under this Agreement or his gross negligence or intentional
wrongdoing. Disbursing Agent may rely upon the genuineness or authenticity
of any document tendered to it by either the Merged Partnership or the
Surviving Partnership, and shall be under no duty of independent inquiry
with respect to any acts or circumstances recited in such document. The
Merged Partnership and the Surviving Partnership shall indemnify, defend
and hold harmless Disbursing Agent from and against all cost, claims or
liabilities arising from the performance by Disbursing Agent of his
obligations under this Agreement, other than for his failure to comply
herewith, gross negligence or intentional wrongdoing.
(d) As used in this Section 9.16, the term "Deposit" shall refer to the
amount set forth at Section 9.16(a), together with all interest thereon.
The Deposit shall be held by the Disbursing Agent in one or more federally-
insured money market accounts acceptable to both the Merged Partnership and
the Surviving Partnership, or in short-term United States government
obligations having a maturity date which is acceptable to the General
Partner and the Surviving Partnership or in one or more interest-bearing
deposit accounts of a bank or other financial institution acceptable to the
General Partner and the Surviving Partnership. The Merged Partnership's
taxpayer identification number is 23-2291012; the Surviving Partnership's
taxpayer identification number is 16-1455130.
(e) Although Disbursing Agent is counsel for the Merged Partnership, the
Disbursing Agent shall not be disqualified or prohibited from representing
Merged Partnership in connection with any matter arising out of this
Agreement by reason of its capacity as Disbursing Agent.
9.17 SURVIVAL.
(a) The representations, warranties, covenants and agreements of HME and the
Surviving Partnership contained in this Agreement will survive Closing (i)
indefinitely with respect to the warranties and representations in Sections
4.2(a) and 10.2(a), (ii) until 60 calendar days after the expiration of all
applicable statutes of limitation (including all periods of extension,
whether automatic or permissive) with respect to matters covered by Section
10.2(f), (iii) until the fifth anniversary of the Effective Date in the
case of all other representations and warranties and any covenant or
agreement to be performed in whole or part prior to Closing and (iv) with
respect to each other covenant or agreement contained in this Agreement,
for five years following the last date on which such covenant or agreement
is to be observed, performed or complied with, or, if no such date is
specified, indefinitely, except that any representation, warranty, covenant
or agreement that would otherwise terminate in accordance with clauses
(ii), (iii) or (iv) above will continue to survive if notice of claim shall
have been timely given on or prior to such termination date until such
claim has been satisfied or otherwise resolved. This Section shall not
limit in any way the survival and enforceability of any covenant or
agreement of the parties hereto which by its terms contemplates, or is of
such nature that it would require, performance, observance or compliance
after the Effective Date.
(b) The representations, warranties, covenants and agreements of the Merged
Partnership contained in this Agreement will survive Closing for a period
of one hundred eighty (180) days, subject to the limitations on liability
provided in Section 9.14 hereof.
9.18 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original for all
purposes and all of which, when taken together, shall constitute one and
the same instrument.
ARTICLE X
ADDITIONAL REPRESENTATIONS AND WARRANTIES
BY THE SURVIVING PARTNERSHIP
10.1 DEFINITIONS.As used in this Article X, the following defined terms
shall be the meanings indicated below:
"AFFILIATE" means any Person that directly, or indirectly through one or
more intermediaries, controls or is controlled by or is under common
control with the Person specified. For purposes of this definition, control
of a Person means the power, direct or indirect, to direct or cause the
direction of the management and policies of such Person whether by Contract
or otherwise and, in any event and without limitation of the previous
sentence, any Person owning 10% or more of the voting securities of a
second Person shall be deemed to control that second Person.
"BENEFIT PLAN" means any Plan entered into, established, maintained,
contributed to or required to be contributed to, by HME or any Company
ERISA Affiliate providing benefits to employees, former employees,
independent contractors, former independent contractors of the Company or
any Company ERISA Affiliate, or their dependents or beneficiaries.
"CODE" means the Internal Revenue Code of 1986, as amended, and the rules
and regulations promulgated thereunder.
"COMMON STOCK" means shares of Common Stock of HME.
"COMPANY ERISA AFFILIATE" means an entity required (at any relevant time)
to be aggregated with HME under Sections 414(b), (c), (m) or (o) of the
Code or Section 4001 of ERISA.
"COMPANY FINANCIAL STATEMENTS" shall have the meaning set forth at Section
10.2(c) below.
"COMPANY SEC REPORTS" shall have the meaning set forth at Section 10.2(c)
below.
"CONTRACTS" means any agreement or obligation of any kind to which HME or
any of its Subsidiaries is a party or by which HME or any of its
Subsidiaries or any of their respective assets or properties is bound.
"GAAP" means generally accepted accounting principles, consistently applied
throughout the specified period and in the immediately prior comparable
period.
"PERSON" means any natural person, corporation, limited liability company,
general partnership, limited partnership, proprietorship, other business
organization, trust, union, association or Governmental or Regulatory
Authority.
"PLAN" means any employment, bonus, incentive compensation, deferred
compensation, pension, profit sharing, retirement, stock purchase, stock
option, stock ownership, stock appreciation rights, phantom stock, leave of
absence, layoff, vacation, day or dependent care, legal services,
cafeteria, life, health, medical, accident, disability worker's
compensation or other insurance, severance, separation, termination, change
of control or other benefit plan, agreement, practice, policy or
arrangement of any kind, whether written or oral, including, but not
limited to, any "employee benefit plan" within the meaning of Section 3(3)
of ERISA.
"SEC" means the Securities and Exchange Commission.
"SECURITIES" means the shares of Common Stock and the Units to be issued
and sold to partners in the Merged Partnership, including shares of Common
Stock issuable upon conversion of Units to be issued and sold, pursuant to
this Agreement and the Transaction Agreements.
"SUBSIDIARY" means with respect to any party, a corporation, partnership or
other organization, whether incorporated or unincorporated, of which more
than 50% of either the equity interests in, or the voting control of, such
corporation, partnership or other organization is, directly or indirectly
through Subsidiaries or otherwise, beneficially owned by such party.
Notwithstanding the foregoing, "Subsidiary," when used with respect to HME,
includes, without limitation, the Surviving Partnership.
"TRANSACTION AGREEMENTS" means all agreements and documents to be delivered
by HME and the Surviving Partnership in connection with the transactions
contemplated by this Agreement and the Transaction Agreements.
10.2 REPRESENTATIONS AND WARRANTIES. The Surviving Partnership and HME
hereby make the following representations and warranties to the Merged
Partnership, their liability with respect to such representations and
warranties being joint and several:
(a) CAPITAL STOCK. The authorized capital stock of HME consists solely of
(i) 10 million shares of preferred stock, par value $.01 per share, none of
which are issued and outstanding, (ii) 10 million shares of excess stock,
par value $.01 per share, none of which is issued, and (iii) 30 million
shares of Common Stock, 7,166,458.397 of which are issued and outstanding
as of the date hereof and 4,189,824 of which are reserved for issuance upon
exercise of stock options or exchange of Units in the Surviving Partnership
as of the date hereof. SCHEDULE 10.2(A) hereto sets forth a true and
correct list of the number of Units of the Surviving Partnership that are
issued and outstanding and the holders thereof. All of the outstanding
shares of Common Stock have been duly authorized and validly issued and are
fully paid and nonassessable (except, in the case of Units, as contemplated
by the New York Revised Uniform Limited Partnership Act) and have been
offered and sold in compliance with all applicable laws including, without
limitation, federal and state securities laws and none of them was issued
in violation of any preemptive or other similar right. The Securities, when
issued and sold pursuant to this Agreement and the Transaction Agreements,
will be duly authorized and validly issued, fully paid and nonassessable
(except, in the case of Units, as contemplated by the New York Revised
Uniform Limited Partnership Act) and none of them will be issued in
violation of any preemptive or other similar right. Except as identified
on SCHEDULE 10.2(A) attached hereto, there is no outstanding option,
warrant or other right calling for the issuance of, and there is no
commitment, plan or arrangement to issue, any shares of capital stock of
HME or any security convertible into or exercisable or exchangeable for,
such capital stock. The Common Stock and the Securities conform in all
material respects to all statements relating thereto contained in the
Company SEC Reports.
(b) NO VIOLATIONS OR DEFAULTS. Neither HME nor any of its Subsidiaries is
in violation of its certificate or articles of incorporation, bylaws,
certificates of partnership, partnership agreements, limited liability
company agreements or other similar governing documents, as the case may
be, and none of HME or any of its Subsidiaries is in default in the
performance or observance of any obligation, agreement, covenant or
condition contained in any Contracts to which such entity is a party or by
which such entity may be bound, or to which any of its properties or assets
may be bound or subject, except for such violations or defaults that
individually or in the aggregate would not have a Material Adverse Effect.
(c) SEC REPORTS AND FINANCIAL STATEMENTS; PARTNERSHIP AGREEMENT. HME has
filed all forms, reports, schedules, registration statements, and other
documents required to be filed by it with the SEC since the date of its
formation (as such documents have since the time of their filing been
amended or supplemented, the "Company SEC Reports"). As of their
respective dates, the Company SEC Reports (i) compiled as to form in all
material respects with the requirements of the Securities Act, or the
Securities Exchange Act of 1934, as amended, as the case may be, and (ii)
did not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading. The audited consolidated financial statements and
the interim consolidated financial statements (including, in each case, the
notes, if any, thereto) included in the Company SEC Reports (the "Company
Financial Statements") (A) were compiled as to form in all material
respects with the published rules and regulations of the SEC with respect
thereto, (B) were prepared in accordance with GAAP applied on a consistent
basis during the periods involved (except as may be indicated therein or in
the notes thereto and except with respect to unaudited statements as
permitted by Forms 10-Q and 8-K of the SEC) and (C) fairly present in all
material respects (subject, in the case of the unaudited interim financial
statements, to normal, recurring year- end audit adjustments which are not
expected to be, individually or in the aggregate, materially adverse to HME
and its Subsidiaries taken as a whole) the consolidated financial position
of HME and its consolidated subsidiaries as at the respective dates thereof
and the consolidated results of their operations and cash flows for the
respective periods then ended. Except for the Subsidiaries identified on
SCHEDULE 10.2(C) attached hereto, each Subsidiary of HME is treated as a
consolidated subsidiary of HME in the Company Financial Statements for all
periods covered thereby.
(d) ABSENCE OF CHANGES
(1) Except for the execution and delivery of this Agreement and the
Transaction Agreements, and the transactions to take place pursuant hereto
and thereto on the Effective Date, since March 31, 1997 there has not been
any change, event or development having, or that could reasonably be
expected to have, individually or in the aggregate, a Material Adverse
Effect. Without limiting the foregoing, between March 31, 1997 and the
date hereof (A) except with respect to the activities described in the
press releases attached hereto as EXHIBIT I, HME and its Subsidiaries have
conducted their respective businesses only in the ordinary course
consistent with past practice and (B) neither HME nor any of its
Subsidiaries have taken any action which, if taken after the date hereof,
would constitute a breach of any provision of clause (2) of this Section
10.2(d).
(2) Prior to the Effective Date, HME and its Subsidiaries shall use all
commercially reasonable efforts to preserve intact in all material respects
their present business organizations and reputation, to keep available the
services of their key officers and employees, to maintain their assets and
properties in good working order and condition, ordinary wear and tear
excepted, to maintain insurance on their tangible assets and businesses in
at least such amounts and against such risks and losses as are currently in
effect, to preserve their relationships with customers and suppliers and
others having significant business dealings with them and to comply in all
material respects with any statute, law, rule, regulation or ordinance or
any judgment, decree, order, writ, permit or license, of any court,
tribunal, arbitrator, authority, agency, commission, official or other
instrumentality of the United States or any domestic, state, county, city
or other political subdivision, applicable to HME or any of its
Subsidiaries.
(e) ABSENCE OF UNDISCLOSED LIABILITIES. Except for matters reflected in the
consolidated balance sheet of HME as of March 31, 1997 (or the footnotes
thereto) included in the Company Financial Statements and the press
releases attached hereto as EXHIBIT I, neither HME nor any of its
Subsidiaries had at such date, or has incurred since that date, any
liabilities or obligations (whether absolute, accrued, contingent, fixed or
otherwise, or whether due or to become due) of any nature, except
liabilities or obligations (i) which were incurred in the ordinary course
of business consistent with past practice since such date, and (ii) which
have not had, and could not be reasonably expected to have, individually or
in the aggregate, a Material Adverse Effect.
(f) REIT QUALIFICATION. At all times since its taxable year ended December
31, 1996, HME has been, and upon each issuance of any of the Securities,
HME will continue to be,
organized and operated in conformity with the requirements for
qualification as a real estate investment trust under the Code, and its
proposed method of operation will enable it to continue to meet the
requirements for taxation as a real estate investment trust under the Code.
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
executed by a duly executed general partner as of the date first above
written.
GLENVWK PARTNERSHIP
/s/ Henry A. Quinn
- -------------------------------
Henry A. Quinn, General Partner
HOME PROPERTIES OF NEW YORK, L.P.
By:Home Properties of New York, Inc.
General Partner
By: /s/ Norman Leenhouts
- -----------------------------------
Norman Leenhouts, Chairman
For purposes of acknowledging and agreeing
to the provisions of Sections 1.4, 5.5 and
6.3(e)
/s/ Henry A. Quinn
- ------------------------------------
Henry A. Quinn
<PAGE>
JOINDER
Home Properties of New York, Inc. joins in this Agreement for the purpose
of making in its individual capacity, the same representations and
warranties as are made by the Surviving Partnership in Article X of this
Agreement.
HOME PROPERTIES OF NEW YORK, INC.
By: /s/ Norman Leenhouts
-------------------------------
Norman Leenhouts, Chairman
<PAGE>
SCHEDULE 3.13
RESERVE FUNDS CLAIMS PROCEDURE
PROCEDURES WITH RESPECT TO CLAIMS
(a)If any claim (a "Claim") is made by the Surviving Partnership for
payment out of the Reserve Amount of a Liabilities Claim or an Indemnity
Claim, the Surviving Partnership shall thereafter notify the General
Partner and the Disbursing Agent of such Claim. At such time as there is a
Final Determination (as hereinafter defined) with respect to a Claim, the
Surviving Partnership shall notify the Disbursing Agent (with a copy to the
General Partner) of such Final Determination. A Final Determination with
respect to a Claim shall occur when (1) the Surviving Partnership and the
General Partner agree in writing to a payment from a Reserve with respect
to a Claim and each so advises the Disbursing Agent, or (2) the arbitrator
determining the disposition of a Claim pursuant to Section (d) below
renders a final decision with respect to a Claim determining that a payment
is to be made from a Reserve to the Surviving Partnership or (3) provided
that the General Partner (on behalf of all of the former Partners of the
Merged Partnership) shall have been given a reasonable opportunity to
participate in the defense of such third-party claim throughout the course
of such third-party claim, the Claim is made on account of a judgment
rendered by a court of competent jurisdiction requiring, on a third-party's
claim that is an Indemnity Claim, a specified payment on account of such an
Indemnity Claim to the third-party claimant and such judgment has become
final and not subject to further appeal. Upon receipt of a Final
Determination, the Disbursing Agent shall pay the amount of the Claim as
set forth in the Final Determination to the Surviving Partnership.
(b)On each of 90 days from and after the Effective Time and 180 days from
and after the Effective Time, and thereafter, at any time and from time to
time, within 10 days after the written request of the General Partner, the
Surviving Partnership shall send a notice (the "Anniversary Notice") to the
Disbursing Agent and to the General Partner describing each then
outstanding Claim with respect to which a Final Determination has not
theretofore been made and specifying what the Surviving Partnership
believes, acting reasonably and in good faith, to be the aggregate amount
of damages that have been incurred theretofore or are likely to be incurred
thereafter as a result of or arising out of each such Claim (the "Damage
Amount").
(c)If the General Partner believes, acting reasonably and in good faith,
that the Surviving Partnership's estimate of the Damage Amount with respect
to one or more of the Claims as set forth in the Anniversary Notice is
unreasonable (a "Disputed Amount"), the General Partner shall send a notice
(the "Dispute Notice") to the Surviving Partnership and the Disbursing
Agent, within 10 days after receipt of the Anniversary Notice, specifying
the amount that the General Partner believes, acting reasonably and in good
faith, to be the proper Damage Amount with respect to any Claim described
in the Anniversary Notice. Upon the issuance of a Dispute Notice, the
General Partner and representatives of the Surviving Partnership shall
immediately meet and shall use all necessary diligence in a concerted, good
faith effort to resolve all Disputed Amounts within 10 days after issuance
of the Dispute Notice. If the General Partner and the Surviving
Partnership resolve such dispute within the 10-day period as aforesaid,
they shall jointly notify the Disbursing Agent of the agreed-upon Damage
Amount with respect to each Claim, and such joint notice shall constitute a
Final Determination with respect to the relevant Claims.
(d)If the General Partner and the Surviving Partnership do not so agree,
the determination of the Damage Amount with respect to all disputed Claims
shall be immediately submitted to prompt and binding arbitration before an
arbitrator appointed by the Philadelphia, Pennsylvania office of the
American Arbitration Association in accordance with its rules, and acting
in accordance with its rules. If any such Disputed Amount relates to a
third-party claim that is then in litigation or is otherwise unresolved,
the standard to be applied by the arbitrator in determining the Damage
Amount shall be the aggregate amount of damages that have been or are
likely thereafter to be incurred by the Surviving Partnership, including
the Surviving Partnerships' attorneys' fees, court costs and other costs of
defense, arising out of such claim. The award of the arbitrator shall be
communicated to the parties and the Disbursing Agent and shall constitute a
Final Determination, which shall be final, binding and not subject to
appeal, with respect to all the Claims that are the subject of such award,
notwithstanding that an underlying third-party claim still remains
unresolved or is subsequently resolved in a manner inconsistent with the
arbitrator's award.
(e)If the Disbursing Agent in his capacity as such is threatened with
litigation or is sued, he shall have the right to interplead all interested
parties in any court of competent jurisdiction and to deposit the Reserves
(or any portion thereof) with the clerk of that court.
(f)The Disbursing Agent shall not be liable to either the General Partner,
the former Partners of the Merged Partnership or the Surviving
Partnership, other than for performance of his duties under the Reserves
Escrow agreement or his gross negligence or intentional wrongdoing. The
Disbursing Agent may rely upon the genuineness or authenticity of any
document tendered to him by either the General Partner or the Surviving
Partnership, and shall be under no duty of independent inquiry with respect
to any acts or circumstances recited in such document.
(g)As used in this Schedule 3.13, the term "Reserves" shall refer to the
respective amounts set forth at the beginning of this Section 3.13,
together with all interest thereon. The Reserves, which are held in Cash,
shall be held by the Disbursing Agent in one or more federally- insured
money market accounts acceptable to both the General Partner and the
Surviving Partnership, or in short-term United States government
obligations having a maturity date which is acceptable to the General
Partner and the Surviving Partnership or in one or more interest-bearing
deposit accounts at a bank or other financial institution acceptable to the
General Partner and the Surviving Partnership.
(h)All Claims must be made within 180 days of the Effective Time.
(i)No Claim shall be made, other than Liabilities Claims to be paid from
the Liabilities Reserve, until total Claims exceed $25,000.00.
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT and Plan of Merger (this "Agreement") is dated as of
this 31st day of July, 1997, and is among Home Properties of New York,
L.P., a limited partnership formed under the laws of New York (the
"Surviving Partnership"), Henry A. Quinn ("Quinn") and PK Partnership, a
limited partnership formed under the laws of Pennsylvania (the "Merged
Partnership").
WITNESSETH:
WHEREAS, the Merged Partnership is governed by the Pennsylvania
Revised Limited Partnership Act (the "Pennsylvania Act") and, subject to
the receipt of the requisite approval of its limited partners, desires to
merge into the Surviving Partnership;
WHEREAS, Quinn and the Merged Partnership are all of the partners of a
Pennsylvania general partnership trading under the names of Karen Court and
Patricia Court (the "General Partnership"); and
WHEREAS, the Surviving Partnership was formed under the New York
Revised Limited Partnership Act (the "New York Act") and, subject to the
receipt of the requisite approval, desires to merge with the Merged
Partnership.
NOW THEREFORE, the parties hereto agree as follows:
ARTICLE I
THE MERGER
1.1 AGREEMENT TO MERGE. Subject to the terms and conditions of this
Agreement, including but not limited to the satisfaction of the conditions
in Article VI hereof (the "Merger Conditions"), the Merged Partnership
shall be merged into the Surviving Partnership and Quinn shall contribute
his partnership interest in the General Partnership (the "General
Partnership Interest") to the Surviving Partnership (the "Merger").
1.2 CERTIFICATE OF MERGER; ASSIGNMENT OF GENERAL PARTNERSHIP
INTEREST. Subject to the satisfaction of the Merger Conditions, (a) the
general partner of each of the Merged Partnership and Surviving Partnership
shall execute a Certificate of Merger in the form necessary to effect the
merger of the Merged Partnership into the Surviving Partnership pursuant to
applicable law (the "Certificate of Merger") and the Surviving Partnership
shall deliver the Certificate of Merger to the Department of State of the
Commonwealth of Pennsylvania and the State of New York for filing, and (b)
Quinn shall contribute to the Surviving Partnership by assignment the
General Partnership Interest .
1.3 EFFECTIVE TIME. The Merger shall be effective immediately upon the
later to occur of the filing of the Certificate of Merger by the Department
of State of the State of New York or the Commonwealth of Pennsylvania, but
not later than September 30, 1997 (the "Effective Time"). The date during
which the Effective Time occurs is referred to hereinafter as the
"Effective Date". The closing for the Merger (the "Closing") shall be held
on the Effective Date at the offices of Wolf, Block, Schorr and Solis-
Cohen, 350 Sentry Parkway, Building 640, Blue Bell, Pennsylvania,
commencing at 10:00 a.m.
1.4 SOLICITATION OF MERGED PARTNERSHIP APPROVAL. By executing this
Agreement, Henry A. Quinn as the general partner of the Merged Partnership
(the "General Partner") agrees that he will, promptly after the execution
of this Agreement, cause the Merged Partnership to solicit the approval of
its partners to the Merger in compliance with the New York Act and the
Pennsylvania Act (the "Acts"). Furthermore, the General Partner agrees
that he will vote his interests in the Merged Partnership in favor of the
Merger. The General Partner further agrees that, between the date of the
execution of this Agreement and the Effective Time or the earlier
termination of this Agreement, he will not offer to sell or negotiate a
sale of the Property, directly or indirectly, including, without
limitation, pursuant to a merger.
