AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT and Plan of Merger (this "Agreement") is dated as of
this 31st day of July, 1997, and is among Home Properties of New York,
L.P., a limited partnership formed under the laws of New York (the
"Surviving Partnership"), ▇▇▇▇▇ ▇. ▇▇▇▇▇ ("▇▇▇▇▇") and PK Partnership, a
limited partnership formed under the laws of Pennsylvania (the "Merged
Partnership").
WITNESSETH:
WHEREAS, the Merged Partnership is governed by the Pennsylvania
Revised Limited Partnership Act (the "Pennsylvania Act") and, subject to
the receipt of the requisite approval of its limited partners, desires to
merge into the Surviving Partnership;
WHEREAS, ▇▇▇▇▇ and the Merged Partnership are all of the partners of a
Pennsylvania general partnership trading under the names of ▇▇▇▇▇ Court and
▇▇▇▇▇▇▇▇ Court (the "General Partnership"); and
WHEREAS, the Surviving Partnership was formed under the New York
Revised Limited Partnership Act (the "New York Act") and, subject to the
receipt of the requisite approval, desires to merge with the Merged
Partnership.
NOW THEREFORE, the parties hereto agree as follows:
ARTICLE I
THE MERGER
1.1 AGREEMENT TO MERGE. Subject to the terms and conditions of this
Agreement, including but not limited to the satisfaction of the conditions
in Article VI hereof (the "Merger Conditions"), the Merged Partnership
shall be merged into the Surviving Partnership and ▇▇▇▇▇ shall contribute
his partnership interest in the General Partnership (the "General
Partnership Interest") to the Surviving Partnership (the "Merger").
1.2 CERTIFICATE OF MERGER; ASSIGNMENT OF GENERAL PARTNERSHIP
INTEREST. Subject to the satisfaction of the Merger Conditions, (a) the
general partner of each of the Merged Partnership and Surviving Partnership
shall execute a Certificate of Merger in the form necessary to effect the
merger of the Merged Partnership into the Surviving Partnership pursuant to
applicable law (the "Certificate of Merger") and the Surviving Partnership
shall deliver the Certificate of Merger to the Department of State of the
Commonwealth of Pennsylvania and the State of New York for filing, and (b)
▇▇▇▇▇ shall contribute to the Surviving Partnership by assignment the
General Partnership Interest .
1.3 EFFECTIVE TIME. The Merger shall be effective immediately upon the
later to occur of the filing of the Certificate of Merger by the Department
of State of the State of New York or the Commonwealth of Pennsylvania, but
not later than September 30, 1997 (the "Effective Time"). The date during
which the Effective Time occurs is referred to hereinafter as the
"Effective Date". The closing for the Merger (the "Closing") shall be held
on the Effective Date at the offices of Wolf, Block, ▇▇▇▇▇▇ and ▇▇▇▇▇-
▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇,
commencing at 10:00 a.m.
1.4 SOLICITATION OF MERGED PARTNERSHIP APPROVAL. By executing this
Agreement, ▇▇▇▇▇ ▇. ▇▇▇▇▇ as the general partner of the Merged Partnership
(the "General Partner") agrees that he will, promptly after the execution
of this Agreement, cause the Merged Partnership to solicit the approval of
its partners to the Merger in compliance with the New York Act and the
Pennsylvania Act (the "Acts"). Furthermore, the General Partner agrees
that he will vote his interests in the Merged Partnership in favor of the
Merger. The General Partner further agrees that, between the date of the
execution of this Agreement and the Effective Time or the earlier
termination of this Agreement, he will not offer to sell or negotiate a
sale of the Property, directly or indirectly, including, without
limitation, pursuant to a merger.
1.5 SOLICITATION OF SURVIVING PARTNERSHIP APPROVAL. By executing this
Agreement, Home Properties of New York, Inc. as the general partner of the
Surviving Partnership ("HME") agrees that it will promptly after the
execution of this Agreement, cause the Surviving Partnership to solicit the
approval of its partners to (a) the Merger in compliance with the Acts and
(b) the Surviving Partnership Amendments.
ARTICLE II
EFFECTS OF THE MERGER
2.1 SURVIVING PARTNERSHIP. The Surviving Partnership shall be the surviving
limited partnership. The Agreement of Limited Partnership of the Surviving
Partnership (the "Surviving Partnership Agreement") shall remain in full
force and effect after the Merger in its form immediately prior to the
Merger, except the Surviving Partnership Agreement shall be amended on the
Effective Date to (a) reflect the issuance of the Units pursuant to
subparagraphs 3.3(a) and (c) below and (b) incorporate the provisions set
forth in EXHIBIT B (EXHIBIT A has been reserved) attached hereto (the
"Surviving Partnership Amendments").
2.2 MERGED PARTNERSHIP. At the Effective Time, the separate existence of
the Merged Partnership shall cease.
2.3 TRANSFER OF ASSETS AND ASSUMPTION OF LIABILITIES. At the Effective
Time, all of the real and tangible or intangible personal property rights,
privileges, immunities, powers and all other assets whatsoever of the
Merged Partnership and the General Partnership shall vest in the Surviving
Partnership without further act or deed. Thereafter, the Surviving
Partnership shall be liable for all debts, obligations, liabilities and
penalties of the Merged Partnership and the General Partnership as though
each such debt, obligation, liability or penalty had been originally
incurred by the Surviving Partnership, provided that the Reserves described
in Section 3.2 of this Agreement shall be established to pay, to the extent
thereof, for any liabilities of the Merged Partnership and the General
Partnership that the Surviving Partnership has not specifically agreed to
assume as provided herein.
ARTICLE III
CONSIDERATION
3.1 TOTAL CONSIDERATION.The aggregate consideration (the "Consideration")
payable by the Surviving Partnership in connection with the merger of the
Merged Partnership with and into the Surviving Partnership and the
contribution of the General Partnership Interest to the Surviving
Partnership shall be $4,520,000., subject to adjustments at Closing
pursuant to Section 3.9 and costs paid pursuant to Section 3.10(c) and
Section 3.11, plus the amount of any tax or other reserves held by the
Existing Lender (hereinafter defined).
