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"), XXXXX X. XXXXX ("Xxxxx") and XXXXX PARTNERSHIP, a
Pennsylvania limited partnership (the "Contributing Partnership") (Xxxxx
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 xxxx of sale (the "Xxxx
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, Xxxxxx and Xxxxx-Xxxxx, 000
Xxxxxx Xxxxxxx, Xxxxxxxx 000, Xxxx Xxxx, Xxxxxxxxxxxx, 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.
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 XXXXX.Xx 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, Xxxxxx and Xxxxx-Xxxxx (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, Xxxxx
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 Xxxxx 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 Xxxxx and distributable to each holder of
an Interest shall be the portion of the Closing Price payable to Xxxxx 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 Xxxxxx
Court Apartments which includes 44 apartments and Xxxxxxxx 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 Xxxx 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 Xxxxx 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 Xxxxxxxx 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 Xxxxx 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 Xxxxx or any such partner, the
Partnership will purchase any or all of the Units held by Xxxxx 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 Xxxxx 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, Xxxxx 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 Xxxxx 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 Xxxxx'x 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 Xxxxx 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
Xxxxx 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 Xxxxx 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 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 Xxxxx and the partners of the Contributing
Partnership who shall have received Units in the Partnership (Xxxxx 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 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. Xxxxx 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 3-601 ET SEQ. (the "business combination"
statute) and 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.
000 Xxxxxxx Xxxxxx
Xxxxxxxxx, Xxx Xxxx 00000
Attention: Xxxxxx Xxxxxxxxx
With a copy to Xxx X. XxXxxxxxx
at the same address
To the Contributors:
Xxxxx X. Xxxxx
000 Xxxxxxxx Xxxxx
Xxxxxxxx, Xxxxxxxxxxxx 00000
With a copy to:
Xxxxx X. Xxxxxx, Esq.
Wolf, Block, Xxxxxx and Xxxxx-Xxxxx
000 Xxxxxx Xxxxxxx
Building 640
Blue Xxxx, Pennsylvania 19422
And a copy to:
Xxxx X. Xxxxxxx, Xx., Esq.
Xxxx, Block Xxxxxx and Xxxxx-Xxxxx
Twelfth Floor, Packard Building
00xx xxx Xxxxxxxx Xxxxxxx
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000
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 X.X. Xxxx & 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 Xxxxx and the General Partner an
agreement, in form and substance satisfactory to Xxxxx and the General
Partner and Xxxxx'x and the General Partner's counsel, whereby the
Partnership agrees to indemnify and hold harmless Xxxxx 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 Xxxxx, 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, Xxxxx, 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 00-0000000; the
Partnership's taxpayer identification number is 00-0000000.
(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 XXXXXXXXXXX.Xx 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.
XXXXX PARTNERSHIP
By: /s/ Xxxxx X. Xxxxx
-----------------------------
Xxxxx X. Xxxxx, General Partner
/s/ Xxxxx X. Xxxxx
-----------------------------
Xxxxx X. Xxxxx
HOME PROPERTIES OF NEW YORK, L.P.
By:Home Properties of New York, Inc.
General Partner
By: /s/ Xxxxxx X. Xxxxxxxxx
-----------------------------------
Xxxxxx Xxxxxxxxx, 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/ Xxxxxx Xxxxxxxxx
-----------------------------------
Xxxxxx Xxxxxxxxx, Chairman
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.