1.5 SOLICITATION OF SURVIVING PARTNERSHIP APPROVAL. By executing this
Agreement, Home Properties of New York, Inc. as the general partner of the
Surviving Partnership ("HME") agrees that it will promptly after the
execution of this Agreement, cause the Surviving Partnership to solicit the
approval of its partners to (a) the Merger in compliance with the Acts and
(b) the Surviving Partnership Amendments.
ARTICLE II
EFFECTS OF THE MERGER
2.1 SURVIVING PARTNERSHIP. The Surviving Partnership shall be the surviving
limited partnership. The Agreement of Limited Partnership of the Surviving
Partnership (the "Surviving Partnership Agreement") shall remain in full
force and effect after the Merger in its form immediately prior to the
Merger, except the Surviving Partnership Agreement shall be amended on the
Effective Date to (a) reflect the issuance of the Units pursuant to
subparagraphs 3.3(a) and (c) below and (b) incorporate the provisions set
forth in EXHIBIT B (EXHIBIT A has been reserved) attached hereto (the
"Surviving Partnership Amendments").
2.2 MERGED PARTNERSHIP. At the Effective Time, the separate existence of
the Merged Partnership shall cease.
2.3 TRANSFER OF ASSETS AND ASSUMPTION OF LIABILITIES. At the Effective
Time, all of the real and tangible or intangible personal property rights,
privileges, immunities, powers and all other assets whatsoever of the
Merged Partnership and the General Partnership shall vest in the Surviving
Partnership without further act or deed. Thereafter, the Surviving
Partnership shall be liable for all debts, obligations, liabilities and
penalties of the Merged Partnership and the General Partnership as though
each such debt, obligation, liability or penalty had been originally
incurred by the Surviving Partnership, provided that the Reserves described
in Section 3.2 of this Agreement shall be established to pay, to the extent
thereof, for any liabilities of the Merged Partnership and the General
Partnership that the Surviving Partnership has not specifically agreed to
assume as provided herein.
ARTICLE III
CONSIDERATION
3.1 TOTAL CONSIDERATION.The aggregate consideration (the "Consideration")
payable by the Surviving Partnership in connection with the merger of the
Merged Partnership with and into the Surviving Partnership and the
contribution of the General Partnership Interest to the Surviving
Partnership shall be $4,520,000., subject to adjustments at Closing
pursuant to Section 3.9 and costs paid pursuant to Section 3.10(c) and
Section 3.11, plus the amount of any tax or other reserves held by the
Existing Lender (hereinafter defined).
3.2 CONVERSION OF PARTNERSHIP INTERESTS.At the Effective Time each of the
outstanding interests in the Merged Partnership and the General Partnership
Interest (the "Interests") shall automatically, by operation of law and
without any action by the holders thereof, be converted into the right to
receive the Conversion Price and the Deferred Consideration Right as
provided below. "Conversion Price" means the Consideration less the
principal amount at the Effective Time of the existing mortgage loans
(collectively the "Existing Loan") covering the Merged Partnership's
property in favor of IDS Life Insurance Company of New York (the "Existing
Lender") less the amount specified by the General Partner as described in
Section 3.11 and less the Reserve Amount multiplied by the percentage
interest of the Interest in the General Partnership. "Reserve Amount"
means the sum of: (a) an amount equal to the current liabilities of the
Merged Partnership and the General Partnership at the Effective Time (other
than the principal amount of the Existing Loan) (the "Liabilities Reserve")
and (b) $84,000 (the "Indemnity Reserve"); provided, however, that the
Reserve Amount shall be reduced in proportion to the Interests of partners
of the Merged Partnership ("Dissenting Partners") who have properly
indicated their intention to seek payment of the fair value of their
interests under Section 121-1102 of the New York Law. The Reserve Amount
shall be held and disbursed by the Disbursing Agent (as defined in Section
3.3) as described in Sections 3.4 and 3.13. "Deferred Consideration Right"
with respect to each of the Interests means the right to receive the
Reserve Amount less all amounts used to satisfy the current liabilities of
the Merged Partnership and the General Partnership ("Liabilities Claims")
and any amounts paid or subject to claims of the Surviving Partnership by
reason of a material breach or material misrepresentation of any
representations, warranties, covenants or agreements of the Merged
Partnership or Quinn which survive Closing (but only during the period of
such survival) ("Indemnity Claims") multiplied by (a) the percentage
interest of the Interest in the General Partnership, in the case of the
General Partnership Interest, or (b) the percentage interest of the
Interest in the Merged Partnership multiplied by the Merged Partnership's
percentage interest in the General Partnership, in the case of the
Interests in the Merged Partnership. As of the Effective Time, all
Interests in the Merged Partnership shall cease to be outstanding and shall
be canceled and each holder of an Interest shall, by virtue of the Merger,
cease to have any rights with respect to the General Partnership, Merged
Partnership or the Interests therein except the rights to receive the
Conversion Price and the Deferred Consideration Rights with respect
thereto, or the right, if any, to receive payment from the Surviving
Partnership of cash equal to the fair value of his Interest in the Merged
Partnership as provided in Section 121-1102 of the New York Law. The
Surviving Partnership hereby agrees to comply, at its expense, with all
payment and all other substantive and procedural obligations and
requirements which must be complied with respect to Dissenting Partners,
including, without limitation, Section 121-1102 of the New York Law.
Notwithstanding anything to the contrary contained in this Agreement, (i)
if and to the extent that the amount required to be paid to any Dissenting
Partner exceeds the portion (the "Dissenting Partner Portion") of the
Conversion Price which would have been paid to such partner of the Merged
Partnership if such partner was not a Dissenting Partner, such excess
amount shall be paid by the Surviving Partnership in addition to the
Consideration, (ii) the Dissenting Partner Portion paid by the Surviving
Partnership to Dissenting Partners shall be credited against the Conversion
Price and (iii) in the event that the holders of more than 10% of the
Interests are Dissenting Partners, the Surviving Partnership shall have the
right to terminate this Agreement by giving written notice thereof to the
Merged Partnership within ten (10) days after the Surviving Partnership
receives notification thereof.
3.3 PAYMENT OF THE CONVERSION PRICE.
(a) The Surviving Partnership shall deliver, in immediately available funds
and in Units (hereinafter defined), to Wolf, Block, Schorr and Solis-Cohen
(the "Disbursing Agent") the Reserve Amount.
(b) The "Cash Portion of the Conversion Price shall be the aggregate amount
of the Conversion Price payable to the holders of Interests in the Merged
Partnership who have failed to provide the Surviving Partnership with
evidence satisfactory to it that such holders are "Accredited Investors" as
such term is defined in Regulation D promulgated by the Securities and
Exchange Commission under the Securities Act of 1933, as amended (the
"Securities Act"). Notwithstanding anything to the contrary contained in
this Agreement if the total of the Interests held by Dissenting Partners
and by partners who are not Accredited Investors exceeds fifteen percent of
all of the Interests, the Merged Partnership shall have the right, by
giving written notice thereof to the Surviving Partnership at any time
prior to the Effective Date, to terminate this Agreement.
(c) The Conversion Price payable to the holders of Interests other than
those described in (b) above shall be paid by the issuance of Units of
limited partnership in the Surviving Partnership ("Units"). The number of
Units to be issued to each holder of an Interest shall be the Conversion
Price for the Interest of such holder divided by the average of the daily
market price for the ten (10) consecutive trading days immediately
preceding the Effective Date of the shares of common stock of HME (the
"Effective Date Price"). The market price for each such trading day shall
be the closing price of the common stock on the New York Stock Exchange,
regular way, on such day as reported in the Wall Street Journal, Eastern
Edition.
3.4 PAYMENT WITH RESPECT TO DEFERRED CONSIDERATION RIGHTS.
(a) On the 90th day after the Effective Date, the Disbursing Agent shall
distribute pro rata to the holders of Interests immediately prior to the
Effective Time (other than Dissenting Partners) that portion of the
Liabilities Reserve which has not been paid for the liabilities of the
Merged Partnership and the General Partnership as provided in this
Agreement and one-half of that portion of the Indemnity Reserve that has
not been paid or subject to Indemnity Claims.
(b) On the 180th day after the Effective Date, the Disbursing Agent shall
distribute pro rata to the holders of Interests immediately prior to the
Effective Time (other than Dissenting Partners), that portion of the
Indemnity Reserve that has not been paid, disbursed or subject to Indemnity
Claims.
(c) At any time, and from time to time, after the 180th day after the
Effective Date that there is a Final Determination (as defined in Schedule
3.13) that any remaining portion, if any, of the Indemnity Reserve is no
longer subject to Indemnity Claims, the Disbursing Agent shall distribute
such remaining portion pro rata to the holders of Interests immediately
prior to the Effective Time (other than Dissenting Partners).
3.5 INTENTIONALLY OMITTED
3.6 INTENTIONALLY OMITTED
3.7 INTENTIONALLY OMITTED
3.8 PRO-RATED DISTRIBUTION. The initial distribution payable with respect
to Units issued as part of the Consideration shall be made on the date on
which HME pays the dividend to the holders of its common stock that relates
to the earnings for the calendar quarter in which the Units were issued and
shall be pro-rated such that the partners receiving Units shall receive a
pro-rata distribution for the period from the date on which the Units were
issued to and including the last day of the calendar quarter in which the
Units were issued.
3.9 ADJUSTMENTS AT CLOSING. With respect to the Property, the following
shall be adjusted and pro-rated between the Surviving Partnership and Quinn
and the Merged Partnership on the Effective Date as if the Surviving
Partnership was the owner of the Property as of midnight of the night
preceding the Effective Date and shall be paid in cash at Closing:
A. current fiscal year real estate taxes;
B. water and sewer rents and charges;
C. INTENTIONALLY OMITTED
D. fuel;
E. INTENTIONALLY OMITTED
F. INTENTIONALLY OMITTED
G. charges under the service contracts;
H. laundry income;
I. interest with respect to the Existing Loan; and
J. INTENTIONALLY OMITTED
K. rents.
(i) All rent payments collected on or before the Effective Date for
the month in which the Effective Date occurs shall be pro-rated as
between the parties as of the Effective Date.
(ii) All rent collected after the Effective Date shall be applied
first to the rent due for the month in which such rent was collected
and shall then be applied to the next most recent delinquent rent,
including any rent which was not collected for any period prior to
the Effective Date. Delinquent rent amounts collected with respect
to any period prior to the Effective Date shall belong to Quinn and
former partners of the Merged Partnership and, if paid to the
Surviving Partnership, the Surviving Partnership shall promptly
send such rent to the General Partner for distribution to Quinn and
the former partners of the Merged Partnership pursuant to the
agreement described in paragraph (e) of Section 6.3.
(iii) All rent collected by the Merged Partnership, prior to the
Effective Date, for months subsequent to Effective Date shall be paid
to the Surviving Partnership at the Effective Time.
(iv) All rent collected for rental periods after the Effective Date
shall belong to the Surviving Partnership and, if paid to Quinn or to
any of the former partners of the Merged Partnership shall be
promptly sent to the Surviving Partnership.
Any error in the calculation of adjustments shall be corrected subsequent
to the Effective Date with appropriate credits to be given based upon
corrected adjustments, provided, however, that the adjustments (except if
errors are caused by misrepresentations) shall be final upon expiration of
the 90th day after the Effective Date.
3.10 COSTS.
(a) The Surviving Partnership, on the one hand, and Quinn and the Merged
Partnership, on the other hand, shall each be responsible for one half of
any assumption fees payable to the Existing Lender, provided, however, that
if as of the Effective Date any Existing Loan may be prepaid without a
penalty of more than 1% of its principal balance at the time of prepayment,
the entire assumption fee, or, if the Surviving Partnership elects to
prepay such Existing Loan, the entire prepayment fee, shall be the
responsibility of the Surviving Partnership.
(b) The Surviving Partnership shall pay all recording fees, its attorneys'
fees, the costs of obtaining a binder or commitment from a title insurance
company, the premium for its title insurance policy, one half of any
Pennsylvania state and local transfer tax, and all other costs and expenses
incidental to or in connection with closing this transaction customarily
paid for by the purchaser of similar property. The Merged Partnership and
Quinn shall pay their attorneys' fees, one-half of any Pennsylvania state
and local transfer tax, and all other costs and expenses incidental to or
in connection with closing this transaction customarily paid for by the
seller of similar property.
(c) The amounts payable pursuant to Sections 3.10(a) and/or (b) by the
Merged Partnership or Quinn on account of any assumption fee payable to the
Existing Lender and/or account of one half of any Pennsylvania state and
local transfer tax shall be charged against the Consideration.
3.11 PAYMENT DIRECTED BY GENERAL PARTNER. At the Effective Time, the
General Partner shall be entitled to direct that a portion of the
Consideration, up to a maximum amount equal to 6%of the Consideration, be
paid by the Surviving Partnership to pay certain closing costs of Quinn and
the Merged Partnership and to satisfy certain liabilities of the Merged
Partnership and the General Partnership.
3.12 CASH HELD BY MERGED PARTNERSHIP. Subject to Section 3.13 below,
on, or at any time prior to, the Effective Time, Quinn and the General Partner
shall have the right to spend on behalf of the General Partnership and the
Merged Partnership and/or distribute to the partners of the General
Partnership and the Merged Partnership any and all cash held by the General
Partnership and the Merged Partnership.
3.13 ESCROW AGREEMENT.The Reserve Amount shall be held and disbursed
pursuant to the terms of an escrow agreement that shall be in form and
substance acceptable to the parties hereto, but which provide at least the
following:
(a) The entire Liabilities Reserve shall be applied to pay current
liabilities of the Merged Partnership before application of the Indemnity
Reserve. To the extent that the Liabilities Reserve shall not be
sufficient to pay the current liabilities of the Merged Partnership the
Indemnity Reserve may be used to fund current liabilities.
(b) The claim resolution procedures set forth in SCHEDULE 3.13 hereof.
3.14 INSURANCE REFUND. At the Effective Time, the Surviving Partnership
shall cause the cancellation of all insurance maintained by the Merged
Partnership or the General Partnership and thereafter shall diligently seek
to obtain such refunds as may be due on account of such cancellation. Upon
receipt of such refunds, the Surviving Partnership shall pay them over to
the General Partner for distribution to Quinn and the former partners of
the Merged Partnership.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1 BY THE MERGED PARTNERSHIP. The Merged Partnership hereby makes the
following representations and warranties to the Surviving Partnership as of
the date hereof.
(a) REAL PROPERTY DESCRIPTION. The real property owned by the General
Partnership and to become the property of the Surviving Partnership at the
Effective Time consists of one or more parcels of land known as Patricia
Court Apartments which includes 66 apartments and Karen Court Apartments
which includes 49 apartments (collectively the "Project"), located in the
Borough of Lansdowne and Commonwealth of Pennsylvania, more particularly
described on EXHIBIT C, attached hereto, together and including all
buildings and other improvements thereon, including but not limited to, the
66 apartment units and 49 apartment units, respectively, and all rights of
the General Partnership in and to any and all streets, roads, highways,
alleys, driveways, easements and rights-of-way appurtenant thereto (the
foregoing are hereafter collectively referred to as the "Property").
(b) OTHER ITEMS. The following items now in or on the Property if owned by
the General Partnership and not by tenants of the Property shall become the
property of the Surviving Partnership at the Effective Time:
(1) all heating, plumbing and lighting fixtures,
(2) ranges, refrigerators, disposals and dishwashers,
(3) water heaters,
(4) any and all bathroom fixtures, wall-to-wall carpeting,
traverse rods, exhaust fans, hoods, signs, screens, maintenance
building, model unit furniture (except for model unit furniture
which is rented), fences, carpeting and runners, cabinets, mirrors,
shelving, any humidifier and dehumidifier units, air conditioning
units, mailboxes, office furniture (except for office furniture
which is rented), and related equipment in connection with the
Project, and
(5) any fixtures appurtenant to the Property and any other furniture or
equipment used in connection with the operation and maintenance of the
Property, including any vehicles used in connection with the operation and
maintenance of the Property (hereinafter with the items listed in (1)-(4)
above, collectively, the "Other Items").
(c) CONDITION OF OTHER ITEMS. To the best knowledge of the General Partner
and the current officers of Mill Creek Realty Co., substantially all of the
Other Items are in reasonable working order or condition. Except with
respect to the Existing Loan, the General Partnership has not subjected any
of the Other Property to any security interests, liens, claims, charges or
other encumbrances.
(d) ORGANIZATION AND AUTHORIZATION. The Merged Partnership is a limited
partnership duly organized, validly existing and in good standing under the
laws of the Commonwealth of Pennsylvania and was either formed under, or by
operation of law has become subject to, the Pennsylvania Act. It has all
requisite power and authority to own, lease and operate its properties and
to carry on its business as now being conducted. It is duly qualified or
licensed to do business as a foreign limited partnership and in good
standing in each jurisdiction in which the property owned, leased or
operated by it makes such qualification or license necessary, except in
each case in those jurisdictions where the failure to be so duly qualified
or licensed and in good standing would not have a Material Adverse Effect.
For purposes of this Agreement, "Material Adverse Effect" means a material
adverse effect on the business, assets, financial condition or results of
operation of the party making the representation or warranty to which such
qualification is being applied.
(e) AUTHORITY RELATIVE TO THIS AGREEMENT. Subject to receipt of the
approval described in Section 1.4 of this Agreement: (i) the Merged
Partnership has full power and authority to execute, deliver and perform
this Agreement and to consummate the transactions contemplated hereby; (ii)
all actions necessary to be taken by it or on its behalf to execute,
deliver and perform this Agreement and to consummate the transactions
contemplated hereby, have been duly and validly taken; and (iii) this
Agreement has been duly and validly executed and delivered by it and,
assuming due execution and delivery by the Surviving Partnership,
constitutes a valid and binding agreement enforceable against it in
accordance with its terms, except to the extent that enforceability may be
limited by applicable bankruptcy, reorganization, insolvency, moratorium or
similar laws affecting the enforcement of creditors' rights generally as at
the time in effect and by general principles of equity, regardless of
whether such enforceability is considered in a proceeding in equity or at
law.
(f) OUTSTANDING LIMITED PARTNERSHIP INTERESTS. SCHEDULE 4.1(F) hereto
lists the current holders of all outstanding limited partnership interests
of the Merged Partnership together with the percentage interest held by
each holder. In the event that any holder listed on SCHEDULE 4.1(F)
transfers any interests prior to the Effective Time, the Merged Partnership
shall provide written notice to the Surviving Partnership of such transfer
prior to the Effective Time, and such notice shall include the names of the
transferor and the transferee, the address of the transferee and the number
of units transferred.
(g) CONSENTS AND APPROVALS; NO VIOLATION. To the best of the Merged
Partnership's knowledge, neither the execution, delivery and performance of
this Agreement nor the consummation of the transactions contemplated hereby
will: (i) conflict with or will result in any breach of any provision of
its Agreement of Limited Partnership or Certificate of Limited Partnership;
(ii) require it to obtain any consent, approval, authorization or permit
from, or file with or notify, any governmental or regulatory authority,
except where the failure to obtain such consent, approval, authorization or
permit, or to make such filing or notification, would not have a Material
Adverse Effect; (iii) except to the extent that the consent of the Existing
Lender is required, constitute a breach or will result in a default under
any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, license, contract, agreement or other instrument or obligation
of any kind to which it is a party or by which it is bound, except for any
such breach or default as would not have a Material Adverse Effect; or (iv)
violate any order, writ, injunction, judgment, decree, law, statute, rule,
regulation or governmental permit or license applicable to it, which
violation would have a Material Adverse Effect, unless any waiver, consent,
approval, authorization, permit, filing or notification necessary to
prevent any such conflict, breach, default or violation has been obtained
prior to the Effective Time.
(h) LIABILITIES. Except (i) as disclosed in SCHEDULE 4.1(H) attached
hereto, (ii) for liabilities and obligations incurred in the normal course
of business of the Merged Partnership and (iii) as otherwise disclosed in
this Agreement, the neither the General Partnership nor the Merged
Partnership has any material liability or obligation of any nature which in
any way materially affects or is related to the Property or the Other Items
whether now due or to become due, absolute, contingent or otherwise,
including liabilities for taxes (or any interest or penalties thereto).
(i) LITIGATION. Except as disclosed in SCHEDULE 4.1(I) attached hereto,
there is no litigation, proceeding or investigation which, to the best
knowledge of the Merged Partnership, is pending, or, to the best knowledge
of the Merged Partnership, threatened, against or affecting the General
Partnership, the Merged Partnership or the Property that might affect or
relate to the validity of this Agreement or any action taken or to be taken
pursuant hereto, or that might have a Material Adverse Effect upon the
Property or the Other Items or any part or the operation thereof, unless
fully covered by insurance.
(j) COMPLIANCE WITH LAWS. Except as disclosed in SCHEDULE 4.1(J) attached
hereto, neither the General Partner nor any current officer of Mill Creek
Realty Co. has received written notice, addressed to the General
Partnership, the Merged Partnership or Mill Creek Realty Co., which remains
outstanding that it has not complied with and is in default under, or in
violation of, or received any written notice which remains outstanding that
the General Partnership, the Merged Partnership, the Property or the Other
Items may be in violation of, any law, ordinance, rule, regulation or code
or condition in any approval or permit pursuant thereto (including without
limitation, any zoning, sign, environmental, labor, safety, health or price
or wage control, ordinance, rule, regulation or order of) applicable to the
ownership, development, operation or maintenance of the Property or the
Other Items.
(k) LEASES. There are no written leases affecting the Property to which the
General Partnership is a party with a term greater than one year. The rent
roll attached hereto as SCHEDULE 4.1(K) is true and correct as of the date
of this Agreement.
(l) CONDEMNATION. The General Partnership has not received written notice
of pending condemnation of the Property, or any part thereof, or of any
plans for improvements which might result in a special assessment against
the Property.
(m) INTENTIONALLY OMITTED
(n) SERVICE CONTRACTS. There are no service contracts with respect to the
Property or the Other Items which will continue in effect after the Closing
except as set forth on SCHEDULE 4.1(N) attached hereto.
(o) EXECUTORY CONTRACTS. There are no executory contracts connected with
the Property or the Other Items, except as set forth on SCHEDULE 4.1(O)
attached hereto.