3.2 CONVERSION OF PARTNERSHIP ▇▇▇▇▇▇▇▇▇.▇▇ the Effective Time each of the
outstanding interests in the Merged Partnership and the General Partnership
Interest (the "Interests") shall automatically, by operation of law and
without any action by the holders thereof, be converted into the right to
receive the Conversion Price and the Deferred Consideration Right as
provided below. "Conversion Price" means the Consideration less the
principal amount at the Effective Time of the existing mortgage loans
(collectively the "Existing Loan") covering the Merged Partnership's
property in favor of IDS Life Insurance Company of New York (the "Existing
Lender") less the amount specified by the General Partner as described in
Section 3.11 and less the Reserve Amount multiplied by the percentage
interest of the Interest in the General Partnership. "Reserve Amount"
means the sum of: (a) an amount equal to the current liabilities of the
Merged Partnership and the General Partnership at the Effective Time (other
than the principal amount of the Existing Loan) (the "Liabilities Reserve")
and (b) $84,000 (the "Indemnity Reserve"); provided, however, that the
Reserve Amount shall be reduced in proportion to the Interests of partners
of the Merged Partnership ("Dissenting Partners") who have properly
indicated their intention to seek payment of the fair value of their
interests under Section 121-1102 of the New York Law. The Reserve Amount
shall be held and disbursed by the Disbursing Agent (as defined in Section
3.3) as described in Sections 3.4 and 3.13. "Deferred Consideration Right"
with respect to each of the Interests means the right to receive the
Reserve Amount less all amounts used to satisfy the current liabilities of
the Merged Partnership and the General Partnership ("Liabilities Claims")
and any amounts paid or subject to claims of the Surviving Partnership by
reason of a material breach or material misrepresentation of any
representations, warranties, covenants or agreements of the Merged
Partnership or ▇▇▇▇▇ which survive Closing (but only during the period of
such survival) ("Indemnity Claims") multiplied by (a) the percentage
interest of the Interest in the General Partnership, in the case of the
General Partnership Interest, or (b) the percentage interest of the
Interest in the Merged Partnership multiplied by the Merged Partnership's
percentage interest in the General Partnership, in the case of the
Interests in the Merged Partnership. As of the Effective Time, all
Interests in the Merged Partnership shall cease to be outstanding and shall
be canceled and each holder of an Interest shall, by virtue of the Merger,
cease to have any rights with respect to the General Partnership, Merged
Partnership or the Interests therein except the rights to receive the
Conversion Price and the Deferred Consideration Rights with respect
thereto, or the right, if any, to receive payment from the Surviving
Partnership of cash equal to the fair value of his Interest in the Merged
Partnership as provided in Section 121-1102 of the New York Law. The
Surviving Partnership hereby agrees to comply, at its expense, with all
payment and all other substantive and procedural obligations and
requirements which must be complied with respect to Dissenting Partners,
including, without limitation, Section 121-1102 of the New York Law.
Notwithstanding anything to the contrary contained in this Agreement, (i)
if and to the extent that the amount required to be paid to any Dissenting
Partner exceeds the portion (the "Dissenting Partner Portion") of the
Conversion Price which would have been paid to such partner of the Merged
Partnership if such partner was not a Dissenting Partner, such excess
amount shall be paid by the Surviving Partnership in addition to the
Consideration, (ii) the Dissenting Partner Portion paid by the Surviving
Partnership to Dissenting Partners shall be credited against the Conversion
Price and (iii) in the event that the holders of more than 10% of the
Interests are Dissenting Partners, the Surviving Partnership shall have the
right to terminate this Agreement by giving written notice thereof to the
Merged Partnership within ten (10) days after the Surviving Partnership
receives notification thereof.
3.3 PAYMENT OF THE CONVERSION PRICE.
(a) The Surviving Partnership shall deliver, in immediately available funds
and in Units (hereinafter defined), to Wolf, Block, ▇▇▇▇▇▇ and ▇▇▇▇▇-▇▇▇▇▇
(the "Disbursing Agent") the Reserve Amount.
(b) The "Cash Portion of the Conversion Price shall be the aggregate amount
of the Conversion Price payable to the holders of Interests in the Merged
Partnership who have failed to provide the Surviving Partnership with
evidence satisfactory to it that such holders are "Accredited Investors" as
such term is defined in Regulation D promulgated by the Securities and
Exchange Commission under the Securities Act of 1933, as amended (the
"Securities Act"). Notwithstanding anything to the contrary contained in
this Agreement if the total of the Interests held by Dissenting Partners
and by partners who are not Accredited Investors exceeds fifteen percent of
all of the Interests, the Merged Partnership shall have the right, by
giving written notice thereof to the Surviving Partnership at any time
prior to the Effective Date, to terminate this Agreement.
(c) The Conversion Price payable to the holders of Interests other than
those described in (b) above shall be paid by the issuance of Units of
limited partnership in the Surviving Partnership ("Units"). The number of
Units to be issued to each holder of an Interest shall be the Conversion
Price for the Interest of such holder divided by the average of the daily
market price for the ten (10) consecutive trading days immediately
preceding the Effective Date of the shares of common stock of HME (the
"Effective Date Price"). The market price for each such trading day shall
be the closing price of the common stock on the New York Stock Exchange,
regular way, on such day as reported in the Wall Street Journal, Eastern
Edition.
3.4 PAYMENT WITH RESPECT TO DEFERRED CONSIDERATION RIGHTS.
(a) On the 90th day after the Effective Date, the Disbursing Agent shall
distribute pro rata to the holders of Interests immediately prior to the
Effective Time (other than Dissenting Partners) that portion of the
Liabilities Reserve which has not been paid for the liabilities of the
Merged Partnership and the General Partnership as provided in this
Agreement and one-half of that portion of the Indemnity Reserve that has
not been paid or subject to Indemnity Claims.
(b) On the 180th day after the Effective Date, the Disbursing Agent shall
distribute pro rata to the holders of Interests immediately prior to the
Effective Time (other than Dissenting Partners), that portion of the
Indemnity Reserve that has not been paid, disbursed or subject to Indemnity
Claims.
(c) At any time, and from time to time, after the 180th day after the
Effective Date that there is a Final Determination (as defined in Schedule
3.13) that any remaining portion, if any, of the Indemnity Reserve is no
longer subject to Indemnity Claims, the Disbursing Agent shall distribute
such remaining portion pro rata to the holders of Interests immediately
prior to the Effective Time (other than Dissenting Partners).
3.5 INTENTIONALLY OMITTED
3.6 INTENTIONALLY OMITTED
3.7 INTENTIONALLY OMITTED
3.8 PRO-RATED DISTRIBUTION. The initial distribution payable with respect
to Units issued as part of the Consideration shall be made on the date on
which HME pays the dividend to the holders of its common stock that relates
to the earnings for the calendar quarter in which the Units were issued and
shall be pro-rated such that the partners receiving Units shall receive a
pro-rata distribution for the period from the date on which the Units were
issued to and including the last day of the calendar quarter in which the
Units were issued.
3.9 ADJUSTMENTS AT CLOSING. With respect to the Property, the following
shall be adjusted and pro-rated between the Surviving Partnership and ▇▇▇▇▇
and the Merged Partnership on the Effective Date as if the Surviving
Partnership was the owner of the Property as of midnight of the night
preceding the Effective Date and shall be paid in cash at Closing:
A. current fiscal year real estate taxes;
B. water and sewer rents and charges;
C. INTENTIONALLY OMITTED
D. fuel;
E. INTENTIONALLY OMITTED
F. INTENTIONALLY OMITTED
G. charges under the service contracts;
H. laundry income;
I. interest with respect to the Existing Loan; and
J. INTENTIONALLY OMITTED
K. rents.
(i) All rent payments collected on or before the Effective Date for
the month in which the Effective Date occurs shall be pro-rated as
between the parties as of the Effective Date.
