CONTRIBUTION AGREEMENT
This Contribution Agreement ("Agreement"), made as of the 7th day of June,
1999 by and among
HOME PROPERTIES OF NEW YORK, L.P., a New York limited partnership, having
its principal office at 000 Xxxxxxx Xxxxxx, Xxxxxxxxx, Xxx Xxxx 00000,
("Home Properties"); and
_____________________________, a _______________________(the
"Partnership"), having its principal office at _________________.
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 ________, all as more particularly described on
EXHIBIT A;
WHEREAS, the Partnership desires to cause each of its members (the
"Partners") to contribute each of the member 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% (but not less than 90%)
of the Interests in the Partnership and thus a 100% (but not less than 90%) 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;
WHEREAS the parties hereto also desire, subject to the terms and conditions set
forth herein and in the agreements noted below, that the entities described on
EXHIBIT B attached hereto (the "Affiliated Partnerships") cause each of their
respective constituents (the "Affiliated Partners") to contribute to Home
Properties and Home Properties accepts from the Affiliated Partners, all (but
not less than 90%) of the ownership interests in the Affiliated Partnerships
(the "Affiliated Interests") pursuant to contribution agreements entered into
between the Affiliated Partnerships and Home Properties, each of even date
herewith (the "Other Contribution Agreements"), and that the transactions
contemplated therein close simultaneously with, and as a condition to, the
closing of the transactions contemplated hereby;
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 ______________,
which includes ___apartments (the " Project"), located in __________________,
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 AE 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 Managers (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 who have accepted the
Offer 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 _______________ and ________________ (the "Managers") hereby agrees
that they will accept the Offer with respect to all of their Interests.
C. Notwithstanding the foregoing right of Partners to elect to be paid their
portion of the Exchange Value in cash, Units, or a combination of both cash and
Units, $50 million shall be the maximum aggregate portion of the Exchange Price
payable to the Partners in cash under this Contribution Agreement as well as
under the Other Contribution Agreements and the Contribution Agreement (the
"Management Company Agreement") between Home Properties and Community Realty
Company, Inc. (the "Management Company"). In the event that the aggregate
portion of the Exchange Price to be paid in cash to the Partners, the
Affiliated Partners, and the Management Company who are not accredited
investors under the securities laws (and are therefore not permitted to receive
Units) (collectively, the "Non-Accredited Investors") or who are accredited
investors under the securities laws but have nonetheless elected to receive all
or any portion of their Exchange Price in cash (the "Accredited Cash Payees")
exceeds $50 million in the aggregate, then cash, up to $50 million, shall be
paid first to the Non-Accredited Investors, and then the remaining cash, if
any, shall be paid pro-rata to the Accredited Cash Payees. The remainder of
the Exchange Value, if any, not paid in cash to the Accredited Cash Payees (the
"Remaining Non-Cash Exchange Value"), shall be paid to such Accredited Cash
Payees in the form of Units at the Designated Value (as hereinafter defined).
4. CONSIDERATION AND MANNER OF PAYMENT.
A. The aggregate consideration payable by Home Properties for 100% of the
Interests shall be $___________ (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 Managers 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 Managers may reasonably determine are necessary or prudent to
retain to satisfy any Partnership Claims (hereinafter defined) (the
"Liabilities Reserve") and (b) the sum of $___________ (the "Indemnity
Reserve"); provided, however, that the Indemnity Reserve portion of the Reserve
Amount shall be reduced in proportion to the Interests of Partners of the
Partnership ("Dissenting Partners") who do not accept the Offer. 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 Managers or their 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 Managers 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 C.
E. Subject to the limitation described in Paragraph C. of Section 3, 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 and Partners who are
Accredited Cash-Payees who because of the $50 million cash limitation described
in Paragraph 3.C. herein, are not paid all of their Exchange Value in cash
(each a "Unit Partner" and collectively the "Unit Partners") shall be paid
their Exchange Price (or in the case of Accredited Cash Payees the Remaining
Non-Cash Exchange Value) 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
$25.9417, which is the average closing price for the period from and including
May 10 to and including May 28, 1999 of a share of common stock of Home
Properties of New York, Inc., ("HME") as listed on the New York Stock Exchange.
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 D 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 a sum equal to the amount of the
Liability Reserve with Commercial Settlements, Inc. (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 E.
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 Managers 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 Managers
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. Notwithstanding the above, Dissenting Partners shall not be entitled
to a distribution of any portion of the Indemnity Reserve.
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 Managers. The Managers 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.
Notwithstanding the above, Dissenting Partners shall not be entitled to a
distribution of any portion of the Indemnity Reserve.
C. Not later than 360 days after the Closing Date (provided that there have
been no unanticipated Partnership Claims), the Managers 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 Managers have reason to believe that such
unanticipated Partnership Claims may be asserted, the Managers may continue to
hold the Contingency Reserve until such time as the Managers deem prudent,
after which time any undisbursed amount remaining in the Contingency Reserve
shall be disbursed by the Managers pro rata to the Partners in accordance with
their percentage interests. Notwithstanding the above, Dissenting Partners
shall not be entitled to a distribution of any portion of the Indemnity
Reserve.