(p) ONGOING PERFORMANCE. Until the Effective Time, the General Partnership
shall continue to fulfill all of its obligations under the terms of the
Existing Mortgage, the leases encumbering the Property, the service
contracts and the executory contracts, and the General Partnership shall
operate, and perform routine maintenance and repair with respect to, all
landscaping, buildings, fixtures and facilities, including, without
limitation, the Other Items, in accordance its current practices. With
respect to non-routine maintenance or repair, the following shall apply:
(1) Except in the case of emergency, the General Partnership shall not
arrange for the making of any non-routine repair or replacement costing in
excess of $10,000 in any one instance without the prior written consent of
the Surviving Partnership which consent shall not be unreasonably withheld
and shall be deemed given if it is not denied by written notice received by
the General Partnership within 3 business days after request for such
consent was received by the Surviving Partnership. If such consent is
given or if such cost is less than $10,000, in the event that the Merger
occurs, the cost of such repair or replacement shall be the responsibility
of the Surviving Partnership and if any amount on account of such cost is
paid by the General Partnership prior to Closing, the Surviving Partnership
shall reimburse that to the General Partnership at Closing.
(2) Any non-routine repairs or replacements arranged by the General
Partnership which are not the responsibility of the Surviving Partnership
pursuant to Section 4.1(p)(1) above or Section 4.1(p)(3) below shall be a
liability of the General Partnership which shall not be assumed by the
Surviving Partnership.
(3) In the event that any non-routine repairs or replacements are
required on an emergency basis, which emergency is such as does not comfortably
allow the passage of the time period specified above for obtaining the
approval of the Surviving Partnership, the General Partnership may arrange
for such repair or replacement, and in the event that the Merger occurs,
the cost thereof shall be the responsibility of the Surviving Partnership
and at Closing the Surviving Partnership shall reimburse the General
Partnership for any amount paid on account of such repair or replacement
prior to Closing.
(q) APPLIANCES. Except as previously disclosed to the Surviving
Partnership, all of the ranges and refrigerators in the Property are the
property of the General Partnership and not of the tenants.
(r) FINANCIAL INFORMATION. The financial information attached hereto as
SCHEDULE 4.1(R) (income and expenses for calendar year 1995 and 1996) is
substantially true and accurate.
(s) ENVIRONMENTAL. Except as identified in SCHEDULE 4.1(S) attached hereto,
the General Partnership has received no notice of any violation of any
applicable Environmental Laws (below defined) with respect to the Property.
"Environmental Laws" shall mean all federal, state and local laws,
statutes, ordinances and codes relating to the protection of the
environment and/or governing the use, storage, treatment, generation,
transportation, processing, handling, production or disposal of any
Hazardous Substance and the rules, regulations, and orders with respect
thereto. "Hazardous Substance" means, without limitation, any flammable,
explosive or radioactive material, polychlorinated biphenyl, petroleum or
petroleum product, methane, hazardous materials, hazardous wastes,
hazardous or toxic substances or related materials, as defined in any
applicable Environmental Laws. From the date of acceptance hereof to and
including the Effective Date or the earlier termination of this Agreement,
the General Partnership shall promptly provide the Surviving Partnership
with a copy of any notice, citation, complaint or other directive from any
person, entity or governmental authority whereby compliance with
Environmental Laws is called into question with respect to the Property.
(t) TAXES. Except for state and local realty transfer taxes (which are
governed by Section 3.10) and real estate taxes (which are governed by
Section 3.9), each of the Merged Partnership and the General Partnership
has filed or will file when due all notices, reports and returns of Taxes
(as defined below) required to be filed before the Effective Date and has
paid or, if due after the date hereof and prior to the Effective Date, will
pay, all Taxes and other charges for the periods shown to be due on such
notices, reports and returns. "Taxes" shall mean all taxes, charges, fees,
levies or other assessments, including, without limitation, income, excise,
property, sale, gross receipts, employment and franchise taxes imposed by
the United States, or any state, county, local or foreign government, or
subdivision or agency thereof with respect to the assets or the business of
the Merged Partnership and the General Partnership, and including any
interest, penalties or additions attributable thereto.
4.2 BY THE SURVIVING PARTNERSHIP. The Surviving Partnership hereby makes
the following representations and warranties to Quinn and the Merged
Partnership as of the date hereof.
(a) ORGANIZATION AND AUTHORIZATION. The Surviving Partnership is a limited
partnership duly organized, validly existing and in good standing under the
laws of the State of New York and has adopted the New York Act. It has all
requisite power and authority to own, lease and operate its properties and
to carry on its business as now being conducted. It is duly qualified or
licensed to do business as a foreign limited partnership and in good
standing in each jurisdiction in which the property owned, leased or
operated by it makes such qualification or license necessary, except in
each case in those jurisdictions where the failure to be so duly qualified
or licensed and in good standing would not have a Material Adverse Effect.
(b) AUTHORITY RELATIVE TO THIS AGREEMENT. Subject to the receipt of the
approvals described in Section 1.5 and in subparagraph (e) of Section 6.3
of this Agreement: (i) the Surviving Partnership has full power and
authority to execute, deliver and perform this Agreement and to consummate
the transactions contemplated hereby; (ii) all actions necessary to be
taken by it or on its behalf to execute, deliver and perform this Agreement
and to consummate the transactions contemplated hereby, have been duly and
validly taken; and (iii) this Agreement has been duly and validly executed
and delivered by it and, assuming due execution and delivery by the Merged
Partnership, constitutes a valid and binding agreement enforceable against
it in accordance with its terms, except to the extent that enforceability
may be limited by applicable bankruptcy, reorganization, insolvency,
moratorium or similar laws affecting the enforcement of creditors' rights
generally as at the time in effect and by general principles of equity,
regardless or whether such enforceability is considered in a proceeding in
equity or at law.
(c) CONSENTS AND APPROVALS; NO VIOLATIONS. To the best of the Surviving
Partnership's knowledge, as of the Effective Time, neither the execution,
delivery and performance of this Agreement nor the consummation of the
transactions contemplated hereby will: (i) conflict with or will result in
any breach of any provision of its Agreement of Limited Partnership or
Certificate of Limited Partnership; (ii) require it to obtain any consent,
approval, authorization or permit from, or file with or notify, any
governmental or regulatory authority, except where the failure to obtain
such consent, approval, authorization or permit, or to make such filing or
notification, would not have a Material Adverse Effect; (iii) constitute a
breach or will result in a default under any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, license, contract,
agreement or other instrument or obligation of any kind to which it is a
party or by which it is bound, except for any such breach or default as
would not have a Material Adverse Effect; or (iv) violate any order, writ,
injunction, judgment, decree, law, statute, rule, regulation or
governmental permit or license applicable to it, which violation would have
a Material Adverse Effect, unless, any waiver, consent, approval,
authorization, permit, filing or notification necessary to prevent any such
conflict, breach, default or violation has been obtained prior to the
Effective Time.
(d)PARTNERSHIP INTERESTS. On the Effective Date, the Units to be issued
as provided in this Agreement shall be duly issued by the Surviving
Partnership and the recipients will be duly admitted as limited partners of
the Surviving Partnership.
(e)SURVIVING PARTNERSHIP AGREEMENT. A true, correct and complete copy of
the Surviving Partnership Agreement is attached hereto as EXHIBIT "D". The
Surviving Partnership hereby agrees that, with the following exceptions,
the Surviving Partnership Agreement shall not be further amended on or
prior to the Effective Date: (i) the Surviving Partnership Amendments, (ii)
amendments in connection with the issuance of additional shares under HME's
Dividend Reinvestment Stock Purchase, Resident Stock Purchase and Employee
Stock Purchase Plan, (iii) amendments in connection with mergers or other
transactions similar to the Merger which are currently in process wherein
additional Units are issued in connection with the acquisition of real
property or of interests in entities which own real property, the
provisions of which have been disclosed in writing to the Merged
Partnership prior to the execution of this Agreement, and (iv) the
formation of a subsidiary of HME to hold Units owned by HME.
ARTICLE V
COVENANTS OF THE PARTIES
5.1 FURTHER ASSURANCE. Subject to the terms and conditions of this
Agreement, each of the parties hereto will use reasonable efforts to take,
or cause to be taken, all actions, and to do, or cause to be done, all
things necessary under applicable laws and regulations to consummate the
transactions contemplated by this Agreement, including, but not limited to,
taking any actions necessary to cause the Merger Conditions to be
satisfied.
5.2 REPRESENTATIONS AND WARRANTIES. Each of the parties hereto shall give
written notice to the other party promptly upon the occurrence of, or upon
becoming aware of, either: (i) the occurrence of any event which makes any
representation or warranty contained in this Agreement not true in any
material respect; or (ii) any material and adverse development in the
condition (financial or otherwise) or operations of such party.
5.3 REPURCHASE AGREEMENTS. The Surviving Partnership hereby covenants and
agrees that it will, on or prior to the Effective Date, enter into an
agreement with Quinn and each of the partners of the Merged Partnership
other than Dissenting Partners whereby the Surviving Partnership agrees
that:
(a) Upon the written request of Quinn or any such partner, the Surviving
Partnership will purchase any or all of the Units held by Quinn or such
partner at a purchase price per Unit equal to the Effective Date Price (as
defined in Section 3.3(c) above). The written notice must be received by
the Surviving Partnership on or before the date which is one hundred eighty
(180) days after the Effective Date.
(b) Upon the written request of any such partner which is made (i) after the
date which is one hundred eighty (180) days after the Effective Date and
(ii) on or before the date which is the later of (A) the last day of any
holding period (which holding period shall not, in any event, exceed one
year after the Effective Date) during which, in order to comply with the
requirements of the SEC, Quinn and such partners are not permitted to
convert Units into shares of common stock of HME and (B) the date on which
the SEC declares effective the Registration Statement required to be filed
with the SEC pursuant to Section 5.11 hereof, the Surviving Partnership
will purchase any or all of the Units held by such partner at a purchase
price per Unit equal to the average of the daily market price for the ten
(10) consecutive trading days immediately preceding the date of such
partner's request of the shares of common stock of HME.
5.4 ACCESS TO INFORMATION. Between the date of this Agreement and the
Effective Date, the Surviving Partnership, on the one hand, and Quinn and
the Merged Partnership, on the other hand, will each, during ordinary
business hours and upon reasonable advance notice, give to the other and
their authorized representatives reasonable access to inspect their books,
records, offices and other facilities and properties; provided, however,
that: (i) any such investigation shall be conducted in such a manner as
not to interfere unreasonably with the operation of the other's business;
(ii) no party shall be required to take any action which would constitute a
waiver of the attorney-client privilege; (iii) no party need supply the
other with any information which it is under a legal obligation not to
supply; and (iv) with respect to Quinn, such access shall be limited to
information pertaining to the General Partnership.
5.5 FINANCIAL ACCESS.
(a) Upon the demand of the Surviving Partnership, the General Partner will
provide a signed representation letter substantially in the form of EXHIBIT
"E" attached hereto. The General Partner and the Merged Partnership will
provide access to the Surviving Partnership's representative to all
financial and other information relating to the General Partnership, Merged
Partnership and the Property as is sufficient to enable them to prepare
audited and pro-forma financial statements, in conformity with Regulation
S-X of the Securities and Exchange Commission (the "Commission") and any
registration Statement, report or disclosure statement to be filed with the
Commission.
(b) Prior to the Effective Date the Surviving Partnership shall from time to
time, promptly after request, supply to the Merged Partnership, and certify
to the Merged Partnership the accuracy and completeness of, copies of any
financial statements and records and other documents and information
requested by the General Partner regarding the Surviving Partnership and
HME which are available to the public.
(c) The Parties hereto recognize that, at the Effective Date, the Merged
Partnership will be treated for federal income tax purposes as having
contributed all of its assets to the Surviving Partnership in exchange for
the Consideration, which the Merged Partnership will be deemed to have
distributed to its Partners in complete liquidation of the Merged
Partnership. Upon the Contribution of the General PartnershipInterest by
Quinn to the Surviving Partnership, the General Partnership will terminate
for federal income tax purposes. Consequently, the Merged Partnership and
the General Partnership will terminate for federal income tax purposes at
the Effective Time. The Parties hereto shall prepare their tax returns for
their respective taxable years which include the Effective Date consistent
with that characterization of the transaction. The Surviving Partnership
shall make available to the General Partner (and its representatives)
promptly upon request, all financial and other information relating to the
Merged Partnership and the General Partnership which is necessary to permit
each of the Merged Partnership and the General Partnership to file its tax
returns for its taxable year ended on the Effective Date.
5.6 INTENTIONALLY OMITTED
5.7 NEGATIVE COVENANTS. Each of Quinn and the Merged Partnership agrees
that, prior to the Effective Date, it will not take any of the following
actions with respect to the Merged Partnership or the General Partnership
without first obtaining the Surviving Partnership's prior written consent,
which consent shall not be unreasonably withheld or delayed.
A. Create, incur or assume any indebtedness for money borrowed, including
obligations in respect of capital leases, except: (i) purchase money
mortgages granted in connection with the acquisition of property in the
ordinary course of business consistent with past practice; and (ii) short-
term indebtedness for borrowed money in accordance with loan agreements and
lines of credit in effect as of the date hereof.
B. Assume, guarantee, endorse or otherwise become liable or responsible
(whether directly, contingently or otherwise) for the obligations of any
other person except in the ordinary course of business consistent with past
practices.
C. Sell or otherwise dispose of or abandon any of its assets except in the
ordinary course of business.
D. Increase the rate or terms of: (i) compensation payable or to become
payable to any of its employees; or (ii) any bonus, insurance, pension or
other employee benefit plan, payment or arrangement made to, for or with
any employee, except salary increases to site employees not exceeding 3%
occurring in the ordinary course of business in accordance with its
customary practices (which shall include normal periodic performance
reviews and related compensation and benefit increases).
E. Enter into any agreement, commitment or transaction (including without
limitation any borrowing, capital expenditure or capital financing),
material to the business, operations or financial condition of its
business, except agreements, commitments or transactions in the ordinary
course of business consistent with past practice.
F. Transfer, mortgage, pledge, grant any security interest in or permit
the imposition of any lien or other encumbrance on any of its assets other than
in the ordinary course of business consistent with past practice.
5.8 MANAGEMENT AGREEMENTS. On or prior to the Effective Date, the General
Partnership shall terminate any agreements pertaining to the management of
the Property.
5.9 CLOSING DOCUMENTS. At the Effective Time, Quinn and the Merged
Partnership shall deliver to the Surviving Partnership a certificate of
title and any necessary transfer documents relating to any vehicles, a
current rent roll ("Rent Roll") certified, as of the date of the Effective
Date, which shall include a list of all tenants, all rental obligations of
each tenant with respect to the Property and all security deposits
(including all interest due to tenants pursuant to Pennsylvania or other
applicable laws). At the Closing, Quinn and the Merged Partnership shall
transfer to the Surviving Partnership an amount equal to the aggregate
amount of the security deposits shown on the Rent Roll. At the Effective
Time, Quinn and the Merged Partnership shall also deliver to the Surviving
Partnership complete originals of each lease listed on the Rent Roll.
5.10 INSPECTION. Upon and after execution of this Agreement by both
parties, Quinn and the Merged Partnership agree that the Surviving
Partnership and its authorized representatives shall have the right and
privilege to enter upon the Property and the General Partnership's offices,
upon reasonable notice, during regular business hours, for the purpose of
gathering such information and conducting such environmental and
engineering studies or other tests and reviews as the Surviving Partnership
may deem appropriate and necessary. All such inspections, studies, tests
and reviews shall be at the Surviving Partnership's sole expense. Each of
Quinn and the Merged Partnership agrees to cooperate with the Surviving
Partnership by making available to the Surviving Partnership such records,
plans, drawings or other data as may be in their or the General
Partnership's or the Merged Partnership's possession or control relating to
the Property and its operation; provided, however, that the Surviving
Partnership agrees to indemnify Quinn and the Merged Partnership of and
from any loss or damage occasioned by such entry, and agrees further to
restore to its original condition, at the Surviving Partnership's own cost
and expense, any property disturbed by such entry.
5.11 SUFFICIENT REGISTERED SHARES. The Surviving Partnership hereby
represents and warrants to and covenants with Quinn and the Merged
Partnership and its partners that on the Effective Date and thereafter for
so long as any Units issued to Quinn and the partners of the Merged
Partnership are outstanding there shall be at all times, a sufficient
number of reserved shares of HME to permit the conversion of all
outstanding Units into shares of HME pursuant to the terms of the Surviving
Partnership Agreement. Within 10 days after the Effective Date, the
Surviving Partnership agrees to file a registration statement (the
"Registration Statement") with the SEC registering the resale of the shares
of common stock of HME into which the Units may be converted and to use
reasonable commercial efforts to have the registration promptly declared
effective by the SEC. Notwithstanding anything to the contrary contained in
this Agreement, in the event that the Surviving Partnership has not filed
the Registration Statement with the SEC by the date (the "Outside Filing
Date") which is the 30th day after the Effective Date, then for and with
respect to each day during the period between the Outside Filing Date and
the date on which the Registration Statement is filed with the SEC, the
Surviving Partnership shall pay to Quinn and the former partners of the
Merged Partnership which hold Units, as liquidated damages and not as a
penalty, the sum of $10,000, which sum shall be apportioned pro rata among
such Quinn and the former partners of the Merged Partnership.
5.12 TAX PROVISIONS. The Surviving Partnership agrees to observe and comply
with the following:
(a) The Surviving Partnership will use the traditional method (and not the
curative or remedial method), as contemplated by Treasury Regulations
<section>1.704-3(b) to allocate book-tax differences with respect to the
assets which are deemed contributed to the Surviving Partnership by Quinn
and the Merged Partnership.
(b) Home Properties agrees that for a period of 5 years following the
Effective Time, (i) the Surviving Partnership shall not restructure the
share of the Surviving Partnership's debt of Quinn and the former partners
of the Merged Partnership who shall have received Units in the Surviving
Partnership (Quinn and such former partners of the Merged Partnership who
shall have received Units are hereinafter called the "Unit Partners") in
such manner as to cause a reduction in the amount of Unit Partners' share
of non-recourse debt allocable to and encumbering the Property without the
Unit Partners' prior written consent; and (ii) the Surviving Partnership
will not dispose of any of its interest in the Real Property, unless such
disposition is structured as a tax-deferred, like- exchange under
<section>1031 of the Code, or otherwise is substantially tax-deferred under
the Code. Any property or real estate assets acquired by the Surviving
Partnership pursuant to such tax-deferred, like-exchange shall remain
subject to the restriction on disposition contained hereunder until the end
of the aforesaid 5-year period. In the event that the Surviving
Partnership takes any such action during such 5-year period, the Surviving
Partnership shall indemnify and save harmless the Unit Partners from and
against any federal and state income tax liability, including but not
limited to: (i) income taxes suffered as a result of all payments made
under this subsection; and (ii) interest, penalties and the reasonable fees
of attorneys and accountants.
(c) As a partner contributing interests in a partnership in exchange for a
limited partnership interest in the Surviving Partnership, the Unit
Partners will receive annually from the Surviving Partnership Form 1065,
Schedule K-1, Partner's Share of Income, Credit, Deductions, etc. This form
will also be part of the tax return, Form 1065, filed by the Surviving
Partnership with the Internal Revenue Service. The Surviving Partnership
represents that the Schedule K-1 submitted to Unit Partners for use in the
preparation of their tax returns will reflect the allocation to Unit
Partners as partners of a share of non-recourse liabilities in accordance
with Reg. Sec. 1.752-3 of the Internal Revenue Code, such that as a result
of the allocation the Unit Partners shall recognize no income upon the
contribution of the Property to the Surviving Partnership, and for a period
of 5 years following the Effective Time except to the extent cash
distributions from the Surviving Partnership to a Unit Partner exceeds such
Unit Partner's basis in his or her Units. The Merged Partnership and Quinn
represent that as of December 31, 1996: (i) their aggregate built in gain
determined in accordance with the principals set forth in Section 704(c) of
the Internal Revenue Code of 1986 ("Code") is as set forth on SCHEDULE 5.12
assuming that the Property has a fair market value of $4,520,000. as of the
date of the Merger; (ii) the amount of nonrecourse debt encumbering the
Property is $3,097,819.; (iii) the capital account of each of the Unit
Partners is as set forth on SCHEDULE 5.12. The Surviving Partnership's
representation contained in this Section 5.12 (c) is conditioned upon the
accuracy of the representations contained in the preceding sentence.
ARTICLE VI
CONDITIONS OF MERGER
6.1 MANDATORY CONDITIONS. None of the Surviving Partnership, Quinn or the
Merged Partnership shall have any obligation contribute the General
Partnership Interest or to execute or file the Certificate of Merger as
described in Section 2.1 unless, on or before September 30, 1997:
(a) OTHER CONDITIONS. All of the contingencies and conditions (including,
without limitation, the conditions set forth in Sections 6.2 and 6.3
hereof) contained in this Agreement have been satisfied or waived as
provided herein.
(b) OTHER MERGERS. The conditions to the mergers and other transactions of
the Surviving Partnership with the entities listed on the attached SCHEDULE
6.1 also shall have been satisfied and the mergers are to occur
simultaneously with the Merger of the Merged Partnership into the Surviving
Partnership.
(c) EXISTING LENDER APPROVAL. The Existing Lender shall have approved the
Merger and shall have agreed to the assumption of the Existing Loan by the
Surviving Partnership (unless the Surviving Partnership elects to prepay
the Existing Loan pursuant to Section 3.10(a) hereof).
6.2 CONDITIONS TO QUINN'S AND MERGED PARTNERSHIP'S OBLIGATIONS. On the
date all of the requirements set forth in Section 6.1 hereof have been
satisfied (the "Satisfaction Date"), the general partner of the Merged
Partnership shall execute the Certificate of Merger and deliver it to the
Surviving Partnership and Quinn shall assign the General Partnership
Interest to the Surviving Partnership. The general partner of the Merged
Partnership shall have no obligation to execute and deliver the Certificate
of Merger, and Quinn shall have no obligation to assign the General
Partnership Interest, unless:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties of
the Surviving Partnership set forth herein shall be true and correct in all
material respects as of the Satisfaction Date, as certified in writing by
the general partner of the Surviving Partnership.
(b) COVENANTS. The Surviving Partnership has complied in all material
respects with the covenants made by it in this Agreement to be complied
with by it from the date hereof through the Satisfaction Date.
(c) APPROVAL. The Merged Partnership shall have obtained the requisite
approval of its limited partners to the Merger and the other transactions
described in this Agreement on the terms and conditions described herein.
(d) OPINION OF COUNSEL. The Surviving Partnership's independent counsel
shall have delivered an opinion of counsel in the form of EXHIBIT F
attached hereto.
(e)INTENTIONALLY OMITTED
(f) REGISTRATION RIGHTS AGREEMENT. Quinn and the partners of the Merged
Partnership who receive Units and the Surviving Partnership shall have
entered into a registration rights agreement on customary terms,
including, without limitation, the granting of piggyback registration
rights.
