Exhibit 2.4
CONTRIBUTION AGREEMENT
This Contribution Agreement ("Agreement"), made as of the 22nd day of May,
2000 by and among
HOME PROPERTIES OF NEW YORK, L.P., a New York limited partnership, having
its principal office at 850 Clinton Square, Rochester, New York 14604,
("Home Properties"); and
ELMWOOD VENTURE LIMITED PARTNERSHIP, a Maryland limited partnership (the
"Partnership"), having its principal office at 200-A Monroe Street, Suite
105, Rockville, MD 20850
W I T N E S S E T H:
WHEREAS, the Partnership owns a certain apartment complex and adjacent
land located in the State of Maryland, all as more particularly described on
EXHIBIT A;
WHEREAS, the Partnership desires to cause each of its partners (the
"Partners") to contribute each of the partnership interests in the Partnership
(the "Interests") to Home Properties in exchange for limited partnership
interests in Home Properties (the "Units"), cash, or a combination of both
Units and cash, to be allocated among the Partners in accordance with SCHEDULE
1 attached hereto;
WHEREAS, Home Properties desires to obtain 100% of the Interests in the
Partnership and thus a 100% of the interests in the entity that owns fee simple
title to the Property (as hereinafter defined), together with the related Other
Items (as hereinafter defined), in exchange for Units, cash, or a combination
of both Units and cash, all as more particularly described herein;
NOW, THEREFORE, in consideration, of the 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 owned by the
Partnership consists of an apartment complex commonly known as Elmwood Terrace
Apartments, which includes ___ apartments (the "Project"), located in
Frederick, Maryland, on land more particularly described on EXHIBIT A attached
hereto, together and including all buildings and other improvements thereon,
including but not limited to, the ____ apartment units and all rights 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").
2. OTHER ITEMS. The transfer, exchange, conveyance and acquisition of
the Interests shall include all of the right, title and interest of the
Partnership in and to the following items now or at the Closing (hereinafter
defined) in or on the Property and owned by the Partnership:
A. all heating, air-conditioning, plumbing and lighting fixtures,
B. ranges, refrigerators and disposals (one of each for each apartment
unit),
C. water heaters,
D. any and all pools and pool equipment, bathroom fixtures, exhaust
fans, hoods, signs, screens, maintenance building, fences, cabinets,
mirrors, shelving, mail boxes, office furniture and equipment,
including but not limited to computers, and any and all related
equipment in connection with the Property,
E. 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,
F. all tenant security deposits (and interest thereon if required by
law or contract to be earned thereon) (hereinafter with the items
listed in A through E above, collectively, the "Other Items").
At Closing, the Other Items will be free and clear of all liens and
encumbrances, subject only to the Existing Loan and Permitted Exceptions (as
each such terms are hereinafter defined).
Notwithstanding anything set forth herein to the contrary, the transfer,
exchange, conveyance and acquisition of the Interests shall specifically
exclude any right, title or interest of the Partnership in or to: (i) any tax,
insurance or other escrows held by any Existing Lender (hereinafter defined)
and (ii) any working capital, capital reserves or any other cash accounts held
or maintained by the Partnership (other than tenant security deposits described
in subparagraph F. hereinabove) (collectively, the "Excluded Items"). Subject
to the obligation to establish and fund the Reserve Amount (hereinafter
defined), on or before the Closing, the Excluded Items shall be transferred by
the Partnership to its General Partner (hereinafter defined) to be held for
distribution to the Partners.
3. EXCHANGE.
A. Promptly after the expiration of the Due Diligence Period (if this
Agreement has not been previously terminated), Home Properties shall
make an offer (the "Offer") to each of the Partners to exchange the
Partners' Interests in the Partnership for: (i) cash, (ii) Units or
(iii) a combination of both cash and Units, as each such Partner
may, subject to Paragraph 3.C., elect to receive, and having a
value, in each instance, equal to the Exchange Price (hereinafter
defined). The Partnership agrees that it will use its reasonable
efforts to solicit acceptance from the Partners of the Offer,
whether in exchange for cash, Units, or a combination of both cash
and Units. Upon and subject to the terms and conditions set forth in
this Agreement, Home Properties agrees that on the Closing Date (as
hereinafter defined), it shall accept an assignment of the Interests
from the Partners and will issue Units, pay cash, or pay and issue a
combination of both cash and Units to the Partners, as each such
Partner shall have elected, and as more particularly provided
herein.
B. Subject to the satisfaction or waiver of the closing conditions to
the Partnership's obligations to close the transaction contemplated
by this Agreement SS Associates, LLC (the "General Partner") hereby
agrees that it will accept the Offer with respect to all of its
Interests.
4. CONSIDERATION AND MANNER OF PAYMENT.
A. The aggregate consideration payable by Home Properties for 100% of
the Interests shall be Twenty Million Five Hundred Thousand and
No/100 Dollars ($20,500,000) (the "Consideration").
B. On the Closing Date, each of the Partners who has accepted the Offer
shall assign their Interests to Home Properties in exchange for the
Exchange Price. As used herein, the term "Exchange Price" means the
Consideration less the principal amount on the Closing Date of the
Existing Loan (as hereinafter defined), multiplied by the percentage
interest of the relevant Partner's Interest in the Partnership as
set forth on SCHEDULE 1.
C. At Closing, the General Partner shall establish from Partnership
funds otherwise distributable to the Partners a "Reserve Amount".
As used herein, the term "Reserve Amount" means the sum of: (a) an
amount equal to the current accrued and unpaid monetary liabilities
of the Partnership on the Closing Date (other than the principal
amount of the Existing Loan), together with such other amounts as
the General Partner may reasonably determine are necessary or
prudent to retain to satisfy any Partnership Claims (hereinafter
defined) (the "Liabilities Reserve") and (b) the sum of $120,000
(the "Indemnity Reserve"). The Reserve Amount shall be held and
disbursed by the Disbursing Agent (as defined in Paragraph D of this
Section 4) as described in Paragraph D of this Section 4 and in
Paragraphs A and B of Section 5. The Reserve Amount shall initially
be used to pay all amounts required to satisfy the accrued and
unpaid monetary liabilities of the Partnership on the Closing Date
(other than the principal amount of the Existing Loan) and any
liabilities of or claims against the Partnership accrued before the
Closing Date (other than the principal amount of the Existing Loan)
that Home Properties has not specifically agreed to assume as
provided herein ("Liabilities Claims") and any amounts paid or
subject to claims of Home Properties by reason of a material breach
or material misrepresentation of any representations, warranties,
covenants or agreements of the Partnership which survive Closing
(but only during the period of such survival) ("Indemnity Claims",
together with Liabilities Claims herein referred to collectively as
"Partnership Claims"). Notwithstanding the above, if the Partnership
can establish to Home Properties' reasonable satisfaction that after
Closing, the General Partner or its agents will have retained
sufficient Partnership funds to pay all Liabilities Claims, then no
Liabilities Reserve will be required to be established.
D. At Closing, the General Partner shall deliver in immediately
available funds from monies otherwise distributable to the partners
of the Partnership (but not from proceeds of Consideration) to the
Title Company as "Disbursing Agent" the Reserve Amount. The Reserve
Amount shall be held and disbursed pursuant to the terms of an
escrow agreement that shall be in form and substance substantially
similar to that attached hereto as EXHIBIT B.
