Exhibit 10.2
PARTNERSHIP INTEREST PURCHASE AGREEMENT
This Partnership Interest Purchase Agreement (the "Agreement"),
dated as of the 23rd day of December, 1996, is by and among Home
Properties of New York, L.P., a New York limited partnership (the
"Partnership"), Home Properties of New York, Inc., a Maryland
corporation and the general partner of the Partnership (the
"General Partner"), and State Treasurer of the State of Michigan,
Custodian of Michigan Public School Employees' Retirement System,
State Employees' Retirement System, Michigan State Police
Retirement System and Michigan Judges' Retirement System ("SMRS").
WITNESSETH:
WHEREAS, the Partnership desires to issue and sell to SMRS the
Class A Limited Partnership Interest in the Partnership (the "Class
A Interest") as such interest is described in Amendment No. 9
("Amendment No. 9") to the Amended and Restated Agreement of
Limited Partnership of the Partnership (together with Amendment No.
9 and prior amendments, the "Partnership Agreement");
WHEREAS, SMRS desires to purchase the Class A Interest from the
Partnership;
WHEREAS, the General Partner is the general partner of the
Partnership and has been asked by SMRS to covenant and agree as to
certain matters in connection with the issuance and sale of the
Class A Interest to SMRS;
WHEREAS, the General Partner as general partner of the Partnership
and the holder of significant interests in the Partnership will
benefit from the issuance and sale of the Class A Interest to SMRS;
NOW THEREFORE, in consideration of the premises and the mutual
agreements contained herein, the parties hereby agree as follows:
1. Definitions. Capitalized terms used herein and not otherwise
defined shall have the meaning given them in the Partnership
Agreement. The following capitalized terms shall have the meanings
indicated:
1.1 "Action" shall mean any suit, arbitration, inquiry,
proceeding or injunction by or before any Governmental or
Regulatory Authority, court or arbitrator.
1.2 "Affiliate" shall have the meaning specified in Rule 12b-
2 promulgated under the Securities Exchange Act of 1934, as
amended.
1.3 "Approval Breach" shall mean the taking by the General
Partner of any of the actions described in paragraphs (a) and (b)
of Section 6.4 of this Agreement and
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paragraph (b) of Section 10.07
of Amendment No. 9 without obtaining the prior approvals specified
in those sections.
1.4 "Articles of Incorporation" shall mean the Articles of
Amendment and Restatement of the Articles of Incorporation of the
General Partner, as currently in effect.
1.5 "Board" shall mean the Board of Directors of the General
Partner.
1.6 "Business Day" shall mean any day except a Saturday,
Sunday or other day on which commercial banks in the City of New
York are authorized or required by law to close.
1.7 "Class A Interest Holder" shall mean any Person holding
all or any portion of the Class A Interest.
1.8 "Closing" shall mean the consummation of the transactions
contemplated by Section 2 of this Agreement.
1.9 "Closing Date" shall mean December 30, 1996, the date on
which the Closing occurs.
1.10 "Code" shall mean the Internal Revenue Code of 1986, as
amended, and the rules and regulations promulgated thereunder.
1.11 "Company Reports" shall mean each registration statement,
report, proxy statement or information statement and all exhibits
thereto prepared by the General Partner or relating to its
properties since the effective date of the Registration Statement,
which are set forth in Schedule 3.5(a) hereto (including exhibits
and any amendments thereto).
1.12 "Equity Capitalization" shall mean the aggregate of the
Value of the Class A Interest, the Value of the Units not owned by
the General Partner and the Market Value of all outstanding HP
Shares at the time that the determination is made.
1.13 "Equity Ownership" shall mean, with respect to each Class
A Interest Holder, the percentage obtained by dividing the sum of
the Value of the Class A Interest and the Value of the HP
Conversion Shares held by that Class A Interest Holder on the date
that the calculation is made by the Equity Capitalization.
1.14 "GAAP" shall mean generally accepted accounting
principles.
1.15 "Governmental or Regulatory Authority" shall mean any
government or state (or any subdivision thereof) of or in the
United States, or any foreign country, or any agency, authority,
bureau, commission, department or similar body or instrumentality
thereof, or any governmental court or tribunal thereof.
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1.16 "HP Conversion Shares" shall mean the HP Shares received
on conversion of all or any portion of the Class A Interest that
have not previously been transferred on a Public Basis.
1.17 "HP Shares" shall mean the common stock, par value $.01
per share, of Home Properties of New York, Inc.
1.18 "Investor Group Representative" shall mean the Person
appointed by the Rights Holders to act as their representative as
described in paragraph (d) of Section 6.4 of this Agreement
1.19 "Investor Nominee" shall mean each director that the
Rights Holders shall have the right to have on the Board as
described in Section 6 of this Agreement
1.20 "Key Committee" shall mean, with respect to the Board,
the Audit Committee, the Compensation Committee and any committee
of the Board, special or otherwise, which shall be charged with
exercising substantial authority on behalf of the Board.
1.21 "Law" shall mean all laws, statutes, rules, regulations,
ordinances and other pronouncements having the effect of law of the
United States, any foreign country or any domestic or foreign
state, country, city or other political subdivision or of any
Governmental or Regulatory Authority.
1.22 "Liabilities" shall mean, as to any person, all debts,
adverse claims, liabilities and obligations, direct, indirect,
absolute or contingent of such person, whether accrued, vested or
otherwise, whether in contract, tort, strict liability or otherwise
and whether or not actually reflected, or required by GAAP to be
reflected, in such person's or entity's balance sheets or other
books and records, including: (i) all indebtedness or liability of
such person for borrowed money, or for the purchase price of
property or services (including trade obligations); (ii)
reimbursement obligations of such person in respect of letters of
credit; (iii) all liabilities of other persons or entities,
directly or indirectly, guaranteed, endorsed (other than for
collection or deposit in the ordinary course of business), or
discounted with recourse by such person or with respect to which
the person in question is otherwise directly or indirectly liable;
(iv) all obligations secured by any lien on property of such
person, whether or not the obligations have been assumed; and (v)
all other items which have been, or in accordance with GAAP would
be, included in determining total liabilities on the liability side
of the balance sheet.
1.23 "Liens" shall mean any mortgage, pledge, assessment,
security interest, lease, lien, adverse claim, levy, charge or
other encumbrance of any kind, or any conditional sale contract,
title retention contract or other contract to give any of the
foregoing.
1.24 "Lock-Up Letter" shall mean the letter agreement, dated
the date of this Agreement, from SMRS to the General Partner
whereby SMRS acknowledges certain
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restrictions on the sale of HP
Shares received on conversion of all or a portion of the Class A
Interest.
1.25 "Market Value" shall have the meaning given it in Section
1.41 of the Partnership Agreement, provided that the Rights
Holders, by accepting the issuance or assignment to them of the
Class A Interest or HP Conversion Shares, covenant and agree that,
during the ten (10) consecutive trading days immediately preceding
the date on which the Market Value is to be determined, they will
not purchase or sell any HP Shares, cause the purchase and sale of
any HP Shares or take any other actions that are intended to or
that actually affect the market price of HP Shares.
1.26 "Material Adverse Effect" shall mean a material adverse
effect on the financial condition, result of operations or business
of the General Partner, the Partnership or the Subsidiaries taken
as a whole.
1.27 "Order" shall mean any writ, judgment, decree, injunction
or similar order of any Governmental or Regulatory Authority (in
each such case whether preliminary or final).
1.28 "Original Investment" shall mean the sum of Thirty Five
Million and 00/100 Dollars ($35,000,000).
1.29 "Preferred Return" shall mean the distribution payable to
the Class A Interest Holders as described in Section 10.04 of the
Partnership Agreement.
1.30 "Preferred Return Breach" shall mean the failure to make
a payment of the Preferred Return, in whole or in part, for a
period of thirty (30) Business Days after the payment was due.
1.31 "Private Offering" shall mean all private offerings of
stock (whether common or preferred) made by the General Partner and
all private offerings of Partnership Interests (including Units) by
the Partnership.
1.32 "Proceeding" shall mean any action, suit, proceeding,
arbitration or Governmental or Regulatory Authority investigation
or audit.
1.33 "Properties" shall mean all real property owned or leased
by the Partnership, the General Partner or the Subsidiaries
(collectively, and together with all buildings, structures and
other improvements and fixtures located on or under such land and
all easements, rights and other appurtenances to such land).
1.34 "Public Basis" shall mean the sale of any HP Shares by
means of the facilities of any public stock exchange or in any
Public Offering.
1.35 "Public Offering" shall mean a public offering of HP
Shares, preferred shares of the General Partner or Partnership
Interests (including Units), other than a registration relating
solely to the sale of securities to participants in a dividend
reinvestment plan, a
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registration on Form S-4 relating to a
business combination or similar transaction permitted to be
registered on such Form S-4, a registration on Form S-8 relating
solely to the sale of securities to participants in a stock or
employee benefit plan, or a registration permitted under Rule 462
under the Securities Act registering additional securities of the
same class as were included in an earlier registration statement
for the same offering and declared effective.
1.36 "Registration Rights Agreement" shall mean the
Registration Rights Agreement, to be dated the date of this
Agreement, to be entered into between the General Partner and
SMRS..
1.37 "Registration Statement" shall mean the Registration
Statement on Form S-11 filed by the General Partner with the SEC
in connection with its initial public offering of HP Shares.
1.38 "REIT" shall mean a real estate investment trust within
the meaning of the Code.
1.39 "Rights Holders" shall mean the Class A Interest Holders
and the holders of HP Conversion Shares.
1.40 "Rights Termination Date" shall mean the date on which
the combined Value of the Class A Interest and the Value of the HP
Conversion Shares held by the Rights Holders: (i) shall be less
than $35,000,000 and (ii) shall cease to exceed 8% of the Equity
Capitalization for a period of 30 consecutive trading days.
1.41 "SEC" shall mean the Securities and Exchange Commission.
1.42 "Securities Laws" shall mean the Securities Act of 1933,
as amended, and the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
1.43 "Stock Option Plan" shall mean the Stock Option Plan of
the General Partner whereby certain of the directors and employees
of the General Partner have been and will be granted options to
purchase HP Shares.
1.44 "Subsidiaries" shall mean Home Properties Management,
Inc. and Conifer Realty Corporation, both of which are Maryland
corporations.
1.45 "Units" shall mean each of the fractional, undivided
partnership interests of partners of the Partnership issued
pursuant to Sections 3.01 and 3.02 of the Partnership Agreement.
1.46 "Value of the HP Conversion Shares" shall mean the Market
Value of the equivalent number of HP Shares.
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1.47 "Value of the Class A Interest" shall mean the Market
Value of the HP Shares into which the Class A Interest can be
converted.
1.48 "Value of the Units" shall mean the Market Value of the
HP Shares into which the outstanding Units can be converted.