(ii) All rent collected after the Effective Date shall be applied
first to the rent due for the month in which such rent was collected
and shall then be applied to the next most recent delinquent rent,
including any rent which was not collected for any period prior to
the Effective Date. Delinquent rent amounts collected with respect
to any period prior to the Effective Date shall belong to ▇▇▇▇▇ and
former partners of the Merged Partnership and, if paid to the
Surviving Partnership, the Surviving Partnership shall promptly
send such rent to the General Partner for distribution to ▇▇▇▇▇ and
the former partners of the Merged Partnership pursuant to the
agreement described in paragraph (e) of Section 6.3.
(iii) All rent collected by the Merged Partnership, prior to the
Effective Date, for months subsequent to Effective Date shall be paid
to the Surviving Partnership at the Effective Time.
(iv) All rent collected for rental periods after the Effective Date
shall belong to the Surviving Partnership and, if paid to ▇▇▇▇▇ or to
any of the former partners of the Merged Partnership shall be
promptly sent to the Surviving Partnership.
Any error in the calculation of adjustments shall be corrected subsequent
to the Effective Date with appropriate credits to be given based upon
corrected adjustments, provided, however, that the adjustments (except if
errors are caused by misrepresentations) shall be final upon expiration of
the 90th day after the Effective Date.
3.10 COSTS.
(a) The Surviving Partnership, on the one hand, and ▇▇▇▇▇ and the Merged
Partnership, on the other hand, shall each be responsible for one half of
any assumption fees payable to the Existing Lender, provided, however, that
if as of the Effective Date any Existing Loan may be prepaid without a
penalty of more than 1% of its principal balance at the time of prepayment,
the entire assumption fee, or, if the Surviving Partnership elects to
prepay such Existing Loan, the entire prepayment fee, shall be the
responsibility of the Surviving Partnership.
(b) The Surviving Partnership shall pay all recording fees, its attorneys'
fees, the costs of obtaining a binder or commitment from a title insurance
company, the premium for its title insurance policy, one half of any
Pennsylvania state and local transfer tax, and all other costs and expenses
incidental to or in connection with closing this transaction customarily
paid for by the purchaser of similar property. The Merged Partnership and
▇▇▇▇▇ shall pay their attorneys' fees, one-half of any Pennsylvania state
and local transfer tax, and all other costs and expenses incidental to or
in connection with closing this transaction customarily paid for by the
seller of similar property.
(c) The amounts payable pursuant to Sections 3.10(a) and/or (b) by the
Merged Partnership or ▇▇▇▇▇ on account of any assumption fee payable to the
Existing Lender and/or account of one half of any Pennsylvania state and
local transfer tax shall be charged against the Consideration.
3.11 PAYMENT DIRECTED BY GENERAL PARTNER. At the Effective Time, the
General Partner shall be entitled to direct that a portion of the
Consideration, up to a maximum amount equal to 6%of the Consideration, be
paid by the Surviving Partnership to pay certain closing costs of ▇▇▇▇▇ and
the Merged Partnership and to satisfy certain liabilities of the Merged
Partnership and the General Partnership.
3.12 CASH HELD BY MERGED PARTNERSHIP. Subject to Section 3.13 below,
on, or at any time prior to, the Effective Time, ▇▇▇▇▇ and the General Partner
shall have the right to spend on behalf of the General Partnership and the
Merged Partnership and/or distribute to the partners of the General
Partnership and the Merged Partnership any and all cash held by the General
Partnership and the Merged Partnership.
3.13 ESCROW AGREEMENT.The Reserve Amount shall be held and disbursed
pursuant to the terms of an escrow agreement that shall be in form and
substance acceptable to the parties hereto, but which provide at least the
following:
(a) The entire Liabilities Reserve shall be applied to pay current
liabilities of the Merged Partnership before application of the Indemnity
Reserve. To the extent that the Liabilities Reserve shall not be
sufficient to pay the current liabilities of the Merged Partnership the
Indemnity Reserve may be used to fund current liabilities.
(b) The claim resolution procedures set forth in SCHEDULE 3.13 hereof.
3.14 INSURANCE REFUND. At the Effective Time, the Surviving Partnership
shall cause the cancellation of all insurance maintained by the Merged
Partnership or the General Partnership and thereafter shall diligently seek
to obtain such refunds as may be due on account of such cancellation. Upon
receipt of such refunds, the Surviving Partnership shall pay them over to
the General Partner for distribution to ▇▇▇▇▇ and the former partners of
the Merged Partnership.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1 BY THE MERGED PARTNERSHIP. The Merged Partnership hereby makes the
following representations and warranties to the Surviving Partnership as of
the date hereof.
(a) REAL PROPERTY DESCRIPTION. The real property owned by the General
Partnership and to become the property of the Surviving Partnership at the
Effective Time consists of one or more parcels of land known as ▇▇▇▇▇▇▇▇
Court Apartments which includes 66 apartments and ▇▇▇▇▇ Court Apartments
which includes 49 apartments (collectively the "Project"), located in the
Borough of Lansdowne and Commonwealth of Pennsylvania, more particularly
described on EXHIBIT C, attached hereto, together and including all
buildings and other improvements thereon, including but not limited to, the
66 apartment units and 49 apartment units, respectively, and all rights of
the General Partnership in and to any and all streets, roads, highways,
alleys, driveways, easements and rights-of-way appurtenant thereto (the
foregoing are hereafter collectively referred to as the "Property").
(b) OTHER ITEMS. The following items now in or on the Property if owned by
the General Partnership and not by tenants of the Property shall become the
property of the Surviving Partnership at the Effective Time:
(1) all heating, plumbing and lighting fixtures,
(2) ranges, refrigerators, disposals and dishwashers,
(3) water heaters,
(4) any and all bathroom fixtures, wall-to-wall carpeting,
traverse rods, exhaust fans, hoods, signs, screens, maintenance
building, model unit furniture (except for model unit furniture
which is rented), fences, carpeting and runners, cabinets, mirrors,
shelving, any humidifier and dehumidifier units, air conditioning
units, mailboxes, office furniture (except for office furniture
which is rented), and related equipment in connection with the
Project, and
(5) any fixtures appurtenant to the Property and any other furniture or
equipment used in connection with the operation and maintenance of the
Property, including any vehicles used in connection with the operation and
maintenance of the Property (hereinafter with the items listed in (1)-(4)
above, collectively, the "Other Items").