(g) MARYLAND ANTI-TAKEOVER STATUTES. The Board of Directors of HME
shall have taken all action necessary so that the transactions contemplated by
this Agreement including, without limitation, the issuance of Units and the
conversion of Units into shares of HME, shall be irrevocably exempt from
the operation of <section>3-601 ET SEQ. (the "business combination"
statute) and <section>3-701 ET SEQ. (the "control share acquisition"
statute) of the Maryland General Corporation Law (collectively, the
"Maryland Anti-Takeover Statutes") and from any provisions of the Articles
of Incorporation and Bylaws of HME that may have the effect of limiting the
acquisition of Units and shares of HME in connection with the transactions
contemplated in this Agreement, including without limitation, Article 7 of
the Articles of Incorporation of HME. The Surviving Partnership and its
counsel shall have confirmed to the Merged Partnership's satisfaction that
this Agreement, the Merger and the other transactions contemplated hereby
are exempt from the operation of the Maryland Anti-Takeover Statutes.
6.3 CONDITIONS TO SURVIVING PARTNERSHIP'S OBLIGATIONS. On the next day
following the date that the Surviving Partnership receives the Certificate
of Merger executed by the general partner of the Merged Partnership (the
"Delivery Date"), the general partner of the Surviving Partnership shall
execute the Certificate of Merger, deliver it to the Department of State of
the State of New York and the Commonwealth of Pennsylvania for filing and
notify the Merged Partnership of such delivery. The general partner of the
Surviving Partnership shall have no obligation to execute or deliver the
Certificate of Merger unless:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of the Merged Partnership set forth in this Agreement shall be true and
correct in all material respects as of the Delivery Date, as certified in
writing by the General Partner.
(b) COVENANTS. Each of Quinn and the Merged Partnership has complied
with the covenants made by it in this Agreement to be complied with by it from
the date hereof through the Delivery Date.
(c) CONDITION OF PROPERTY. There are on the Delivery Date, 66 and 49
respectively, apartment units in rentable condition and in compliance with
federal, state, county or local laws, ordinances, rules and regulations.
(d) APPROVALS. The Surviving Partnership represents and warrants that it
has obtained the requisite approval of the Board of Directors of HME to the
Merger and the other transactions described in this Agreement on the terms
and conditions described herein, including, without limitation, the
Surviving Partnership Amendments. The Surviving Partnership, on or prior
to the Effective Date shall have obtained the requisite approval of its
limited partners and the State of Michigan Retirement Systems to the Merger
and the other transactions described in this Agreement on the terms and
conditions described herein. The Surviving Partnership agrees to recommend
to the Board of Directors of HME, the limited partners of the Surviving
Partnership and the State of Michigan Retirements Systems that they vote
in favor of the Merger and the other transactions described in this
Agreement.
(e) GENERAL PARTNER AGREEMENT. The General Partner shall have executed an
agreement whereby he agrees that he will be responsible for making all
final distributions to Quinn and the former partners of the Merged
Partnership and shall indemnify the Surviving Partnership from all claims
relating thereto.
(f) OPINION OF COUNSEL. The Merged Partnership's independent counsel
shall have delivered an opinion of counsel in the form of EXHIBIT G attached
hereto.
ARTICLE VII
TERMINATION
7.1 TERMINATION. If the conditions of Section 6.1 of this Agreement are not
satisfied, any party, at its option and upon notice to the other parties,
may terminate this Agreement. If the conditions of Section 6.2 of this
Agreement are not satisfied, either Quinn or the Merged Partnership, at its
option and upon written notice to the Surviving Partnership, may terminate
this Agreement. If the condition of Section 6.3 of this Agreement are not
satisfied, the Surviving Partnership, at its option and upon written notice
to Quinn and the Merged Partnership, may terminate this Agreement. Upon the
termination of this Agreement as provided herein, no party shall have any
further rights or obligations hereunder and no party shall take any action
to file the Certificate of Merger.
ARTICLE VIII
TITLE MATTERS
8.1 TITLE POLICIES AND SURVEYS. The Merged Partnership has, prior to the
date of this Agreement, furnished and delivered to the Surviving
Partnership a copy of the most recent title policy issued with respect to
the Property and a copy of the most recent survey of the Property.
8.2 OBJECTIONS TO TITLE.
(a) The obligation of the Surviving Partnership to execute or file the
Certificate of Merger is conditioned upon the ability of the Surviving
Partnership to obtain title insurance with respect to the Property
insuring that, as of the Effective Date, title to the Property is not
subject to any liens, encumbrances or other title objections other than the
lien of the mortgage securing the Existing Loan, any apartment leases for
tenants of the Property and the title exceptions identified in EXHIBIT H
attached hereto.
(b) The Merged Partnership agrees that, upon the request of the Surviving
Partnership, it will provide an affidavit in such customary form as shall
allow the Surviving Partnership to obtain a non-imputation endorsement to
the title policy purchased by the Surviving Partnership.
ARTICLE IX
MISCELLANEOUS
9.1 AMENDMENT. This Agreement may be amended only by a writing executed by
the Surviving Partnership, Quinn and the Merged Partnership.
9.2 WAIVER OF COMPLIANCE. Except as otherwise provided in this Agreement,
any failure of any party to comply with any obligation, covenant, agreement
or condition herein may be waived by the party entitled to the benefits
thereof only by a written instrument signed by the party granting such
waiver, but such waiver or failure to insist upon strict compliance with
such obligation, covenant, agreement or condition shall not operate as a
waiver of, or estoppel with respect to, any subsequent or other failure.
9.3 ENTIRE AGREEMENT. This Agreement, including the documents, schedules,
certificates and instruments referred to herein, embody the entire
agreement and understanding of the parties hereto in respect of the
transactions contemplated by this Agreement. There are no restrictions,
promises, representations, warranties, covenants or undertakings, other
than those expressly set forth or referred to herein or therein. This
Agreement supersedes all prior agreements and understandings between the
parties with respect to such transactions.
9.4 ASSIGNMENT. This Agreement and all obligations and rights of the
parties hereunder may not be assigned by either party. Commencing with the
Effective Time, the General Partner and the former partners of the Merged
Partnership shall be third-party beneficiaries of this Agreement.
9.5 GOVERNING LAW. This Agreement shall be governed by the laws of the
Commonwealth of Pennsylvania, without reference to its principles of
conflicts of law.
9.6 INTERPRETATION. The article and section headings contained in this
Agreement are solely for the purpose of reference, are not part of the
agreement of the parties and shall not in any way affect the meaning or
interpretation of this Agreement. Article and Section references which do
not otherwise specify, are to the designated Article or Section of this
Agreement.
9.7 SEVERABILITY. The invalidity or unenforceability of any particular
provision of this Agreement shall be construed in all respects as if such
invalid or unenforceable provision were omitted. All provisions of this
Agreement shall be enforced to the full extent permitted by law.
9.8 NOTICES. All notices given pursuant to any provision of this Agreement
shall be in writing and shall be effective only if delivered personally, or
sent by registered or certified mail, postage prepaid or sent by nationally
recognized overnight carrier, to the addresses set forth below:
To Home Properties:
Home Properties of New York, L.P.
850 Clinton Square
Rochester, New York 14604
Attention: Norman Leenhouts
With a copy to Ann M. McCormick
at the same address
To the Merged Partnership and Quinn
General Partner:
Henry A. Quinn
100 Chetwynd Drive
Rosemont, Pennsylvania 19010
With a copy to:
Bruce R. Lesser, Esq.
Wolf, Block, Schorr and Solis-Cohen
350 Sentry Parkway
Building 640
Blue Bell, Pennsylvania 19422
And a copy to:
John S. Roberts, Jr., Esq.
Wolf, Block Schorr and Solis-Cohen
Twelfth Floor, Packard Building
15th and Chestnut Streets
Philadelphia, Pennsylvania 19102
9.9 CONFIDENTIALITY. By execution of this Agreement and except as otherwise
provided herein, prior to the Effective Time the Surviving Partnership
agrees to keep any and all information obtained in or in connection with
the due diligence process with respect to the Merged Partnership, its
operations, the Real Property and Other Items strictly confidential, and
will not disclose any such information without the Merged Partnership's
prior written consent, except to the extent required by law.
9.10 BROKER'S COMMISSION. Quinn and the Merged Partnership represent to the
Surviving Partnership that they did not employ any broker in connection
with this sale other than Mill Creek Realty Co., and they hereby agree
that, pursuant to Section 3.11 hereof, they will cause the Surviving
Partnership to pay any fees or commissions payable to Mill Creek Realty Co.
in connection with the transaction described in this Agreement. The
Surviving Partnership represents that it employed F.M. Stec & Associates as
broker and agrees that it will pay any fees or commissions due as a result
of the Surviving Partnership's employment of that broker. The parties each
agree to indemnify the other for any and all claims and expenses, including
legal fees if any other fees or commission is determined to be due by
reason of the employment of any other broker by the indemnifying party.
9.11 CONDITION OF PROPERTY AND OTHER ITEMS
(a)The entire agreement between the parties hereto with respect to the
Property and the Other Items and the sale thereof is expressly set forth in
this Agreement, and the parties are not bound by any agreement,
understandings, provisions, conditions, representations or warranties other
than as are expressly set forth and stipulated herein. Without in any
manner limiting the generality of the foregoing, the Surviving Partnership
acknowledges that and its representatives will have fully inspected the
Property and the Other Items, and will be fully familiar with the physical
and financial condition thereof, and that the Property and the Other Items
will be accepted by the Surviving Partnership pursuant to the Merger in an
"as is" and "where is" condition as a result of such inspection and
investigations and not in reliance on any agreement, understanding,
condition, warranty or representation made by the General Partner, the
Merged Partnership or any agent or employee of the Merged Partnership
(except as expressly elsewhere provided in this Agreement) as to the
condition thereof, as to any permitted use thereof, or as to the income or
expense in connection therewith, or as to any other matter in connection
therewith; and the Surviving Partnership further acknowledges that none of
the Merged Partnership, Quinn or any party acting on their behalf has made
or shall be deemed to have made any such agreement, condition,
representation or warranty (except as expressly elsewhere provided in this
Agreement).
(b) The Surviving Partnership shall accept the Property and the Other Items
at the time of Closing in the same condition as the same are as of the date
of this Agreement as such condition shall have changed by reason of wear
and tear, damage by fire or other casualty and vandalism.
(c) If the Merger occurs, Quinn and the Merged Partnership shall assign to
the Surviving Partnership any net insurance and/or condemnation proceeds
received by the Merged Partnership with respect to the Property, less any
amount expended by the Merged Partnership for collection, repair,
restoration or related expenses.
9.12 DEFAULT.
(a) If the Surviving Partnership defaults hereunder at or prior to the
Effective Date by failing to complete Closing in accordance with the terms
of this Agreement or in any other respect, then on the Effective Date (or
sooner in the event of an anticipatory breach) the Surviving Partnership
shall pay to Quinn and the Merged Partnership the aggregate sum of $70,000.
(the "Liquidated Damages Amount") as liquidated damages. Notwithstanding
anything to the contrary contained in this Agreement, the failure to
satisfy any of the conditions to the Merger contained in Article VI hereof
shall not, in and of itself, be deemed to be a failure of the Surviving
Partnership to complete Closing or a default by the Surviving Partnership
under this Agreement. If the Surviving Partnership pays Quinn and the
Merged Partnership the Liquidated Damages Amount as liquidated damages, the
payment of such sum shall be Quinn's and the Merged Partnership's only
remedy in the event of the Surviving Partnership's default at or prior to
the Effective Date, and Quinn and the Merged Partnership in such event
hereby waives any right, unless Closing is completed, to recover the
balance of the Consideration. If Quinn and the Merged Partnership shall be
paid the Liquidated Damages Amount as liquidated damages, this Agreement
shall be and become null and void and all copies will be surrendered to the
Merged Partnership for cancellation. Nothing in this Section shall limit
Quinn's and the Merged Partnership's rights against the Surviving
Partnership and the Surviving Partnership's liability to Quinn and the
Merged Partnership by reason of a default by the Surviving Partnership
under this Agreement which survives Closing.
(b) The term "Permitted Event" shall mean the occurrence of the following on
the Effective Date: the Surviving Partnership shall be ready, willing and
able to complete Closing in accordance with the Agreement; the Surviving
Partnership, or its authorized representative, shall have appeared at the
place designated for Closing and shall have tendered the Consideration, and
Quinn and the Merged Partnership, notwithstanding the foregoing, shall have
failed to complete Closing in accordance with this Agreement or are
otherwise in default under this Agreement. Notwithstanding anything to the
contrary contained in this Agreement, the failure to satisfy any of the
conditions to the Merger contained in Article VI hereof shall not, in and
of itself, be deemed to be a failure of Quinn or the Merged Partnership to
complete Closing or a default by Quinn or the Merged Partnership under this
Agreement. Except upon the occurrence of the Permitted Event, the
Surviving Partnership agrees that it shall not (and hereby waives any right
to) ever file or assert any LIS PENDENS against the Property nor commence
or maintain any action against Quinn or the Merged Partnership for specific
performance under this Agreement nor for a declaratory judgment as to the
Surviving Partnership's rights under this Agreement. Except as expressly
provided above and elsewhere in this Agreement, nothing herein shall be
deemed to limit or impair any of the Surviving Partnership's rights and
remedies at law, in equity or by statute.
9.13 INDEMNITY AGREEMENT. On the Effective Date, as an express condition to
the obligation of the Merged Partnership to complete Closing, the Surviving
Partnership shall execute and deliver to Quinn and the General Partner an
agreement, in form and substance satisfactory to Quinn and the General
Partner and Quinn's and the General Partner's counsel, whereby the
Surviving Partnership agrees to indemnify and hold harmless (a) the
General Partner, both individually and in his capacity as the general
partner of the Merged Partnership and (b) Quinn, both individually and as
a general partner of the General Partnership, from and against any and all
liabilities and obligations, including, without limitation, guaranties and
carve-outs from non- recourse, arising in connection with the Existing
Loan.
9.14 NO PERSONAL LIABILITY. Notwithstanding anything to the contrary
contained in this Agreement, none of Quinn, the General Partner or any
other partners of the Merged Partnership shall have any personal liability,
and no action of any kind shall be maintained against any of them or their
respective assets, with respect to this Agreement and/or the transactions
described in this Agreement, and the Surviving Partnership, its successors
and assigns, shall look solely to the assets of the Merged Partnership and
the General Partnership and the cash or assets held by the Disbursing Agent
pursuant to Section 3.2 above, for the payment of any claim against or the
performance of any obligation of Quinn and the Merged Partnership. The
foregoing limitation of liability shall not apply in the case of fraud or
intentional and material misrepresentation; provided, however, that in
connection with any action involving alleged fraud or intentional and
material misrepresentation, if the Surviving Partnership, its successors or
assigns, is not the prevailing party, it shall be responsible for the
payment of all attorneys' fees and expenses of all parties, but if the
Surviving Partnership, its successors or assigns, is the prevailing party,
each party shall bear its own attorneys' fees and expenses.
9.15 NUMBER OF DAYS. In computing the number of days for purposes of this
Agreement, all days shall be counted, including Saturdays, Sundays and
holidays; provided, however, that if the final day of any time period falls
on a Saturday, Sunday or holiday on which federal banks are or may elect to
be closed, then the final day shall be deemed to be the next day which is
not a Saturday, Sunday or such holiday.
9.16 DEPOSIT.
(a) As security for the payment of the Liquidated Damages Amount, upon the
execution of this Agreement, the Surviving Partnership shall deposit with
the Disbursing Agent in escrow the sum of $70,000.(the "Deposit"). If the
Surviving Partnership shall become obligated to pay to Quinn and the Merged
Partnership the Liquidated Damages Amount, Quinn and the Merged Partnership
shall have the right to be paid the Deposit on account of the Liquidated
Damages Amount. If Closing is completed hereunder or if this Agreement is
terminated as provided in Section 7.1 hereof, the Disbursing Agent shall
refund the Deposit to the Surviving Partnership.
(b) Notwithstanding anything contained in this Section 9.16, if either party
terminates this Agreement as a result of the other's default or pursuant to
the exercise of any right of termination conferred by this Agreement,
Disbursing Agent shall not disburse the Deposit until the earlier to occur
of (i) receipt by Disbursing Agent of written instructions from Quinn, the
Merged Partnership and the Surviving Partnership or (ii) entry of a final
and unappealable adjudication determining which party is entitled to
receive the Deposit, as applicable, at which time the Deposit shall be
distributed in accordance with such written instructions or adjudication.
Except to the extent of any dispute among them, Quinn, the Merged
Partnership and the Surviving Partnership agree to act in good faith to
provide the Disbursing Agent with the instructions described in (i) above
in the event that the Agreement is terminated.
(c) In the event of a dispute among the Surviving Partnership Quinn
and the Merged Partnership with respect to the Deposit, the Disbursing Agent
may deposit the Deposit with a court of proper jurisdiction and commence an
interpleader action. Upon notifying the Merged Partnership and the
Surviving Partnership of the commencement of such action, Disbursing Agent
shall be released from all liability with respect to the Deposit, except to
the extent of accounting for any moneys previously delivered by Disbursing
Agent out of escrow. Disbursing Agent shall not be liable to either the
Merged Partnership or the Surviving Partnership, other than for performance
of its duties under this Agreement or his gross negligence or intentional
wrongdoing. Disbursing Agent may rely upon the genuineness or authenticity
of any document tendered to it by either the Merged Partnership or the
Surviving Partnership, and shall be under no duty of independent inquiry
with respect to any acts or circumstances recited in such document. Quinn,
the Merged Partnership and the Surviving Partnership shall indemnify,
defend and hold harmless Disbursing Agent from and against all cost, claims
or liabilities arising from the performance by Disbursing Agent of his
obligations under this Agreement, other than for his failure to comply
herewith, gross negligence or intentional wrongdoing.
(d) As used in this Section 9.16, the term "Deposit" shall refer to the
amount set forth at Section 9.16(a), together with all interest thereon.
The Deposit shall be held by the Disbursing Agent in one or more federally-
insured money market accounts acceptable to both the Merged Partnership and
the Surviving Partnership, or in short-term United States government
obligations having a maturity date which is acceptable to the General
Partner and the Surviving Partnership or in one or more interest-bearing
deposit accounts at a bank or other financial institution acceptable to the
General Partner and the Surviving Partnership. The Merged Partnership's
taxpayer identification number is 23-2227384; the Surviving Partnership's
taxpayer identification number is 16-1455130.
(e) Although Disbursing Agent is counsel for Quinn and the Merged
Partnership, the Disbursing Agent shall not be disqualified or prohibited
from representing Merged Partnership in connection with any matter arising
out of this Agreement by reason of its capacity as Disbursing Agent.
9.17 SURVIVAL.
(a) The representations, warranties, covenants and agreements of HME and the
Surviving Partnership contained in this Agreement will survive Closing (i)
indefinitely with respect to the warranties and representations in Sections
4.2(a) and 10.2(a), (ii) until 60 calendar days after the expiration of all
applicable statutes of limitation (including all periods of extension,
whether automatic or permissive) with respect to matters covered by Section
10.2(f), (iii) until the fifth anniversary of the Effective Date in the
case of all other representations and warranties and any covenant or
agreement to be performed in whole or part prior to Closing and (iv) with
respect to each other covenant or agreement contained in this Agreement,
for five years following the last date on which such covenant or agreement
is to be observed, performed or complied with, or, if no such date is
specified, indefinitely, except that any representation, warranty, covenant
or agreement that would otherwise terminate in accordance with clauses
(ii), (iii) or (iv) above will continue to survive if notice of claim shall
have been timely given on or prior to such termination date until such
claim has been satisfied or otherwise resolved. This Section shall not
limit in any way the survival and enforceability of any covenant or
agreement of the parties hereto which by its terms contemplates, or is of
such nature that it would require, performance, observance or compliance
after the Effective Date.
(b) The representations, warranties, covenants and agreements of Quinn and
the Merged Partnership contained in this Agreement will survive Closing for
a period of one hundred eighty (180) days, subject to the limitations on
liability provided in Section 9.14 hereof.
9.18 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original for all
purposes and all of which, when taken together, shall constitute one and
the same instrument.
ARTICLE X
ADDITIONAL REPRESENTATIONS AND WARRANTIES
BY THE SURVIVING PARTNERSHIP
10.1 DEFINITIONS. As used in this Article X, the following defined terms
shall be the meanings indicated below:
"AFFILIATE" means any Person that directly, or indirectly through one or
more intermediaries, controls or is controlled by or is under common
control with the Person specified. For purposes of this definition, control
of a Person means the power, direct or indirect, to direct or cause the
direction of the management and policies of such Person whether by Contract
or otherwise and, in any event and without limitation of the previous
sentence, any Person owning 10% or more of the voting securities of a
second Person shall be deemed to control that second Person.
"BENEFIT PLAN" means any Plan entered into, established, maintained,
contributed to or required to be contributed to, by HME or any Company
ERISA Affiliate providing benefits to employees, former employees,
independent contractors, former independent contractors of the Company or
any Company ERISA Affiliate, or their dependents or beneficiaries.
"CODE" means the Internal Revenue Code of 1986, as amended, and the rules
and regulations promulgated thereunder.
"COMMON STOCK" means shares of Common Stock of HME.
"COMPANY ERISA AFFILIATE" means an entity required (at any relevant time)
to be aggregated with HME under Sections 414(b), (c), (m) or (o) of the
Code or Section 4001 of ERISA.
"COMPANY FINANCIAL STATEMENTS" shall have the meaning set forth at Section
10.2(c) below.
"COMPANY SEC REPORTS" shall have the meaning set forth at Section 10.2(c)
below.
"CONTRACTS" means any agreement or obligation of any kind to which HME or
any of its Subsidiaries is a party or by which HME or any of its
Subsidiaries or any of their respective assets or properties is bound.
"GAAP" means generally accepted accounting principles, consistently applied
throughout the specified period and in the immediately prior comparable
period.
"PERSON" means any natural person, corporation, limited liability company,
general partnership, limited partnership, proprietorship, other business
organization, trust, union, association or Governmental or Regulatory
Authority.
"PLAN" means any employment, bonus, incentive compensation, deferred
compensation, pension, profit sharing, retirement, stock purchase, stock
option, stock ownership, stock appreciation rights, phantom stock, leave of
absence, layoff, vacation, day or dependent care, legal services,
cafeteria, life, health, medical, accident, disability worker's
compensation or other insurance, severance, separation, termination, change
of control or other benefit plan, agreement, practice, policy or
arrangement of any kind, whether written or oral, including, but not
limited to, any "employee benefit plan" within the meaning of Section 3(3)
of ERISA.