E. Home Properties shall pay the Partners who are Non-Accredited
Investors or Accredited Cash Payees their Exchange Price in cash at
the Closing,
F. Partners who are accredited under applicable securities laws and who
have elected to receive Units in exchange for their Interests (each
a "Unit Partner" and collectively the "Unit Partners") shall be paid
their Exchange Price by the issuance of Units. The number of Units
to be issued to each Unit Partner shall be the Exchange Price
divided by the "Designated Value" of a Unit. The Designated Value of
a Unit shall be equal to $27.00.
G. The initial distribution payable with respect to Units issued
hereunder 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 Unit Partners 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.
H. Subject to the terms of a Registration Rights and Lock-Up Agreement,
in the form of EXHIBIT C attached hereto, to be dated as of the
Closing Date and entered into between HME and each Unit Partner, and
to the terms of that certain Second Amended and Restated Agreement
of Limited Partnership of the Operating Partnership, as amended (the
"Operating Partnership Agreement"), the Units will be convertible
into HME common stock, on a one-to-one basis, after the elapse of
one (1) year from and after the Closing Date (the "Lock-Up Period"),
during which time the Unit Partners will be restricted, to the
extent provided in the Registration Rights and Lock-Up Agreement and
the Operating Partnership Agreement, from converting, or
transferring, any of the Units. From and after the expiration of the
Lock-Up Period, the Unit Partners shall have all of the transfer,
exchange and conversion rights with regard to the Units as are set
forth in the Operating Partnership Agreement and the Registration
Rights and Lock-Up Agreement.
I. Upon the expiration of the Due Diligence Period (as hereinafter
defined) and provided Home Properties has not exercised its right to
terminate this Agreement, Home Properties shall deposit the sum of
$100,000 with Wheeler & Korpeck (the "Title Company") as a good
faith deposit hereunder (the "Deposit"). The Title Company shall
invest the Deposit in an FDIC or FSLIC insured money market account
and shall be held and disbursed as provided in the Escrow Agreement
attached hereto as EXHIBIT D. Any interest earned on such investment
shall be reported to Home Properties Federal tax identification
number. The Deposit shall be refunded to Home Properties at Closing
in the event Home Properties consummates the transaction
contemplated hereby, upon termination of this Agreement by Home
Properties expressly permitted hereunder, or upon the Partnership's
default and resulting termination of this Agreement by Home
Properties expressly permitted hereunder. In the event Home
Properties fails to acquire the Interests other than by reason of a
termination by Home Properties expressly permitted hereunder or the
Partnership's default, the Deposit shall be forfeited to the
Partnership as liquidated damages. Any and all sums deposited
hereunder shall be applied or refunded as provided herein. (All
references to "Deposit" shall be deemed to include all accrued
interest thereon).
5. RELEASE OF RESERVES.
A. On the 180{th} day after the Closing Date, the parties hereto shall
jointly instruct the Disbursing Agent to disburse to the General
Partner that portion of the Reserve Amount that has not been paid,
disbursed or otherwise required to be paid on account of Liability
Claims or Indemnity Claims. The General Partner may then elect: (i)
to continue to hold such disbursed amounts for up to 360 days after
the Closing Date, in trust for the benefit of the Partnership and
the Partners, as a fund against which to pay unanticipated
Partnership Claims (the "Contingency Reserve"); or (ii) to
distribute such sums pro rata to the Partners.
B. At any time, and from time to time, after the 180{th} day after the
Closing Date that there is a Final Determination (as defined in
EXHIBIT C) that any remaining portion, if any, of the Reserve Amount
is no longer subject to Liability Claims or Indemnity Claims, the
parties hereto shall instruct the Disbursing Agent to distribute
such remaining portion of the Reserve Amount to the General Partner.
The General Partner may then elect: (i) to continue to hold such
disbursed amounts for up to 360 days after the Closing Date, in
trust for the benefit of the Partners, as a Contingency Reserve; or
(ii) to distribute such sums pro rata to the Partners in accordance
with their percentage interests.
C. Not later than 360 days after the Closing Date (provided that there
have been no unanticipated Partnership Claims), the General Partner
shall distribute any balance remaining in the Contingency Reserve
pro rata to the Partners in accordance with their percentage
interests. In the event that at the end of the 360 day period
following Closing there are unanticipated Partnership Claims pending
or asserted, or the General Partner has reason to believe that such
unanticipated Partnership Claims may be asserted, the General
Partner may continue to hold the Contingency Reserve until such time
as the General Partner deems prudent, after which time any
undisbursed amount remaining in the Contingency Reserve shall be
disbursed by the General Partner pro rata to the Partners in
accordance with their percentage interests.
6. EXISTING LOANS. Home Properties acknowledges that the Property is
currently subject to mortgage financing having a principal balance as of
December 31, 1999 of approximately $4,691,852 (the "Existing Loan") and held by
John Hancock Life Insurance Company of America (the "Existing Lender"). Subject
to the consent of the Existing Lender, Home Properties agrees that at the time
it acquires the Interests, the Property will remain subject to the Existing
Loan. The costs involved in connection with obtaining the Existing Lender's
consent to that transaction (the "Assumption"), including any assumption fees,
shall be paid by Home Properties.
7. ADJUSTMENTS AT CLOSING. The following shall be adjusted and prorated
between Home Properties and the Partnership at Closing as if Home Properties
was the owner of the Property as of the Closing Date (the Closing Date being a
day of income and expense to Home Properties). All such adjustments and
prorations between Home Properties and the Partnership shall be settled in cash
and shall not increase or decrease the Consideration, as the case may be.
A. All ad valorem real estate and personal property taxes with respect
to the Property for the calendar year or other applicable tax period
in which the Closing is consummated. If the amount of such taxes is
not known at Closing, proration of such taxes will be made upon the
basis of the most recently ascertainable taxes. In such event, Home
Properties and the General Partner on behalf of the former partners
of the Partnership agree to re-prorate/adjust the taxes between
themselves after the Closing, based upon the full amount of the
actual taxes for the Property when the actual amount of such taxes
is known.
B. Water charges.
C. Sewer charges.
D. Fuel, electricity and other utilities.
E. All tenant security deposits (and interest thereon if required by
law or contract to be earned thereon) shall remain in the
Partnership whose Interests are conveyed to Home Properties at
Closing. At Closing, Home Properties shall assume the Partnership's
obligations related to tenant security deposits to the extent they
remain part of the Other Items. Alternatively, in lieu of the
assumption of the security deposit accounts at Closing, Home
Properties may elect to receive a credit at Closing of an amount
equal to the aggregate amount of the security deposits with interest
as required by law. Home Properties agrees that it will indemnify,
defend, hold the Partnership harmless and will indemnify the
Partnership against all demands, claims, losses, costs, damages,
expenses or liabilities, including, but not limited to, attorneys'
fees, arising out of or in connection with the transfer or
disposition of such security deposits if and to the extent such
demands, claims, losses, costs, damages, expenses or liabilities
relate to the period after the Closing Date.
F. Charges under the service contracts assumed by Home Properties,
including a pro rata credit to Home Properties for any signing bonus
or other sum paid by a service company in connection with any
service or laundry contract.
G. Laundry income.
H. Any other charges incurred with respect to the Property which the
Partnership or the Partners are obligated to pay.
I. Accrued and unpaid interest on the Existing Loan.
J. Rents.
(1) All rent payments collected as of the Closing Date for the
month of Closing shall be prorated as between the parties as of
the Closing Date.
(2) All rent collected after Closing for any period prior to
Closing shall belong to the Partnership and, if paid to Home
Properties, Home Properties shall promptly send such rent to
the General Partner for distribution to the Partners.
(3) All rent collected by the Partnership prior to the Closing for
rental periods subsequent to Closing shall be paid to Home
Properties at Closing.