(c) CONDITION OF OTHER ITEMS. To the best knowledge of the General Partner
and the current officers of Mill Creek Realty Co., substantially all of the
Other Items are in reasonable working order or condition. Except with
respect to the Existing Loan, the General Partnership has not subjected any
of the Other Property to any security interests, liens, claims, charges or
other encumbrances.
(d) ORGANIZATION AND AUTHORIZATION. The Merged Partnership is a limited
partnership duly organized, validly existing and in good standing under the
laws of the Commonwealth of Pennsylvania and was either formed under, or by
operation of law has become subject to, the Pennsylvania Act. It has all
requisite power and authority to own, lease and operate its properties and
to carry on its business as now being conducted. It is duly qualified or
licensed to do business as a foreign limited partnership and in good
standing in each jurisdiction in which the property owned, leased or
operated by it makes such qualification or license necessary, except in
each case in those jurisdictions where the failure to be so duly qualified
or licensed and in good standing would not have a Material Adverse Effect.
For purposes of this Agreement, "Material Adverse Effect" means a material
adverse effect on the business, assets, financial condition or results of
operation of the party making the representation or warranty to which such
qualification is being applied.
(e) AUTHORITY RELATIVE TO THIS AGREEMENT. Subject to receipt of the
approval described in Section 1.4 of this Agreement: (i) the Merged
Partnership has full power and authority to execute, deliver and perform
this Agreement and to consummate the transactions contemplated hereby; (ii)
all actions necessary to be taken by it or on its behalf to execute,
deliver and perform this Agreement and to consummate the transactions
contemplated hereby, have been duly and validly taken; and (iii) this
Agreement has been duly and validly executed and delivered by it and,
assuming due execution and delivery by the Surviving Partnership,
constitutes a valid and binding agreement enforceable against it in
accordance with its terms, except to the extent that enforceability may be
limited by applicable bankruptcy, reorganization, insolvency, moratorium or
similar laws affecting the enforcement of creditors' rights generally as at
the time in effect and by general principles of equity, regardless of
whether such enforceability is considered in a proceeding in equity or at
law.
(f) OUTSTANDING LIMITED PARTNERSHIP INTERESTS. SCHEDULE 4.1(F) hereto
lists the current holders of all outstanding limited partnership interests
of the Merged Partnership together with the percentage interest held by
each holder. In the event that any holder listed on SCHEDULE 4.1(F)
transfers any interests prior to the Effective Time, the Merged Partnership
shall provide written notice to the Surviving Partnership of such transfer
prior to the Effective Time, and such notice shall include the names of the
transferor and the transferee, the address of the transferee and the number
of units transferred.
(g) CONSENTS AND APPROVALS; NO VIOLATION. To the best of the Merged
Partnership's knowledge, neither the execution, delivery and performance of
this Agreement nor the consummation of the transactions contemplated hereby
will: (i) conflict with or will result in any breach of any provision of
its Agreement of Limited Partnership or Certificate of Limited Partnership;
(ii) require it to obtain any consent, approval, authorization or permit
from, or file with or notify, any governmental or regulatory authority,
except where the failure to obtain such consent, approval, authorization or
permit, or to make such filing or notification, would not have a Material
Adverse Effect; (iii) except to the extent that the consent of the Existing
Lender is required, constitute a breach or will result in a default under
any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, license, contract, agreement or other instrument or obligation
of any kind to which it is a party or by which it is bound, except for any
such breach or default as would not have a Material Adverse Effect; or (iv)
violate any order, writ, injunction, judgment, decree, law, statute, rule,
regulation or governmental permit or license applicable to it, which
violation would have a Material Adverse Effect, unless any waiver, consent,
approval, authorization, permit, filing or notification necessary to
prevent any such conflict, breach, default or violation has been obtained
prior to the Effective Time.
(h) LIABILITIES. Except (i) as disclosed in SCHEDULE 4.1(H) attached
hereto, (ii) for liabilities and obligations incurred in the normal course
of business of the Merged Partnership and (iii) as otherwise disclosed in
this Agreement, the neither the General Partnership nor the Merged
Partnership has any material liability or obligation of any nature which in
any way materially affects or is related to the Property or the Other Items
whether now due or to become due, absolute, contingent or otherwise,
including liabilities for taxes (or any interest or penalties thereto).
(i) LITIGATION. Except as disclosed in SCHEDULE 4.1(I) attached hereto,
there is no litigation, proceeding or investigation which, to the best
knowledge of the Merged Partnership, is pending, or, to the best knowledge
of the Merged Partnership, threatened, against or affecting the General
Partnership, the Merged Partnership or the Property that might affect or
relate to the validity of this Agreement or any action taken or to be taken
pursuant hereto, or that might have a Material Adverse Effect upon the
Property or the Other Items or any part or the operation thereof, unless
fully covered by insurance.
(j) COMPLIANCE WITH LAWS. Except as disclosed in SCHEDULE 4.1(J) attached
hereto, neither the General Partner nor any current officer of Mill Creek
Realty Co. has received written notice, addressed to the General
Partnership, the Merged Partnership or Mill Creek Realty Co., which remains
outstanding that it has not complied with and is in default under, or in
violation of, or received any written notice which remains outstanding that
the General Partnership, the Merged Partnership, the Property or the Other
Items may be in violation of, any law, ordinance, rule, regulation or code
or condition in any approval or permit pursuant thereto (including without
limitation, any zoning, sign, environmental, labor, safety, health or price
or wage control, ordinance, rule, regulation or order of) applicable to the
ownership, development, operation or maintenance of the Property or the
Other Items.
(k) LEASES. There are no written leases affecting the Property to which the
General Partnership is a party with a term greater than one year. The rent
roll attached hereto as SCHEDULE 4.1(K) is true and correct as of the date
of this Agreement.
(l) CONDEMNATION. The General Partnership has not received written notice
of pending condemnation of the Property, or any part thereof, or of any
plans for improvements which might result in a special assessment against
the Property.
(m) INTENTIONALLY OMITTED
(n) SERVICE CONTRACTS. There are no service contracts with respect to the
Property or the Other Items which will continue in effect after the Closing
except as set forth on SCHEDULE 4.1(N) attached hereto.
(o) EXECUTORY CONTRACTS. There are no executory contracts connected with
the Property or the Other Items, except as set forth on SCHEDULE 4.1(O)
attached hereto.
(p) ONGOING PERFORMANCE. Until the Effective Time, the General Partnership
shall continue to fulfill all of its obligations under the terms of the
Existing Mortgage, the leases encumbering the Property, the service
contracts and the executory contracts, and the General Partnership shall
operate, and perform routine maintenance and repair with respect to, all
landscaping, buildings, fixtures and facilities, including, without
limitation, the Other Items, in accordance its current practices. With
respect to non-routine maintenance or repair, the following shall apply:
(1) Except in the case of emergency, the General Partnership shall not
arrange for the making of any non-routine repair or replacement costing in
excess of $10,000 in any one instance without the prior written consent of
the Surviving Partnership which consent shall not be unreasonably withheld
and shall be deemed given if it is not denied by written notice received by
the General Partnership within 3 business days after request for such
consent was received by the Surviving Partnership. If such consent is
given or if such cost is less than $10,000, in the event that the Merger
occurs, the cost of such repair or replacement shall be the responsibility
of the Surviving Partnership and if any amount on account of such cost is
paid by the General Partnership prior to Closing, the Surviving Partnership
shall reimburse that to the General Partnership at Closing.