6. EXISTING LOANS. Home Properties acknowledges that the Property is
currently subject to mortgage financing having a principal balance as of May 1,
1999 of approximately $____________ (the "Existing Loan") and held by
________________ (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 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 Managers 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. 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.
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 Managers 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 Managers 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 the sixtieth day 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 90% 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 D;
(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 C; 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) An opinion of a nationally recognized law firm acting as counsel for Home
Properties and HME reasonably acceptable in form and content to the Partnership
to the effect that (1) HME has been organized in conformity with the
requirements for qualification as a real estate investment trust under the Code
and currently qualifies to be taxed as such, and (2) 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;
(3) Such cash as may be required of Home Properties to pay closing costs or
charges properly allocable to Home Properties;
(4) 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;
(5) 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;
(6) An executed original of the Registration Rights and Lock-Up Agreement in
the form attached hereto as EXHIBIT D; and,
(7) 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 15, 1999 (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 18, 1999 (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 18, 1999 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 June 8, 1999, 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) June 30, 1999; 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 June 30, 1999, 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 other than the fees due to Friedman,
Billings, Xxxxxx and Co., Inc. which fees Home Properties agrees to pay. 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 other broker by the
indemnifying party. This representation and indemnity shall survive the
Closing. Without limitation of the foregoing, at the Closing, the Partnership
(prior to Home Properties acquiring the Interests) shall pay to the Management
Company a disposition fee of .25% of the Consideration. The 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 966 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 subject only to
the Permitted Exceptions.
D. It shall be a condition to Home Properties' obligation to close that prior
to May 30, 1999, the Board of Directors of HME (the "Board") shall have
approved the acquisition of the Interests by Home Properties on the terms and
conditions set forth in this Agreement.
E. 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.
F. It shall be a condition to Home Properties' obligation to close that the
Managers shall have executed an agreement whereby they agree that they 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 Managers hold,
and shall indemnify Home Properties for all claims relating thereto.
It shall be a condition to Home Properties' obligation to close that the Unit
Partners shall provide a guarantee to the Existing Lender of the Partnership's
indebtedness in the amount determined by the Partnership to be necessary to
avoid disguised sale treatment under applicable regulations. Notwithstanding
the foregoing, no Unit Partner will be required to guarantee any debt of Home
Properties other than with respect to debt described in the immediately
preceding sentence.
It is understood that the conditions set forth Paragraphs A through G 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. The Management Company shall have conveyed to Home Properties and Home
Properties shall have accepted from the Management Company, the assets and
management agreements to be conveyed to Home Properties pursuant to the terms
of the Management Company Agreement, and the transactions contemplated therein
have closed simultaneously with the transactions contemplated hereby;
F. The Affiliated Partners shall have contributed to Home Properties and Home
Properties shall have accepted from the Affiliated Partners, all (but not less
than 90%) of the Affiliated Interests pursuant to the Other Contribution
Agreements, and the transactions contemplated therein have closed
simultaneously with the transactions contemplated hereby; and,
G. Partners owning not less than 90% of the aggregate 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.
H. Home Properties and Xxxxxxx Xxxxxx shall have entered into a
mutually satisfactory written employment agreement.
I. All of the provisions of the Operating 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
member of the Partnership.
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 G and the contracts listed
on the attached EXHIBIT H (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 G.
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. All of Community Realty Company, Inc.'s obligations under the management
agreement for the Property (the "Management Agreement") have been performed and
the Partnership has no claim of any nature against Community Realty Company,
Inc. or any of its successors and assigns relating to that Management
Agreement.
G. The Partnership is a limited liability company, 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.
H. 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.
I. 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.
J. 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.
K. 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.
L. 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).
M. 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.
As used in the foregoing representations and warranties, the phrase "to
the best of the Partnership's knowledge" shall mean the actual, conscious
knowledge of Xxxxxxx Xxxxxx.
Notwithstanding the foregoing Paragraphs A. through M. 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, 1999 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 for HME for the period ending December 31, 1998;
(ii) all quarterly reports on Form 10-Q for HME for each of the quarters in
1998 and first quarter of 1999; (iii) definitive proxy statement for HME for
the 1999 Shareholders' Meeting; (iv) any current reports on Form 8-K filed by
HME since December 31, 1998; and (v) any other form, report, schedule and
statement and filed by HME with the Securities and Exchange Commission ("SEC")
under the Exchange Act, since January 1, 1999 (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.
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: c/o Community Realty Company, Inc.
Attn: Xxxxxxx X. Xxxxxx
0000 Xxx Xxxx, Xxxxx 000
Xxxxxxxxx, Xxxxxxxx 00000
Telecopy No.: (000) 000-0000
To Home Properties: HOME PROPERTIES OF NEW YORK, L.P.
Attn: Xxxxxx Xxxxxxxxx, Chairman
000 Xxxxxxx Xxxxxx
Xxxxxxxxx, Xxx Xxxx 00000
Telecopy No.: (000) 000-0000
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 covenants that it hereby waives any and all claims it may
have against Home Properties as assignee of the Management Agreement relating
to any defaults by Community Realty Company, Inc. in the performance of its
obligations under the Management Agreement.