(4) All rent collected by Partnership or Home Properties for rental
periods after the Closing shall belong to Home Properties and,
if paid to the Partnership, the Partnership shall promptly send
such rent to Home Properties.
(5) Home Properties will make reasonable efforts to collect all
rents due for the month of the Closing and any past due rents,
but shall not be required to bring suit to collect such rents.
Any rent received from any tenant after Closing shall first be
applied to pay any rent owing by that tenant for the month of
the Closing and then to pay rent owing for the then current
month and thereafter in reverse order of delinquency. Any rents
due for the month of Closing (and accruing prior to the Closing
Date) and past due rents not collected by Home Properties
within the period of 180 days following the Closing Date shall
be assigned to the General Partner without recourse who may
pursue such remedies for collection thereof for its own
account.
Any error in the calculation of adjustments shall be corrected subsequent
to Closing with appropriate credits to be given based upon corrected
adjustments, provided, however, that the adjustments (except if errors are
caused by misrepresentations and except for actual taxes) shall be final upon
expiration of ninety (90) days after Closing.
8. COSTS. Home Properties shall pay all recording fees, its attorneys'
fees, one-half of any applicable transfer and recordation taxes, if any, the
costs of obtaining any title commitment and title policy, one-half of the
closing charges of the Title Company, and all other incidental costs and
expenses, if any, incurred in connection with closing this transaction
customarily paid for by the transferee of similar property. The Partnership
shall pay one-half of any applicable transfer and recordation taxes, if any,
attorneys' fees incurred by them in connection with this transaction, one-half
of the closing charges of the Title Company and all other incidental costs and
expenses, if any, incurred in connection with closing this transaction
customarily paid for by the transferor of similar property.
9. EVIDENCE OF TITLE. The Partnership shall furnish to Home Properties,
at the Partnership's expense, and within ten (10) days from the execution
hereof, a copy of the most recent title policy relating to the Property along
with the most recent instrument survey of the Property, in each case, to the
extent in its possession or control. At the time of the Closing, as a condition
to Home Properties' obligation to close, the Property shall be subject only to:
(i) all zoning and building laws, ordinances, resolutions and regulations of
all governmental authorities having jurisdiction which affect the Property and
the use and improvement thereof; (ii) all leases identified in the Rent Roll
(hereinafter defined); (iii) ad valorem real estate taxes for the current year
and subsequent years which are not yet due and payable; and (iv) easements,
covenants, restrictions, agreements and/or reservations of record, so long as
they do not interfere with the use of the Property as a rental apartment
complex, if any, (v) private, public and utility easements and roads and
highways, if any, (vi) the documents evidencing or securing the Existing Loan;
and (vii) and any other exceptions not objected to or waived by Home Properties
under Section 12 herein (collectively, the "Permitted Exceptions").
10. CLOSING DOCUMENTS.
A. At the time of Closing, the Partnership shall deliver to Home
Properties the following:
(1) Properly executed Assignments to Home Properties of no less
than 100% of the Interests;
(2) A current rent roll ("Rent Roll") certified, as of the date of
Closing, which shall include a correct list of all tenants, all
rental obligations of each tenant with respect to the Property
and all security deposits along with a copy of all leases shown
on the Rent Roll;
(3) A certificate of title and any other documentation necessary to
transfer title to any vehicles, if any;
(4) Copies of the personnel files of all employees employed at the
Property by the Partnership, if any, and remaining in the
employment of Home Properties after the Closing;
(5) An executed original of the Registration Rights and Lock-Up
Agreement in the form attached hereto as EXHIBIT C;
(6) An estoppel certificate from the Existing Lender confirming
that there is no default under the Existing Loan, and that
there exists no event that with the passage of time or the
giving of notice, or both, would constitute such a default;
(7) Any and all affidavits, certificates or other documents
reasonably and customarily required by the Title Company in
order to cause it to issue the title policy regarding the
Property in the form and condition required by this Agreement
and any affidavits as may be necessary in order for Home
Properties to obtain a non-imputation endorsement;
(8) All keys to the Property in the possession of the Partnership,
which shall remain at the rental office and need not be brought
to Closing;
(9) A certified copy of the Certificate of Limited Partnership of
the Partnership, and such other evidence of the Partnership's
power and authority as the Title Company may reasonably
request;
(10) A signed counterpart of the Escrow Agreement-Reserve Amount in
form substantially similar to EXHIBIT B; and,
(11) Any additional funds, documents and or instruments as may be
necessary for the proper performance by the Partnership of its
obligations contemplated by this Agreement.
B. At the time of Closing, Home Properties shall deliver to the
Partnership the following:
(1) Evidence of organization, existence and authority of Home
Properties and HME and the authority of each person executing
documents on behalf of each, reasonably satisfactory to the
Partnership;
(2) Such cash as may be required of Home Properties to pay closing
costs or charges properly allocable to Home Properties;
(3) An Amendment to the Home Properties' Partnership Agreement in
the form necessary to admit the Unit Partners as limited
partners of Home Properties and evidencing the issuance of the
Units required pursuant to this Agreement;
(4) Subject to the limitation set forth in Section 3.C. herein,
cash in an amount sufficient to pay Partners required to be
paid, or electing to be paid their share of the Exchange Value
in cash;
(5) An executed original of the Registration Rights and Lock-Up
Agreement in the form attached hereto as EXHIBIT C; and,
(6) Any additional funds, documents and or instruments as may be
necessary for the proper performance by Home Properties of its
obligations contemplated by this Agreement.
11. INSPECTION. For a period ending on June 21, 2000 (the "Due Diligence
Period"), the Partnership agrees that Home Properties and its authorized
representatives shall have the right and privilege to enter upon the Property
and the 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 Home
Properties may deem appropriate and necessary, including but not limited to a
review of the Partnership's books and records pertaining to the Property and
the Other Items, matters relating to zoning compliance and compliance by the
Property and the Other Items with other applicable governmental regulations,
the markets in which the Property operates, any service or other contracts
relating to the Property, the tax assessment on the Property and on comparable
properties, the documents pertaining to the Existing Loan and such other
matters as Home Properties shall deem reasonably necessary or appropriate in
connection with the Property and the Other Items. All such inspections,
studies, tests and reviews shall be at Home Properties' sole expense. The
Partnership agrees to cooperate with Home Properties by making available to
Home Properties such records, plans, drawings or other data as may be in the
Partnership's possession or control relating to the Property and its operation;
excluding however, any files containing confidential documents such as
personnel documents, tax returns, appraisals, market analyses, projections,
internal communications, or correspondence between the property manager and the
Partnership. Home Properties agrees that it will provide the Partnership with a
copy of any third party reports received by Home Properties with respect to its
due diligence activities pursuant to this paragraph. Home Properties hereby
agrees to indemnify, defend and hold the Partnership, the Partnership's
tenants, agents, employees, partners and the Property harmless from and against
all claims, losses, costs, damages, expenses or liabilities, including, but not
limited to, mechanic's and materialmen's liens and attorneys' fees arising out
of or in connection with Home Properties' access to or entry upon the Property.