(2) Any non-routine repairs or replacements arranged by the General
Partnership which are not the responsibility of the Surviving Partnership
pursuant to Section 4.1(p)(1) above or Section 4.1(p)(3) below shall be a
liability of the General Partnership which shall not be assumed by the
Surviving Partnership.
(3) In the event that any non-routine repairs or replacements are
required on an emergency basis, which emergency is such as does not comfortably
allow the passage of the time period specified above for obtaining the
approval of the Surviving Partnership, the General Partnership may arrange
for such repair or replacement, and in the event that the Merger occurs,
the cost thereof shall be the responsibility of the Surviving Partnership
and at Closing the Surviving Partnership shall reimburse the General
Partnership for any amount paid on account of such repair or replacement
prior to Closing.
(q) APPLIANCES. Except as previously disclosed to the Surviving
Partnership, all of the ranges and refrigerators in the Property are the
property of the General Partnership and not of the tenants.
(r) FINANCIAL INFORMATION. The financial information attached hereto as
SCHEDULE 4.1(R) (income and expenses for calendar year 1995 and 1996) is
substantially true and accurate.
(s) ENVIRONMENTAL. Except as identified in SCHEDULE 4.1(S) attached hereto,
the General Partnership has received no notice of any violation of any
applicable Environmental Laws (below defined) with respect to the Property.
"Environmental Laws" shall mean all federal, state and local laws,
statutes, ordinances and codes relating to the protection of the
environment and/or governing the use, storage, treatment, generation,
transportation, processing, handling, production or disposal of any
Hazardous Substance and the rules, regulations, and orders with respect
thereto. "Hazardous Substance" means, without limitation, any flammable,
explosive or radioactive material, polychlorinated biphenyl, petroleum or
petroleum product, methane, hazardous materials, hazardous wastes,
hazardous or toxic substances or related materials, as defined in any
applicable Environmental Laws. From the date of acceptance hereof to and
including the Effective Date or the earlier termination of this Agreement,
the General Partnership shall promptly provide the Surviving Partnership
with a copy of any notice, citation, complaint or other directive from any
person, entity or governmental authority whereby compliance with
Environmental Laws is called into question with respect to the Property.
(t) TAXES. Except for state and local realty transfer taxes (which are
governed by Section 3.10) and real estate taxes (which are governed by
Section 3.9), each of the Merged Partnership and the General Partnership
has filed or will file when due all notices, reports and returns of Taxes
(as defined below) required to be filed before the Effective Date and has
paid or, if due after the date hereof and prior to the Effective Date, will
pay, all Taxes and other charges for the periods shown to be due on such
notices, reports and returns. "Taxes" shall mean all taxes, charges, fees,
levies or other assessments, including, without limitation, income, excise,
property, sale, gross receipts, employment and franchise taxes imposed by
the United States, or any state, county, local or foreign government, or
subdivision or agency thereof with respect to the assets or the business of
the Merged Partnership and the General Partnership, and including any
interest, penalties or additions attributable thereto.
4.2 BY THE SURVIVING PARTNERSHIP. The Surviving Partnership hereby makes
the following representations and warranties to ▇▇▇▇▇ and the Merged
Partnership as of the date hereof.
(a) ORGANIZATION AND AUTHORIZATION. The Surviving Partnership is a limited
partnership duly organized, validly existing and in good standing under the
laws of the State of New York and has adopted the New York Act. It has all
requisite power and authority to own, lease and operate its properties and
to carry on its business as now being conducted. It is duly qualified or
licensed to do business as a foreign limited partnership and in good
standing in each jurisdiction in which the property owned, leased or
operated by it makes such qualification or license necessary, except in
each case in those jurisdictions where the failure to be so duly qualified
or licensed and in good standing would not have a Material Adverse Effect.
(b) AUTHORITY RELATIVE TO THIS AGREEMENT. Subject to the receipt of the
approvals described in Section 1.5 and in subparagraph (e) of Section 6.3
of this Agreement: (i) the Surviving Partnership has full power and
authority to execute, deliver and perform this Agreement and to consummate
the transactions contemplated hereby; (ii) all actions necessary to be
taken by it or on its behalf to execute, deliver and perform this Agreement
and to consummate the transactions contemplated hereby, have been duly and
validly taken; and (iii) this Agreement has been duly and validly executed
and delivered by it and, assuming due execution and delivery by the Merged
Partnership, constitutes a valid and binding agreement enforceable against
it in accordance with its terms, except to the extent that enforceability
may be limited by applicable bankruptcy, reorganization, insolvency,
moratorium or similar laws affecting the enforcement of creditors' rights
generally as at the time in effect and by general principles of equity,
regardless or whether such enforceability is considered in a proceeding in
equity or at law.
(c) CONSENTS AND APPROVALS; NO VIOLATIONS. To the best of the Surviving
Partnership's knowledge, as of the Effective Time, neither the execution,
delivery and performance of this Agreement nor the consummation of the
transactions contemplated hereby will: (i) conflict with or will result in
any breach of any provision of its Agreement of Limited Partnership or
Certificate of Limited Partnership; (ii) require it to obtain any consent,
approval, authorization or permit from, or file with or notify, any
governmental or regulatory authority, except where the failure to obtain
such consent, approval, authorization or permit, or to make such filing or
notification, would not have a Material Adverse Effect; (iii) constitute a
breach or will result in a default under any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, license, contract,
agreement or other instrument or obligation of any kind to which it is a
party or by which it is bound, except for any such breach or default as
would not have a Material Adverse Effect; or (iv) violate any order, writ,
injunction, judgment, decree, law, statute, rule, regulation or
governmental permit or license applicable to it, which violation would have
a Material Adverse Effect, unless, any waiver, consent, approval,
authorization, permit, filing or notification necessary to prevent any such
conflict, breach, default or violation has been obtained prior to the
Effective Time.
(d)PARTNERSHIP INTERESTS. On the Effective Date, the Units to be issued
as provided in this Agreement shall be duly issued by the Surviving
Partnership and the recipients will be duly admitted as limited partners of
the Surviving Partnership.