2. Purchase of Class A Interest.
2.1 Purchase. On the terms and subject to the conditions set
forth in this Agreement, the Partnership shall issue and sell to
SMRS and SMRS shall purchase from the Partnership 100% of the Class
A Interest and SMRS shall be admitted as a limited partner to the
Partnership and the sole holder of such Class A Interest. The
aggregate purchase price for the Class A Interest shall be the
Original Investment.
2.2 The Closing. The Closing will take place at the offices
of the General Partner, or at such other place as SMRS and the
Partnership mutually agree, at 10:00 am, local time, on December
30, 1996. At the Closing, SMRS will pay the Original Investment by
wire transfer of immediately available funds to such account as the
Partnership may reasonably direct by written notice delivered to
SMRS. Simultaneously therewith, the Partnership will issue and
sell to the SMRS good and valid title in and to the Class A
Interest, free and clear of all liens, delivering to SMRS Amendment
No. 9, duly executed by the General Partner. At the Closing,
there shall also be delivered to the Partnership and SMRS the
agreements, certificates and opinions to be delivered under Section
2.3 and Section 2.4.
2.3 Conditions to the Obligations of SMRS. The obligations
of SMRS hereunder are subject to the fulfillment, at or before the
Closing, of each of the following conditions (all or any of which
may be waived in whole or in part by SMRS in its sole discretion):
(a) Representations and Warranties. Each of the
representations and warranties made by the General Partner and the
Partnership (other than those made as of a specified date earlier
than the Closing Date) shall be true and correct in all material
respects on and as of the Closing Date as though such
representation or warranty was made on and as of the Closing Date,
and any representation or warranty made as of a specified date
earlier than the Closing Date shall have been true and correct in
all material respects on and as of such earlier date.
(b) Performance. The General Partner and the Partnership
shall have performed and complied with, in all material respects,
each agreement, covenant and obligations required by this Agreement
to be so performed or complied with by the General Partner and the
Partnership at or before the Closing.
(c) Officers' Certificates. The General Partner and the
Partnership shall have delivered to SMRS a certificate, dated the
Closing Date and executed by the President of the General Partner,
in form and substance reasonably satisfactory to SMRS, confirming
the matters specified in Section 2.3(a) and (b) and confirming the
incumbency of the specified officers of the General Partner.
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(d) Orders and Laws. There shall not be in effect on the
Closing Date any Order or Law restraining, enjoining or otherwise
prohibiting or making illegal the consummation of any of the
transactions contemplated by this Agreement or any of the other
transactions contemplated hereby or which could reasonably be
expected to otherwise result in a material diminution of the
benefits of the transactions contemplated by this Agreement to
SMRS, and there shall not be pending or threatened on the Closing
Date any Action or Proceeding or any other action in, before or by
any Governmental or Regulatory Authority which could reasonably be
expected to result in the issuance of any such Order or the
enactment, promulgation or deemed applicability to SMRS, the
General Partner, the Partnership or the Subsidiaries of any such
Law.
(e) Regulatory Consents and Approvals. All consents,
approvals and actions of, filings with and notices to any
governmental or regulatory authority necessary to permit SMRS, the
General Partner and the Partnership to perform their respective
obligations under this Agreement and to consummate the transactions
contemplated hereby (i) shall have been duly obtained, made or
given, (ii) shall be in form and substance reasonably satisfactory
to SMRS, (iii) shall not be subject to the satisfaction of any
condition that has not been satisfied or waived and (iv) shall be
in full force and effect.
(f) Opinion of Counsel. SMRS shall have received the opinion
of Nixon, Hargrave, Devans & ▇▇▇▇▇, counsel to the General Partner
and the Partnership, dated the Closing Date, substantially in the
form and to the effect of Exhibit A hereto, and to such further
effect as SMRS may reasonably request.
(g) Appointment of Director. The designee of SMRS shall have
been appointed to the Board of Directors of the General Partner and
SMRS shall have received evidence of such appointment reasonably
satisfactory to SMRS.
(h) Other Agreements. The General Partner and the
Partnership shall have executed and delivered to SMRS Amendment No.
9, the Registration Rights Agreement and the Lock-Up Letter.
(i) Proceedings. All proceedings to be taken on the part of
the General Partner and the Partnership in connection with the
transactions contemplated by this Agreement and all documents
incident thereto shall be reasonably satisfactory in form and
substance to SMRS, and SMRS shall have received copies of all such
documents and other evidences as SMRS may reasonably request in
order to establish the consummation of such transactions and the
taking of all proceedings in connection therewith.
2.4 Conditions to the Obligations of the General Partner and
the Partnership. The obligations of the General Partner and the
Partnership hereunder are subject to the fulfillment, at or before
the Closing, of each of the following conditions (all or any of
which may be waived in whole or in part by the General Partner and
the Partnership in their sole discretion):
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(a) Representations and Warranties. Each of the
representations and warranties made by SMRS (other than those made
as of a specified date earlier than the Closing Date) shall be true
and correct in all material respects on and as of the Closing Date
as though such representation or warranty was made on and as of the
Closing Date, and any representation or warranty made as of a
specified date earlier than the Closing Date shall have been true
and correct in all material respects on and as of such earlier
date.
(b) Performance. SMRS shall have performed and complied
with, in all material respects, each agreement, covenant and
obligation required by this Agreement to be so performed or
complied with by SMRS at or before the Closing.
(c) Officers' Certificates. SMRS shall have delivered to
the General Partner a certificate, dated the Closing Date and
executed by an authorized representative of SMRS, in form and
substance reasonably satisfactory to SMRS, confirming the matters
specified in Section 2.4(a) and (b) and confirming the incumbency
of the specified representatives.
(d) Purchase Price. SMRS shall have delivered to the General
Partner the Original Investment.
2.5 Use of Proceeds. The Original Investment described in
Section 2.1 of this Agreement shall be used by the Partnership to
fund acquisitions of multi-family apartment communities and for the
repayment of debt.
3. Representations and Warranties of the General Partner and the
Partnership. The General Partner and the Partnership hereby
represent and warrant as follows:
3.1 Organization and Qualification; Subsidiaries.
(a) The General Partner is a corporation duly incorporated,
validly existing and in good standing under the laws of the State
of Maryland. The General Partner has all requisite corporate power
and authority to enter into this Agreement, Amendment No. 9, the
Registration Rights Agreement and the Lock-Up Letter and to perform
its obligations hereunder and thereunder. The General Partner has
all the requisite governmental licenses, authorizations, consents
and approvals to own, operate, lease and encumber its Properties
and carry on its business as now conducted, except where the
failure to do so could not, individually or in the aggregate,
reasonably be expected to result in a Material Adverse Effect.
(b) The Partnership is a limited partnership duly organized,
validly existing and in good standing under the laws of the State
of New York. The Partnership has all requisite partnership power
and authority to enter into this Agreement and Amendment No. 9.
The Partnership has all the requisite governmental licenses,
authorizations, consents and approvals to own, operate, lease and
encumber its Properties and carry on its business as now conducted,
except where the failure to do so could not, individually or in the
aggregate, reasonably be expected to result in a Material Adverse
Effect.
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(c) Each of the Subsidiaries is a corporation duly organized,
validly existing and in good standing under the laws of the State
of Maryland. Each of the Subsidiaries has all the requisite
governmental licenses, authorizations, consents and approvals to
own, operate, lease and encumber its Properties and carry on its
business as now conducted, except where the failure to do so could
not, individually or in the aggregate, reasonably be expected to
result in a Material Adverse Effect.
(d) Each of the General Partner, the Partnership and the
Subsidiaries is duly qualified to do business and in good standing
in each jurisdiction in which the ownership of its Properties or
the conduct of its business requires such qualification, except for
any failures to be so qualified or to be in good standing as would
not, individually or in the aggregate, reasonably be expected to
result in a Material Adverse Effect.
(e) The General Partner's Annual Report on Form 10-K for the
year ended December 31, 1995 (together with all information
incorporated by reference therein, the "Annual Report") sets forth
all information regarding the Partnership and the Subsidiaries
required to be stated therein. All of the outstanding shares of
capital stock of, or other equity interest in, each of the
Subsidiaries owned by the Partnership are duly authorized, validly
issued, fully paid and nonassessable, and are owned by the
Partnership free and clear of all Liens. The following information
for each Subsidiary is set forth in Schedule 3.1(e): (i) its name;
and (ii) the type of and percentage interest held by the
Partnership in the Subsidiary and the names of and percentage
interest held by the other interest holders in the Subsidiary.
Except as described in the Company Reports, there are no existing
options, warrants, calls, subscriptions, convertible securities or
other rights, agreements or commitments which obligate the General
Partner, the Partnership or any of the Subsidiaries to issue,
transfer or sell any shares of capital stock or equity interests in
any of the Subsidiaries.
(f) The financial statements to the Annual Report set forth a
description of all allocations among the General Partner, the
Partnership and the Subsidiaries of the material expense incurred
by the General Partner, the Partnership and the Subsidiaries, taken
as a whole, as are required to be stated therein.
3.2 Authority Relative to Agreements; Board Approval.
(a) The execution, delivery and performance of this Agreement,
the Registration Rights Agreement, Amendment No. 9 and the Lock-
Up Letter by the General Partner and the Partnership, as the case
may be, and the issuance and delivery of the Class A Interest in
accordance with the provisions of Amendment No. 9, and the issuance
and delivery of the HP Conversion Shares in accordance with the
provisions of Amendment No. 9, have been duly and validly
authorized by all necessary corporate action on the part of the
General Partner and all necessary partnership action on the part of
the Partnership. Each of this Agreement, the Registration Rights
Agreement, Amendment No. 9 and the Lock-Up Letter has been duly
executed and delivered by the General Partner for itself and as the
general partner of the Partnership and constitutes the valid and
legally binding obligations
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of the General Partner and the
Partnership, enforceable against the General Partner and the
Partnership in accordance with its terms.
(b) The Board has, as of the date hereof, approved the
transactions contemplated hereby and in the Registration Rights
Agreement, Amendment No. 9 and the Lock-Up Letter.
(c) The Class A Interest to be acquired pursuant to this
Agreement has been duly authorized for issuance by the Partnership,
and upon issuance will be duly and validly issued, fully paid and
nonassessable. The HP Shares issuable by the General Partner upon
conversion of the Class A Interest, or any portion thereof, have
been duly and validly reserved for such issuance and, when issued
upon such conversion in accordance with Amendment No. 9, will be
duly and validly issued, fully paid and nonassessable.
(d) The Board has authorized the creation and issuance of the
Class A Interest and the conversion by SMRS of all or a portion of
the Class A Interest to HP Shares, provided that on the Conversion
Date (as defined in Amendment No. 9) the representations contained
in Section 4.6 of this Agreement are true and correct.