If any inspection or test disturbs the Property, Home Properties will restore
the Property, at Home Properties' own cost and expense, to the same condition
as existed prior to any inspection or test. Home Properties agrees that prior
to any physical inspection or testing at the Property, it or its agents will
provide the Partnership with appropriate evidence of insurance reasonably
satisfactory to the Partnership. Home Properties agrees that its rights under
this Section 11 shall be subject to the rights of the residents at the Property
and that it will use its reasonable efforts to minimize any disruption to those
residents. Home Properties shall have the right to terminate this Agreement if
it determines that it does not wish to purchase the Property as a result of its
findings during the Due Diligence Period and notifies the Partnership in
writing of such decision on or before June 26, 2000 (the "Termination
Notice"). In such event, this Agreement shall be null and void and neither
party shall have any further rights or obligations under this Agreement, other
than the obligations expressly surviving any such termination, and Home
Properties shall be entitled to the prompt return of the Deposit. Home
Properties' failure to deliver the Termination Notice on or before June 26,
2000 shall be deemed to be a waiver by Home Properties of its right to
terminate the Agreement as provided in this Section 11. The provisions of this
Section 11 shall survive indefinitely any termination of this Agreement.
12. TITLE; TITLE EXAMINATION; OBJECTIONS TO TITLE. Promptly upon
execution of this Agreement by all of the parties, Home Properties shall order
from the Title Company a commitment ("Title Commitment") for an ALTA owner's
policy insuring the Partnership's title to the Property in an amount equal to
the Consideration. No later than May 31, 2000, Home Properties shall deliver to
the Partnership a statement (a "Statement of Title Defects") of defects,
encumbrances or objections to title or survey matters ("Title Defects"). If
Home Properties fails to deliver a Statement of Title Defects within such time
period as aforesaid, such failure shall be deemed to be a waiver of any such
Title Defects and the Partnership shall convey title in accordance with this
Agreement and such Title Defects will be additional Permitted Exceptions. Upon
receipt of Home Properties' Statement of Title Defects, the Partnership shall
have five (5) business days to determine whether it wishes to attempt to cure
any matters shown on such statement. If the Partnership is unable or unwilling
to cure or attempt to cure any such matters, the Partnership shall give notice
to Home Properties within such five (5) day period, but if no such notice is
given, the Partnership shall be deemed to be unwilling to cure any such Title
Defects. If the Partnership does not agree to attempt such cure, Home
Properties shall have ten (10) days after the expiration of the foregoing five
(5) business day period to terminate this Agreement, in which case it shall
have the right to the return of the Deposit, or to give the Partnership notice
that it has elected to take title to the Property subject to the Title Defects
without abatement of the Consideration and such Title Defects will be
additional Permitted Exceptions. If no notice is given by Home Properties
within the ten (10) day period, Home Properties shall be deemed to have
terminated this Agreement. Home Properties agrees that the Partnership shall be
under no obligation whatsoever to commence any proceedings, suits or actions to
clear title or eliminate any Title Defects or expend any funds in connection
therewith.
13. CLOSING DATE. Unless this Agreement is terminated as provided
herein, the Closing shall occur upon the later of: (a) July 13, 2000; and (b)
ten (10) days after receipt of the consent of the Existing Lender to the
Assumption. In the event that the consent of the Existing Lender is not
received on or before July 31, 2000, either Home Properties or the Partnership
may terminate this Contribution Agreement in which event this Agreement shall
be null and void and neither party shall have any further rights or obligations
under this Agreement, other than the obligations expressly surviving any such
termination, and Home Properties shall be entitled to a return of the Deposit.
14. POSSESSION. Home Properties shall have possession and occupancy of
the Property from and after the Closing Date subject only to the Permitted
Exceptions and to the rights of tenants shown on the Rent Roll delivered to
Home Properties at Closing.
15. BROKER'S COMMISSION. Home Properties and the Partnership each
represent to the other that there are no fees or commissions due as a result of
their employment of any Broker in connection with the transactions described
herein. Home Properties and the Partnership 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 broker by
the indemnifying party. The representations and provisions of this Section 15
shall survive indefinitely any termination or Closing of this Agreement.
16. RISK OF LOSS. Risk of loss resulting from any eminent domain
proceeding which is commenced prior to Closing, and risk of loss to the
Property due to fire or any other casualty prior to Closing shall remain with
the Partnership. If prior to the Closing the Property or any portion thereof is
destroyed or damaged in excess of $250,000, or if the Property or any portion
thereof shall is subjected to a BONA FIDE threat of condemnation or becomes the
subject of any proceedings, judicial, administrative or otherwise, with respect
to the taking by eminent domain or condemnation, the Partnership shall notify
Home Properties thereof within a reasonable time after receipt of actual notice
thereof by the Partnership, but in any event prior to Closing, and, at its
option, Home Properties may, within 5 days after receipt of such notice, elect
to cancel this Agreement in which event this Agreement shall terminate and the
Deposit shall be returned to Home Properties. If the Closing Date is within the
aforesaid 5-day period, then Closing shall be extended to the next business day
following the end of said 5-day period. If no such election is made, and in any
event if the destruction or damage is not in excess of $250,000, this Agreement
shall remain in full force and effect and the contribution contemplated herein,
less any interest taken by eminent domain or condemnation, shall be effected
with no further adjustment, and upon the Closing of this contribution, the
Partnership shall assign, transfer and set over to Home Properties all of the
right, title and interest of the Partnership in and to any awards that have
been or that may thereafter be made for such taking, and the Partnership shall
assign, transfer and set over to Home Properties any insurance proceeds that
may have been or that may thereafter be made for such damage or destruction
giving Home Properties a credit at Closing for any deductible under such
policies. The Partnership hereby agrees that it shall keep all insurance
policies presently existing which relate to the Property in effect through the
Closing Date.
17. CONDITIONS PRECEDENT TO HOME PROPERTIES' OBLIGATION TO CLOSE.
A. It shall be a condition to Home Properties' obligation to consummate
the Closing that there are at Closing ___ apartment units in
rentable condition and with respect to all of which the Partnership
has received no notice from any governmental authority or agency
having jurisdiction over the Partnership, the Property and the Other
Items stating that the Partnership, the Property or the Other Items
are in violation of any federal, state, county or local laws,
ordinances, rules and regulations. In the event that the Partnership
has received any such notice, then at its election, the Partnership
shall, for up to sixty (60) days after the receipt of such notice,
have the right, but not the obligation, to cure any violation set
forth therein and the Closing Date shall be extended to that date
which is five days after the violation has been cured, but such
extension is not to be for more than 65 days. If the Partnership
fails to notify Home Properties that it has elected to cure any such
violation within 10 days of the receipt of any such notice, then the
Partnership shall be deemed to have elected not to cure any such
violation.
B. It shall be a condition to Home Properties' obligation to consummate
the Closing that Home Properties has not exercised its right to
terminate this Agreement as provided herein.
C. It shall be a condition to Home Properties' obligation to consummate
the Closing that on the Closing Date the Title Company is prepared
to issue a title policy insuring the Partnership's fee interest in
the Property in the amount of the Consideration subject only to the
Permitted Exceptions.
D. It shall be a condition to Home Properties' obligation to close
that, as at the Closing Date, the Existing Loan shall be in full
force and effect and no default or right to accelerate shall be
occurring under the Existing Loan.
E. It shall be a condition to Home Properties' obligation to close that
the sole member of the General Partner shall have executed an
agreement whereby it agrees that it will be responsible for making
all final distributions to the former Partners of the Partnership
from: (i) any amounts remaining in the Reserve Amount and/or
Contingency Account (as the case may be) at the time of expiration
of such Accounts; and (ii) and from any other Partnership funds that
the General Partner holds, and shall indemnify Home Properties for
all claims relating thereto.