(e)SURVIVING PARTNERSHIP AGREEMENT. A true, correct and complete copy of
the Surviving Partnership Agreement is attached hereto as EXHIBIT "D". The
Surviving Partnership hereby agrees that, with the following exceptions,
the Surviving Partnership Agreement shall not be further amended on or
prior to the Effective Date: (i) the Surviving Partnership Amendments, (ii)
amendments in connection with the issuance of additional shares under HME's
Dividend Reinvestment Stock Purchase, Resident Stock Purchase and Employee
Stock Purchase Plan, (iii) amendments in connection with mergers or other
transactions similar to the Merger which are currently in process wherein
additional Units are issued in connection with the acquisition of real
property or of interests in entities which own real property, the
provisions of which have been disclosed in writing to the Merged
Partnership prior to the execution of this Agreement, and (iv) the
formation of a subsidiary of HME to hold Units owned by HME.
ARTICLE V
COVENANTS OF THE PARTIES
5.1 FURTHER ASSURANCE. Subject to the terms and conditions of this
Agreement, each of the parties hereto will use reasonable efforts to take,
or cause to be taken, all actions, and to do, or cause to be done, all
things necessary under applicable laws and regulations to consummate the
transactions contemplated by this Agreement, including, but not limited to,
taking any actions necessary to cause the Merger Conditions to be
satisfied.
5.2 REPRESENTATIONS AND WARRANTIES. Each of the parties hereto shall give
written notice to the other party promptly upon the occurrence of, or upon
becoming aware of, either: (i) the occurrence of any event which makes any
representation or warranty contained in this Agreement not true in any
material respect; or (ii) any material and adverse development in the
condition (financial or otherwise) or operations of such party.
5.3 REPURCHASE AGREEMENTS. The Surviving Partnership hereby covenants and
agrees that it will, on or prior to the Effective Date, enter into an
agreement with ▇▇▇▇▇ and each of the partners of the Merged Partnership
other than Dissenting Partners whereby the Surviving Partnership agrees
that:
(a) Upon the written request of ▇▇▇▇▇ or any such partner, the Surviving
Partnership will purchase any or all of the Units held by ▇▇▇▇▇ or such
partner at a purchase price per Unit equal to the Effective Date Price (as
defined in Section 3.3(c) above). The written notice must be received by
the Surviving Partnership on or before the date which is one hundred eighty
(180) days after the Effective Date.
(b) Upon the written request of any such partner which is made (i) after the
date which is one hundred eighty (180) days after the Effective Date and
(ii) on or before the date which is the later of (A) the last day of any
holding period (which holding period shall not, in any event, exceed one
year after the Effective Date) during which, in order to comply with the
requirements of the SEC, ▇▇▇▇▇ and such partners are not permitted to
convert Units into shares of common stock of HME and (B) the date on which
the SEC declares effective the Registration Statement required to be filed
with the SEC pursuant to Section 5.11 hereof, the Surviving Partnership
will purchase any or all of the Units held by such partner at a purchase
price per Unit equal to the average of the daily market price for the ten
(10) consecutive trading days immediately preceding the date of such
partner's request of the shares of common stock of HME.
5.4 ACCESS TO INFORMATION. Between the date of this Agreement and the
Effective Date, the Surviving Partnership, on the one hand, and ▇▇▇▇▇ and
the Merged Partnership, on the other hand, will each, during ordinary
business hours and upon reasonable advance notice, give to the other and
their authorized representatives reasonable access to inspect their books,
records, offices and other facilities and properties; provided, however,
that: (i) any such investigation shall be conducted in such a manner as
not to interfere unreasonably with the operation of the other's business;
(ii) no party shall be required to take any action which would constitute a
waiver of the attorney-client privilege; (iii) no party need supply the
other with any information which it is under a legal obligation not to
supply; and (iv) with respect to ▇▇▇▇▇, such access shall be limited to
information pertaining to the General Partnership.
5.5 FINANCIAL ACCESS.
(a) Upon the demand of the Surviving Partnership, the General Partner will
provide a signed representation letter substantially in the form of EXHIBIT
"E" attached hereto. The General Partner and the Merged Partnership will
provide access to the Surviving Partnership's representative to all
financial and other information relating to the General Partnership, Merged
Partnership and the Property as is sufficient to enable them to prepare
audited and pro-forma financial statements, in conformity with Regulation
S-X of the Securities and Exchange Commission (the "Commission") and any
registration Statement, report or disclosure statement to be filed with the
Commission.
(b) Prior to the Effective Date the Surviving Partnership shall from time to
time, promptly after request, supply to the Merged Partnership, and certify
to the Merged Partnership the accuracy and completeness of, copies of any
financial statements and records and other documents and information
requested by the General Partner regarding the Surviving Partnership and
HME which are available to the public.
(c) The Parties hereto recognize that, at the Effective Date, the Merged
Partnership will be treated for federal income tax purposes as having
contributed all of its assets to the Surviving Partnership in exchange for
the Consideration, which the Merged Partnership will be deemed to have
distributed to its Partners in complete liquidation of the Merged
Partnership. Upon the Contribution of the General PartnershipInterest by
▇▇▇▇▇ to the Surviving Partnership, the General Partnership will terminate
for federal income tax purposes. Consequently, the Merged Partnership and
the General Partnership will terminate for federal income tax purposes at
the Effective Time. The Parties hereto shall prepare their tax returns for
their respective taxable years which include the Effective Date consistent
with that characterization of the transaction. The Surviving Partnership
shall make available to the General Partner (and its representatives)
promptly upon request, all financial and other information relating to the
Merged Partnership and the General Partnership which is necessary to permit
each of the Merged Partnership and the General Partnership to file its tax
returns for its taxable year ended on the Effective Date.
5.6 INTENTIONALLY OMITTED
5.7 NEGATIVE COVENANTS. Each of ▇▇▇▇▇ and the Merged Partnership agrees
that, prior to the Effective Date, it will not take any of the following
actions with respect to the Merged Partnership or the General Partnership
without first obtaining the Surviving Partnership's prior written consent,
which consent shall not be unreasonably withheld or delayed.
A. Create, incur or assume any indebtedness for money borrowed, including
obligations in respect of capital leases, except: (i) purchase money
mortgages granted in connection with the acquisition of property in the
ordinary course of business consistent with past practice; and (ii) short-
term indebtedness for borrowed money in accordance with loan agreements and
lines of credit in effect as of the date hereof.
B. Assume, guarantee, endorse or otherwise become liable or responsible
(whether directly, contingently or otherwise) for the obligations of any
other person except in the ordinary course of business consistent with past
practices.
C. Sell or otherwise dispose of or abandon any of its assets except in the
ordinary course of business.
D. Increase the rate or terms of: (i) compensation payable or to become
payable to any of its employees; or (ii) any bonus, insurance, pension or
other employee benefit plan, payment or arrangement made to, for or with
any employee, except salary increases to site employees not exceeding 3%
occurring in the ordinary course of business in accordance with its
customary practices (which shall include normal periodic performance
reviews and related compensation and benefit increases).