(e) The issuance of the Class A Interest by the Partnership
does not, and the issuance of HP Shares by the General Partner upon
conversion of the Class A Interest or any portion thereof will not:
(i) require the approval of any partner of the Partnership or any
stockholder of the General Partner; (ii) result in the violation
or a breach of any provision of the Partnership Agreement of the
Partnership, the Articles of Incorporation or By-laws of the
General Partner or the General Corporation Law of the State of
Maryland; or (iii) require the additional approval of any
stockholder of the General Partner under, or result in the
violation or a breach of any provision of, the rules, regulations
or requirements of the New York Stock Exchange.
(f) The conversion of the Class A Interest pursuant to the
provisions of Amendment No. 9 will not give any stockholder of the
General Partner the right to demand the redemption of, or payment
for, its shares under the General Corporation Law of the State of
Maryland.
3.3 Capital Stock and Units.
(a) The authorized capital stock of the General Partner on the
date hereof consists of 30,000,000 shares of common stock, par
value $0.01 per share, 10,000,000 shares of preferred stock, par
value $0.01 per share, and 10,000,000 shares of excess stock, par
value $.01 per share. As of the date hereof, there are
6,144,399.156 HP Shares issued and outstanding, and no shares of
such preferred stock or excess stock issued and outstanding. All
such issued and outstanding HP Shares are duly authorized, validly
issued, fully paid, nonassessable and free of preemptive rights.
The General Partner has no outstanding bonds, debentures, notes or
other obligations the holders of which have the right to vote (or
which are convertible into or exercisable for securities the
holders of which have the right to vote) with the shareholders of
the General Partner on any matter. Other than (i) Units which may
be redeemed by the holders thereof for HP Shares or the
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cash
equivalent thereof (at the option of the General Partner); (ii)
options subject to grant under the General Partner's Stock Option
Plan, there are no existing options, warrants, calls,
subscriptions, convertible securities, or other rights, agreements
or commitments which obligate the General Partner to issue,
transfer or sell any shares of capital stock or other equity
interests of the General Partner or which entitle any Person to
acquire from the General Partner any shares of capital stock or
other equity interest in the General Partner.
(b) As of the date hereof, 7,347,418.156 Units of the
Partnership are validly issued and outstanding, fully paid and
nonassessable, of which 6,144,399.156 Units are owned by the
General Partner and the balance by the Limited Partners. Except
for the Class A Interest, there are no other classes of units, or
any other form of limited partnership interest, of the Partnership
issued or outstanding as of the date hereof and the Partnership has
not issued or granted securities convertible into interests in the
Partnership, and is not a party to any outstanding commitments of
any kind relating to, or any presently effective agreements or
understandings with respect to, interests in the Partnership,
whether issued or unissued.
(c) Upon the execution and delivery of Amendment No. 9 by the
General Partner, the Partnership and SMRS and the issuance and
delivery of the Class A Interest in accordance with the provisions
thereof, SMRS will be duly admitted to the Partnership as a limited
partner.
(d) SMRS has been exempted from the "Ownership Limit" set
forth in Article VII of the Articles of Incorporation with respect
to the Class A Interest and the HP Conversion Shares issuable upon
conversion of the Class A Interests with the result that the
issuance of the Class A Interest to SMRS and the conversion of the
Class A Interest to HP Conversion Shares will not violate the
Ownership Limit.
(e) The General Partner has taken all steps that may be
necessary to irrevocably exempt SMRS and the present or future
affiliates or associates of SMRS or any other person acting in
concert or as a group with any of the foregoing from the business
combination provisions of Section 3-601 et seq. and from the
control share provisions of Section 3-701 et seq. of the Maryland
General Corporation Law or any successor statutory provisions.
(f) Except for interests in the Partnership and the
Subsidiaries, none of the General Partner, the Partnership or the
Subsidiaries owns, directly or indirectly, any interest or
investment (whether equity or debt) in any corporation,
partnership, joint venture, business, trust or entity (other than
investments in short-term investment securities), which would have
a material effect on the business prospects and condition
(financial or otherwise) and operations of the General Partner and
the Partnership.
(g) The outstanding HP Shares have been issued in accordance
with the registration and qualification provisions of the
Securities Laws and relevant state securities laws or pursuant to
valid exemptions thereto.
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(h) Except as set forth in the Company Reports and for the
registration rights of certain limited partners of the Partnership,
who in the aggregate hold 1,124,282 Units, neither the General
Partner nor the Partnership is obligated to register under the
Securities Laws any of its currently outstanding securities or any
of its securities that may subsequently be issued.
(i) As of the Closing Date, the HP Conversion Shares will be
approved for listing on the New York Stock Exchange subject to
official notice of issuance. After the Closing Date, the General
Partner will continue the listing of the HP Conversion Shares
required to be delivered upon conversion of all or any portion of
the Class A Interest, on the New York Stock Exchange or on each
national securities exchange, if any, upon which the outstanding HP
Shares are listed as the time of delivery.
3.4 No Conflicts; No Defaults; Required Filings and Consents.
Except as contemplated hereby, neither the execution and delivery
by the General Partner and the Partnership of this Agreement nor
the consummation by the General Partner and the Partnership of the
transactions contemplated hereby in accordance with the terms
hereof will:
(a) conflict with or result in a breach of any provisions of
the articles of incorporation or by-laws of the General Partner or
the Subsidiaries or the Partnership Agreement;
(b) result in a breach or violation of, a default under, or
the triggering of any payment or other obligations pursuant to, or
accelerate vesting under the Stock Option Plan, or similar
compensation plan, or any grant or award made under the foregoing;
(c) violate or conflict with any statute, regulation,
judgment, order, writ, decree or injunction applicable to the
General Partner, the Partnership or the Subsidiaries;
(d) violate or conflict with or result in a breach of any
provision of, or constitute a default (or any event which, with
notice or lapse of time or both, would constitute a default) under,
or result in the termination or in a right of termination or
cancellation of, or accelerate the performance required by, or
result in the creation of any Lien upon any of the Properties of
the General Partner, the Partnership or the Subsidiaries under, or
result in being declared void, voidable or without further binding
effect, any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, deed of trust or any license, franchise,
permit, lease, contract, agreement or other instrument, commitment
or obligation to which the General Partner, the Partnership or the
Subsidiaries is a party, or by which the General Partner, the
Partnership or the Subsidiaries or any of their Properties is
bound or affected; or
(e) require any consent, approval or authorization of, or
declaration, notice to, filing or registration with, any
Governmental or Regulatory Authority, except for the filing of a
Current Report on Form 8-K with the SEC disclosing this Agreement
and the consummation of the transactions contemplated hereby.
Page 12
3.5 SEC and Other Documents.
(a) The General Partner has delivered or made available to
SMRS the Registration Statement and each of the Company Reports.
The Company Reports were filed with the SEC in a timely manner and
constitute all forms, reports and documents required to be filed by
the General Partner under the Securities Laws. As of their
respective dates, the Company Reports (i) complied as to form in
all material respects with the applicable requirements of the
Securities Laws; 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 to make the statements made therein, in
the light of the circumstances under which they were made, not
misleading. There is no unresolved violation asserted by any
Governmental or Regulatory Authority with respect to any of the
Company Reports.
(b) Each of the balance sheets included in or incorporated by
reference into the Company Reports (including the related notes and
schedules) fairly presented the financial position of the entity or
entities to which it relates as of its date and each of the
statements or operations, stockholders' equity (deficit) and cash
flows included in or incorporated by reference into the Company
Reports (including any related notes and schedules) fairly
presented the results of operations, retained earnings or cash
flows, as the case may be, of the entity or entities to which it
relates for the periods set forth therein, in each case in
accordance with GAAP consistently applied during the periods
involved, except as may be noted therein and except, in the case of
any unaudited statements, normal recurring year-end adjustments
which would not, individually or in the aggregate, reasonably be
expected to result in a Material Adverse Effect.
(c) Except as set forth in the Company Reports or on Schedule
3.5(c), none of the General Partner, the Partnership or the
Subsidiaries has any Liabilities (nor do there exist any
circumstances) that would, individually or in the aggregate,
reasonably be expected to result in a Material Adverse Effect.
3.6 Litigation; Compliance With Law.
(a) Except as described in Schedule 3.6, there are no legal
actions pending or, to the General Partner's knowledge, threatened
against the General Partner, the Partnership or any Subsidiaries
that would, individually or in the aggregate, reasonably be
expected to result in a Material Adverse Effect, or to result in
any material change in the equity ownership of the General Partner,
the Partnership or any Subsidiaries, or which question the validity
of this Agreement, the Registration Rights Agreement, Amendment No.
9 or the Lock-Up Letter or any action taken or to be taken in
connection herewith or therewith.
(b) None of the General Partner, the Partnership or any of
the Subsidiaries is in violation of any statute, rule, regulation,
order, writ, decree or injunction of any Governmental or Regulatory
Authority or any body having jurisdiction over them or any of their
respective Properties which, if enforced, could, individually or in
the aggregate, reasonably be expected to result in a Material
Adverse Effect.
Page 13
3.7 Investment Company. The General Partner and the
Partnership are not, and after giving effect to the sale and
issuance of the Class A Interest, will not be, an "investment
company" within the meaning of the Investment Company Act of 1940,
as amended.
3.8 Solicitation; Access to Information. No form of general
solicitation or general advertising was used by the General Partner
or the Partnership or any other person acting on their behalf in
respect of or in connection with the offer and sale of the Class A
Interest.
3.9 Absence of Certain Changes or Events. Except as
disclosed in the Company Reports filed with the SEC prior to the
date hereof or in Schedule 3.9, since September 30, 1996, the
General Partner, the Partnership and each of the Subsidiaries has
conducted its business only in the ordinary course of such business
and has not acquired any real estate or entered into any financing
arrangements in connection therewith, and there has not been (a)
any change, circumstance or event that would reasonably be expected
to result in a Material Adverse Effect, (b) any declaration,
setting aside or payment of any dividend or other distribution with
respect to HP Shares or the Units; (c) any commitment, contractual
obligation, borrowing, capital expenditure or transaction entered
into by the General Partner, the Partnership or any of the
Subsidiaries, other than commitments which would not, individually
or in the aggregate, reasonably be expected to result in a Material
Adverse Effect, or (d) any change in the General Partner's
accounting principles, practices or methods which would,
individually or in the aggregate, reasonably be expected to result
in a Material Adverse Effect.