"SEC" means the Securities and Exchange Commission.
"SECURITIES" means the shares of Common Stock and the Units to be issued
and sold to partners in the Merged Partnership, including shares of Common
Stock issuable upon conversion of Units to be issued and sold, pursuant to
this Agreement and the Transaction Agreements.
"SUBSIDIARY" means with respect to any party, a corporation, partnership or
other organization, whether incorporated or unincorporated, of which more
than 50% of either the equity interests in, or the voting control of, such
corporation, partnership or other organization is, directly or indirectly
through Subsidiaries or otherwise, beneficially owned by such party.
Notwithstanding the foregoing, "Subsidiary," when used with respect to HME,
includes, without limitation, the Surviving Partnership.
"TRANSACTION AGREEMENTS" means all agreements and documents to be delivered
by HME and the Surviving Partnership in connection with the transactions
contemplated by this Agreement and the Transaction Agreements.
10.2 REPRESENTATIONS AND WARRANTIES. The Surviving Partnership and HME
hereby make the following representations and warranties to Quinn and the
Merged Partnership, their liability with respect to such representations
and warranties being joint and several:
(a) CAPITAL STOCK. The authorized capital stock of HME consists solely of
(i) 10 million shares of preferred stock, par value $.01 per share, none of
which are issued and outstanding, (ii) 10 million shares of excess stock,
par value $.01 per share, none of which is issued, and (iii) 30 million
shares of Common Stock, 7,166,458.397 of which are issued and outstanding
as of the date hereof and 4,189,824 of which are reserved for issuance upon
exercise of stock options or exchange of Units in the Surviving Partnership
as of the date hereof. SCHEDULE 10.2(A) hereto sets forth a true and
correct list of the number of Units of the Surviving Partnership that are
issued and outstanding and the holders thereof. All of the outstanding
shares of Common Stock have been duly authorized and validly issued and are
fully paid and nonassessable (except, in the case of Units, as contemplated
by the New York Revised Uniform Limited Partnership Act) and have been
offered and sold in compliance with all applicable laws including, without
limitation, federal and state securities laws and none of them was issued
in violation of any preemptive or other similar right. The Securities, when
issued and sold pursuant to this Agreement and the Transaction Agreements,
will be duly authorized and validly issued, fully paid and nonassessable
(except, in the case of Units, as contemplated by the New York Revised
Uniform Limited Partnership Act) and none of them will be issued in
violation of any preemptive or other similar right. Except as identified
on SCHEDULE 10.2(A) attached hereto, there is no outstanding option,
warrant or other right calling for the issuance of, and there is no
commitment, plan or arrangement to issue, any shares of capital stock of
HME or any security convertible into or exercisable or exchangeable for,
such capital stock. The Common Stock and the Securities conform in all
material respects to all statements relating thereto contained in the
Company SEC Reports.
(b) NO VIOLATIONS OR DEFAULTS. Neither HME nor any of its Subsidiaries is
in violation of its certificate or articles of incorporation, bylaws,
certificates of partnership, partnership agreements, limited liability
company agreements or other similar governing documents, as the case may
be, and none of HME or any of its Subsidiaries is in default in the
performance or observance of any obligation, agreement, covenant or
condition contained in any Contracts to which such entity is a party or by
which such entity may be bound, or to which any of its properties or assets
may be bound or subject, except for such violations or defaults that
individually or in the aggregate would not have a Material Adverse Effect.
(c) SEC REPORTS AND FINANCIAL STATEMENTS; PARTNERSHIP AGREEMENT. HME has
filed all forms, reports, schedules, registration statements, and other
documents required to be filed by it with the SEC since the date of its
formation (as such documents have since the time of their filing been
amended or supplemented, the "Company SEC Reports"). As of their
respective dates, the Company SEC Reports (i) compiled as to form in all
material respects with the requirements of the Securities Act, or the
Securities Exchange Act of 1934, as amended, as the case may be, and (ii)
did not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading. The audited consolidated financial statements and
the interim consolidated financial statements (including, in each case, the
notes, if any, thereto) included in the Company SEC Reports (the "Company
Financial Statements") (A) were compiled as to form in all material
respects with the published rules and regulations of the SEC with respect
thereto, (B) were prepared in accordance with GAAP applied on a consistent
basis during the periods involved (except as may be indicated therein or in
the notes thereto and except with respect to unaudited statements as
permitted by Forms 10-Q and 8-K of the SEC) and (C) fairly present in all
material respects (subject, in the case of the unaudited interim financial
statements, to normal, recurring year- end audit adjustments which are not
expected to be, individually or in the aggregate, materially adverse to HME
and its Subsidiaries taken as a whole) the consolidated financial position
of HME and its consolidated subsidiaries as at the respective dates thereof
and the consolidated results of their operations and cash flows for the
respective periods then ended. Except for the Subsidiaries identified on
SCHEDULE 10.2(C) attached hereto, each Subsidiary of HME is treated as a
consolidated subsidiary of HME in the Company Financial Statements for all
periods covered thereby.
(d) ABSENCE OF CHANGES
(1) Except for the execution and delivery of this Agreement and the
Transaction Agreements, and the transactions to take place pursuant hereto
and thereto on the Effective Date, since March 31, 1997 there has not been
any change, event or development having, or that could reasonably be
expected to have, individually or in the aggregate, a Material Adverse
Effect. Without limiting the foregoing, between March 31, 1997 and the
date hereof (A) except with respect to the activities described in the
press releases attached hereto as EXHIBIT I, HME and its Subsidiaries have
conducted their respective businesses only in the ordinary course
consistent with past practice and (B) neither HME nor any of its
Subsidiaries have taken any action which, if taken after the date hereof,
would constitute a breach of any provision of clause (2) of this Section
10.2(d).
(2) Prior to the Effective Date, HME and its Subsidiaries shall use all
commercially reasonable efforts to preserve intact in all material respects
their present business organizations and reputation, to keep available the
services of their key officers and employees, to maintain their assets and
properties in good working order and condition, ordinary wear and tear
excepted, to maintain insurance on their tangible assets and businesses in
at least such amounts and against such risks and losses as are currently in
effect, to preserve their relationships with customers and suppliers and
others having significant business dealings with them and to comply in all
material respects with any statute, law, rule, regulation or ordinance or
any judgment, decree, order, writ, permit or license, of any court,
tribunal, arbitrator, authority, agency, commission, official or other
instrumentality of the United States or any domestic, state, county, city
or other political subdivision, applicable to HME or any of its
Subsidiaries.
(e) ABSENCE OF UNDISCLOSED LIABILITIES. Except for matters reflected in the
consolidated balance sheet of HME as of March 31, 1997 (or the footnotes
thereto) included in the Company Financial Statements and the press
releases attached hereto as EXHIBIT I, neither HME nor any of its
Subsidiaries had at such date, or has incurred since that date, any
liabilities or obligations (whether absolute, accrued, contingent, fixed or
otherwise, or whether due or to become due) of any nature, except
liabilities or obligations (i) which were incurred in the ordinary course
of business consistent with past practice since such date, and (ii) which
have not had, and could not be reasonably expected to have, individually or
in the aggregate, a Material Adverse Effect.
(f) REIT QUALIFICATION. At all times since its taxable year ended December
31, 1996, HME has been, and upon each issuance of any of the Securities,
HME will continue to be, organized and operated in conformity with the
requirements for qualification as a real estate investment trust under the
Code, and its proposed method of operation will enable it to continue to
meet the requirements for taxation as a real estate investment trust under
the Code.
ARTICLE XI
OPTION TO CONTRIBUTE PARTNERSHIP INTERESTS
11.1 OPTION TO CONTRIBUTE PARTNERSHIP INTERESTS. Notwithstanding anything
to the contrary contained in this Agreement, provided that the General
Partner obtains the consent of the holders of eighty percent (80%) or more
of the Interests in the Merged Partnership to contribute their Interests in
the Merged Partnership to the Surviving Partnership, the General Partner
shall have the right to effect the Merger by such contributions of
Interests in the Merged Partnership rather than a merger of the Merged
Partnership into the Surviving Partnership. In such event, Quinn, the
Merged Partnership and the Surviving Partnership shall enter into an
amendment to this Agreement to reflect the changes in the structure of the
transaction.
<PAGE>
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
executed by a duly executed general partner as of the date first above
written.
PK PARTNERSHIP
By: /s/ Henry A. Quinn
---------------------------
Henry A. Quinn, General Partner
/s/ Henry A. Quinn
- --------------------------------
Henry A. Quinn
HOME PROPERTIES OF NEW YORK, L.P.
By:Home Properties of New York, Inc.
General Partner
By: /s/ Norman Leenhouts
--------------------------------
Norman Leenhouts, Chairman
For purposes of acknowledging and agreeing
to the provisions of Sections 1.4, 5.5 and
6.3(e)
/s/ Henry A. Quinn
- ---------------------------
Henry A. Quinn
<PAGE>
JOINDER
Home Properties of New York, Inc. joins in this Agreement for the purpose
of making in its individual capacity, the same representations and
warranties as are made by the Surviving Partnership in Article X of this
Agreement.
HOME PROPERTIES OF NEW YORK, INC.
By:/s/ Norman Leenhouts
-------------------------------
Norman Leenhouts, Chairman
<PAGE>
SCHEDULE 3.13
RESERVE FUNDS CLAIMS PROCEDURE
PROCEDURES WITH RESPECT TO CLAIMS
(a)If any claim (a "Claim") is made by the Surviving Partnership for
payment out of the Reserve Amount of a Liabilities Claim or an Indemnity
Claim, the Surviving Partnership shall thereafter notify the General
Partner and the Disbursing Agent of such Claim. At such time as there is a
Final Determination (as hereinafter defined) with respect to a Claim, the
Surviving Partnership shall notify the Disbursing Agent (with a copy to the
General Partner) of such Final Determination. A Final Determination with
respect to a Claim shall occur when (1) the Surviving Partnership and the
General Partner agree in writing to a payment from a Reserve with respect
to a Claim and each so advises the Disbursing Agent, or (2) the arbitrator
determining the disposition of a Claim pursuant to Section (d) below
renders a final decision with respect to a Claim determining that a payment
is to be made from a Reserve to the Surviving Partnership or (3) provided
that the General Partner (on behalf of all of the former Partners of the
Merged Partnership) shall have been given a reasonable opportunity to
participate in the defense of such third-party claim throughout the course
of such third-party claim, the Claim is made on account of a judgment
rendered by a court of competent jurisdiction requiring, on a third-party's
claim that is an Indemnity Claim, a specified payment on account of such an
Indemnity Claim to the third-party claimant and such judgment has become
final and not subject to further appeal. Upon receipt of a Final
Determination, the Disbursing Agent shall pay the amount of the Claim as
set forth in the Final Determination to the Surviving Partnership.
(b)On each of 90 days from and after the Effective Time and 180 days from
and after the Effective Time, and thereafter, at any time and from time to
time, within 10 days after the written request of the General Partner, the
Surviving Partnership shall send a notice (the "Anniversary Notice") to the
Disbursing Agent and to the General Partner describing each then
outstanding Claim with respect to which a Final Determination has not
theretofore been made and specifying what the Surviving Partnership
believes, acting reasonably and in good faith, to be the aggregate amount
of damages that have been incurred theretofore or are likely to be incurred
thereafter as a result of or arising out of each such Claim (the "Damage
Amount").
(c)If the General Partner believes, acting reasonably and in good faith,
that the Surviving Partnership's estimate of the Damage Amount with respect
to one or more of the Claims as set forth in the Anniversary Notice is
unreasonable (a "Disputed Amount"), the General Partner shall send a notice
(the "Dispute Notice") to the Surviving Partnership and the Disbursing
Agent, within 10 days after receipt of the Anniversary Notice, specifying
the amount that the General Partner believes, acting reasonably and in good
faith, to be the proper Damage Amount with respect to any Claim described
in the Anniversary Notice. Upon the issuance of a Dispute Notice, the
General Partner and representatives of the Surviving Partnership shall
immediately meet and shall use all necessary diligence in a concerted, good
faith effort to resolve all Disputed Amounts within 10 days after issuance
of the Dispute Notice. If the General Partner and the Surviving
Partnership resolve such dispute within the 10-day period as aforesaid,
they shall jointly notify the Disbursing Agent of the agreed-upon Damage
Amount with respect to each Claim, and such joint notice shall constitute a
Final Determination with respect to the relevant Claims.
(d)If the General Partner and the Surviving Partnership do not so agree,
the determination of the Damage Amount with respect to all disputed Claims
shall be immediately submitted to prompt and binding arbitration before an
arbitrator appointed by the Philadelphia, Pennsylvania office of the
American Arbitration Association in accordance with its rules, and acting
in accordance with its rules. If any such Disputed Amount relates to a
third-party claim that is then in litigation or is otherwise unresolved,
the standard to be applied by the arbitrator in determining the Damage
Amount shall be the aggregate amount of damages that have been or are
likely thereafter to be incurred by the Surviving Partnership, including
the Surviving Partnerships' attorneys' fees, court costs and other costs of
defense, arising out of such claim. The award of the arbitrator shall be
communicated to the parties and the Disbursing Agent and shall constitute a
Final Determination, which shall be final, binding and not subject to
appeal, with respect to all the Claims that are the subject of such award,
notwithstanding that an underlying third-party claim still remains
unresolved or is subsequently resolved in a manner inconsistent with the
arbitrator's award.
(e)If the Disbursing Agent in his capacity as such is threatened with
litigation or is sued, he shall have the right to interplead all interested
parties in any court of competent jurisdiction and to deposit the Reserves
(or any portion thereof) with the clerk of that court.
(f)The Disbursing Agent shall not be liable to either the General Partner,
the former Partners of the Merged Partnership or the Surviving
Partnership, other than for performance of his duties under the Reserves
Escrow agreement or his gross negligence or intentional wrongdoing. The
Disbursing Agent may rely upon the genuineness or authenticity of any
document tendered to him by either the General Partner or the Surviving
Partnership, and shall be under no duty of independent inquiry with respect
to any acts or circumstances recited in such document.
(g)As used in this Schedule 3.13, the term "Reserves" shall refer to the
respective amounts set forth at the beginning of this Section 3.13,
together with all interest thereon. The Reserves, which are held in Cash,
shall be held by the Disbursing Agent in one or more federally- insured
money market accounts acceptable to both the General Partner and the
Surviving Partnership, or in short-term United States government
obligations having a maturity date which is acceptable to the General
Partner and the Surviving Partnership or in one or more interest-bearing
deposit accounts at a bank or other financial institution acceptable to the
General Partner and the Surviving Partnership.
(h)All Claims must be made within 180 days of the Effective Time.
(i)No Claim shall be made, other than Liabilities Claims to be paid from
the Liabilities Reserve, until total Claims exceed $25,000.00.
FIRST AMENDMENT TO AGREEMENT AND PLAN OF MERGER
THIS FIRST AMENDMENT TO AGREEMENT AND PLAN OF MERGER (this
"Agreement") is made as of the first day of September, 1997 by and among
HOME PROPERTIES OF NEW YORK, L.P., a New York limited partnership (the
"Surviving Partnership"), HENRY A. QUINN ("Quinn"), PK PARTNERSHIP, a
Pennsylvania limited partnership (the "Merged Partnership"), and the
undersigned partners of the Merged Partnership (the "PK Partners").
BACKGROUND
A. The Surviving Partnership, Quinn and the Merged Partnership
are parties to an Agreement and Plan of Merger dated as of July 31, 1997
(the "Merger Agreement"). All capitalized terms in this Agreement which
are not otherwise defined herein shall have the same meanings as such
capitalized terms are given in the Merger Agreement.
B. The General Partner has obtained the consent of the holders
of more than 80% of the Interests in the Merged Partnership to contribute
their Interests in the Merged Partnership to the Surviving Partnership, and
the parties hereto now wish to amend the Merger Agreement as provided in
Section 11.1 thereof.
NOW, THEREFORE, for good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, and intending to be
legally bound, the parties hereto agree as follows:
1. The PK Partners are hereby added as additional parties to
the Agreement. The personal liability of the PK Partners shall be limited
as provided in Section 9.14 of the Merger Agreement.
2. The parties hereto hereby agree that the Merger shall be
effected by the contribution by the PK Partners of the Interests in the
Merged Partnership to the Surviving Partnership rather than by a merger of
the Merged Partnership into the Surviving Partnership.
3. The parties hereto agree to take all actions which are
necessary to effect the Merger by the contribution by the PK Partners of
the Interests in the Merged Partnership to the Surviving Partnership rather
than by a merger of the Merged Partnership into the Surviving Partnership.
4. Except as amended by this Agreement, all of the terms and
conditions of the Merger Agreement shall remain in full force and effect.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
SURVIVING PARTNERSHIP:
HOME PROPERTIES OF NEW YORK,L.P., a New York limited partnership
By: Home Properties of New York, Inc.,
its General Partner
By: /s/ Ann M. McCormick
---------------------------
Ann M. McCormick, Vice President
PK PARTNERSHIP, a Pennsylvania limited
partnership
By: /s/ Henry A. Quinn
----------------------------
Henry A. Quinn, General Partner
QUINN:
/s/ Henry A. Quinn
- --------------------
Henry A. Quinn
PK PARTNERS:
/s/ Henry A. Quinn
- ---------------------
Henry A. Quinn, as Attorney-In-Fact for
the PK Parners listed on Exhibit "A"
attached to this Agreement
<PAGE>
EXHIBIT "A"
PK PARTNERS
FIRST AMENDMENT TO AGREEMENT AND PLAN OF MERGER
THIS FIRST AMENDMENT TO AGREEMENT AND PLAN OF MERGER (this
"Agreement") is made as of the 22nd day of September, 1997 by and among
HOME PROPERTIES OF NEW YORK, L.P., a New York limited partnership (the
"Surviving Partnership"), NOP CORP., a Pennsylvania corporation ("NOP"),
and NORPARK PARTNERSHIP, a Pennsylvania limited partnership (the "Merged
Partnership").
BACKGROUND
A. The Surviving Partnership and New Orleans East Limited, a
New Jersey limited partnership ("New Orleans East") are parties to an
Agreement and Plan of Merger dated as of July 31, 1997 (the "Merger
Agreement"). All capitalized terms in this Agreement which are not
otherwise defined herein shall have the same meanings as such capitalized
terms are given in the Merger Agreement.
B. As provided in Section 11.1 of the Merger Agreement, NOP
has, as of the date of this Agreement, dissolved New Orleans East and NOP
and the Merged Partnership have become the fee owners of the Property, as
tenants in common, in proportion to their respective Interests in New
Orleans East.
C. The parties hereto now wish to amend the Merger Agreement as
provided in Section 11.1 thereof.
NOW, THEREFORE, for good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, and intending to be
legally bound, the parties hereto agree as follows:
1. NOP and the Merged Partnership are hereby added as
additional parties to the Merger Agreement. The personal liability of NOP
and the Merged Partnership shall be limited as provided in Section 9.14 of
the Merger Agreement.
2. New Orleans East is hereby deleted as a party to the Merger
Agreement.
3. The Merged Partnership, rather than New Orleans East, shall
be merged into the Surviving Partnership substantially in accordance with
the terms of the Merger Agreement.
4. At the Closing, NOP shall contribute its interest in the
Property to the Surviving Partnership.
5. The parties hereto agree to take all actions which are
necessary to effect the foregoing changes to the structure of the
transactions described in the Merger Agreement.
5. Except as amended by this Agreement, all of the terms and
conditions
<PAGE>
of the Merger Agreement shall remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
SURVIVING PARTNERSHIP:
HOME PROPERTIES OF NEW YORK,L.P., a New York limited partnership
By: Home Properties of New York, Inc.,
its General Partner
By:/s/ Ann M. McCormick
---------------------------------
Ann M. McCormick, Vice President
NORPARK PARTNERSHIP, a Pennsylvania limited partnership
By: /s/ Henry A. Quinn
--------------------------
Henry A. Quinn, General Partner
NOP CORP.
By:/s/ Henry A. Quinn
-------------------------------
Henry A. Quinn, President
CONTRIBUTION AGREEMENT
THIS CONTRIBUTION AGREEMENT (this "Agreement") is dated as of this
31st day of July, 1997, and is between HOME PROPERTIES OF NEW YORK, L.P.,
a limited partnership formed under the laws of New York (the
"Partnership"), HENRY A. QUINN ("Quinn") and LAMAR PARTNERSHIP, a
Pennsylvania limited partnership (the "Contributing Partnership") (Quinn
and the Contributing Partnership are hereinafter collectively called the
"Contributors").
WITNESSETH:
WHEREAS, the Contributors own title to the Property (hereinafter
defined); and
WHEREAS, it is the intention of the parties hereto that, pursuant to
the terms of this Agreement, the Contributors will contribute the Property
to the Partnership and the Partnership will acquire the Property from the
Contributors.
NOW THEREFORE, the parties hereto agree as follows:
ARTICLE I
CONTRIBUTION
1.1 CONTRIBUTION. Subject to the terms and conditions of this
Agreement, including but not limited to the satisfaction or waiver of the
conditions set forth in Article VI hereof (the "Contribution Conditions"),
the Contributors agree to contribute to the Partnership, and the
Partnership agrees to accept from the Contributors, the Property (the
"Contribution").
1.2 DEED. Subject to the satisfaction of the Contribution
Conditions, at the completion of the Closing (hereinafter defined), fee
simple title to the Real Property (hereinafter defined) shall be conveyed
by the Contributors to the Partnership by a deed (the "Deed") containing
the Contributors' special warranty, excluding from such warranty the
Permitted Encumbrances (as defined in Section 8.2 below). Title to the
Other Items (hereinafter defined) shall be conveyed by the Contributors to
the Partnership at the completion of Closing by a bill of sale (the "Bill
of Sale").
1.3 CLOSING. The closing for the Contribution (the "Closing") shall
be held on the date (the "Closing Date") on which all of the Contribution
Conditions have been waived or satisfied but not later than September 30,
1997. The closing for the Contribution (the "Closing") shall be held on the
Closing Date at the offices of Wolf, Block, Schorr and Solis-Cohen, 350
Sentry Parkway, Building 640, Blue Bell, Pennsylvania, commencing at 10:00
a.m.
1.4 SOLICITATION OF PARTNERSHIP APPROVAL. By executing this
Agreement, Home Properties of New York, Inc. as the general partner of the
Partnership ("HME") agrees that it will, promptly after the date of this
Agreement, cause the Partnership to solicit the approval of its partners to
(a) the Contribution and (b) the Partnership Amendments.