E. Enter into any agreement, commitment or transaction (including without
limitation any borrowing, capital expenditure or capital financing),
material to the business, operations or financial condition of its
business, except agreements, commitments or transactions in the ordinary
course of business consistent with past practice.
F. Transfer, mortgage, pledge, grant any security interest in or permit
the imposition of any lien or other encumbrance on any of its assets other than
in the ordinary course of business consistent with past practice.
5.8 MANAGEMENT AGREEMENTS. On or prior to the Effective Date, the General
Partnership shall terminate any agreements pertaining to the management of
the Property.
5.9 CLOSING DOCUMENTS. At the Effective Time, ▇▇▇▇▇ and the Merged
Partnership shall deliver to the Surviving Partnership a certificate of
title and any necessary transfer documents relating to any vehicles, a
current rent roll ("Rent Roll") certified, as of the date of the Effective
Date, which shall include a list of all tenants, all rental obligations of
each tenant with respect to the Property and all security deposits
(including all interest due to tenants pursuant to Pennsylvania or other
applicable laws). At the Closing, ▇▇▇▇▇ and the Merged Partnership shall
transfer to the Surviving Partnership an amount equal to the aggregate
amount of the security deposits shown on the Rent Roll. At the Effective
Time, ▇▇▇▇▇ and the Merged Partnership shall also deliver to the Surviving
Partnership complete originals of each lease listed on the Rent Roll.
5.10 INSPECTION. Upon and after execution of this Agreement by both
parties, ▇▇▇▇▇ and the Merged Partnership agree that the Surviving
Partnership and its authorized representatives shall have the right and
privilege to enter upon the Property and the General Partnership's offices,
upon reasonable notice, during regular business hours, for the purpose of
gathering such information and conducting such environmental and
engineering studies or other tests and reviews as the Surviving Partnership
may deem appropriate and necessary. All such inspections, studies, tests
and reviews shall be at the Surviving Partnership's sole expense. Each of
▇▇▇▇▇ and the Merged Partnership agrees to cooperate with the Surviving
Partnership by making available to the Surviving Partnership such records,
plans, drawings or other data as may be in their or the General
Partnership's or the Merged Partnership's possession or control relating to
the Property and its operation; provided, however, that the Surviving
Partnership agrees to indemnify ▇▇▇▇▇ and the Merged Partnership of and
from any loss or damage occasioned by such entry, and agrees further to
restore to its original condition, at the Surviving Partnership's own cost
and expense, any property disturbed by such entry.
5.11 SUFFICIENT REGISTERED SHARES. The Surviving Partnership hereby
represents and warrants to and covenants with ▇▇▇▇▇ and the Merged
Partnership and its partners that on the Effective Date and thereafter for
so long as any Units issued to ▇▇▇▇▇ and the partners of the Merged
Partnership are outstanding there shall be at all times, a sufficient
number of reserved shares of HME to permit the conversion of all
outstanding Units into shares of HME pursuant to the terms of the Surviving
Partnership Agreement. Within 10 days after the Effective Date, the
Surviving Partnership agrees to file a registration statement (the
"Registration Statement") with the SEC registering the resale of the shares
of common stock of HME into which the Units may be converted and to use
reasonable commercial efforts to have the registration promptly declared
effective by the SEC. Notwithstanding anything to the contrary contained in
this Agreement, in the event that the Surviving Partnership has not filed
the Registration Statement with the SEC by the date (the "Outside Filing
Date") which is the 30th day after the Effective Date, then for and with
respect to each day during the period between the Outside Filing Date and
the date on which the Registration Statement is filed with the SEC, the
Surviving Partnership shall pay to ▇▇▇▇▇ and the former partners of the
Merged Partnership which hold Units, as liquidated damages and not as a
penalty, the sum of $10,000, which sum shall be apportioned pro rata among
such ▇▇▇▇▇ and the former partners of the Merged Partnership.
5.12 TAX PROVISIONS. The Surviving Partnership agrees to observe and comply
with the following:
(a) The Surviving Partnership will use the traditional method (and not the
curative or remedial method), as contemplated by Treasury Regulations
1.704-3(b) to allocate book-tax differences with respect to the
assets which are deemed contributed to the Surviving Partnership by ▇▇▇▇▇
and the Merged Partnership.
(b) Home Properties agrees that for a period of 5 years following the
Effective Time, (i) the Surviving Partnership shall not restructure the
share of the Surviving Partnership's debt of ▇▇▇▇▇ and the former partners
of the Merged Partnership who shall have received Units in the Surviving
Partnership (▇▇▇▇▇ and such former partners of the Merged Partnership who
shall have received Units are hereinafter called the "Unit Partners") in
such manner as to cause a reduction in the amount of Unit Partners' share
of non-recourse debt allocable to and encumbering the Property without the
Unit Partners' prior written consent; and (ii) the Surviving Partnership
will not dispose of any of its interest in the Real Property, unless such
disposition is structured as a tax-deferred, like- exchange under
1031 of the Code, or otherwise is substantially tax-deferred under
the Code. Any property or real estate assets acquired by the Surviving
Partnership pursuant to such tax-deferred, like-exchange shall remain
subject to the restriction on disposition contained hereunder until the end
of the aforesaid 5-year period. In the event that the Surviving
Partnership takes any such action during such 5-year period, the Surviving
Partnership shall indemnify and save harmless the Unit Partners from and
against any federal and state income tax liability, including but not
limited to: (i) income taxes suffered as a result of all payments made
under this subsection; and (ii) interest, penalties and the reasonable fees
of attorneys and accountants.
(c) As a partner contributing interests in a partnership in exchange for a
limited partnership interest in the Surviving Partnership, the Unit
Partners will receive annually from the Surviving Partnership Form 1065,
Schedule K-1, Partner's Share of Income, Credit, Deductions, etc. This form
will also be part of the tax return, Form 1065, filed by the Surviving
Partnership with the Internal Revenue Service. The Surviving Partnership
represents that the Schedule K-1 submitted to Unit Partners for use in the
preparation of their tax returns will reflect the allocation to Unit
Partners as partners of a share of non-recourse liabilities in accordance
with Reg. Sec. 1.752-3 of the Internal Revenue Code, such that as a result
of the allocation the Unit Partners shall recognize no income upon the
contribution of the Property to the Surviving Partnership, and for a period
of 5 years following the Effective Time except to the extent cash
distributions from the Surviving Partnership to a Unit Partner exceeds such
Unit Partner's basis in his or her Units. The Merged Partnership and ▇▇▇▇▇
represent that as of December 31, 1996: (i) their aggregate built in gain
determined in accordance with the principals set forth in Section 704(c) of
the Internal Revenue Code of 1986 ("Code") is as set forth on SCHEDULE 5.12
assuming that the Property has a fair market value of $4,520,000. as of the
date of the Merger; (ii) the amount of nonrecourse debt encumbering the
Property is $3,097,819.; (iii) the capital account of each of the Unit
Partners is as set forth on SCHEDULE 5.12. The Surviving Partnership's
representation contained in this Section 5.12 (c) is conditioned upon the
accuracy of the representations contained in the preceding sentence.