3.10 Tax Matters; REIT and Partnership Status.
(a) The General Partner, the Partnership and each of the
Subsidiaries has timely filed with the appropriate taxing authority
all tax returns required to be filed by it or has timely requested
extensions and any such request has been granted and has not
expired. Each such tax return is true, complete and correct in all
respects. The General Partner, the Partnership and each of the
Subsidiaries have paid within the time and manner prescribed by
law, all taxes that are due and payable. The General Partner, the
Partnership and each of the Subsidiaries have properly accrued all
taxes for such periods subsequent to the periods covered by such
tax returns as required by GAAP. None of the General Partner, the
Partnership or any of the Subsidiaries has executed or filed with
the Internal Revenue Service or any other taxing authority any
agreement now in effect extending the period for assessment or
collection of any tax. None of the General Partner, the
Partnership nor any of the Subsidiaries is a party to any pending
action or proceeding by any taxing authority for assessment or
collection of any tax and no claim for assessment or collection of
any tax has been asserted against any of them and no basis exists
for any such claim or assessment. No claim has been made by any
Governmental or Regulatory Authority in any jurisdiction where the
General Partner, the Partnership or any of the Subsidiaries do not
file Tax Returns that they are or may be subject to taxation by
that jurisdiction. To the General Partner's knowledge, as of the
date hereof: (i) the General Partner is a "domestically-controlled
REIT" within the meaning of Code Section 897(h)(4)(B); and (ii)
the General Partner is not a "pension held REIT" within the meaning
of Code Section 856 (h)(3).
Page 14
(b) The General Partner: (i) was eligible and has elected in
its federal income tax return for its taxable year ended December
31, 1994 to be taxed as a REIT and such election has and will
continue to remain in effect for each of the General Partner's
subsequent taxable years and has complied (or will comply) with
all applicable provisions of the Code relating to a REIT, for each
of its taxable years; (ii) has operated, and intends to continue to
operate, in such a manner as to qualify as a REIT for each of its
taxable years; (iii) has not taken or omitted to take any action
which would reasonably be expected to result in a challenge to its
status as a REIT, and, to the General Partner's knowledge, no such
challenge is pending or threatened; and (iv) assuming the accuracy
of SMRS' representation in Section 4.6, will not be rendered unable
to qualify as a REIT for federal income tax purposes as a
consequence of the transactions contemplated hereby.
(c) The Partnership has been at all times operating and
intends to continue to operate in such a manner as to be
classified as a partnership for federal income tax purposes and not
an association taxable as a corporation or a publicly traded
partnership.
3.11 Agreements, Etc.
(a) Neither the General Partner, the Partnership nor the
Subsidiaries are in default under or in violation of any provision
of the articles of incorporation or by-laws of the General Partner
or the Subsidiaries or the Partnership Agreement (or equivalent
documents) or any agreement filed as an exhibit to the Company
Reports except where such default or violation would not result in
a Material Adverse Effect.
(b) All material agreements, as of the date hereof, entered
into by the General Partner, the Partnership or the Subsidiaries,
except for agreements entered into in the ordinary course of
business, relating to any indebtedness of the General Partner, the
development or construction of, additions or expansions to, or
management or leasing services for real properties which are
currently in effect and under which the General Partner, the
Partnership or the Subsidiaries currently have, or expect to incur,
any material obligation and which are required to be described in
the Company Reports, are described in the Company Reports or in
Schedules 3.5(c) and 3.11. No payments, if any thereunder, are
delinquent and no notice of such delinquency thereunder has been
received by the General Partner, except where such default or
violation would not result in a Material Adverse Effect. True and
complete copies of such agreements with all amendments and
supplements thereto have been made available to SMRS.
3.12 Financial Records; Company Charter and By-laws.
(a) The books of account and other financial records of the
General Partner, the Partnership and each of the Subsidiaries are
in all respects true and complete, have been maintained in
accordance with good business practices, and are accurately
reflected in all material respects, as required by GAAP, in the
financial statements included in the Company Reports.. Except as
set forth in the notes thereto, all such financial statements were
prepared in accordance with GAAP and fairly present the
consolidated financial
Page 15
results of operation of the General Partner
and its consolidated subsidiaries as of the respective dates
thereof and for respective periods covered thereby. Except as
described in the Company Reports, the financial conditions of each
of the Subsidiaries and the Partnership are consolidated with those
of the General Partner.
(b) The General Partner has previously delivered or made
available to SMRS true and complete copies of the Articles of
Incorporation and the By-laws of the General Partner and each of
the Subsidiaries, each as amended to date, and the Partnership
Agreement, and all amendments thereto.
(c) The minute books and other records of corporate or
partnership proceedings of the General Partner, the Partnership and
each of the Subsidiaries will be made available to SMRS and contain
in all material respects accurate records of all meetings and
accurately reflect in all material respects all other corporate
action of the stockholders and directors and any committees of the
Board of the General Partner and the Subsidiaries and all actions
of the partners of the Partnership.
3.13 Affiliate Transactions. The Company Reports set forth an
accurate description of all transactions with Affiliates, which are
required to be included therein. A true and complete copy of all
agreements or contracts relating to any such transaction has been
made available to SMRS. Except as set forth in the Company
Reports, all such transactions were conducted on terms that are
substantially the same as those that would have applied in an arm's
length transaction.
3.14 Insurance. The General Partner and the Partnership
maintain insurance policies covering the assets, business,
equipment, Properties, operations, employees, officers and
directors of the General Partner, the Partnership and each of the
Subsidiaries which are of a type and in amounts customarily carried
by persons conducting businesses similar to those of the General
Partner and the Partnership, but in any event in an amount not less
than the replacement cost of the Properties insured. There is no
material claim by the General Partner, the Partnership or any of
the Subsidiaries pending under any of the material insurance
policies as to which coverage has been questioned, denied or
disputed by the underwriters or such policies.
3.15 Brokers or Finders. No agent, broker, investment banker
or other firm or person, is or will be entitled to any broker's or
finder's fee or any other commission or similar fee from the
General Partner or the Partnership in connection with this
Agreement or any of the transactions contemplated hereby for which
SMRS will be responsible.
3.16. Properties.
(a) The General Partner, the Partnership and the Subsidiaries
have the requisite power, right and authority to conduct their
respective businesses as now conducted, or as proposed to be
conducted by them, and to own and operate the Properties consistent
with past practice and in compliance with applicable law and to
enjoy uninterrupted ownership, operation and maintenance of the
Properties, except where any such failure could not,
Page 16
individually,
or in the aggregate, reasonably be expected to result in a Material
Adverse Effect.
(b) Except as described in the Company Reports, each of the
General Partner, the Partnership and the Subsidiaries is insured by
insurers of recognized financial responsibility against such losses
and risks in such amounts as are prudent and customary in the
General Partner's business, and none of the General Partner, the
Partnership or the Subsidiaries has any reason to believe that it
will be unable to renew its existing insurance coverage as and when
such coverage expires or to obtain similar coverage from similar
insurers as may be necessary to continue its business, at a cost
that could not reasonably be expected to result in a Material
Adverse Effect.
(c) Each of the General Partner, the Partnership and the
Subsidiaries possesses such certificates, authorizations or permits
issued by the appropriate regulatory agencies or bodies necessary
to conduct the business now conducted by it, or proposed to be
conducted by it, and none of the General Partner, the Partnership
or the Subsidiaries has received any notice of proceedings relating
to the revocation or modification of any such certificate,
authority or permit which, individually or in the aggregate, if the
subject of an unfavorable decision, ruling or finding, could
reasonably be expected to result in a Material Adverse Effect.
3.17 Environmental Matters.
(a) Except as discussed in the environmental reports set
forth on Schedule 3.17 or in the Company Reports, (A) to the
knowledge of the General Partner, the Environment (as defined
below) at each of the Properties is free of any Hazardous Substance
(as defined below) except for any Hazardous Substance that could
not reasonably be expected to have a Material Adverse Effect; (B)
neither the General Partner, the Partnership nor the Subsidiaries
and, to the knowledge of the General Partner, no prior owner of any
Property has caused or suffered to occur any Release (as defined
below) of any Hazardous Substance into the Environment on, in,
under or from any Property in violation of any Environmental Law
(as defined below) applicable to such Property in an amount that
would reasonably be expected to have a Material Adverse Effect and
no condition exists on, in or under any Property or, to the
knowledge of the General Partner, any property adjacent to any
Property that could reasonably be expected to result in the
occurrence of material liabilities under, or any material
violations of, any Environmental Law applicable to such Property,
give rise to the imposition of any material Lien under any
Environmental Law, or cause or constitute a material environmental
hazard to any property, person or entity, except where such
condition or violation could not result in a Material Adverse
Effect; (C) neither the General Partner, the Partnership nor the
Subsidiaries is engaged in or intends to engage in any
manufacturing or any other similar operations at any Property and,
to the knowledge of the General Partner, no prior owner of any
Property engaged in any manufacturing or any similar operations at
any Property that (i) require the use, handling, transportation,
storage, treatment or disposal of any Hazardous Substance (other
than paints, stains, cleaning solvents, insecticides, herbicides,
or other substances that are used in the ordinary course of
operating any Property and in compliance with all applicable
Environmental Laws) or (ii) require permits
Page 17
or are otherwise
regulated pursuant to any Environmental Law; (D) neither the
General Partner, the Partnership nor the Subsidiaries and, to the
knowledge of the General Partner, no prior owner of any Property
has received any notice of a claim under or pursuant to any
Environmental Law applicable to a Property or under common law
pertaining to property at which Hazardous Substances generated at
any Property have come to be located; (E) neither the General
Partner, the Partnership nor the Subsidiaries and, to the best
knowledge of the General Partner, no prior owner of any Property
has received any notice from any Governmental or Regulatory
Authority claiming any violation of any Environmental Law that is
uncured or unremediated as of the date hereof; and (F) no Property
(i) is included or proposed for inclusion on the National
Priorities List issued pursuant to CERCLA (as defined below) by the
United States Environmental Protection Agency (the "EPA") or on the
Comprehensive Environmental Response, Compensation, and Liability
Information System database maintained by the EPA as a potential
CERCLA removal, remedial or response site or (ii) is included or
proposed for inclusion on, any similar list of potentially
contaminated sites pursuant to any other applicable Environmental
Law nor have the General Partner, the Partnership or the
Subsidiaries received any written notice from the EPA or any other
Governmental or Regulatory Authority proposing the inclusion of any
Property on such list.
(b) As used herein, "Hazardous Substance" shall include any
hazardous substance, hazardous waste, toxic or dangerous substance,
pollutant, asbestos-containing materials, PCBs, pesticides,
explosives, radioactive materials, dioxins, urea formaldehyde
insulation, pollutant or waste, including any such substance,
pollutant or waste identified, listed or regulated under any
Environmental Law (including, without limitation, materials listed
in the United States Department of Transportation Optional
Hazardous Material Table, 49 C.F.R. Section 172.101, as the same
may now or hereafter be amended, or in the EPA's list of Hazardous
Substances and Reportable Quantities, 40 C.F.R. Part 2302, as the
same may now or hereafter be amended); "Environment" shall mean any
surface water, drinking water, ground water, land surface,
subsurface strata, river sediment, buildings and structures;
"Environmental Law" shall mean the Comprehensive Environmental
Response, Compensation and Liability Act, as amended (42 U.S.C.