<PAGE>
1.5 NO OFFER TO SELL. The General Partner (hereinafter defined) hereby
agrees that, between the date of the execution of this Agreement and the
Closing Date, he will not offer to sell or negotiate a sale of the
Property, directly or indirectly, including, without limitation, pursuant
to a merger.
ARTICLE II
PARTNERSHIP AMENDMENTS
2.1 PARTNERSHIP. The Agreement of Limited Partnership of the Partnership
(the "Partnership Agreement") shall remain in full force and effect after
the Contribution in its form immediately prior to the Contribution, except
the Partnership Agreement shall be amended on the Closing Date to (a)
reflect the issuance of the Units pursuant to subparagraphs 3.3(a) and (c)
below and (b) incorporate the provisions set forth in EXHIBIT B (EXHIBIT A
is reserved) attached hereto (the "Partnership Amendments").
ARTICLE III
CONSIDERATION
3.1 TOTAL CONSIDERATION.The aggregate consideration (the "Consideration")
payable by the Partnership in connection with the contribution of the
Property to the Partnership shall be $3,630,000, subject to adjustments at
Closing pursuant to Section 3.9 and costs paid pursuant to Section 3.10(c)
and Section 3.11, plus the amount of any tax or other reserves held by the
Existing Lender (hereinafter defined).
3.2 CLOSING PRICE.At the Closing, the Partnership shall pay the
Contributors, in proportion to their percentage ownership interests in the
Real Property, the Closing Price. "Closing Price" means the Consideration
less the principal amount as of the Closing Date of the existing mortgage
loans (collectively the "Existing Loan") covering the Real Property in
favor of IDS Life Insurance Company of New York and Keystone Bank
(collectively the "Existing Lender") less the amount specified by the
Contributors as described in Section 3.11 and less the Reserve Amount.
"Reserve Amount" means $72,000 . The net amount of the Closing Price
received by the Contributing Partnership shall be distributed by the
general partner (the "General Partner") of the Contributing Partnership to
the holders of the outstanding interests in the Contributing Partnership
(the "Interests"). The General Partner may direct that the Partnership
issue Units directly to the holders of Interests who are to receive Units.
The Reserve Amount shall be held and disbursed by the Disbursing Agent (as
defined in Section 3.3) as described in Sections 3.4 and 3.13. The
Contributors shall have the right to receive the Reserve Amount less all
amounts paid or subject to claims of the Partnership by reason of a
material breach or material representation of any representations,
warranties, covenants or agreements of the Contributors which survive
Closing (but only during the period of such survival) ("Indemnity Claims").
3.3 PAYMENT OF THE CLOSING PRICE.
(a)The Partnership shall deliver, in immediately available funds and in
Units (hereinafter defined), to Wolf, Block, Schorr and Solis-Cohen (the
"Disbursing Agent") the Reserve Amount.
(b)The "Cash Portion" of the Closing Price shall be the aggregate amount of
the Closing Price distributable by the Contributing Partnership to the
holders of Interests who have failed to provide the Surviving Partnership
with evidence satisfactory to it that such holders are "Accredited
Investors," as such term is defined in Regulation D promulgated by the
Securities and Exchange Commission under the Securities Act of 1933, as
amended (the "Securities Act"). Notwithstanding anything to the contrary
contained in this Agreement, if the total of the Interests who are not
Accredited Investors exceeds fifteen percent of all of the Interests, Quinn
and the Contributing Partnership shall have the right, by giving written
notice thereof to the Partnership at any time prior to the Closing Date, to
terminate this Agreement.
(c)The Closing Price payable to Quinn and distributable to those holders of
Interests other than those described in (b) above shall be paid by the
issuance of Units of limited partnership in the Partnership ("Units"). The
number of Units to be issued to Quinn and distributable to each holder of
an Interest shall be the portion of the Closing Price payable to Quinn and
distributable to the holder of such Interest divided by the average of the
daily market price for the ten (10) consecutive trading days immediately
preceding the Closing Date of the shares of common stock of HME (the
"Closing Date Price"). The market price for each such trading day shall be
the closing price of the common stock on the New York Stock Exchange,
regular way, on such day as reported in the Wall Street Journal, Eastern
Edition.
3.4 PAYMENT WITH RESPECT TO THE RESERVE AMOUNT.
(a) On the 90th day after the Closing Date, the Disbursing Agent shall
distribute pro rata to the Contributors one-half of that portion of the
Reserve Amount that has not been paid or subject to Indemnity Claims.
(b) On the 180th day after the Closing Date, the Disbursing Agent shall
distribute pro rata to the Contributors that portion of the Reserve Amount
that has not been paid, disbursed or subject to Indemnity Claims.
(c) At any time, and from time to time, after the 180th day after the
Closing Date that there is a Final Determination (as defined in Schedule
3.13) that any remaining portion, if any, of the Reserve Amount is no
longer subject to Indemnity Claims, the Disbursing Agent shall distribute
such remaining portion pro rata to the Contributors.
3.5 INTENTIONALLY OMITTED
3.6 INTENTIONALLY OMITTED
3.7 INTENTIONALLY OMITTED
3.8 PRO-RATED DISTRIBUTION. The initial distribution payable with respect
to Units issued as part of the Consideration shall be made on the date on
which HME pays the dividend to the holders of its common stock that relates
to the earnings for the calendar quarter in which the Units were issued and
shall be pro-rated such that the partners receiving Units shall receive a
pro-rata distribution for the period from the date on which the Units were
issued to and including the last day of the calendar quarter in which the
Units were issued.
3.9 ADJUSTMENTS AT CLOSING. With respect to the Property, the following
shall be adjusted and pro-rated between the Partnership and the
Contributors on the Closing Date as of midnight of the night preceding the
Closing Date and shall be paid in cash at Closing:
A. current fiscal year real estate taxes;
B. water and sewer rents and charges;
C. INTENTIONALLY OMITTED
D. fuel;
E. INTENTIONALLY OMITTED
F. INTENTIONALLY OMITTED
G. charges under the service contracts;
H. laundry income;
I. interest with respect to the Existing Loan; and
J. INTENTIONALLY OMITTED
K. rents.
(i) All rent payments collected on or before the Closing Date for the month
in which the Closing Date occurs shall be pro-rated as between the parties
as of the Closing Date.
(ii) All rent collected after the Closing Date shall be applied first to
the rent due for the month in which such rent was collected and shall then be
applied to the next most recent delinquent rent, including any rent which
was not collected for any period prior to the Closing Date. Delinquent rent
amounts collected with respect to any period prior to the Closing Date
shall belong to the Contributors and, if paid to the Partnership, the
Partnership shall promptly send such rent pro rata to the Contributors and
the pro rata portion paid to the Contributing Partnership shall be
distributed by the General Partner to the partners of the Contributing
Partnership pursuant to the agreement described in paragraph (e) of Section
6.3.
(iii) All rent collected by the Contributors, prior to the Closing Date,
for months subsequent to Closing Date shall be paid to the Partnership at
the Closing.
(iv) All rent collected for rental periods after the Closing Date shall
belong to the Partnership and, if paid to any of the Contributors shall be
promptly sent to the Partnership.
Any error in the calculation of adjustments shall be corrected subsequent
to the Closing Date with appropriate credits to be given based upon
corrected adjustments, provided, however, that the adjustments (except if
errors are caused by misrepresentations) shall be final upon expiration of
the 90th day after the Closing Date.
3.10 COSTS.
(a) The Partnership and the Contributors shall each be responsible for
one half of any assumption fees payable to the Existing Lender, provided,
however, that if as of the Closing Date any Existing Loan may be prepaid
without a penalty of more than 1% of its principal balance at the time of
prepayment, the entire assumption fee, or, if the Partnership elects to
prepay such Existing Loan, the entire prepayment fee, shall be the
responsibility of the Partnership.
(b) The Partnership shall pay all recording fees, its attorneys' fees,
the costs of obtaining a binder or commitment from a title insurance company,
the premium for its title insurance policy, one half of any Pennsylvania
state and local transfer tax, and all other costs and expenses incidental
to or in connection with closing this transaction customarily paid for by
the purchaser of similar property. The Contributors shall pay its
attorneys' fees, one-half of any Pennsylvania state and local transfer tax,
and all other costs and expenses incidental to or in connection with
closing this transaction customarily paid for by the seller of similar
property.
(c) The amounts payable pursuant to Sections 3.10(a) and/or (b) by the
Contributors on account of any assumption fee payable to the Existing
Lender and/or account of one half of any Pennsylvania state and local
transfer tax shall be charged against the Consideration.
3.11 CASH PAYMENT DIRECTED BY CONTRIBUTORS. At the Closing, the
Contributors shall be entitled to direct that a portion of the
Consideration, up to a maximum amount equal to 7% of the Consideration, be
paid by the Partnership to pay certain closing costs of the Contributors
and to satisfy certain liabilities of the Contributors.
3.12 INTENTIONALLY OMITTED.
3.13 ESCROW AGREEMENT.The Reserve Amount shall be held and disbursed
pursuant to the terms of an escrow agreement that shall be in form and
substance acceptable to the parties hereto, but which provide at least the
claim resolution procedures set forth in SCHEDULE 3.13 hereof.
3.14 INTENTIONALLY OMITTED.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1 BY THE CONTRIBUTORS. The Contributors hereby make the following
representations and warranties to the Partnership as of the date hereof.
(a) REAL PROPERTY DESCRIPTION. The real property owned by the
Contributors and to be conveyed to the Partnership by the Deed on the
Closing Date consists of one or more parcels of land known as Landon
Court Apartments which includes 44 apartments and Marshall House Apartments
which includes 63 apartments (collectively the "Project"), located in the
Borough of Lansdowne and Commonwealth of Pennsylvania, more particularly
described on EXHIBIT C, attached hereto, together and including all buildings
and other improvements thereon, including but not limited to, the 44 and 63
apartment units, respectively, and all rights of the Contributors in and to
any and all streets, roads, highways, alleys, driveways, easements and
rights-of-way appurtenant thereto (the foregoing are hereafter collectively
referred to as the "Real Property").
(b) OTHER ITEMS. To the extent that the following items do not
constitute part of the Real Property, the following items now in or on
the Real Property if owned by the Contributors and not by tenants of the Real
Property shall be conveyed to the Partnership by the Bill of Sale on the
Closing Date:
(1) all heating, plumbing and lighting fixtures,
(2) ranges, refrigerators, disposals and dishwashers,
(3) water heaters,
(4) any and all bathroom fixtures, wall-to-wall carpeting, traverse
rods, exhaust fans, hoods, signs, screens, maintenance building, model unit
furniture (except for model unit furniture which is rented), fences,
carpeting and runners, cabinets, mirrors, shelving, any humidifier and
dehumidifier units, air conditioning units, mailboxes, office furniture
(except for office furniture which is rented), and related equipment in
connection with the Project, and
(5) any fixtures appurtenant to the Property and any other furniture or
equipment used in connection with the operation and maintenance of the
Property, including any vehicles used in connection with the operation and
maintenance of the Property (hereinafter with the items listed in (1)-(4)
above, collectively, the "Other Items"). The Real Property and the Other
Items are hereinafter collectively called the Property.
(c) CONDITION OF OTHER ITEMS. To the best knowledge of Quinn and the
General Partner and the current officers of Mill Creek Realty Co.,
substantially all of the Other Items are in reasonable working order or
condition. Except with respect to the Existing Loan, the Contributors have
not subjected any of the Other Property to any security interests, liens,
claims, charges or other encumbrances.
(d) ORGANIZATION AND AUTHORIZATION. The Contributing Partnership is a
limited partnership duly organized, validly existing and in good standing
under the laws of the Commonwealth of Pennsylvania.
(e) AUTHORITY RELATIVE TO THIS AGREEMENT. (i) The Contributing
Partnership has full power and authority to execute, deliver and perform this
Agreement and to consummate the transactions contemplated hereby; (ii) all
actions necessary to be taken by it or on its behalf to execute, deliver and
perform this Agreement and to consummate the transactions contemplated
hereby, have been duly and validly taken; and (iii) this Agreement has been
duly and validly executed and delivered by it and, assuming due execution
and delivery by the Partnership, constitutes a valid and binding agreement
enforceable against it in accordance with its terms, except to the extent
that enforceability may be limited by applicable bankruptcy,
reorganization, insolvency, moratorium or similar laws affecting the
enforcement of creditors' rights generally as at the time in effect and by
general principles of equity, regardless of whether such enforceability is
considered in a proceeding in equity or at law.
(f) OUTSTANDING LIMITED PARTNERSHIP INTERESTS. SCHEDULE 4.1(F) hereto
lists the current holders of all outstanding limited partnership interests
of the Contributing Partnership together with the percentage interest held
by each holder. In the event that any holder listed on SCHEDULE 4.1(F)
transfers any interests prior to the Closing Date, the Contributing
Partnership shall provide written notice to the Partnership of such
transfer prior to the Closing Date, and such notice shall include the names
of the transferor and the transferee, the address of the transferee and the
number of units transferred.
(g) CONSENTS AND APPROVALS; NO VIOLATION. To the best of the
Contributing Partnership's knowledge, neither the execution, delivery and
performance of this Agreement nor the consummation of the transactions
contemplated hereby will: (i) conflict with or will result in any breach
of any provision of its Agreement of Limited Partnership or Certificate of
Limited Partnership; (ii) require it to obtain any consent, approval,
authorization or permit from, or file with or notify, any governmental or
regulatory authority, except where the failure to obtain such consent,
approval, authorization or permit, or to make such filing or notification,
would not have a Material Adverse Effect (hereinafter defined); (iii)
except to the extent that the consent of the Existing Lender is required,
constitute a breach or will
result in a default under any of the terms, conditions or provisions of any
note, bond, mortgage, indenture, license, contract, agreement or other
instrument or obligation of any kind to which it is a party or by which it
is bound, except for any such breach or default as would not have a
Material Adverse Effect; or (iv) violate any order, writ, injunction,
judgment, decree, law, statute, rule, regulation or governmental permit or
license applicable to it, which violation would have a Material Adverse
Effect, unless any waiver, consent, approval, authorization, permit, filing
or notification necessary to prevent any such conflict, breach, default or
violation has been obtained prior to the Closing Date.
(h) INTENTIONALLY OMITTED.
(i) INTENTIONALLY OMITTED.
(j) COMPLIANCE WITH LAWS. Except as disclosed in SCHEDULE 4.1(J) attached
hereto, neither the General Partner nor any current officer of Mill Creek
Realty Co. has received written notice, addressed to the Contributors or
Mill Creek Realty Co., which remains outstanding that it has not complied
with and is in default under, or in violation of, or received any written
notice which remains outstanding that the Contributors, the Property or the
Other Items may be in violation of, any law, ordinance, rule, regulation or
code or condition in any approval or permit pursuant thereto (including
without limitation, any zoning, sign, environmental, labor, safety, health
or price or wage control, ordinance, rule, regulation or order of)
applicable to the ownership, development, operation or maintenance of the
Property or the Other Items.
(k) LEASES. There are no written leases affecting the Property to which
the Contributors is a party with a term greater than one year. The rent roll
attached hereto as SCHEDULE 4.1(K) is true and correct as of the date of
this Agreement.
(l) CONDEMNATION. The Contributors have not received written notice of
pending condemnation of the Property, or any part thereof, or of any plans
for improvements which might result in a special assessment against the
Property.
(m) INTENTIONALLY OMITTED
(n) SERVICE CONTRACTS. There are no service contracts with respect to
the Property or the Other Items which will continue in effect after the Closing
except as set forth on SCHEDULE 4.1(N) attached hereto.
(o) EXECUTORY CONTRACTS. There are no executory contracts connected with
the Property or the Other Items, except as set forth on SCHEDULE 4.1(O)
attached hereto.
(p) ONGOING PERFORMANCE. Until the Closing Date, the Contributors shall
continue to fulfill all of their obligations under the terms of the
Existing Mortgage, the leases encumbering the Property, the service
contracts and the executory contracts, and the Contributors shall operate,
and perform routine maintenance and repair with respect to, all
landscaping, buildings, fixtures and facilities, including, without
limitation, the Other Items, in accordance their current practices. With
respect to non-routine maintenance or repair, the following shall apply:
(1)Except in the case of emergency, the Contributors shall not arrange
for the making of any non-routine repair or replacement costing in
excess of $10,000 in any one instance without the prior written consent
of the Partnership which consent shall not be unreasonably withheld
and shall be deemed given if it is not denied by written notice
received by the Contributors within 3 business days after request for
such consent was received by the Partnership. If such consent is given
or if such cost is less than $10,000, in the event that the Contribution
occurs, the cost of such repair or replacement shall be the
responsibility of the Partnership and if any amount on account of such
cost is paid by the Contributors prior to Closing, the Partnership
shall reimburse that to the Contributors at Closing.
(2) Any non-routine repairs or replacements arranged by the
Contributors which are not the responsibility of the Partnership
pursuant to Section 4.1(p)(1) above or Section 4.1(p)(3) below
shall be a liability of the Contributors which shall not be assumed
by the Partnership.
(3) In the event that any non-routine repairs or replacements are
required on an emergency basis, which emergency is such as does not
comfortably allow the passage of the time period specified above for
obtaining the approval of the Partnership, the Contributors may
arrange for such repair or replacement, and in the event that the
Contribution occurs, the cost thereof shall be the responsibility
of the Partnership and at Closing the Partnership shall reimburse
the Contributors for any amount paid on account of such repair or
replacement prior to Closing.
(q) APPLIANCES. All of the air conditioning units at Marshall House
belong to the tenants thereof. Except as previously disclosed to the
Surviving Partnership, all of the ranges and refrigerators in the Property
are the property of the Contributors and not of the tenants.
(r) FINANCIAL INFORMATION. The financial information attached hereto as
SCHEDULE 4.1(R) (income and expenses for calendar year 1995 and 1996) is
substantially true and accurate.
(s) ENVIRONMENTAL. Except as identified in SCHEDULE 4.1(S) attached
hereto, the Contributors have received no notice of any violation of any
applicable Environmental Laws (below defined) with respect to the Property.
"Environmental Laws" shall mean all federal, state and local laws,
statutes, ordinances and codes relating to the protection of the
environment and/or governing the use, storage, treatment, generation,
transportation, processing, handling, production or disposal of any
Hazardous Substance and the rules, regulations, and orders with respect
thereto. "Hazardous Substance" means, without limitation, any flammable,
explosive or radioactive material, polychlorinated biphenyl, petroleum or
petroleum product, methane, hazardous materials, hazardous wastes,
hazardous or toxic substances or related materials, as defined in any
applicable Environmental Laws. From the date of acceptance hereof to and
including the Closing Date or the earlier termination of this Agreement,
the Contributors shall promptly provide the Partnership with a copy of any
notice, citation, complaint or other directive from any person, entity or
governmental authority whereby compliance with Environmental Laws is called
into question with respect to the Property.
4.2 BY THE PARTNERSHIP. The Partnership hereby makes the following
representations and warranties to the Contributors as of the date hereof.
(a) ORGANIZATION AND AUTHORIZATION. The Partnership is a limited
partnership duly organized, validly existing and in good standing under the
laws of the State of New York and has adopted the New York Act. It has all
requisite power and authority to own, lease and operate its properties and
to carry on its business as now being conducted. It is duly qualified or
licensed to do business as a foreign limited partnership and in good
standing in each jurisdiction in which the property owned, leased or
operated by it makes such qualification or license necessary, except in
each case in those jurisdictions where the failure to be so duly qualified
or licensed and in good standing would not have a Material Adverse Effect.
For purposes of this Agreement, "Material Adverse Effect" means a material
adverse effect on the business, assets, financial condition or results of
operation of the party making the representation or warranty to which such
qualification is being applied.
(b) AUTHORITY RELATIVE TO THIS AGREEMENT. Subject to the receipt of the
approvals described in Section 1.4 and in subparagraph (e) of Section 6.3
of this Agreement: (i) the Partnership has full power and authority to
execute, deliver and perform this Agreement and to consummate the
transactions contemplated hereby; (ii) all actions necessary to be taken
by it or on its behalf to execute, deliver and perform this Agreement and
to consummate the transactions contemplated hereby, have been duly and
validly taken; and (iii) this Agreement has been duly and validly executed
and delivered by it and, assuming due execution and delivery by the
Contributors, constitutes a valid and binding agreement enforceable against
it in accordance with its terms, except to the extent that enforceability
may be limited by applicable bankruptcy, reorganization, insolvency,
moratorium or similar laws affecting the enforcement of creditors' rights
generally as at the time in effect and by general principles of equity,
regardless or whether such enforceability is considered in a proceeding in
equity or at law.
(c) CONSENTS AND APPROVALS; NO VIOLATIONS. To the best of the
Partnership's knowledge, as of the Closing Date, neither the execution,
delivery and performance of this Agreement nor the consummation of the
transactions contemplated hereby will: (i) conflict with or will result in
any breach of any provision of its Agreement of Limited Partnership or
Certificate of Limited Partnership; (ii) require it to obtain any consent,
approval, authorization or permit from, or file with or notify, any
governmental or regulatory authority, except where the failure to obtain
such consent, approval, authorization or permit, or to make such filing or
notification, would not have a Material Adverse Effect; (iii) constitute a
breach or will result in a default under any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, license, contract,
agreement or other instrument or obligation of any kind to which it is a
party or by which it is bound, except for any such breach or default as
would not have a Material Adverse Effect; or (iv) violate any order, writ,
injunction, judgment, decree, law, statute, rule, regulation or
governmental permit or license applicable to it, which violation would have
a Material Adverse Effect, unless, any waiver, consent, approval,
authorization, permit, filing or notification necessary to prevent any such
conflict, breach, default or violation has been obtained prior to the
Closing Date.
(d) PARTNERSHIP INTERESTS. On the Closing Date, the Units to be issued
as provided in this Agreement shall be duly issued by the Partnership and the
recipients will be duly admitted as limited partners of the Partnership.
(e) PARTNERSHIP AGREEMENT. A true, correct and complete copy of the
Partnership Agreement is attached hereto as EXHIBIT "D". The Partnership
hereby agrees that, with the following exceptions, the Partnership
Agreement shall not be further amended on or prior to the Closing Date: (i)
the Partnership Amendments, (ii) amendments in connection with the issuance
of additional shares under HME's Dividend Reinvestment Stock Purchase,
Resident Stock Purchase and Employee Stock Purchase Plan, (iii) amendments
in connection with mergers or transactions similar to the Contribution
which are currently in process wherein additional Units are issued in
connection with the acquisition of real property or of interests in
entities which own real property, the provisions of which have been
disclosed in writing to the Contributors prior to the execution of this
Agreement, and (iv) the formation of a subsidiary of HME to hold Units
owned by HME.