It is understood that the conditions set forth Paragraphs A through E in
this Section 17 are for Home Properties' benefit and may be waived by Home
Properties at any time. If any of the above conditions are not satisfied or
waived by Home Properties, Home Properties shall have the right to terminate
this Agreement by written notice to the Partnership. In the event of such a
termination, this Agreement shall be null and void and neither party shall have
any further rights or obligations under this Agreement, other than the
obligations expressly surviving any such termination, and Home Properties shall
have the right to the return of its Deposit.
18. CONDITIONS TO THE PARTIES' OBLIGATIONS TO CLOSE. In addition to all
other conditions set forth herein, the obligation of Home Properties, on the
one hand, and Partnership, on the other hand, to consummate the Closing
contemplated hereunder shall be contingent upon the following:
A. The other party's representations and warranties contained herein
shall be true and correct as of the date of this Agreement and the
Closing Date.
B. As of the Closing Date, the other party shall have performed its
obligations hereunder and all deliveries to be made at Closing have
been tendered;
C. There shall exist no pending or threatened actions, suits,
arbitrations, claims, attachments, proceedings, assignments for the
benefit of creditors, insolvency, bankruptcy, reorganization or
other proceedings, against the other party that would materially and
adversely affect the other party's ability to perform its
obligations under this Agreement;
D. There shall exist no pending or threatened action, suit or
proceeding with respect to the other party before or by any court or
administrative agency which seeks to restrain or prohibit, or to
obtain damages or a discovery order with respect to, this Agreement
or the consummation of the transactions contemplated hereby;
E. Partners owning not less than 100% of the Partnership Interests
shall have agreed in writing on or before the Closing Date to
exchange their Interests in the Partnership for cash, Units, or a
combination of both cash and Units, and assignments for such
interests shall have been received by Closing.
F. All of the provisions of the partnership agreement of the
Partnership shall have been complied with or properly waived by the
necessary parties in order for Home Properties to acquire the
Interests and be substituted as a partner of the Partnership.
G. The Existing Lender shall have consented to or approved the transfer
of interests in the Partnership to Home Properties and the Existing
Lender's counsel shall have prepared the necessary assumption
documents and shall otherwise be ready to close.
So long as a party is not in default hereunder, if any condition to such
party's obligation to proceed with the Closing hereunder has not been satisfied
as of the Closing Date, such party may, in its sole discretion, (i) terminate
the Agreement by delivering written notice of termination to the other party on
or before the Closing Date specifying the unsatisfied condition entitling the
non-defaulting party to terminate this Agreement and provided the other party
fails to satisfy the condition specified in the notice within five days after
receipt of the notice; (ii) elect to extend the Closing for up to 60 days until
such condition is satisfied, and (iii) elect to consummate the transaction,
notwithstanding the non-satisfaction of such condition, in which event such
party shall be deemed to have waived any such condition. In the event such
party elects to close, notwithstanding the non-satisfaction of such condition,
there shall be no liability on the part of any other party hereto for breaches
of representations and warranties of which the party electing to close had
actual knowledge at the Closing. Notwithstanding the foregoing, the failure of
a condition due to the breach of a party shall not relieve such breaching party
from any liability it would otherwise have hereunder. So long as Home
Properties is not in default hereunder, upon termination of this Agreement as
provided above, Home Properties shall have the right to the return of its
Deposit.
19. REPRESENTATIONS AND WARRANTIES OF THE PARTNERSHIP. The Partnership
makes the following representations and warranties to Home Properties as of the
date hereof and as of Closing:
A. To the best of the Partnership's knowledge, the leases (the
"Leases") listed on the rent roll attached hereto as EXHIBIT E and
the contracts listed on the attached EXHIBIT F (the "Contracts")
comprise all of the leases and rights to the property and all of the
contracts to which Home Properties will be subject on the Closing
Date.
B. All of the Partnership's obligations under the Leases and Contracts
are fully performed and, to the best of the Partnership's knowledge,
except as set forth on the attached Exhibits and except for
delinquencies in the payment of rent for the current month, there is
no default under any of the Leases and Contracts by any party
thereto or no event which, with the giving of notice or passage of
time, or both, would constitute a default thereunder. There are no
other security deposits (the "Security Deposits") except as
identified on EXHIBIT E.
C. Other than to the Existing Lender, the Partnership has made no prior
assignment or conveyance of the Leases, Security Deposits and
Contracts and the Partnership is the valid holder of landlord's
interest in the Leases.
D. To the best of the Partnership's knowledge, there is no litigation,
proceeding or investigation pending, or to the knowledge of the
Partnership threatened, against or affecting the Partnership that
might affect or relate to the validity of this Agreement, any action
taken or to be taken pursuant hereto, or the Property or the Other
Items or any part or the operation thereof, whether or not fully
covered by insurance.
E. To the best of the Partnership's knowledge, the Partnership has not
received any written notices from any governmental authority or
agency having jurisdiction over the Partnership or the Property that
the Partnership, the Property or the Other Items are 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. Promptly upon receipt of any such notice, the
Partnership shall provide Home Properties with a copy.
F. The Partnership is a limited partnership, duly organized, validly
existing, and in good standing under the laws of the State of
Maryland, and, subject to consent of the Partners and the consent of
the Existing Lender, the Partnership has full power and authority to
enter into, and to fully perform and comply with the terms of this
Agreement and to own, lease and operate its properties and to carry
on its business as it is now being conducted.
G. Subject to consent of the Partners and the consent of Existing
Lender, the execution and delivery of this Agreement, and its
performance by the Partnership, will not conflict with, or result in
the breach of, any contract, agreement, law, rule or regulation to
which the Partnership is a party, or by which the Partnership is
bound.
H. Subject to consent of the Partners and consent of Existing Lender,
to the best knowledge of the Partnership this Agreement is valid and
enforceable against the Partnership in accordance with its terms,
and each instrument to be executed by the Partnership pursuant to
this Agreement, or in connection herewith, will, when executed and
delivered, be valid and enforceable against the Partnership in
accordance with its terms, except as such enforcement may be limited
by bankruptcy and other laws affecting creditors' rights generally.
I. To the best knowledge of the Partnership, the tax-related
information set forth on SCHEDULE 2 attached hereto is true,
complete and accurate in all material aspects as at the date set
forth therein. The obligations of Home Properties contained in
Paragraph (A)(ii) of Section 29 are based upon and limited to, the
information set forth on SCHEDULE 2.
J. SCHEDULE 1 hereto lists the current holders of all outstanding
Partner Interests of the Partnership together with the percentage
Interest held by each Partner. In the event that any Partner listed
on SCHEDULE 1 transfers any Interests prior to the Closing Date, the
Partnership shall use good faith reasonable efforts to promptly
provide written notice to Home Properties of such transfer, and such
notice shall include the names of the transferor and the transferee,
the address of the transferee and the percentage of Interests
transferred.
K. To the best knowledge of the Partnership, except: (i) as disclosed
in SCHEDULE 3 attached hereto; (ii) for liabilities and obligations
incurred in the normal course of business of the Partnership; and
(iii) as otherwise disclosed in this Agreement, the Partnership has
no material liability or obligation of any nature which in any way
materially affects the Partnership, 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).
L. To the best knowledge of the Partnership, the Partnership has filed
or will file when due all notices, reports and returns of Taxes (as
defined below) required to be filed before the Closing Date and has
paid or, if due and payable between the date hereof and the Closing
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, country, local or foreign government, or subdivision or
agency thereof with respect to the assets or the business of the
Partnership, and including any interest, penalties or additions
attributable thereto.