Section 9601, et seq.) ("CERCLA"), the Resource Conservation
Recovery Act, as amended (42 U.S.C. Section 6901, et seq.), the
Clean Air Act, as amended (42 U.S.C. Section 7401, et seq.), the
Clean Water Act, as amended (33 U.S.C. Section 1251, et seq.), the
Toxic Substances Control Act, as amended (15 U.S.C. Section 2601,
et seq.), the Toxic Substances Control Act, as amended (29 U.S.C.
Section 651, et seq.), the Hazardous Materials Transportation Act,
as amended (49 U.S.C. Section 1801, et seq.), together with all
rules, regulations and orders promulgated hereunder and all other
federal, state and local laws, ordinances, rules, regulations and
orders relating to the protection of the environment from
environmental effects; and "Release" shall mean any spilling,
leaking, pumping, pouring, emitting, emptying, discharging,
injecting, escaping, leaching, dumping, emanating or disposing of
any Hazardous Substance into the Environment, including, without
limitation, the abandonment or discard of barrels, containers,
tanks (including, without limitation, underground storage tanks) or
other receptacles containing or previously containing any Hazardous
Substance or any release, emission, discharge or similar term, as
those terms are defined or used in any Environmental Law.
Page 18
3.18 Employee Benefit Plans. The plans listed in Schedule
3.18 hereto are the only employee benefit plans (as defined in
Section 3(3) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA")), and plans, programs, policies,
practices, arrangements or contracts (whether group or individual)
providing for payments, benefits or reimbursements to employees,
former employees and independent contractors, or their
beneficiaries and dependents, under which such employees, former
employees or independent contractors, or their beneficiaries or
dependents, are covered due to an employment or other contractual
relationship with the General Partner, the Partnership, the
Subsidiaries or any entity required to be aggregated in a
controlled group or affiliated service group with the General
Partner for purposes of ERISA or the Code, including without
limitation, under Section 414(b), (c), (m) or (o) of the Code or
Section 4001 of ERISA, at any relevant time ("Benefit Plans").
With respect to each Benefit Plan, to the extent applicable:
(i) Such Benefit Plan has been maintained and operated in
material compliance with its terms and with the applicable
provisions of ERISA, the Code and all other applicable governmental
laws and regulations; each such Benefit Plan intended to qualify
under Section 401(a) of the Code is the subject of a favorable
unrevoked determination letter issued by the IRS as to its tax-
qualified status under the Code;
(ii) There is no material suit, action, dispute, claim,
arbitration or legal, administrative or other proceeding or
governmental investigation pending, or threatened, alleging any
breach of the terms of any such Benefit Plan or of any fiduciary
duties thereunder or violation of any applicable statute, law, rule
or regulation with respect to any Benefit Plan;
(iii) No Benefit Plan is or has ever been subject to Title
IV of ERISA or Section 412 of the Code; and
(iv) None of the General Partner, the Partnership or any
Subsidiary, or any "party in interest" (as defined in Section 3(14)
of ERISA) or any "disqualified person" (as defined in Section 4975
of the Code) with respect to any such Benefit Plan, has engaged in
a non-exempt "prohibited transaction" within the meaning of Section
4975 of the Code or Section 406 of ERISA.
SMRS nor any plan maintained by SMRS or any of its Affiliates shall
be subject to any tax, fine, penalty or other liability of any kind
whatsoever, that would not have been incurred by SMRS or any of its
Affiliates but for the transactions contemplated hereby.
3.19 Knowledge Defined. As used herein, the phrase "to the
General Partner's knowledge" (or words of similar import) means the
actual knowledge of the executive officers of the General Partner
and includes any facts, matters or circumstances set forth in any
written notice from any government authority or any other material
written notice received by the General Partner, the Partnership or
any of the Subsidiaries and also includes any matter of which SMRS
informs the General Partner in writing.
Page 19
4. Representations and Warranties of SMRS. SMRS hereby
represents and warrants to the General Partner and the Partnership
as follows:
4.1 Organization. SMRS is a government sponsored retirement
system, duly created, validly existing and in good standing under
the laws of the State of Michigan. SMRS has all requisite power
and authority to enter into this Agreement, Amendment No. 9, the
Registration Rights Agreement and the Lock-Up Letter and to perform
its obligations hereunder and thereunder.
4.2 Due Authorization. The execution, delivery and
performance of this Agreement, Amendment No. 9, the Registration
Rights Agreement, and the Lock-Up Letter have been duly and validly
authorized by all necessary action on the part of SMRS. This
Agreement, Amendment No. 9, the Registration Rights Agreement and
the Lock-Up Letter have been duly executed and delivered by and
constitute the valid and legally binding obligations of SMRS,
enforceable against SMRS in accordance with their terms, subject to
applicable bankruptcy, insolvency, moratorium or other similar laws
relating to creditors' rights or general principles of equity.
4.3 Conflicting Agreements and Other Matters. Neither the
execution and delivery of this Agreement, Amendment No. 9, the
Registration Rights Agreement, and the Lock-Up Letter nor the
performance by SMRS of its obligations herein or thereunder will
conflict with, result in a breach of the terms, conditions or
provisions of, constitute a default under, result in the creation
of any mortgage, security interest, encumbrance, lien or charge of
any kind upon any of the properties or assets of SMRS, pursuant to,
or require any consent, approval or other action by or any notice
to or filing with any government authority other than those
consents or approvals that have already been obtained or actions
that have already been taken as of the date hereof.
4.4 Acquisition for Investment; Sophistication. SMRS is
acquiring the Class A Interest for its own account for the purpose
of investment and not with a view to or for sale in connection with
any distribution thereof, and SMRS has no present intention or
plan to effect any distribution of the Class A Interest; provided,
however, that the disposition of the Class A Interest and the HP
Shares to which the Class A Interest can be converted shall at all
times be and remain within its control, subject to the provisions
of this Agreement, the Partnership Agreement, the Registration
Rights Agreement and the Lock-Up Letter. SMRS is able to bear the
economic risk of the acquisition of the Class A Interest pursuant
hereto and can afford to sustain a total loss on such investment,
and has such knowledge and experience in financial and business
matters that it is capable of evaluating the merits and risks of
the proposed investment, and therefore has the capacity to protect
its own interests in connection with the acquisition of the Class A
Interest pursuant hereto.
4.5 Brokers or Finders. No agent, broker, investment banker
or other firm or person, is or will be entitled to any broker's or
finder's fee or any other commission or similar fee from SMRS in
connection with this Agreement or any of the transactions
contemplated hereby for which the General Partner or the
Partnership will be responsible.
Page 20
4.6 REIT Qualification Matters. SMRS is a "qualified trust"
described in Section 401(a) of the Code and exempt from tax under
Section 501(a) of the Code. Under Section 856(h) of the Code, SMRS
will not be treated as an "individual" for purposes of Section
542(a)(2) of the Code (as modified by Section 856(h) of the Code)
and no "individual" owns or would be considered to own (taking into
account the ownership attribution rules under Section 544 of the
Code, as modified by Section 856(h) of the Code) in excess of 5.0%
of the value of the outstanding equity interests in SMRS.
4.7 Tax Matters. SMRS acknowledges that none of the General
Partner, the Partnership nor its officers, directors, employees or
agents have provided advice to SMRS regarding the tax consequences
of its investment in the Class A Interest or HP Shares and SMRS has
consulted with its tax advisors regarding such consequences.
5. Certain Additional Covenants.
5.1 Resale. SMRS acknowledges and agrees that the Class A
Interest that SMRS will acquire will not be registered under the
Securities Act or the securities laws of any state and that it may
be sold or otherwise disposed of only in one or more transactions
registered under the Securities Act and, where applicable, such
state securities laws or as to which an exemption from the
registration requirements of the Securities Act and, where
applicable, such state securities laws is available.
5.2 Investment of Additional Funds. For a period of one
hundred twenty (120) Business Days following the Closing Date, the
Partnership shall have the right to request that SMRS acquire an
additional interest in the Partnership for an additional investment
of no more than $35,000,000. The purchase of such an additional
interest would be on substantially the same terms and conditions as
the terms and conditions hereunder, with the additional interest to
be so acquired having substantially the same rights and privileges
as the Class A Interest. In the event that the Partnership
determines that it wishes to exercise the above right, the
Partnership shall provide written notice of that determination to
SMRS. Within ten (10) Business Days after receipt of that notice,
SMRS shall notify the Partnership as to whether it wishes to make
the additional investment, which determination shall be in the sole
discretion of SMRS. If SMRS elects to make the additional
investment, the consummation of that transaction shall take place
within thirty (30) Business Days after SMRS has notified the
Partnership of its election.
5.3 Conversion. The Partnership and the General Partner
hereby covenant and agree that they shall take, or refrain from
taking, as the case may be, any and all actions reasonably
necessary or appropriate to allow the Class A Interest Holders to
convert all or a portion of the Class A Interest to HP Shares as
described in Amendment No. 9.
5.4 Taking of Necessary Action. Each party hereto agrees to
use their best-efforts promptly to take or cause to be taken all
action and promptly to do or cause to be done all things necessary,
proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this
Agreement, the Registration Rights Agreement, Amendment No. 9 and
the Lock-Up Letter, subject to the terms and conditions hereof and
thereof.
Page 21
5.5 Public Announcements; Confidentiality.
(a) Subject to each party's disclosure obligations imposed by
law and any stock exchange or similar rules and the confidentiality
provisions contained in Section 5.5(b), the General Partner, the
Partnership and SMRS will cooperate with each other in the
development and distribution of all news releases and other public
information disclosures with respect to this Agreement, the
Registration Rights Agreement, Amendment No. 9, the Lock-Up Letter
and any of the transactions contemplated hereby or thereby.
(b) The General Partner and the Partnership agree that all
information provided to them or any of their representatives
pursuant to this Agreement shall be kept confidential, and the
General Partner and the Partnership shall not disclose such
information to any persons other than the directors, officers,
employees, financial advisors, legal advisors, accountants,
consultants and affiliates of the General Partner or the
Partnership, as the case may be, who reasonably need to have access
to the confidential information and who are advised of the
confidential nature of such information; provided, however, the
foregoing obligation of the General Partner and the Partnership
shall not: (i) relate to any information that: (1) is or becomes
generally available other than as a result of unauthorized
disclosure by the General Partner and the Partnership or by persons
to whom they have made such information available; or (2) is or
becomes available to the General Partner and the Partnership on a
nonconfidential basis from a third party that is not, to the
knowledge of the General Partner and the Partnership, bound by any
other confidentiality agreement with SMRS; or (ii) prohibit
disclosure of any information if required or requested by law,
rule, regulation, court order or other legal or governmental
process.