ARTICLE V
COVENANTS OF THE PARTIES
5.1 FURTHER ASSURANCE. Subject to the terms and conditions of this
Agreement, each of the parties hereto will use reasonable efforts to take,
or cause to be taken, all actions, and to do, or cause to be done, all
things necessary under applicable laws and regulations to consummate the
transactions contemplated by this Agreement, including, but not limited to,
taking any actions necessary to cause the Contribution Conditions to be
satisfied.
5.2 REPRESENTATIONS AND WARRANTIES. Each of the parties hereto shall give
written notice to the other party promptly upon the occurrence of, or upon
becoming aware of, either: (i) the occurrence of any event which makes any
representation or warranty contained in this Agreement not true in any
material respect; or (ii) any material and adverse development in the
condition (financial or otherwise) or operations of such party.
5.3 REPURCHASE AGREEMENTS. The Partnership hereby covenants and agrees that
it will, on the Closing Date, enter into an agreement with Quinn and each
of the partners of the Contributing Partnership who is to receive Units
whereby the Partnership agrees that:
(a) Upon the written request of Quinn or any such partner, the
Partnership will purchase any or all of the Units held by Quinn or such
partner at a purchase price per Unit equal to the Closing Date Price
(as defined in Section 3.3(c) above). The written notice must be received
by the Partnership on or before the date which is one hundred eighty (180)
days after the Closing Date.
(b) Upon the written request of Quinn or any such partner which is made
(i) after the date which is one hundred eighty (180) days after the Closing
Date and (ii) on or before the date which is the later of (A) the last day
of any holding period (which holding period shall not, in any event, exceed
one year after the Closing Date) during which, in order to comply with the
requirements of the SEC, Quinn and such partners are not permitted to
convert Units into shares of common stock of HME and (B) the date on which
the SEC declares effective the Registration Statement required to be filed
with the SEC pursuant to Section 5.11 hereof, the Partnership will purchase
any or all of the Units held by Quinn or such partner at a purchase price
per Unit equal to the average of the daily market price for the ten (10)
consecutive trading days immediately preceding the date of Quinn's or such
partner's request of the shares of common stock of HME.
5.4 ACCESS TO INFORMATION. Between the date of this Agreement and the
Closing Date, the Partnership, on the one hand, and the Contributing
Partnership, on the other hand, will each, during ordinary business hours
and upon reasonable advance notice, give to the other and their authorized
representatives reasonable access to inspect their books, records, offices
and other facilities and properties; provided, however, that: (i) any such
investigation shall be conducted in such a manner as not to interfere
unreasonably with the operation of the other's business; (ii) no party
shall be required to take any action which would constitute a waiver of the
attorney-client privilege; and (iii) no party need supply the other with
any information which it is under a legal obligation not to supply.
5.5 REPRESENTATION LETTER. Upon the demand of the Partnership, the
General Partner will provide a signed representation letter substantially
in the form of EXHIBIT "E" attached hereto. The General Partner and the
Contributing Partnership will provide access to the Partnership's
representative to all financial and other information relating to the
Contributing Partnership and the Property as is sufficient to enable them
to prepare audited and pro-forma financial statements, in conformity with
Regulation S-X of the Securities and Exchange Commission (the "Commission")
and any registration Statement, report or disclosure statement to be filed
with the Commission.
5.6 INTENTIONALLY OMITTED
5.7 INTENTIONALLY OMITTED.
5.8 MANAGEMENT AGREEMENTS. On or prior to the Closing Date, the
Contributors shall terminate any agreements pertaining to the management of
the Property.
5.9 CLOSING DOCUMENTS. At the Closing, the Contributors shall deliver to
the Partnership a certificate of title and any necessary transfer documents
relating to any vehicles, a current rent roll ("Rent Roll") certified, as
of the date of the Closing Date, which shall include a list of all tenants,
all rental obligations of each tenant with respect to the Property and all
security deposits (including all interest due to tenants pursuant to
Pennsylvania or other applicable laws). At the Closing, the Contributors
shall transfer to the Partnership an amount equal to the aggregate amount
of the security deposits shown on the Rent Roll. At the Closing, the
Contributors shall also deliver to the Partnership complete originals of
each lease listed on the Rent Roll.
5.10 INSPECTION. Upon and after execution of this Agreement by both
parties, the Contributors agree that the Partnership and its authorized
representatives shall have the right and privilege to enter upon the
Property and the Contributing Partnership's offices, upon reasonable
notice, during regular business hours, for the purpose of gathering such
information and conducting such environmental and engineering studies or
other tests and reviews as the Partnership may deem appropriate and
necessary. All such inspections, studies, tests and reviews shall be at the
Partnership's sole expense. The Contributors agree to cooperate with the
Partnership by making available to the Partnership such records, plans,
drawings or other data as may be in their possession or control relating to
the Property and its operation; provided, however, that the Partnership
agrees to indemnify the Contributors of and from any loss or damage
occasioned by such entry, and agrees further to restore to its original
condition, at the Partnership's own cost and expense, any property
disturbed by such entry.
5.11 SUFFICIENT REGISTERED SHARES. The Partnership hereby represents
and warrants to and covenants with the Contributors and the partners of the
Contributing Partnership that on the Closing Date and thereafter for so
long as any Units issued to Quinn and the partners of the Contributing
Partnership are outstanding there shall be at all times, a sufficient
number of reserved shares of HME to permit the conversion of all
outstanding Units into shares of HME pursuant to the terms of the
Partnership Agreement. Within 10 days after the Closing Date, the
Partnership agrees to file a registration statement (the "Registration
Statement") with the SEC registering the resale of the shares of common
stock of HME into which the Units may be converted and to use reasonable
commercial efforts to have the registration promptly declared effective by
the SEC. Notwithstanding anything to the contrary contained in this
Agreement, in the event that the Partnership has not filed the Registration
Statement with the SEC by the date (the "Outside Filing Date") which is the
30th day after the Closing Date, then for and with respect to each day
during the period between the Outside Filing Date and the date on which the
Registration Statement is filed with the SEC, the Partnership shall pay to
Quinn and the partners of the Contributing Partnership which hold Units, as
liquidated damages and not as a penalty, the sum of $10,000, which sum
shall be apportioned pro rata among Quinn and such partners of the
Contributing Partnership.
5.12 TAX PROVISIONS. The Partnership agrees to observe and comply with
the following:
(a) The Partnership will use the traditional method (and not the curative
or remedial method), as contemplated by Treasury Regulations <section>1.704-
3(b) to allocate book-tax differences with respect to the assets which are
deemed contributed to the Partnership by the Contributors.
(b) Home Properties agrees that for a period of 5 years following the
Closing Date, (i) the Partnership shall not restructure the share of the
Partnership's debt of Quinn and the partners of the Contributing
Partnership who shall have received Units in the Partnership (Quinn and
such partners, collectively, the "Unit Holders") in such manner as to cause
a reduction in the amount of Unit Holders' share of non-recourse debt
allocable to and encumbering the Property without the Unit Holders' prior
written consent, and (ii) the Partnership will not dispose of any of its
interest in the Real Property, unless such disposition is structured as a
tax-deferred, like-exchange under <section>1031 of the Code, or otherwise
is substantially tax-deferred under the Code. Any property or real estate
assets acquired by the Partnership pursuant to such tax-deferred, like-
exchange shall remain subject to the restriction on disposition contained
hereunder until the end of the aforesaid 5-year period. In the event that
the Partnership takes any such action during such 5-year period, the
Partnership shall indemnify and save harmless the Unit Holders from and
against any federal and state income tax liability, including but not
limited to: (i) income taxes suffered as a result of all payments made
under this subsection; and (ii) interest, penalties and the reasonable fees
of attorneys and accountants.
(c) The Unit Holders will receive annually from the Partnership Form 1065,
Schedule K-1, Partner's Share of Income, Credit, Deductions, etc. This
form will also be part of the tax return, Form 1065, filed by the
Partnership with the Internal Revenue Service. The Partnership represents
that the Schedule K-1 submitted to Unit Holders for use in the preparation
of their tax returns will reflect the allocation to Unit Holders as
partners of a share of non-recourse liabilities in accordance with Reg.
Sec. 1.752-3 of the Internal Revenue Code, such that as a result of the
allocation the Unit Holders shall recognize no income upon the contribution
of the Property to the Partnership, and for a period of 5 years following
the Closing Date except to the extent cash distributions from the
Partnership to a Unit Holder exceeds such Unit Holder's basis in his or her
Units. The Contributors represent that as of December 31, 1996: (i) their
aggregate built in gain determined in accordance with the principals set
forth in Section 704(c) of the Internal Revenue Code of 1986 ("Code") is as
set forth on SCHEDULE 5.12 assuming that the Property has a fair market
value of $3,630,000. as of the date of the Contribution; (ii) the amount
of nonrecourse debt encumbering the Property is $1,565,270.; (iii) the
capital account of each of the Unit Holders who is a partner of the
Contributing Partnership is as set forth on SCHEDULE 5.12. The
Partnership's representation contained in this Section 5.12 (c) is
conditioned upon the accuracy of the representations contained in the
preceding sentence.
ARTICLE VI
CONDITIONS OF CONTRIBUTION
6.1 MANDATORY CONDITIONS. Neither the Partnership nor the Contributors
shall have any obligation to complete Closing under this Agreement unless,
on or before September 30, 1997:
(a) OTHER CONDITIONS. All of the contingencies and conditions (including,
without limitation, the conditions set forth in Sections 6.2 and 6.3
hereof) contained in this Agreement have been satisfied or waived as
provided herein.
(b) OTHER TRANSACTIONS. The conditions to the mergers with and
contributions to the Partnership with the entities listed on the attached
SCHEDULE 6.1 also shall have been satisfied, and the mergers and
contributions are to occur simultaneously with the Contribution.
(c) EXISTING LENDER APPROVAL. The Existing Lender shall have approved
the Contribution and shall have agreed to the assumption of the Existing Loan
by the Partnership (unless the Partnership elects to prepay the Existing
Loan pursuant to Section 3.10(a) hereof).
6.2 CONDITIONS TO CONTRIBUTORS'S OBLIGATIONS. Contributors shall have no
obligation to complete Closing under this Agreement unless:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of the Partnership set forth herein shall be true and correct in all material
respects as of the Closing Date, as certified in writing by the general
partner of the Partnership.
(b) COVENANTS. The Partnership has complied in all material respects
with the covenants made by it in this Agreement to be complied with by it from
the date hereof through the Closing Date.
(c) APPROVAL. The Contributing Partnership shall have obtained the
requisite approval of its limited partners to the Contribution and the
other transactions described in this Agreement on the terms and conditions
described herein.
(d) OPINION OF COUNSEL. The Partnership's independent counsel shall
have delivered an opinion of counsel in the form of EXHIBIT F attached hereto.
(e) INTENTIONALLY OMITTED
(f) REGISTRATION RIGHTS AGREEMENT. Quinn and the partners of the
Contributing Partnership who receive Units and the Partnership shall have
entered into a registration rights agreement on customary terms,
including, without limitation, the granting of piggyback registration
rights.
(g) MARYLAND ANTI-TAKEOVER STATUTES. The Board of Directors of HME shall
have taken all action necessary so that the transactions contemplated by
this Agreement including, without limitation, the issuance of Units and the
conversion of Units into shares of HME, shall be irrevocably exempt from
the operation of <section>3-601 ET SEQ. (the "business combination"
statute) and <section>3-701 ET SEQ. (the "control share acquisition"
statute) of the Maryland General Corporation Law (collectively, the
"Maryland Anti-Takeover Statutes") and from any provisions of the Articles
of Incorporation and Bylaws of HME that may have the effect of limiting the
acquisition of Units and shares of HME in connection with the transactions
contemplated in this Agreement, including without limitation, Article 7 of
the Articles of Incorporation of HME. The Partnership and its counsel shall
have confirmed to the Contributors' satisfaction that this Agreement, the
Contribution and the other transactions contemplated hereby are exempt from
the operation of the Maryland Anti-Takeover Statutes.
6.3 CONDITIONS TO PARTNERSHIP'S OBLIGATIONS. The Partnership shall have no
obligation to complete the Closing unless:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of the Contributors set forth in this Agreement shall be true and correct in
all material respects as of the Closing Date, as certified in writing by
the General Partner.
(b) COVENANTS. The Contributors have complied with the covenants made
by them in this Agreement to be complied with by it from the date hereof
through the Closing Date.
(c) CONDITION OF PROPERTY. There are on the Closing Date, 107
apartment units in rentable condition and in compliance with federal,
state, county or local laws, ordinances, rules and regulations.
(d) INTENTIONALLY OMITTED.
(e) APPROVALS. The Partnership represents and warrants that it has
obtained the requisite approval of the Board of Directors of HME to the
Contribution and the other transactions described in this Agreement on the
terms and conditions described herein, including, without limitation, the
Surviving Partnership Amendments. The Partnership, on or prior to the
Closing Date shall have obtained the requisite approval of its limited
partners and the State of Michigan Retirement Systems to the Contribution
and the other transactions described in this Agreement on the terms and
conditions described herein. The Partnership agrees to recommend to the
limited partners of the Partnership and the State of Michigan Retirements
Systems that they vote in favor of the Contribution and the other
transactions described in this Agreement.
(f) GENERAL PARTNER AGREEMENT. The General Partner shall have executed
an agreement whereby he agrees that he will be responsible for making all
final distributions to the partners of the Contributing Partnership and
shall indemnify the Partnership from all claims relating thereto.
(g) OPINION OF COUNSEL. The Contributors' independent counsel shall
have delivered an opinion of counsel in the form of EXHIBIT G attached hereto.
ARTICLE VII
TERMINATION
7.1 TERMINATION. If the conditions of Section 6.1 of this Agreement are not
satisfied, either party, at its option and upon notice to the other party,
may terminate this Agreement. If the conditions of Section 6.2 of this
Agreement are not satisfied, the Contributors, at their option and upon
written notice to the Partnership, may terminate this Agreement. If the
condition of Section 6.3 of this Agreement are not satisfied, the
Partnership, at its option and upon written notice to the Contributors, may
terminate this Agreement. Upon the termination of this Agreement as
provided herein, neither party shall have any further rights or obligations
hereunder.
ARTICLE VIII
TITLE MATTERS
8.1 TITLE POLICIES AND SURVEYS. The Contributors have, prior to the date of
this Agreement, furnished and delivered to the Partnership a copy of the
most recent title policy issued with respect to the Real Property and a
copy of the most recent survey of the Property.
8.2 OBJECTIONS TO TITLE. The obligation of the Partnership to complete the
Closing is conditioned upon the ability of the Partnership to obtain title
insurance with respect to the Real Property insuring that, as of the
Closing Date, title to the Property is not subject to any liens,
encumbrances or other title objections other than the lien of the mortgage
securing the Existing Loan, any apartment leases for tenants of the
Property and the title exceptions identified in EXHIBIT H attached hereto
(collectively, the "Permitted Encumbrances").
ARTICLE IX
MISCELLANEOUS
9.1 AMENDMENT. This Agreement may be amended only by a writing executed by
the Partnership and the Contributors.
9.2 WAIVER OF COMPLIANCE. Except as otherwise provided in this Agreement,
any failure of any party to comply with any obligation, covenant, agreement
or condition herein may be waived by the party entitled to the benefits
thereof only by a written instrument signed by the party granting such
waiver, but such waiver or failure to insist upon strict compliance with
such obligation, covenant, agreement or condition shall not operate as a
waiver of, or estoppel with respect to, any subsequent or other failure.
9.3 ENTIRE AGREEMENT. This Agreement, including the documents, schedules,
certificates and instruments referred to herein, embody the entire
agreement and understanding of the parties hereto in respect of the
transactions contemplated by this Agreement. There are no restrictions,
promises, representations, warranties, covenants or undertakings, other
than those expressly set forth or referred to herein or therein. This
Agreement supersedes all prior agreements and understandings between the
parties with respect to such transactions.
9.4 ASSIGNMENT. This Agreement and all obligations and rights of the
parties hereunder may not be assigned by either party. Commencing with the
Closing Date, the General Partner and the partners of the Contributing
Partnership shall be third-party beneficiaries of this Agreement.
9.5 GOVERNING LAW. This Agreement shall be governed by the laws of the
Commonwealth of Pennsylvania, without reference to its principles of
conflicts of law.
9.6 INTERPRETATION. The article and section headings contained in this
Agreement are solely for the purpose of reference, are not part of the
agreement of the parties and shall not in any way affect the meaning or
interpretation of this Agreement. Article and Section references which do
not otherwise specify, are to the designated Article or Section of this
Agreement.
9.7 SEVERABILITY. The invalidity or unenforceability of any particular
provision of this Agreement shall be construed in all respects as if such
invalid or unenforceable provision were omitted. All provisions of this
Agreement shall be enforced to the full extent permitted by law.
9.8 NOTICES. All notices given pursuant to any provision of this Agreement
shall be in writing and shall be effective only if delivered personally, or
sent by registered or certified mail, postage prepaid or sent by nationally
recognized overnight carrier, to the addresses set forth below:
To Home Properties:
Home Properties of New York, L.P.
850 Clinton Square
Rochester, New York 14604
Attention: Norman Leenhouts
With a copy to Ann M. McCormick
at the same address
To the Contributors:
Henry A. Quinn
100 Chetwynd Drive
Rosemont, Pennsylvania 19010
With a copy to:
Bruce R. Lesser, Esq.
Wolf, Block, Schorr and Solis-Cohen
350 Sentry Parkway
Building 640
Blue Bell, Pennsylvania 19422
And a copy to:
John S. Roberts, Jr., Esq.
Wolf, Block Schorr and Solis-Cohen
Twelfth Floor, Packard Building
15th and Chestnut Streets
Philadelphia, Pennsylvania 19102
9.9 CONFIDENTIALITY. By execution of this Agreement and except as otherwise
provided herein, prior to the Closing Date the Partnership agrees to keep
any and all information obtained in or in connection with the due diligence
process with respect to the Contributors, its operations, the Real Property
and Other Items strictly confidential, and will not disclose any such
information without the Contributors' prior written consent, except to the
extent required by law.
9.10 BROKER'S COMMISSION. The Contributors represent to the Partnership
that they did not employ any broker in connection with this transaction
other than Mill Creek Realty Co., and the Contributors hereby agree that,
pursuant to Section 3.11 hereof, they will cause the Partnership to pay
any fees or commissions payable to Mill Creek Realty Co. in connection with
the transaction described in this Agreement. The Partnership represents
that it employed F.M. Stec & Associates as broker and agrees that it will
pay any fees or commissions due as a result of the Partnership's employment
of that broker. The parties each agree to indemnify the other for any and
all claims and expenses, including legal fees if any other fees or
commission is determined to be due by reason of the employment of any other
broker by the indemnifying party.
9.11 CONDITION OF PROPERTY AND OTHER ITEMS
(a) The entire agreement between the parties hereto with respect to the
Property and the Other Items and the sale thereof is expressly set forth in
this Agreement, and the parties are not bound by any agreement,
understandings, provisions, conditions, representations or warranties other
than as are expressly set forth and stipulated herein. Without in any
manner limiting the generality of the foregoing, the Partnership
acknowledges that it and its representatives have fully inspected the
Property and the Other Items, and are fully familiar with the physical and
financial condition thereof, and that the Property and the Other Items will
be accepted by the Partnership pursuant to the Contribution in an "as is"
and "where is" condition as a result of such inspection and investigations
and not in reliance on any agreement, understanding, condition, warranty or
representation made by the General Partner, the Contributors or any agent
or employee of the Contributors (except as expressly elsewhere provided in
this Agreement) as to the condition thereof, as to any permitted use
thereof, or as to the income or expense in connection therewith, or as to
any other matter in connection therewith; and the Partnership further
acknowledges that neither the Contributors nor any party acting on behalf
of the Contributors has made or shall be deemed to have made any such
agreement, condition, representation or warranty (except as expressly
elsewhere provided in this Agreement).
(b) The Partnership shall accept the Property and the Other Items at the
time of Closing in the same condition as the same are as of the date of
this Agreement as such condition shall have changed by reason of wear and
tear, damage by fire or other casualty and vandalism.
(c) If the Contribution occurs, the Contributors shall assign to the
Partnership any net insurance and/or condemnation proceeds received by the
Contributors with respect to the Property, less any amount expended by the
Contributors for collection, repair, restoration or related expenses.
9.12 DEFAULT.
(a)If the Partnership defaults hereunder at or prior to the Closing Date by
failing to complete Closing in accordance with the terms of this Agreement
or in any other respect, then on the Closing Date (or sooner in the event
of an anticipatory breach) the Partnership shall pay to the Contributors
the sum of $60,000. (the "Liquidated Damages Amount") as liquidated
damages. Notwithstanding anything to the contrary contained in this
Agreement, the failure to satisfy any of the conditions to the Contribution
contained in Article VI hereof shall not, in and of itself, be deemed to be
a failure of the Partnership to complete Closing or a default by the
Partnership under this Agreement. If the Partnership pays the Contributors
the Liquidated Damages Amount as liquidated damages, the payment of such
sum shall be the Contributors' only remedy in the event of the
Partnership's default at or prior to the Closing Date, and the Contributors
in such event hereby waive any right, unless Closing is completed, to
recover the balance of the Consideration. If the Contributors shall be
paid the Liquidated Damages Amount as liquidated damages, this Agreement
shall be and become null and void and all copies will be surrendered to the
Contributors for cancellation. Nothing in this Section shall limit the
Contributors's rights against the Partnership and the Partnership's
liability to the Contributors by reason of a default by the Partnership
under this Agreement which survives Closing.
(b) The term "Permitted Event" shall mean the occurrence of the following on
the Closing Date: the Partnership shall be ready, willing and able to
complete Closing in accordance with the Agreement; the Partnership, or its
authorized representative, shall have appeared at the place designated for
Closing and shall have tendered the Consideration, and the Contributors,
notwithstanding the foregoing, shall have failed to complete Closing in
accordance with this Agreement or are otherwise in default under this
Agreement. Notwithstanding anything to the contrary contained in this
Agreement, the failure to satisfy any of the conditions to the
Contribution contained in Article VI hereof shall not, in and of itself,
be deemed to be a failure of the Contributors to complete Closing or a
default by the Contributors under this Agreement. Except upon the
occurrence of the Permitted Event, the Partnership agrees that it shall not
(and hereby waives any right to) ever file or assert any LIS PENDENS
against the Property nor commence or maintain any action against the
Contributors for specific performance under this Agreement nor for a
declaratory judgment as to the Partnership's rights under this Agreement.