Home Properties acknowledges, understands and agrees that, except as
provided in this Agreement to the contrary, Home Properties' acquisition of the
Property and Other Items and any other rights and interests to be contributed,
conveyed, transferred and/or assigned is on an "AS IS" "WHERE IS" PHYSICAL
BASIS, WITHOUT REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, WITH REGARD TO
PHYSICAL CONDITION OR COMPLIANCE WITH ANY LEGAL REQUIREMENTS OR TITLE
EXCEPTIONS OF THE PROPERTY, INCLUDING WITHOUT LIMITATION ANY LATENT OR PATENT
DEFECTS, CONDITION OF SOILS (INCLUDING SURFACE AND SUBSURFACE CONDITIONS),
EXISTENCE OR NON EXISTENCE OF HAZARDOUS SUBSTANCES OR POLLUTANTS, QUALITY OF
CONSTRUCTION, STATE OF REPAIR, WORKMANSHIP, MERCHANTABILITY OR FITNESS FOR ANY
PARTICULAR PURPOSE OR AS TO THE PHYSICAL MEASUREMENTS OR USABLE SPACE THEREOF,
TITLE TO THE PROPERTY, THE ASSIGNABILITY, ASSUMABILITY OR TRANSFERABILITY OR
VALIDITY OF ANY LICENSES, PERMITS, GOVERNMENT APPROVALS, WARRANTIES OR
GUARANTIES RELATING TO THE PROPERTY OR THE USE OR OPERATION THEREOF, ZONING,
BUILDING CODE, ACCESS, ENVIRONMENTAL, FIRE OR LIFE SAFETY, SUBDIVISION OR OTHER
ORDINANCES, LAWS, CODES OR REGULATIONS, OF ANY KIND, PRIOR OR CURRENT
OPERATIONS CONDUCTED ON THE PROPERTY AND SURROUNDING PROPERTY, OR ANY
COVENANTS, CONDITIONS, RESTRICTIONS OR DECLARATIONS OF RECORD AND ALL OTHER
MATTERS OR THINGS AFFECTING OR RELATING TO THE PROPERTY. THE PROVISIONS OF THIS
PARAGRAPH SHALL SURVIVE INDEFINITELY ANY CLOSING OR TERMINATION OF THIS
AGREEMENT AND SHALL NOT BE MERGED INTO THE CLOSING DOCUMENTS.
Notwithstanding the foregoing Paragraphs A. through L. of this Section 19,
if Home Properties or its representatives has actual knowledge on the Closing
Date that any of the Partnership's representations or warranties in this
Contribution Agreement are not true as of the Closing Date and Home Properties
elects nonetheless to close, Home Properties shall be deemed to have waived any
claim for breach of such representation or warranty, to the extent that
Purchaser or its representatives had actual knowledge that the same was not
true.
The representations and warranties contained herein shall survive the
Closing and shall not be deemed to have merged in any document delivered at
Closing, but each such representation and warranty shall terminate on, and be
of no further force after the 180th day following the Closing Date.
Notwithstanding the foregoing sentence, any claim relating to any intentional,
material breach of a representation and warranty shall survive indefinitely.
Any claim based upon a misrepresentation or a breach of a representation or
warranty contained in this Contribution Agreement shall be actionable or
enforceable only if the amount of damages or losses as a result of such claim
suffered exceeds $25,000.
20. REPRESENTATIONS AND WARRANTIES OF HOME PROPERTIES. Home Properties
represents and warrants to the Partnership as of the date hereof and as of the
Closing as follows:
A. Home Properties is and will be as of the date of Closing 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 Home Properties,
enforceable in accordance with its terms, except as may be limited
by bankruptcy and other laws affecting creditors' rights generally.
C. To the best of its knowledge after due inquiry, there is no
litigation, proceeding or investigation pending, or to the knowledge
of Home Properties threatened, against or affecting Home Properties
or the partners of Home Properties 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 on the
business or operations of Home Properties.
D. HME has been organized in conformity with the requirements for
qualification as a real estate investment trust under the Internal
Revenue Code of 1986 (the "Code") and its method of operation is
expected to enable it to continue to satisfy the requirements for
taxation as a real estate investment trust under the Code for the
fiscal year ending December 31, 2000 and in the future.
E. Home Properties is classified as a partnership and not as an
association or publicly traded partnership taxable as a corporation
for federal income tax purposes.
F. (i) HME, Home Properties, each subsidiary of HME or Home Properties
and each partnership or limited liability company in which HME or
Home Properties owns an interest (any such subsidiary, partnership
or limited liability company being herein referred to as a
"Subsidiary") have filed or caused to be filed all federal, state,
local, foreign and other tax returns, reports, information returns
and statements required to be filed by them; (ii) HME, Home
Properties and each Subsidiary have paid or caused to be paid all
taxes (including interest and penalties) that are shown as due and
payable on such returns or claimed by any taxing authority to be due
and payable with respect to such returns, except those which are
being contested by them in good faith by appropriate proceedings and
in respect of which adequate reserves are being maintained on their
books in accordance with generally accepted accounting principles
consistently applied; (iii) HME Home Properties and each Subsidiary
do not have any material liabilities for taxes other than those
incurred in the ordinary course of business and in respect of which
adequate reserves are being maintained by them in accordance with
generally accepted accounting principles consistently applied; (iv)
as of the date of this Agreement, Federal and state income tax
returns for HME and Home Properties have not been audited by the
Internal Revenue Service or state authorities; (v) as of the date of
this Agreement, no deficiency, assessment with respect to, or
proposed adjustment of, HME's or Home Properties' federal, state,
local, foreign or other tax returns is pending or, to the best of
Home Properties' knowledge, threatened; and (vi) as of the date of
this Agreement, there is no tax lien, whether imposed by any
federal, state, local or other tax authority, outstanding against
the assets, properties or business of HME, Home Properties or any
Subsidiary.
G. Home Properties has delivered to the Partnership a complete and
correct copy of: (i) the Articles of Incorporation and by-laws of
HME; and (ii) the Second Amended and Restated Agreement of Limited
Partnership of Home Properties, in each case, as amended.
H. Home Properties has previously made available to the Partnership as
requested in writing by the Partnership complete and correct copies
of: (i) the annual report on Form 10-K/A for HME for the period
ending December 31, 1999; (ii) all quarterly reports on Form 10-Q
for HME for each of the quarters in 1999 and first quarter of 2000;
(iii) definitive proxy statement for HME for the 2000 Shareholders'
Meeting; (iv) any current reports on Form 8-K filed by HME since
December 31, 1999; and (v) any other form, report, schedule and
statement filed by HME with the Securities and Exchange Commission
("SEC") under the Exchange Act, since January 1, 2000 (collectively,
the "SEC Documents"). As of their respective dates, each of the SEC
Documents complied in all material respects with the requirements of
the Exchange Act to the extent applicable to such SEC Documents, and
none of such SEC Documents (as of their respective dates) contained
an untrue statement of a material fact required to be stated therein
or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, except as
the same was corrected or superseded in a subsequent document duly
filed with the SEC. HME is not aware of any reports or filings
required to be filed under the Exchange Act with the SEC under the
rules and regulations of the SEC that have not been filed.
I. Home Properties is receiving the Interests delivered pursuant to
this Agreement for investment purposes for its own account, and not
with the view to or in connection with any distribution thereof.
Home Properties understands that the Interests may not be sold,
assigned, offered for sale, pledged or otherwise transferred unless
such transaction is registered under the Securities Act of 1933, as
amended, and applicable state securities laws, or exemptions from
such registration requirements.
The representations and warranties of Home Properties contained in this
Agreement, the statements in any Exhibit or Schedules attached to this
Agreement, or other instruments furnished to the Partnership at or prior to
Closing pursuant to this Agreement, or in connection with the transactions
contemplated pursuant to this Agreement, do not contain any untrue statements
or a material fact, or fail to state a material fact necessary to make it not
misleading.