(c) SMRS covenants and agrees that all information provided
to them and their representatives pursuant to this Agreement shall
be kept confidential and that SMRS shall not disclose such
information to any persons other than its directors, officers,
employees, financial advisors, legal advisors, accountants,
consultants and affiliates, as the case may be, who reasonably need
to have access to the confidential information and who are advised
of the confidential nature of such information; provided, however,
the foregoing obligation of SMRS shall not: (i) relate to any
information that: (1) is or becomes generally available other than
as a result of unauthorized disclosure by SMRS or by persons to
whom they have made such information available; or (2) is or
becomes available to SMRS on a nonconfidential basis from a third
party that is not, to the knowledge of SMRS, bound by any other
confidentiality agreement with the General Partner and the
Partnership; or (ii) prohibit disclosure of any information if
required or requested by law, rule, regulation, court order or
other legal or governmental process.
5.6 Information and Access. Prior to the Rights Termination
Date, the General Partner, the Partnership and each of the
Subsidiaries shall afford to SMRS and its accountants, counsel and
other representatives full and reasonable access during normal
business hours (and at such other times as the parties may mutually
agree) to its Properties, books, contracts, commitments, records
and personnel and, during such period, shall furnish promptly to
SMRS (i) a copy of each report, schedule, and other
Page 22
document filed
or received by it pursuant to the requirements of the Securities
Laws; and (ii) all other information concerning its business,
personnel and properties as SMRS may reasonably request. SMRS and
its accountants, counsel and other representatives shall, in the
exercise of the rights described in this Section, not unduly
interfere with the operation of the business of the General
Partner, the Partnership or the Subsidiaries.
5.7 Revocation of Exemption. The Board has approved the
exemption of SMRS from the Ownership Limit, as defined in the
Articles of Incorporation, with respect to the Class A Interest and
the HP Shares into which the Class A Interest can be converted. In
the event that the exemption is revoked for any reason, other than
the fact that a re-structuring or re-organization of SMRS causes it
to cease to be entitled to "look-through" treatment pursuant to
Section 856(h)(3) of the Code ("SMRS Change"), then, at the request
of SMRS, the General Partner shall purchase all of the HP
Conversion Shares or Class A Interest then held by SMRS that shall
have become Excess Stock, as defined in the Articles of
Incorporation (the "Exemption Right"). Such request by SMRS shall
be made within twenty (20) Business Days of the receipt of written
notice by SMRS from the General Partner that the exemption
described above has been revoked. The purchase price (the
"Exemption Purchase Price") for the HP Conversion Shares or Class A
Interest, as the case may be, to be so purchased pursuant to this
Section 5.7 shall be 110% of the greater of: (i) the Value of the
HP Conversion Shares or the Class A Interest, as the case may be,
as of the date of purchase; and (ii) the Original Investment,
including any Accrued Return, times the percentage of the Class A
Interest originally issued hereby still held by SMRS (with all HP
Conversion Shares held by SMRS being treated for the purposes of
this calculation as if they had not been converted), with the
result multiplied by the percentage of the Class A Interest
originally issued hereby or HP Conversion Shares, as the case may
be, still held by SMRS that have become Excess Stock. Payment of
the Exemption Purchase Price shall be made in cash within twenty
(20) Business Days after receipt by the General Partner of notice
from SMRS that SMRS is requiring the General Partner to purchase
the HP Conversion Shares or the Class A Interest, as the case may
be, that have become Excess Stock. In the event that the exemption
is revoked as a result of a SMRS Change, then SMRS shall still have
the Exemption Right, but the Exemption Purchase Price shall be 100%
of the greater of: (i) Value of the HP Conversion Shares or the
Class A Interest, as the case may be, as of the date of purchase;
and (ii) the Original Investment, including any Accrued Return,
times the percentage of the Class A Interest originally issued
hereby and HP Conversion Shares still held by SMRS (with all HP
Conversion Shares held by SMRS being treated for purposes of this
calculation as if they had not been converted), with the result
multiplied by the percentage of the Class A Interest originally
issued hereby or HP Conversion Shares, as the case may be, still
held by SMRS that have become Excess Stock.
5.8 New York Stock Exchange Listing. On or prior to the
Closing Date, the General Partner will cause the HP Conversion
Shares to be approved for listing on the New York Stock Exchange
subject to official notice of issuance. After the Closing Date,
the General Partner will cause to be continued the listing on the
New York Stock Exchange or on each national securities exchange, if
any, upon which the outstanding HP Shares are listed at the time of
delivery of the HP Conversion Shares required to be delivered upon
conversion of all or any portion of the Class A Interest.
Page 23
6. Board of Directors
6.1 Investor Nominees.
(a) (i) The Rights Holders, as a group, shall have the
right to nominate and to have appointed to the Board by the
existing directors of the General Partner one Investor Nominee
prior to the Closing Date to serve until the next following annual
meeting of shareholders. The initial Investor Nominee selected by
SMRS, as the current sole Rights Holder, is ▇▇▇▇ ▇. ▇▇▇▇▇▇.
(ii) The Rights Holders, as a group, shall have the right,
as specified below, to have additional directors (each referred to
also as an "Investor Nominee"):
(A) In the event of an Approval Breach, and in
addition to any other rights or remedies available to the Rights
Holders at law or in equity, the number of directors that the
Rights Holders shall have the right to nominate and to have
appointed to the Board shall be increased to two (2) directors to
be appointed by the other directors of the General Partner as soon
after the Approval Breach as practicable to serve until the next
following annual or special meeting of shareholders.
(B) In the event of a Preferred Return Breach, and
in addition to any other rights or remedies available to the Rights
Holders in law or at equity, the number of directors that the
Rights Holders shall have the right to nominate and to have
appointed to the Board shall be increased as follows, with such
additional Investor Nominees to be appointed by the other directors
of the General Partner as soon after the Preferred Return Breach as
practicable to serve until the next following annual or special
meeting of the shareholders:
(1) Initial Preferred Return Breach: Investor Nominees
increase to 2
(2) Preferred Return Breach that
extends for 4 consecutive quarters: Investor Nominees
increase to 3
(3) Preferred Return Breach that
extends for 6 consecutive quarters: I Investor
Nominees increase to 4
(b) To effectuate the placement of each Investor Nominee on
the Board, the General Partner shall: (i) expand the size of the
Board so that there are at least as many Board seats as there are
current Board members plus the number of permitted Investor
Nominees; and (ii) cause each permitted Investor Nominee to become
a member of the Board through any required action of the then
current Board. After the expiration of the initial term of an
Investor Nominee, at each successive annual or special meeting of
the shareholders of the General Partner at which directors are to
be elected by shareholders, the Rights Holders, as a group, shall
have the right to nominate for election to the Board the applicable
number of Investor Nominees which they are entitled to nominate, as
provided in paragraph (a) above and the General Partner will take
action, or refrain from
Page 25
taking action, as the case may be, with
respect to such nominees as provided in Section 6.1(e). The
General Partner agrees that it will not cause to be nominated for
election to the Board more than that number of individuals as shall
equal the size of the Board less the number of permitted Investor
Nominee(s). Notwithstanding anything to the contrary contained
herein, the Rights Holders' rights with respect to Investor
Nominee(s) shall be terminated on and after the Rights Termination
Date.
To the extent that an Investor Nominee that has been elected by the
shareholders is currently serving on the Board upon the occurrence
of the Rights Termination Date, such Investor Nominee may continue
to serve as a director until the end of his or her then current
term.
(c) Each Investor Nominee shall be paid the same compensation
and reimbursements for serving as a director as that paid to other
non-employee directors and shall be indemnified by the General
Partner to the same extent as the other non-employee directors.
(d) The Rights Holders will not name any person as an
Investor Nominee if: (i) such person is not reasonably experienced
in business, financial or real estate matters; (ii) such person has
been convicted of, or has pled nolo contendere to, a felony; (iii)
the election of such person would violate any law; or (iv) any
event required to be disclosed pursuant to Item 401(f) of
Regulation S-K of the 1934 Act has occurred with respect to such
person.
(e) The General Partner will support the nomination of and
the election of each Investor Nominee to the Board, and the General
Partner will exercise all authority under applicable law to cause
each Investor Nominee to be elected to the Board. Without limiting
the generality of the foregoing, with respect to each meeting of
shareholders of the General Partner at which directors are to be
elected, the General Partner shall use its reasonable efforts to
solicit from, and shall refrain from taking any action which may
hinder the solicitation of, the shareholders of the General Partner
eligible to vote in the election of directors proxies in favor of
each Investor Nominee. In addition, the General Partner will take
such further action as may be reasonably requested by the Investor
Group Representative to insure that each Investor Nominee is added
to the Board, provided that such action shall not be prohibited by
Maryland corporate law, federal securities laws or the rules and
regulations promulgated by the New York Stock Exchange. Further,
subject to the requirements of Maryland corporate law, federal
securities laws and the rules and regulations of the New York Stock
Exchange, the General Partner will refrain from taking any action
with respect to, and will make all reasonable efforts to prevent,
the removal of any Investor Nominee serving on the Board. In the
event that an Investor Nominee is not elected to the Board by the
shareholders or is removed from the Board, the Rights Holders shall
have the right to appoint a representative to attend all Board and
committee meetings. In such event, the appointed representative
shall be notified and invited to attend each Board and committee
meeting and shall have access to the minutes of each Board and
committee meeting and to any materials distributed at those
meetings. Unless otherwise notified in writing by the Investor
Group Representative, the General Partner
Page 25
shall deem the most
recent Investor Nominee to be the representative so appointed by
the Rights Holders.
6.2 Committee Representation. During such time as the Rights
Holders are entitled pursuant to Section 6.1(a) to have at least
one Investor Nominee on the Board, at least one director who is an
Investor Nominee shall serve on each Key Committee.
Notwithstanding the foregoing, if none of the directors who are
Investor Nominees would be considered "independent" of the General
Partner or "disinterested" (i) for purposes of any applicable rule
of the New York Stock Exchange or any other securities exchange or
other self-regulating organization (such as the National
Association of Securities Dealers) requiring that members of the
Audit Committee of the Board be independent of the General Partner;
(ii) for purposes of any law or regulation that requires, in order
to obtain or maintain favorable tax, securities, corporate law or
other material legal benefits with respect to any plan or
arrangement for employee compensation or benefits, that the members
of the committee of the Board charged with responsibility for such
plan or committee formed in connection with any transaction or
potential transaction involving the General Partner and any of the
Rights Holders or any group of which any of the Rights Holders is a
member or such other transaction or potential transaction which
would involve an actual or potential conflict of interest on the
part of the director who is an Investor Nominee, then the director
who is the Investor Nominee shall not be required to be appointed
to any such committee. The committees of the Board shall be
organized such that, to the extent practicable, the items to be
considered by a Key Committee on which no director who is an
Investor Nominee may serve (for the reasons described in the
preceding sentence) shall be limited to those specific items which
provide the basis for preventing the director who is an Investor
Nominee from serving on such Key Committee. With respect to the
committees on which no Investor Nominee may serve as described
above in this Section 6.2, an Investor Nominee shall be notified
and invited to attend each committee meeting and shall have access
to the minutes of each committee meeting and to any materials
distributed at those meetings.