Except as expressly provided above and elsewhere in this Agreement, nothing
herein shall be deemed to limit or impair any of the Partnership's rights
and remedies at law, in equity or by statute.
9.13 INDEMNITY AGREEMENT. On the Closing Date, as an express condition to
the obligation of the Contributors to complete Closing, the Partnership
shall execute and deliver to the Quinn and the General Partner an
agreement, in form and substance satisfactory to Quinn and the General
Partner and Quinn's and the General Partner's counsel, whereby the
Partnership agrees to indemnify and hold harmless Quinn and the General
Partner, both individually and in his capacity as the general partner of
the Continuing Partnership, from and against any and all liabilities and
obligations, including, without limitation, guaranties and carve-outs from
non-recourse, arising in connection with the Existing Loan.
9.14 NO PERSONAL LIABILITY. Notwithstanding anything to the contrary
contained in this Agreement, none of Quinn, the General Partner or any
other partners of the Contributing Partnership shall have any personal
liability, and no action of any kind shall be maintained against any of
them or their respective assets, with respect to this Agreement and/or the
transactions described in this Agreement, and the Partnership, its
successors and assigns, shall look solely to the assets of the Continuing
Partnership and the cash or assets held by the Disbursing Agent pursuant to
Section 3.2 above, for the payment of any claim against or the performance
of any obligation of the Contributors. The foregoing limitation of
liability shall not apply in the case of fraud or intentional and material
misrepresentation; provided, however, that in connection with any action
involving alleged fraud or material misrepresentation, if the Partnership,
its successors or assigns, is not the prevailing party, it shall be
responsible for the payment of all attorneys' fees and expenses of all
parties, but if the Partnership, its successors or assigns, is the
prevailing party, each party shall bear its own attorneys' fees and
expenses.
9.15 NUMBER OF DAYS. In computing the number of days for purposes of this
Agreement, all days shall be counted, including Saturdays, Sundays and
holidays; provided, however, that if the final day of any time period falls
on a Saturday, Sunday or holiday on which federal banks are or may elect to
be closed, then the final day shall be deemed to be the next day which is
not a Saturday, Sunday or such holiday.
9.16 DEPOSIT.
(a) As security for the payment of the Liquidated Damages Amount, upon the
execution of this Agreement, the Partnership shall deposit with the
Disbursing Agent in escrow the sum of $60,000. (the "Deposit"). If the
Partnership shall become obligated to pay to the Contributors the
Liquidated Damages Amount, the Contributors shall have the right to be paid
the Deposit on account of the Liquidated Damages Amount. If Closing is
completed hereunder or if this Agreement is terminated as provided in
Section 7.1 hereof, the Disbursing Agent shall refund the Deposit to the
Partnership.
(b) Notwithstanding anything contained in this Section 9.16, if either party
terminates this Agreement as a result of the other's default or pursuant to
the exercise of any right of termination conferred by this Agreement,
Disbursing Agent shall not disburse the Deposit until the earlier to occur
of (i) receipt by Disbursing Agent of written instructions from the
Contributors and the Partnership or (ii) entry of a final and unappealable
adjudication determining which party is entitled to receive the Deposit, as
applicable, at which time the Deposit shall be distributed in accordance
with such written instructions or adjudication. Except to the extent of
any dispute among them, Quinn, the Contributing Partnership and the
Partnership agree to act in good faith to provide the Disbursing Agent with
the instructions described in (i) above in the event that this Agreement is
terminated.
(c) In the event of a dispute between the Partnership and the Contributors
with respect to the Deposit, the Disbursing Agent may deposit the Deposit
with a court of proper jurisdiction and commence an interpleader action.
Upon notifying the Contributors and the Partnership of the commencement of
such action, Disbursing Agent shall be released from all liability with
respect to the Deposit, except to the extent of accounting for any moneys
previously delivered by Disbursing Agent out of escrow. Disbursing Agent
shall not be liable to either the Contributors or the Partnership, other
than for performance of its duties under this Agreement or his gross
negligence or intentional wrongdoing. Disbursing Agent may rely upon the
genuineness or authenticity of any document tendered to it by either the
Contributors or the Partnership, and shall be under no duty of independent
inquiry with respect to any acts or circumstances recited in such document.
The Contributors and the Partnership shall indemnify, defend and hold
harmless Disbursing Agent from and against all cost, claims or liabilities
arising from the performance by Disbursing Agent of his obligations under
this Agreement, other than for his failure to comply herewith, gross
negligence or intentional wrongdoing.
(d) As used in this Section 9.16, the term "Deposit" shall refer to the
amount set forth at Section 9.16(a), together with all interest thereon.
The Deposit shall be held by the Disbursing Agent in one or more federally-
insured money market accounts acceptable to both the Contributors and the
Partnership, or in short-term United States government obligations having a
maturity date which is acceptable to the Contributors and the Partnership
or in one or more interest- bearing deposit accounts at a bank or other
financial institution acceptable to the Contributors and the Partnership.
The Contributors's taxpayer identification number is 23-2671821; the
Partnership's taxpayer identification number is 16-1455130.
(e) Although Disbursing Agent is counsel for the Contributors, the
Disbursing Agent shall not be disqualified or prohibited from representing
Contributors in connection with any matter arising out of this Agreement by
reason of its capacity as Disbursing Agent.
9.17 SURVIVAL.
(a)The representations, warranties, covenants and agreements of HME and the
Partnership contained in this Agreement will survive Closing (i)
indefinitely with respect to the warranties and representations in Sections
4.2(a) and 10.2(a), (ii) until 60 calendar days after the expiration of all
applicable statutes of limitation (including all periods of extension,
whether automatic or permissive) with respect to matters covered by Section
10.2(f), (iii) until the fifth anniversary of the Closing Date in the case
of all other representations and warranties and any covenant or agreement
to be performed in whole or part prior to Closing and (iv) with respect to
each other covenant or agreement contained in this Agreement, for five
years following the last date on which such covenant or agreement is to be
observed, performed or complied with, or, if no such date is specified,
indefinitely, except that any representation, warranty, covenant or
agreement that would otherwise terminate in accordance with clauses (ii),
(iii) or (iv) above will continue to survive if notice of claim shall have
been timely given on or prior to such termination date until such claim has
been satisfied or otherwise resolved. This Section shall not limit in any
way the survival and enforceability of any covenant or agreement of the
parties hereto which by its terms contemplates, or is of such nature that
it would require, performance, observance or compliance after the Closing
Date.
(b) The representations, warranties, covenants and agreements of the
Contributors contained in this Agreement will survive Closing for a period
of one hundred eighty (180) days, subject to the limitations on liability
provided in Section 9.14 hereof.
9.18 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original for all
purposes and all of which, when taken together, shall constitute one and
the same instrument.
ARTICLE X
ADDITIONAL REPRESENTATIONS AND WARRANTIES
BY THE PARTNERSHIP
10.1 DEFINITIONS.As used in this Article X, the following defined terms
shall be the meanings indicated below:
"AFFILIATE" means any Person that directly, or indirectly through one or
more intermediaries, controls or is controlled by or is under common
control with the Person specified. For purposes of this definition, control
of a Person means the power, direct or indirect, to direct or cause the
direction of the management and policies of such Person whether by Contract
or otherwise and, in any event and without limitation of the previous
sentence, any Person owning 10% or more of the voting securities of a
second Person shall be deemed to control that second Person.
"BENEFIT PLAN" means any Plan entered into, established, maintained,
contributed to or required to be contributed to, by HME or any Company
ERISA Affiliate providing benefits to employees, former employees,
independent contractors, former independent contractors of the Company or
any Company ERISA Affiliate, or their dependents or beneficiaries.
"CODE" means the Internal Revenue Code of 1986, as amended, and the rules
and regulations promulgated thereunder.
"COMMON STOCK" means shares of Common Stock of HME.
"COMPANY ERISA AFFILIATE" means an entity required (at any relevant time)
to be aggregated with HME under Sections 414(b), (c), (m) or (o) of the
Code or Section 4001 of ERISA.
"COMPANY FINANCIAL STATEMENTS" shall have the meaning set forth at Section
10.2(c) below.
"COMPANY SEC REPORTS" shall have the meaning set forth at Section 10.2(c)
below.
"CONTRACTS" means any agreement or obligation of any kind to which HME or
any of its Subsidiaries is a party or by which HME or any of its
Subsidiaries or any of their respective assets or properties is bound.
"GAAP" means generally accepted accounting principles, consistently applied
throughout the specified period and in the immediately prior comparable
period.
"PERSON" means any natural person, corporation, limited liability company,
general partnership, limited partnership, proprietorship, other business
organization, trust, union, association or Governmental or Regulatory
Authority.
"PLAN" means any employment, bonus, incentive compensation, deferred
compensation, pension, profit sharing, retirement, stock purchase, stock
option, stock ownership, stock appreciation rights, phantom stock, leave of
absence, layoff, vacation, day or dependent care, legal services,
cafeteria, life, health, medical, accident, disability worker's
compensation or other insurance, severance, separation, termination, change
of control or other benefit plan, agreement, practice, policy or
arrangement of any kind, whether written or oral, including, but not
limited to, any "employee benefit plan" within the meaning of Section 3(3)
of ERISA.
"SEC" means the Securities and Exchange Commission.
"SECURITIES" means the shares of Common Stock and the Units to be issued
and sold to partners in the Contributors, including shares of Common Stock
issuable upon conversion of Units to be issued and sold, pursuant to this
Agreement and the Transaction Agreements.
"SUBSIDIARY" means with respect to any party, a corporation, partnership or
other organization, whether incorporated or unincorporated, of which more
than 50% of either the equity interests in, or the voting control of, such
corporation, partnership or other organization is, directly or indirectly
through Subsidiaries or otherwise, beneficially owned by such party.
Notwithstanding the foregoing, "Subsidiary," when used with respect to HME,
includes, without limitation, the Partnership.
"TRANSACTION AGREEMENTS" means all agreements and documents to be delivered
by HME and the Partnership in connection with the transactions contemplated
by this Agreement and the Transaction Agreements.
10.2 REPRESENTATIONS AND WARRANTIES. The Partnership and HME hereby make
the following representations and warranties to the Contributors, their
liability with respect to such representations and warranties being joint
and several:
(a)CAPITAL STOCK. The authorized capital stock of HME consists solely of
(i) 10 million shares of preferred stock, par value $.01 per share, none of
which are issued and outstanding, (ii) 10 million shares of excess stock,
par value $.01 per share, none of which is issued, and (iii) 30 million
shares of Common Stock, 7,166,458.397 of which are issued and outstanding
as of the date hereof and 4,189,824 of which are reserved for issuance upon
exercise of stock options or exchange of Units in the Partnership as of the
date hereof. SCHEDULE 10.2(A) hereto sets forth a true and correct list of
the number of Units of the Partnership that are issued and outstanding and
the holders thereof. All of the outstanding shares of Common Stock have
been duly authorized and validly issued and are fully paid and
nonassessable (except, in the case of Units, as contemplated by the New
York Revised Uniform Limited Partnership Act) and have been offered and
sold in compliance with all applicable laws including, without limitation,
federal and state securities laws and none of them was issued in violation
of any preemptive or other similar right. The Securities, when issued and
sold pursuant to this Agreement and the Transaction Agreements, will be
duly authorized and validly issued, fully paid and nonassessable (except,
in the case of Units, as contemplated by the New York Revised Uniform
Limited Partnership Act) and none of them will be issued in violation of
any preemptive or other similar right. Except as identified on SCHEDULE
10.2(A) attached hereto, there is no outstanding option, warrant or other
right calling for the issuance of, and there is no commitment, plan or
arrangement to issue, any shares of capital stock of HME or any security
convertible into or exercisable or exchangeable for, such capital stock.
The Common Stock and the Securities conform in all material respects to all
statements relating thereto contained in the Company SEC Reports.
(b) NO VIOLATIONS OR DEFAULTS. Neither HME nor any of its Subsidiaries is
in violation of its certificate or articles of incorporation, bylaws,
certificates of partnership, partnership agreements, limited liability
company agreements or other similar governing documents, as the case may
be, and none of HME or any of its Subsidiaries is in default in the
performance or observance of any obligation, agreement, covenant or
condition contained in any Contracts to which such entity is a party or by
which such entity may be bound, or to which any of its properties or assets
may be bound or subject, except for such violations or defaults that
individually or in the aggregate would not have a Material Adverse Effect.
(c) SEC REPORTS AND FINANCIAL STATEMENTS; PARTNERSHIP AGREEMENT. HME has
filed all forms, reports, schedules, registration statements, and other
documents required to be filed by it with the SEC since the date of its
formation (as such documents have since the time of their filing been
amended or supplemented, the "Company SEC Reports"). As of their
respective dates, the Company SEC Reports (i) compiled as to form in all
material respects with the requirements of the Securities Act or the
Securities Exchange Act of 1934, as amended, as the case may be, and (ii)
did not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading. The audited consolidated financial statements and
the interim consolidated financial statements (including, in each case, the
notes, if any, thereto) included in the Company SEC Reports (the "Company
Financial Statements") (A) were compiled as to form in all material
respects with the published rules and regulations of the SEC with respect
thereto, (B) were prepared in accordance with GAAP applied on a consistent
basis during the periods involved (except as may be indicated therein or in
the notes thereto and except with respect to unaudited statements as
permitted by Forms 10-Q and 8-K of the SEC) and (C) fairly present in all
material respects (subject, in the case of the unaudited interim financial
statements, to normal, recurring year- end audit adjustments which are not
expected to be, individually or in the aggregate, materially adverse to HME
and its Subsidiaries taken as a whole) the consolidated financial position
of HME and its consolidated subsidiaries as at the respective dates thereof
and the consolidated results of their operations and cash flows for the
respective periods then ended. Except for the Subsidiaries identified on
SCHEDULE 10.2(C) attached hereto, each Subsidiary of HME is treated as a
consolidated subsidiary of HME in the Company Financial Statements for all
periods covered thereby.
(d) ABSENCE OF CHANGES
(1) Except for the execution and delivery of this Agreement and the
Transaction Agreements, and the transactions to take place pursuant hereto
and thereto on the Closing Date, since March 31, 1997, there has not been
any change, event or development having, or that could reasonably be
expected to have, individually or in the aggregate, a Material Adverse
Effect. Without limiting the foregoing, between March 31, 1997 and the
date hereof (A) except with respect to the activities described in the
press releases attached hereto as EXHIBIT I, HME and its Subsidiaries have
conducted their respective businesses only in the ordinary course
consistent with past practice and (B) neither HME nor any of its
Subsidiaries have taken any action which, if taken after the date hereof,
would constitute a breach of any provision of clause (2) of this Section
10.2(d).
(2) Prior to the Closing Date, HME and its Subsidiaries shall use all
commercially reasonable efforts to preserve intact in all material respects
their present business organizations and reputation, to keep available the
services of their key officers and employees, to maintain their assets and
properties in good working order and condition, ordinary wear and tear
excepted, to maintain insurance on their tangible assets and businesses in
at least such amounts and against such risks and losses as are currently in
effect, to preserve their relationships with customers and suppliers and
others having significant business dealings with them and to comply in all
material respects with any statute, law, rule, regulation or ordinance or
any judgment, decree, order, writ, permit or license, of any court,
tribunal, arbitrator, authority, agency, commission, official or other
instrumentality of the United States or any domestic, state, county, city
or other political subdivision, applicable to HME or any of its
Subsidiaries.
(e) ABSENCE OF UNDISCLOSED LIABILITIES. Except for matters reflected in
the consolidated balance sheet of HME as of March 31, 1997 (or the footnotes
thereto) included in the Company Financial Statements and the press
releases attached hereto as EXHIBIT I, neither HME nor any of its
Subsidiaries had at such date, or has incurred since that date, any
liabilities or obligations (whether absolute, accrued, contingent, fixed or
otherwise, or whether due or to become due) of any nature, except
liabilities or obligations (i) which were incurred in the ordinary course
of business consistent with past practice since such date, and (ii) which
have not had, and could not be reasonably expected to have, individually or
in the aggregate, a Material Adverse Effect.
(f) REIT QUALIFICATION. At all times since its taxable year ended December
31, 1996, HME has been, and upon each issuance of any of the Securities,
HME will continue to be, organized and operated in conformity with the
requirements for qualification as a real estate investment trust under the
Code, and its proposed method of operation will enable it to continue to
meet the requirements for taxation as a real estate investment trust under
the Code.
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
executed by a duly executed general partner as of the date first above
written.
LAMAR PARTNERSHIP
By: /s/ Henry A. Quinn
- -----------------------------
Henry A. Quinn, General Partner
/s/ Henry A. Quinn
- -----------------------------
Henry A. Quinn
HOME PROPERTIES OF NEW YORK, L.P.
By:Home Properties of New York, Inc.
General Partner
By: /s/ Norman P. Leenhouts
- -----------------------------------
Norman Leenhouts, Chairman
JOINDER
Home Properties of New York, Inc. joins in this Agreement for the purpose
of making in its individual capacity, the same representations and
warranties as are made by the Partnership in Article X of this Agreement.
HOME PROPERTIES OF NEW YORK, INC.
By:/s/ Norman Leenhouts
- -----------------------------------
Norman Leenhouts, Chairman
<PAGE>
SCHEDULE 3.13
RESERVE FUNDS CLAIMS PROCEDURE
PROCEDURES WITH RESPECT TO CLAIMS
(a) If any claim (a "Claim") is made by the Partnership for payment out of
the Reserve Amount for an Indemnity Claim, the Partnership shall thereafter
notify the General Partner and the Disbursing Agent of such Claim. At such
time as there is a Final Determination (as hereinafter defined) with
respect to a Claim, the Partnership shall notify the Disbursing Agent (with
a copy to the General Partner) of such Final Determination. A Final
Determination with respect to a Claim shall occur when (1) the Partnership
and the General Partner agree in writing to a payment from a Reserve with
respect to a Claim and each so advises the Disbursing Agent, or (2) the
arbitrator determining the disposition of a Claim pursuant to Section (d)
below renders a final decision with respect to a Claim determining that a
payment is to be made from a Reserve to the Partnership or (3) provided
that the General Partner (for himself and on behalf of all of the partners
of the Contributing Partnership) shall have been given a reasonable
opportunity to participate in the defense of such third-party claim
throughout the course of such third-party claim, the Claim is made on
account of a judgment rendered by a court of competent jurisdiction
requiring, on a third-party's claim that is an Indemnity Claim, a specified
payment on account of such Indemnity Claim to the third-party claimant and
such judgment has become final and not subject to further appeal. Upon
receipt of a Final Determination, the Disbursing Agent shall pay the amount
of the Claim as set forth in the Final Determination to the Partnership.
(b) On each of 90 days from the Closing Date and 180 days from the Closing
Date, and thereafter, at any time and from time to time, within 10 days
after the written request of the General Partner, the Partnership shall
send a notice (the "Anniversary Notice") to the Disbursing Agent and to the
General Partner describing each then outstanding Claim with respect to
which a Final Determination has not theretofore been made and specifying
what the Partnership believes, acting reasonably and in good faith, to be
the aggregate amount of damages that have been incurred theretofore or are
likely to be incurred thereafter as a result of or arising out of each
such Claim (the "Damage Amount").
(c) If the General Partner believes, acting reasonably and in good faith,
that the Partnership's estimate of the Damage Amount with respect to one or
more of the Claims as set forth in the Anniversary Notice is unreasonable
(a "Disputed Amount"), the General Partner shall send a notice (the
"Dispute Notice") to the Partnership and the Disbursing Agent, within 10
days after receipt of the Anniversary Notice, specifying the amount that
the General Partner believes, acting reasonably and in good faith, to be
the proper Damage Amount with respect to any Claim described in the
Anniversary Notice. Upon the issuance of a Dispute Notice, the General
Partner and representatives of the Partnership shall immediately meet and
shall use all necessary diligence in a concerted, good faith effort to
resolve all Disputed Amounts within 10 days after issuance of the Dispute
Notice. If the General Partner and the Partnership resolve such dispute
within the 10-day period as aforesaid, they shall jointly notify the
Disbursing Agent of the agreed-upon Damage Amount with respect to each
Claim, and such joint notice shall constitute a Final Determination with
respect to the relevant Claims.
(d) If the General Partner and the Partnership do not so agree, the
determination of the Damage Amount with respect to all disputed Claims
shall be immediately submitted to prompt and binding arbitration before an
arbitrator appointed by the Philadelphia, Pennsylvania office of the
American Arbitration Association in accordance with its rules, and acting
in accordance with its rules. If any such Disputed Amount relates to a
third-party claim that is then in litigation or is otherwise unresolved,
the standard to be applied by the arbitrator in determining the Damage
Amount shall be the aggregate amount of damages that have been or are
likely thereafter to be incurred by the Partnership, including the
Partnerships' attorneys' fees, court costs and other costs of defense,
arising out of such claim. The award of the arbitrator shall be
communicated to the parties and the Disbursing Agent and shall constitute a
Final Determination, which shall be final, binding and not subject to
appeal, with respect to all the Claims that are the subject of such award,
notwithstanding that an underlying third-party claim still remains
unresolved or is subsequently resolved in a manner inconsistent with the
arbitrator's award.
(e) If the Disbursing Agent in his capacity as such is threatened with
litigation or is sued, he shall have the right to interplead all interested
parties in any court of competent jurisdiction and to deposit the Reserves
(or any portion thereof) with the clerk of that court.
(f) The Disbursing Agent shall not be liable to either the General Partner,
the former Partners of the Contributors or the Partnership, other than for
performance of his duties under the Reserves Escrow agreement or his gross
negligence or intentional wrongdoing. The Disbursing Agent may rely upon
the genuineness or authenticity of any document tendered to him by either
the General Partner or the Partnership, and shall be under no duty of
independent inquiry with respect to any acts or circumstances recited in
such document.
(g) As used in this Schedule 3.13, the term "Reserves" shall refer to the
respective amounts set forth at the beginning of this Section 3.13,
together with all interest thereon. The Reserves, which are held in Cash,
shall be held by the Disbursing Agent in one or more federally- insured
money market accounts acceptable to both the Contributors and the
Partnership, or in short- term United States government obligations having
a maturity date which is acceptable to the Contributors and the Partnership
or in one or more interest-bearing deposit accounts at a bank or other
financial institution acceptable to the Contributors and the Partnership.
(h) All Claims must be made within 180 days of the Closing Date.
(i) No Claim shall be made until total Claims exceed $25,000.00.