The representations and warranties contained herein shall survive the
Closing and shall not be deemed to have merged in any document delivered at
Closing.
21. ASSIGNMENT. This Agreement, and all or any portion of the rights of
Home Properties hereunder, may not be assigned by Home Properties without the
prior written consent of the Partnership, which may be granted or withheld in
its sole discretion. Notwithstanding the foregoing, if necessary in order to
preserve the existence of the Partnership upon acquisition of the Interests by
Home Properties, Home Properties may require that up to 5% of the Interests be
assigned to an entity in which Home Properties, directly or indirectly, holds
100% of the equity interests, provided such entity is either disregarded as a
separate entity for Federal income tax purposes or treated as a partnership for
such purposes.
22. NOTICE. All notices given pursuant to any provisions of this
Agreement shall be in writing and shall be effective upon receipt and then only
if delivered personally, or sent by registered or certified mail, postage
prepaid or sent by a national over-night carrier, or by telecopy with
confirmation of receipt to the addresses set forth below:
To the Partnership: ELMWOOD VENTURE LIMITED PARTNERSHIP
Attn: Sanford Slavin
200-A Monroe Street
Suite 105
Rockville, MD 20850
Telecopy No.: ___________
To Home Properties: HOME PROPERTIES OF NEW YORK, L.P.s
Attn: Norman Leenhouts, Chairman and
Kathleen K. Suher, Esq.
850 Clinton Square
Rochester, New York 14604
Telecopy No.: (716) 232-3147
23. PLANS. The Partnership agrees to provide Home Properties with all
plans and architectural drawings in their possession for the improvements
completed at the Property, including, without limitation, all "as built" plans
in their possession and the Partnership further agrees that it will endeavor to
turn over the same to Home Properties at the Property during the Due Diligence
Period.
24. APPLICABLE LAW. The corporate laws of the State of Maryland will
govern all questions concerning the relative rights and obligations of the
parties with respect to any HME Common Shares acquired or acquirable by the
holders of Units on account of their Units. Except as limited by the Operating
Partnership Agreement, the laws of the State of New York will govern all other
questions concerning the relative rights and obligations of the holders of
Units as limited partners in Home Properties, or otherwise with respect to the
Units. This Agreement shall, otherwise, be governed, construed and interpreted
in accordance with the laws of the State of Maryland applicable to contracts
made and to be performed wholly within the State of Maryland without giving
effect to the conflicts-of-laws principles thereof.
25. 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.
26. BINDING AGREEMENT. This Agreement shall not be binding or effective
until properly executed by the Partnership and Home Properties.
27. CONFIDENTIALITY. By execution of this Agreement and except as
otherwise provided herein, prior to the Closing Home Properties and the
Partnership agree 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 the other's prior written consent,
unless such disclosure is required by, or appropriate under, applicable law or
judicial process. Home Properties may disclose the existence of this Agreement
to the extent necessary to conduct its due diligence with respect to the
Property and the Partnership may disclose the existence and terms of this
Agreement to the extent necessary to consummate the transactions contemplated
hereby. Home Properties agrees that it will obtain the consent of the
Partnership, which shall not be unreasonably withheld or delayed, with respect
to the content of any press releases to be issued by Home Properties relating
to the transaction described herein. The provisions of this Section 27 shall
survive indefinitely any termination of this agreement.
28. PARTNERSHIP COVENANTS.
A. Upon the request of Home Properties, the Partnership will provide,
or cause to be provided, a signed representation letter
substantially in the form attached hereto as EXHIBIT I. The
Partnership will provide access by Home Properties' representatives,
to all financial and other information relating to the Property as
is sufficient to enable them to prepare audited financial
statements, at Home Properties' expense, in conformity with
Regulation S-X of the Securities and Exchange Commission (the
"Commission") and any registration statement, report or disclosure
statement required to be filed with the Commission.
B. Prior to the Closing Date, the Partnership shall continue to fulfill
all of its obligations under the terms of the leases encumbering the
Property and under the service contracts and the Partnership shall
operate, maintain and repair all landscaping, buildings, fixtures
and facilities in accordance with its current practices.
C. The Partnership will cease to market the Property during the term
and pendency of the Contribution Agreement. In that regard, the
Partnership will refrain from soliciting or accepting any offer from
any third party, or initiating any discussions with any third party
concerning the sale, refinancing or recapitalization of the
Property, until such time as either Home Properties or the
Partnership shall have terminated this Contribution Agreement.
D. The General Partner hereby covenants to cause the tax returns to be
prepared for the Partnership for the period up to the Closing Date.
Home Properties shall make available to the General Partner (and its
representatives) promptly upon request, all financial and other
information relating to the Partnership which is necessary to permit
the General Partner to file any tax returns on behalf of the
Partnership for its taxable year ended on the Closing Date, and for
such other purposes as may be requested by the General Partner in
order to wind up business affairs for the entity and the Partners,
and shall otherwise cooperate reasonably with the General Partner
with respect to any pre-Closing tax matters.
E. The General Partner shall cause tax returns for the Partnership for
the period up to the Closing Date to be completed within one hundred
twenty (120) days of the Closing Date. A copy of such final tax
returns shall be submitted to Home Properties promptly upon their
filing with the relevant governmental authority. Within one hundred
twenty (120) days of the Closing Date, the General Partner shall
also provide Home Properties with a schedule showing: (i) the net
book value of the Property and the Other Items owned by the
Partnership as of the Closing Date; and (ii) an updated SCHEDULE 2
providing the actual information which was estimated in such
Schedule. The obligation of Home Properties contained in Section
29.A.(2) is limited by the estimated information originally provided
in SCHEDULE 2. The information on the Schedule shall be calculated
in a manner consistent with the calculations made for federal income
tax depreciation purposes.
29. HOME PROPERTIES' COVENANTS.
A. Home Properties hereby covenants to the Partnership and the Unit
Partners as follows:
(1) For a period of ten (10) years from and after the Closing Date,
Home Properties shall not sell, exchange, transfer or otherwise
dispose of the Property unless such transaction occurs in a
manner as to be tax free to the Partners receiving Units. For a
period of five (5) years following the aforementioned ten (10)
year period, Home Properties will use commercially reasonable
efforts to effect any disposition of all or part of the
Property through a 1031 tax-free exchange or other transaction
which does not cause federal income tax gain to be incurred by
the Partners receiving Units and their respective successors
and assigns. In the event that Home Properties breaches any of
its obligations set forth in this Section 29(A)(I), Home
Properties shall indemnify, defend and hold harmless each of
the Partners receiving Units and their respective successors
and assigns (each an "Indemnified Party" and collectively the
"Indemnified Parties") from and against the aggregate federal,
state and local income taxes incurred by such Indemnified Party
as a result thereof (collectively, "Taxes") plus the Taxes
incurred by such Indemnified Party as a result of the receipt
of the Indemnity Payment (the "Tax Indemnity Amount"). Any such
Taxes shall be deemed to be the amount of gain or income
recognized by the relevant Indemnified Party multiplied by the
highest actual rate or rates imposed upon such Indemnified
Party for such gain or income (assuming it is the last dollar
of income or gain) for the year in which such gain or income is
recognized. In determining the Tax Indemnity Amount, no effect
shall be given to the Indemnified Parties' tax deductions, tax
credits, tax carry forwards nor to any other of their tax
benefits or tax attributes. The Tax Indemnity Amount shall be
payable by Home Properties to each Indemnified Party not later
than thirty (30) days following the filing of tax returns for
the Indemnified Party for the year in question.