6.3 Vacancies. In the event that an Investor Nominee
shall cease to serve as a director for any reason other than the
fact that Rights Holders no longer have a right to nominate a
director, as provided in Section 6.1(a), the vacancy resulting
thereby shall be filled by an Investor Nominee designated by the
Rights Holders, as a group; provided, however, that any Investor
Nominee so designated shall satisfy the qualification requirements
set forth in Section 6.1(d). Such replacement Investor Nominee
shall serve until the next following annual meeting of
shareholders. The General Partner will add the replacement
Investor Nominee initially in accordance with the procedures
specified in Section 6.1(b). After the expiration of the initial
term, the General Partner will support the nomination of and the
election of each replacement Investor Nominee to the Board, and the
General Partner will exercise all authority under applicable law to
cause each replacement Investor Nominee to be elected to the Board.
Without limiting the generality of the foregoing, with respect to
each meeting of shareholders of the General Partner at which
directors are to be elected, the General Partner shall use its
reasonable efforts to solicit from, and shall refrain from taking
any action which may hinder the solicitation of, the shareholders
of the General Partner eligible to vote in the election of
directors proxies in favor of each Investor Nominee. In addition,
the General Partner will take such further
Page 26
action as may be
reasonably requested by the Investor Group Representative to insure
that each replacement Investor Nominee is added to the Board,
provided that such action shall not be prohibited by Maryland
corporate law, federal securities laws or the rules and regulations
promulgated by the New York Stock Exchange. Further, subject to the
requirements of Maryland corporate law, federal securities laws and
the rules and regulations of the New York Stock Exchange, the
General Partner will take no action with respect to and will make
all reasonable efforts to prevent, the removal of any such
replacement Investor Nominee serving on the Board.
6.4 Rights Approval.
(a) Prior to the Rights Termination Date, the General Partner
agrees that it will not take any of the following actions without
the approval of the majority of the directors:
(i) authorize the issuance of any additional HP Shares,
other than as already provided for with respect to the General
Partner's Stock Option Plan and the General Partner's Dividend
Reinvestment, Stock Purchase, Resident Stock Purchase and
Employee Stock Purchase Plan;
(ii) appoint any new officers of the General Partner or
remove any existing officers; and
(iii) approve the payment of any dividends or
distributions to its shareholders.
(b) Prior to the Rights Termination Date, the General Partner
agrees that it will not take any of the following actions without
obtaining the prior written consent of the Rights Holders, as a
group:
(i) create a new class of stock or re-classify any of
its stock if such creation or re-classification would
adversely affect the rights or benefits of the Class A
Interest Holders;
(ii) amend the General Partner's Articles of
Incorporation or By-laws if such amendment would adversely
affect the rights or benefits of, or impose any obligations
on, the Class A Interest Holders;
(iii) on its own behalf, commence a voluntary case
under any applicable bankruptcy, insolvency or other similar
law now or hereafter in effect, or consent to the entry of an
order for relief in an involuntary case under any such law;
and
(iv) reduce the Ownership Limit, as described in Section
7.2.1 of its Articles of Amendment and Restatement of its
Articles of Incorporation to below 8%.
(c) The General Partner shall provide the Investor Group
Representative with a written request for the approval of any
matter described in paragraph (b) of this Section 6.4. Such
written notice shall include a reasonable description of the matter
for which
Page 27
approval is sought and shall be made in accordance with
the provisions of Section 8.7. If the Investor Group
Representative does not respond within fifteen (15) Business Days
after the date of receipt of such a written request , the Rights
Holders shall be deemed to have approved the matter as to which
their approval was sought.
(d) With respect to their rights pertaining to Investor
Nominees, as described in Section 6.1 of this Agreement and their
approval rights pursuant to paragraph (b) of Section 6.4, the
Rights Holders shall only be permitted to act as a group. In the
event that there is more than one Rights Holder, the Rights Holders
shall select one Person to act as their Investor Group
Representative and shall so notify the General Partner. SMRS shall
be the initial Investor Group Representative. Upon failure of the
Rights Holders to select an Investor Group Representative, the
largest single holder of Class A Interests shall be designated by
the General Partner as the Investor Group Representative. The
General Partner and the Partnership shall be entitled and obligated
to rely on any and all notifications and directions given to it by
the Investor Group Representative and shall have no obligation to
verify that such notifications and directions constitute the
consensus of the Rights Holders. In addition, upon receipt of
notice from any or all other Rights Holders that such notifications
and directions do not constitute the consensus of the Rights
Holders, the General Partner and the Partnership shall still be
obligated to follow the directions of the Investor Group
Representative.
7. Purchase Rights.
7.1 Private Offering. From and after the date hereof, to and
including the earlier to occur of: (i) the Rights Termination
Date; and (ii) the last day of the 9.0% Preferred Return Period (as
defined in Amendment No. 9), the Class A Interest Holders shall
have the right to purchase securities on the same terms as those
sold by the General Partner or the Partnership in Private
Offerings. Notwithstanding the above, the Class A Interest
Holders' right to purchase securities shall not apply to offerings
of Partnership Interests by the Partnership as consideration for
the purchase of property or real estate operating businesses by the
Partnership. In the event that the General Partner or the
Partnership conducts any Private Offering, it shall inform each of
the Class A Interest Holders in writing of the material terms of
the Private Offering, including but not limited to the anticipated
or actual number of securities, the anticipated or actual price for
the securities and any rights and powers associated with the
securities. The purchase price to be paid by the Class A Interest
Holders for any securities to be purchased in any Private Offering
pursuant to this Section 7.1 shall be the same price as is paid by
the other participants in that Private Offerings provided that the
purchase price to be paid by the Class A Interest Holders shall not
include payment of any underwriting or brokers' ▇▇▇▇-up,
commission, or any other fees. Each Class A Interest Holder shall
have ten (10) Business Days after the receipt of the above written
notice to provide written notice to the General Partner or the
Partnership, as applicable, as to whether such Class A Interest
Holder wishes to purchase securities on the same terms as the
Private Offering. If a Class A Interest Holder does wish to
purchase securities on the same terms as the Private Offering, it
shall indicate the number of securities that it wishes to purchase
and it shall purchase that number of those securities on the later
of: (i) the closing date of the Private Offering; and (ii) ten
(10) Business Days following the receipt by the Interest Holder of
the written notice of the
Page 29
Private Offering. Each Class A Interest
Holder shall have the right to purchase no more than that amount of
securities as shall be necessary for that Interest Holder to
maintain the same Equity Ownership as it had prior to the
completion of the Private Offering. Failure of any Class A
Interest Holder to respond within ten (10) Business Days after the
date of receipt by that Class A Interest Holder of the written
notice from the General Partner or the Partnership shall be deemed
to mean that such Class A Interest Holder does not wish to purchase
securities on the same terms as the Private Offering. At the
General Partner's or the Partnership's option, if a Class A
Interest Holder exercises its right to purchase securities under
this Section 7.1, the securities to be purchased may be allocated
from the securities sold in the Private Offering or the General
Partner or the Partnership, as applicable, may issue to that Class
A Interest Holder additional securities, having the same terms as
those sold in the Private Offering provided that the same Equity
Ownership is maintained. In the event that the securities being
sold consist of HP Shares, the Class A Interest Holder shall have
the right, at its option, to purchase Units in the Partnership in
lieu of HP Shares.
7.2 Public Offerings. From and after the date hereof to and
including the earlier to occur of: (i) the Rights Termination
Date; or (ii) the last day of the 9.0% Preferred Return Period, the
Class A Interest Holders shall have the right to purchase
securities in Public Offerings on the terms described below. The
General Partner and the Partnership agree that they shall use their
reasonable business efforts to cause the sale to any Class A
Interest Holder of any securities in a Public Offering subject to
this Section 7.2 to be excluded from the terms of any underwriting
or similar agreement entered into by the General Partner or the
Partnership as those terms relate to the payment of fees or
commissions to the underwriter or the entitlement of the
underwriter to a discount from the Public Price (defined below).
The General Partner or the Partnership shall provide each Class A
Interest Holder with a copy of the registration statement, together
with any prospectus supplement thereto, relating to any Public
Offering promptly after such registration statement and prospectus
supplement have been filed with the SEC. No less than two (2)
Business Days prior notice to the date upon which the price (the
"Public Price") of the securities to be sold in any such Public
Offering is anticipated to be set (the "Pricing Date"), the General
Partner or the Partnership shall also provide each Class A Interest
Holder with a written notice of the Pricing Date and a copy of the
draft prospectus or prospectus supplement, as the case may be. In
addition, the General Partner or the Partnership shall promptly
provide each Class A Interest Holder with written notification of
the Public Price after it has been set and of the Pricing Date
after it has occurred. If a Class A Interest Holder does wish to
purchase securities in the Public Offering, it shall indicate in a
written notice to the General Partner or the Partnership the number
of such securities that it wishes to purchase and it shall purchase
that number of those securities as described below. If a Class A
Interest Holder shall provide written notice that it wishes to
purchase securities prior to the time at which the Public Price is
set, then the price to be paid for the securities by such Class A
Interest Holder shall be the per share amount equal to the greater
of: (i) the price per share to be paid by the underwriter in the
related Public Offering; or (ii) ninety-seven percent (97%) of the
per share Public Price and payment at that price shall be made on
the closing of the Public Offering. If the Class A Interest Holder
provides written notice that it wishes to purchase securities prior
to the time at which the Public Price is set, the Class A Interest
Holder may specify a maximum price at
Page 29
which it is willing to
purchase shares in the Public Offering. If a Class A Interest
Holder shall provide written notice that it wishes to purchase
securities after the time at which the Public Price is set, then
the price to be paid for the securities by such Class A Interest
Holder shall be the Public Price and payment at that price shall be
made no later than ten (10) Business Days after the Pricing Date in
all events. Each Class A Interest Holder shall have the right to
purchase no more than that amount of securities as shall be
necessary for that Class A Interest Holder to maintain the same
Equity Ownership as it had prior to the completion of the Public
Offering. Failure of the Class A Interest Holder to respond within
ten (10) Business Days after the Pricing Date shall be deemed to
mean that such Class A Interest Holder does not wish to purchase
securities in the Public Offering. At the General Partner's or
the Partnership's option, if a Class A Interest Holder exercises
its right to purchase securities under this Section 7.2, the
securities to be purchased thereunder by that Class A Interest
Holder may be allocated from the securities sold in the Public
Offering or the General Partner or the Partnership, as applicable,
may issue to that Class A Interest Holder additional securities,
having the same terms as those sold in the Public Offering provided
that the same Equity Ownership is maintained. In the event that the
securities being sold consist of HP Shares, the Class A Interest
Holder shall have the right, at its option, to purchase Units in
the Partnership in lieu of HP Shares.