D. 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.
E. The Managers hereby covenant 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 Managers (and their representatives) promptly upon
request, all financial and other information relating to the Partnership which
is necessary to permit the Managers 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 Managers in order to wind up business
affairs for the entity and the Partners, and shall otherwise cooperate
reasonably with the Managers with respect to any pre-Closing tax matters.
F. The Managers 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 Managers 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. After the foregoing 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.
Notwithstanding the above, the Partnership on behalf of itself and the Unit
Partners acknowledges that Home Properties has made no representation that the
transaction as described in this Agreement will avoid disguised sale treatment
under applicable Code regulations.
(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) If, at the expiration of the one-year anniversary of the Closing Date (the
"Lock-In Period") and for one year thereafter a Unit owner elects to exercise
their Purchase Right (as defined in the Operating Partnership Agreement) and
the then current Market Value (as defined in the Operating Partnership
Agreement) is less than the Designated Value, then such Unit owner shall, on
the Specified Purchase Date (as defined in the Operating Partnership
Agreement), receive a proportionately increased Cash Amount (as defined in the
Operating Partnership Agreement) or increased number of HME Common Shares (if
Home Properties has elected to deliver HME Common Shares as permitted pursuant
to Section 6.08(b) of the Operating Partnership Agreement) having a value up
to, but not exceeding 10% of the Designated Value for each Unit with respect to
which the Purchase Right was exercised. An example of the calculation as
described above is attached as EXHIBIT J.
(5) 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.
(6) Simultaneously with the Closing, Home Properties shall cause HME to expand
the number of directors on the Board by one seat and to procure that Xx. Xxxxxx
Small (the "Nominee") is appointed to such Board through any actions of the
then current Board to serve until the next annual meeting of the shareholders
of HME. After the expiration of the initial term of the Nominee, at each
successive annual or special meeting of the shareholders of HME at which
directors are to be elected by shareholders and which meetings are held during
the years 2000, 2001 and 2002, the Unit Partners, collectively as one group
with the individuals and entities that received Units as Consideration under
the Other Contribution Agreements, shall have the right to nominate the
Nominee. Notwithstanding the above, the right to so nominate the Nominee shall
terminate when Xxxxxx Small shall cease to hold a seat on the Board unless
caused by the violation by HME of the above provisions or in the event that Mr.
Small shall become incapacitated or incompetent. In the event that HME adopts
any mandatory age restrictions that would otherwise restrict Mr. Small's
ability to be nominated and elected to the Board as provided above, it is
agreed that, for the years 2000, 2001 and 2002, such restrictions shall not
apply to Mr. Small or that he shall receive a waiver from such restrictions.
(7) Home Properties shall cooperate fully, as and to the extent reasonably
requested by the Managers, 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
$270,000 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. 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 Baltimore, Maryland 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: __________________________
Title: _________________________
(PARTNERSHIP)
By: __________________________
LIST OF EXHIBITS AND SCHEDULES
EXHIBIT A Legal Description
EXHIBIT B Other Contribution Agreements
EXHIBIT C Escrow Agreement Reserve Amount
EXHIBIT D Registration Rights and Lock-Up Agreement
EXHIBIT E Escrow Agreement Deposit
EXHIBIT F Intentionally Omitted.
EXHIBIT G Rent Roll
EXHIBIT H List of Contracts
EXHIBIT I Representation Letter
EXHIBIT J Example of Calculation
Schedule 1 List of Partners
Schedule 2 Tax-Related Information
Schedule 3 Liabilities
PORTFOLIO INFORMATION
NAME AND LOCATION # OF PRICE OWNER ENTITY
UNITS
Xxxxxx Xxxxx Apartments 966 $46,832,000 Xxxxxx Xxxxx,LLC
0 Xxxxxxxxx Xxxxx
Xxxxxxxxx, XX 00000
Carriage Hill Apartments 664 $36,752,000 Kenwood Associates
Glenside Drive Limited Partnership
Richmond, VA
Xxxxxx Xxxxx Apartments 236 $7,488,000 Xxxxxx Xxxxx Club
00000 Xxxxx Xxxx Xxxxxxxxx, XXXX
Xxxxxx, XX 00000
The Pavilion Apartments 432 $30,092,000 Bernmil Associates
0000 Xxxxxxxx Xxxx XXX
Xxxxxxxx, XX 00000
Riverdale Apartments 580 $15,496,000 Riverdale
0000 Xxxxxxxxxx Xxxxx Xxxxxxxxxx, XXX
Xxxxxxx, XX 00000
Seminary Hill Apartments 296 $13,000,000 Seminary Hills
0000 Xxxxxxx Xxx. Xxxxxxx Xxxxxxxxxxx
Xxxxxxxxxx, XX 00000
Seminary Towers Apartments 548 $24,494,000 Seminary Towers
4701 & 0000 Xxxxxxx Xxx. Limited Partnership
Xxxxxxxxxx, XX 00000
CRC Assets N/A $4,160,000 Community Realty
Company, Inc.