(2) For a period of ten (10) years from and after the Closing Date,
Home Properties shall allocate to the Partners receiving Units,
for federal income tax purposes, pursuant to Section 752 of the
Code, nonrecourse liabilities of Home Properties in an
aggregate amount necessary to prevent gain recognition under
Section 731(a)(1) of the Internal Revenue Code (the "Code") by
the Partners receiving Units with negative capital accounts as
a result of a deemed distribution of money to such persons
pursuant to Section 752(b) of the Code.
(3) Home Properties shall utilize the "traditional method" under
Section 704(c) of the Code without curative allocations in
accordance with Treasury Regulation Section 1.7043(b)(1) to
adjust for discrepancies between the agreed-upon value of the
various components of the contributed Property (or for any
property received in exchange for any contributed Property in a
like-kind exchange) and the adjusted tax basis of such
components.
(4) Home Properties covenants and agrees that it shall use its
reasonable commercial efforts to cause HME to continue to be
taxed as a real estate investment trust under the Code unless
the Board of Directors of HME determines that it is in the best
interests of shareholders of HME to be taxed otherwise.
(5) Home Properties shall cooperate fully, as and to the extent
reasonably requested by the General Partner, in connection with
the filing of any tax return, statement, report or form, and
any audit litigation or other proceeding with respect to Taxes.
Such cooperation shall include, without limitation, the
retention and (upon request) the provision of records and
information which are reasonably relevant to any such audit,
litigation or other proceeding. Home Properties agrees to
retain all books and records with respect to Tax matters
pertinent to the Partnership relating to any pre-Closing tax
period until the expiration of the applicable statute of
limitations (taking into account waivers or extensions) or, if
sooner, such time as a final determination shall have been made
with respect to such Taxes for such period, and to abide by all
record retention agreements entered into with any taxing
authority.
30. DEFAULT. In the event that Home Properties fails to acquire the
Interests pursuant to this Agreement other than by reason of a termination by
Home Properties expressly permitted hereunder or the Partnership's default, the
Partnership agrees that the Partnership's sole remedies shall be (i) to have
the Title Company deliver the Deposit to the Partnership as liquidated damages
to recompense the Partnership for time spent, labor and services performed, and
loss of its bargain and to terminate this Agreement; or (ii) to seek specific
performance. Home Properties acknowledges that in the event of such a failure
by Home Properties, the damages suffered by the Partnership will be difficult
to ascertain with certainty. Therefore, Home Properties and the Partnership
agree that in the event of such a failure by Home Properties, and if the
Partnership does not elect to seek specific performance, then the sum of
$100,000 is a good faith estimate of the Partnership's damages and at the
Partnership's election said sum shall be promptly paid to the Partnership in
the form of the Deposit. In such event the Partnership agrees to accept the
Deposit as the Partnership's total damages and relief hereunder in the event of
Home Properties' default hereunder. In the event that Home Properties does so
default and this Agreement is terminated, Home Properties shall have no further
right, title, or interest in the Property or the Interests. In the event the
Partnership fails to sell the Property to Home Properties pursuant to this
Agreement other than by reason of a termination by the Partnership expressly
permitted hereunder or Home Properties' default, Home Properties' sole remedies
shall be (i) cancellation of this Agreement in which event Home Properties
shall be entitled to the return by the Title Company to Home Properties of the
Deposit, or (ii) to seek specific performance. In no event shall either party
be entitled to any remedies or damages for breach of this Agreement, except as
set forth hereinabove. And in no event shall any party be entitled to punitive
or consequential damages for the breach of this Agreement.
31. RECORDATION. Neither party may record this Contribution Agreement;
and any recordation shall render the contract void. Also, neither party may
file a lis pendens against the Property.
32. ARBITRATION. Except for any action for specific performance, any
controversy or claim arising out of or relating to this Agreement, or the
breach or the validity thereof shall be settled by final and binding
arbitration in accordance with the most current Commercial Arbitration Rules
(the "Rules") of the American Arbitration Association ("AAA"). The arbitration
shall be conducted by a tribunal of three (3) arbitrators (the "Tribunal").
Each party shall appoint an arbitrator within ten (10) days from the filing of
the Demand and Submission in accordance with Paragraph 7 of the Rules and the
two (2) arbitrators shall jointly appoint the third arbitrator, within fifteen
(15) days from their appointment, in accordance with Paragraph 7 of the Rules.
If the two (2) appointed arbitrators fail to agree upon a third arbitrator
within said fifteen (15) days and fail to agree to an extension of such period,
the third arbitrator shall be appointed by the AAA in accordance with Paragraph
15 of the Rules. The place of arbitration shall be Alexandria, Virginia and the
Award shall be issued at the place of arbitration. The Tribunal may, however,
call and conduct hearings and meetings at such other places as the parties may
agree. The law applicable to the arbitration procedure shall be the Federal
Arbitration Act (the "Act") as supplemented by any law of the place of
arbitration which is not inconsistent with the Act.
The decision of the Tribunal (the "Award") shall be made within ninety
(90) days of the appointment of the Tribunal pursuant to the provisions hereof,
and the parties hereby agree that any such decision need not be accompanied by
a reasoned opinion. The Award may, except as limited by Section 30 of this
Agreement, include (i) recovery of actual damages for violation of any
obligations under this Agreement or of governing law, including the recovery of
attorneys' fees to the prevailing party (ii) injunctive relief against
threatened or actual violations of any obligation under the Agreement or of
governing law or (iii), if and to the extent permitted under the terms of the
Agreement, the remedy of specific performance. The Award shall be final and
binding on the parties. Judgment upon the Award may be entered in any court
having jurisdiction thereof or having jurisdiction over one or more of the
parties or their assets. The parties specifically waive any right they may
enjoy to apply to any court for relief from the provisions of this Agreement or
from any decision of the Tribunal made prior to the Award.
33. EXECUTION IN COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original as
against any party whose signature appears thereon, and all of which shall
together constitute one and the same instrument. This Agreement shall become
binding when one or more counterparts hereof, individually or taken together,
shall bear the signatures of all of the parties reflected thereon as the
signatories.
34. SIGNATURE BY FACSIMILE. The parties may execute and deliver this
Agreement by forwarding signed facsimile copies of their signature page to this
Agreement and delivering an original of the same by overnight courier. Such
facsimile signatures shall have the same binding effect as original signatures,
and the parties hereby waive any defense to validity based on any such copies
or signatures.
35. EMPLOYEES. The Partnership shall be responsible for, and shall make
arrangements for payment of, all amounts due, up to the Closing Date, as
management fees under any management agreement relating to the Project as well
as for salaries, accrued vacation pay and withholding and payroll taxes, if
any, accruing prior to the Closing Date to the employees of the Partnership.
The Partners hereby indemnify Home Properties for any and all expenses and
costs Home Properties may incur relating to claims by employees of the
Partnership for payment of any salaries or other benefits due to such employees
for periods prior to the Closing Date. Any such claims shall be deemed to be
Indemnity Claims as described in Section 4C above.
IN WITNESS WHEREOF, the parties hereto have caused this Instrument to be
executed as of the day and date first above written.
HOME PROPERTIES OF NEW YORK, L.P.
By: Home Properties of New York, Inc.,
General Partner
By:
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Title:
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ELMWOOD VENTURE LIMITED PARTNERSHIP
By: SS Associates, LLC, a Maryland limited liability
company, General Partner
By:
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Sanford Slavin, sole member