7.3 Exception to Purchase Rights. Notwithstanding the
provisions of Sections 7.1 and 7.2 above, a Class A Interest Holder
shall not have the right to exercise its rights under those
sections if, in the written opinion of legal counsel to the General
Partner, such exercise would render the General Partner unable to
qualify as a REIT for federal income tax purposes or if, in the
written opinion of legal counsel to the Partnership, such exercise
would result in the Partnership being treated as an association
taxable as a corporation.
8. Miscellaneous Provisions.
8.1 Survival. All representations, warranties and covenants
and agreements of the parties contained herein, including indemnity
or indemnification agreements contained herein, or in any Schedule
or Exhibit hereto, or any certificate, documents or other
instrument delivered in connection herewith shall survive the
Closing Date.
8.2 Indemnification by the General Partner and the
Partnership. From and after the Closing Date, the General Partner
and the Partnership shall indemnify and hold harmless SMRS, its
successors and assigns, from and against any and all loss and
expenses (including, without limitation, reasonable attorneys' fees
and expenses), suffered, directly or indirectly, by SMRS by reason
of, or arising out of: (i) any breach as of the date made or
deemed made or required to be true of any representation or
warranty made by the General Partner or the Partnership in or
pursuant to this Agreement and any statements made in any
certificate delivered pursuant to this Agreement; or (ii) any
failure by the General Partner or the Partnership to perform or
fulfill any of their covenants or agreements set forth herein, or
in any other agreement contemplated hereby. Notwithstanding any
other provision of this Agreement to the contrary, in no event
shall loss and expenses include a party's incidental or
consequential damages.
Page 30
8.3 Third-Party Claims. If a claim by a third party is made
against an indemnified party and if such indemnified party intends
to seek indemnity with respect thereto under Section 8.2, such
indemnified party shall promptly notify the General Partner and the
Partnership in writing of such claims setting forth such claims in
reasonable detail. The General Partner and the Partnership shall
have 10 days after receipt of such notice to undertake, through
counsel of its own choosing and at its own expense, the settlement
or defense thereof, and the indemnified party shall cooperate with
it in connection therewith. Notwithstanding the above, the
indemnified party may participate in such settlement or defense
through counsel chosen by such indemnified party, provided that the
fees and expenses of such counsel shall be borne by such
indemnified party, unless: (i) the employment of counsel by the
indemnified party has been authorized by the General Partner and
the Partnership; or (ii) the indemnified party shall have
reasonably concluded that there may be a conflict of interest
between the General Partner and the Partnership on the one hand and
the indemnified party on the other in the conduct of the defense of
such action which would materially hinder the ability of counsel to
the General Partner and the Partnership to represent the
indemnified party. The indemnified party shall not pay or settle
any claim which the General Partner or the Partnership is
contesting. Notwithstanding the foregoing, the indemnified party
shall have the right to pay or settle any such claim, provided that
in such event it shall waive any right to indemnity therefor by the
General Partner and the Partnership. If the General Partner or the
Partnership does not promptly notify the indemnified party within
10 days after the receipt of the indemnified party's notice of a
claim of indemnity hereunder that it elects to undertake the
defense thereof, the indemnified party shall have the right to
contest, settle or compromise the claim at the expense of the
General Partner and the Partnership, but shall not thereby waive
any right to indemnity therefor pursuant to this Agreement.
8.4 Counterparts. This Agreement may be executed in one or
more counterparts, all of which shall be considered one and the
same agreement, and shall become effective when one or more
counterparts have been signed by each party hereto and delivered to
the other party. Copies of executed counterparts transmitted by
telecopy, telefax or other electronic transmission service shall be
considered original executed counterparts for purposes of this
Section, provided receipt of copies of such counterparts is
confirmed.
8.5 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York
without reference to the choice of law principles thereof.
8.6 Entire Agreement. This Agreement (including agreements
incorporated herein) and the Schedules and Exhibits hereto,
Amendment No. 9, the Registration Rights Agreement,the Lock-up
Letter and all other agreements or other instruments executed by
the parties hereto prior to the Closing Date contain the entire
agreement between the parties with respect to the subject matter
hereof and there are no agreements, understandings, representations
or warranties between the parties other than those set forth or
referred to herein. This Agreement is not intended to confer upon
any person not a party hereto (and their successors and assigns)
any rights or remedies hereunder.
Page 31
8.7 Notices. All notices and other communications hereunder
shall be sufficiently given for all purposes hereunder if in
writing and delivered personally, sent by documented overnight
delivery service or, to the extent receipt is confirmed, telecopy,
telefax or other electronic transmission service to the appropriate
address or number as set forth below. Notices to the General
Partner and the Partnership shall be addressed to:
Home Properties of New York, Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇ ▇. ▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
c/o Home Properties of New York, Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
or at such other address and to the attention of such other person
as the General Partner or the Partnership may designate by written
notice to SMRS. Notices to SMRS shall be addressed to:
Express Mail:
Mortgage and Real Estate Division
Michigan Department of Treasury
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: Administrator
(▇▇▇) ▇▇▇-▇▇▇▇
Telecopy No: (▇▇▇) ▇▇▇-▇▇▇▇
Other Mail:
Mortgage and Real Estate Division
Michigan Department of Treasury
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Attn: Administrator
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with a copy to:
Michigan Department of Attorney General
Finance and Development Division
One Michigan Avenue Building
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Attn: Assistant in Charge
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and an additional copy to:
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or at such other address and to the attention of such other person
as SMRS may designate by written notice to the General Partner.
Notices to other Rights Holders, Class A Interest Holders and the
Investor Group Representative shall be by the above means and to
such addresses and to the attention of such person as the Rights
Holders, Class A Interest Holders and the Investor Group
Representative may designate by written notice to the General
Partner.
For purposes of this Agreement, the Investor Group Representative
and SMRS will only be deemed to have received any notice upon the
written acknowledgment by one individual designated by the Investor
Group Representative with authority to acknowledge such receipt or
upon refusal by any such designee to accept receipt of any notice.
The Investor Group Representative shall at all times provide the
General Partner with a written designation of at least two
individuals or titles of positions that are so designated with
authority to acknowledge receipt of written notices.
In all cases where a failure by the Rights Holders, Class A
Interest Holders and/or the Investor Group Representative to
respond within a specified time frame shall be deemed to be their
approval pursuant to this Agreement or to mean that they do not
wish to purchase securities pursuant to this Agreement, then the
written notice or request provided by the General Partner as
described in this agreement hereof shall specifically state that a
failure to respond within the indicated time frame shall be deemed
to be an approval of the matter for which approval was sought.
8.8 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their
respective successors. It is hereby agreed that any internal re-
structuring or re-organization of SMRS shall not be deemed to be an
assignment to a third party.
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8.9 Headings. The Section, Article and other headings
contained in this Agreement are inserted for convenience of
reference only and will not affect the meaning or interpretation of
this Agreement. All references to Sections or Articles contained
herein mean Sections or Articles of this Agreement unless otherwise
stated.
8.10 Amendments and Waivers. This Agreement may not be
modified or amended except by an instrument or instruments in
writing signed by the party against whom enforcement of any such
modification or amendment is sought. Either party hereto may, only
by an instrument in writing, waive compliance by the other party
hereto with any term or provision hereof on the party of such other
party hereto to be performed or complied with. The waiver by any
party hereto of a breach of any term or provision hereof shall not
be construed as a waiver of any subsequent breach.
8.11 Interpretation. For the purposes hereof: (i) words in
the singular shall be held to include the plural and vice versa and
words of one gender shall be held to include the other gender as
the context requires; (ii) terms "hereof", "herein", and "herewith"
and words of similar import shall, unless otherwise stated, be
construed to refer to this Agreement as a whole (including all of
the Schedules and Exhibits hereto) and not to any particular
provision of this Agreement, and Article, Section, paragraph,
Exhibit and Schedule references are to the Articles, Sections,
paragraphs, Exhibits and Schedules to this Agreement unless
otherwise specified; (iii) the word "including" and words of
similar import when used in this Agreement shall mean "including,
without limitation," unless the context otherwise requires or
unless otherwise specified; (iv) the word "or" shall not be
exclusive; and (v) provisions shall apply, when appropriate, to
successive events and transactions.
8.12 Severability. Any provision hereof which is invalid or
unenforceable shall be ineffective to the extent of such invalidity
or unenforceability, without affecting in any way the remaining
provisions hereof.
8.13 Further Assurances. The General Partner, the Partnership
and SMRS agree that, from time to time, each of them will execute
and deliver such further instruments of conveyance and transfer and
take such other action as may be necessary to carry out the
purposes and intents hereof.
8.14 Specific Performance. The General Partner and the
Partnership each acknowledge that, in view of the uniqueness of the
parties hereto, the parties hereto would not have an adequate
remedy at law for money damages in the event that this Agreement
were not performed in accordance with its terms, and therefore
agree that the parties hereto shall be entitled to specific
enforcement of the terms hereof in addition to any other remedy to
which the parties hereto may be entitled at law or in equity.
8.15 Schedules. Any matter set forth on any Schedule shall be
deemed to be referred to on all other Schedules to which such
matter logically relates and where such reference would be appropriate
and can reasonably be inferred from the matters disclosed on the first
Schedule as it is set forth on such other Schedules.
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IN WITNESS WHEREOF, this Agreement has been signed by or on
behalf of each of the parties hereto as of the day first above
written.
HOME PROPERTIES OF NEW YORK, INC.
By: /s/ ▇▇▇ ▇. ▇▇▇▇
▇▇▇ ▇. ▇▇▇▇, Executive Vice President
HOME PROPERTIES OF NEW YORK, L.P.
By: Home Properties of New York, Inc.
General Partner
By: /s/ ▇▇▇ ▇. ▇▇▇▇
▇▇▇ ▇. ▇▇▇▇, Executive Vice President
STATE TREASURER OF THE STATE OF MICHIGAN,
CUSTODIAN OF MICHIGAN PUBLIC SCHOOL
EMPLOYEES' RETIREMENT SYSTEM, STATE
EMPLOYEES' RETIREMENT SYSTEM, MICHIGAN
STATE POLICE RETIREMENT SYSTEM AND MICHIGAN
JUDGES' RETIREMENT SYSTEM
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇ ▇▇▇▇▇▇
Administrator
Mortgage and Real Estate Division
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