ARTICLE VI
CONDITIONS OF MERGER
6.1 MANDATORY CONDITIONS. None of the Surviving Partnership, ▇▇▇▇▇ or the
Merged Partnership shall have any obligation contribute the General
Partnership Interest or to execute or file the Certificate of Merger as
described in Section 2.1 unless, on or before September 30, 1997:
(a) OTHER CONDITIONS. All of the contingencies and conditions (including,
without limitation, the conditions set forth in Sections 6.2 and 6.3
hereof) contained in this Agreement have been satisfied or waived as
provided herein.
(b) OTHER MERGERS. The conditions to the mergers and other transactions of
the Surviving Partnership with the entities listed on the attached SCHEDULE
6.1 also shall have been satisfied and the mergers are to occur
simultaneously with the Merger of the Merged Partnership into the Surviving
Partnership.
(c) EXISTING LENDER APPROVAL. The Existing Lender shall have approved the
Merger and shall have agreed to the assumption of the Existing Loan by the
Surviving Partnership (unless the Surviving Partnership elects to prepay
the Existing Loan pursuant to Section 3.10(a) hereof).
6.2 CONDITIONS TO ▇▇▇▇▇'▇ AND MERGED PARTNERSHIP'S OBLIGATIONS. On the
date all of the requirements set forth in Section 6.1 hereof have been
satisfied (the "Satisfaction Date"), the general partner of the Merged
Partnership shall execute the Certificate of Merger and deliver it to the
Surviving Partnership and ▇▇▇▇▇ shall assign the General Partnership
Interest to the Surviving Partnership. The general partner of the Merged
Partnership shall have no obligation to execute and deliver the Certificate
of Merger, and ▇▇▇▇▇ shall have no obligation to assign the General
Partnership Interest, unless:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties of
the Surviving Partnership set forth herein shall be true and correct in all
material respects as of the Satisfaction Date, as certified in writing by
the general partner of the Surviving Partnership.
(b) COVENANTS. The Surviving Partnership has complied in all material
respects with the covenants made by it in this Agreement to be complied
with by it from the date hereof through the Satisfaction Date.
(c) APPROVAL. The Merged Partnership shall have obtained the requisite
approval of its limited partners to the Merger and the other transactions
described in this Agreement on the terms and conditions described herein.
(d) OPINION OF COUNSEL. The Surviving Partnership's independent counsel
shall have delivered an opinion of counsel in the form of EXHIBIT F
attached hereto.
(e)INTENTIONALLY OMITTED
(f) REGISTRATION RIGHTS AGREEMENT. ▇▇▇▇▇ and the partners of the Merged
Partnership who receive Units and the Surviving Partnership shall have
entered into a registration rights agreement on customary terms,
including, without limitation, the granting of piggyback registration
rights.
(g) MARYLAND ANTI-TAKEOVER STATUTES. The Board of Directors of HME
shall have taken all action necessary so that the transactions contemplated by
this Agreement including, without limitation, the issuance of Units and the
conversion of Units into shares of HME, shall be irrevocably exempt from
the operation of 3-601 ET SEQ. (the "business combination"
statute) and 3-701 ET SEQ. (the "control share acquisition"
statute) of the Maryland General Corporation Law (collectively, the
"Maryland Anti-Takeover Statutes") and from any provisions of the Articles
of Incorporation and Bylaws of HME that may have the effect of limiting the
acquisition of Units and shares of HME in connection with the transactions
contemplated in this Agreement, including without limitation, Article 7 of
the Articles of Incorporation of HME. The Surviving Partnership and its
counsel shall have confirmed to the Merged Partnership's satisfaction that
this Agreement, the Merger and the other transactions contemplated hereby
are exempt from the operation of the Maryland Anti-Takeover Statutes.
6.3 CONDITIONS TO SURVIVING PARTNERSHIP'S OBLIGATIONS. On the next day
following the date that the Surviving Partnership receives the Certificate
of Merger executed by the general partner of the Merged Partnership (the
"Delivery Date"), the general partner of the Surviving Partnership shall
execute the Certificate of Merger, deliver it to the Department of State of
the State of New York and the Commonwealth of Pennsylvania for filing and
notify the Merged Partnership of such delivery. The general partner of the
Surviving Partnership shall have no obligation to execute or deliver the
Certificate of Merger unless:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of the Merged Partnership set forth in this Agreement shall be true and
correct in all material respects as of the Delivery Date, as certified in
writing by the General Partner.
(b) COVENANTS. Each of ▇▇▇▇▇ and the Merged Partnership has complied
with the covenants made by it in this Agreement to be complied with by it from
the date hereof through the Delivery Date.
(c) CONDITION OF PROPERTY. There are on the Delivery Date, 66 and 49
respectively, apartment units in rentable condition and in compliance with
federal, state, county or local laws, ordinances, rules and regulations.
(d) APPROVALS. The Surviving Partnership represents and warrants that it
has obtained the requisite approval of the Board of Directors of HME to the
Merger and the other transactions described in this Agreement on the terms
and conditions described herein, including, without limitation, the
Surviving Partnership Amendments. The Surviving Partnership, on or prior
to the Effective Date shall have obtained the requisite approval of its
limited partners and the State of Michigan Retirement Systems to the Merger
and the other transactions described in this Agreement on the terms and
conditions described herein. The Surviving Partnership agrees to recommend
to the Board of Directors of HME, the limited partners of the Surviving
Partnership and the State of Michigan Retirements Systems that they vote
in favor of the Merger and the other transactions described in this
Agreement.
(e) GENERAL PARTNER AGREEMENT. The General Partner shall have executed an
agreement whereby he agrees that he will be responsible for making all
final distributions to ▇▇▇▇▇ and the former partners of the Merged
Partnership and shall indemnify the Surviving Partnership from all claims
relating thereto.
(f) OPINION OF COUNSEL. The Merged Partnership's independent counsel
shall have delivered an opinion of counsel in the form of EXHIBIT G attached
hereto.
ARTICLE VII
TERMINATION
7.1 TERMINATION. If the conditions of Section 6.1 of this Agreement are not
satisfied, any party, at its option and upon notice to the other parties,
may terminate this Agreement. If the conditions of Section 6.2 of this
Agreement are not satisfied, either ▇▇▇▇▇ or the Merged Partnership, at its
option and upon written notice to the Surviving Partnership, may terminate
this Agreement. If the condition of Section 6.3 of this Agreement are not
satisfied, the Surviving Partnership, at its option and upon written notice
to ▇▇▇▇▇ and the Merged Partnership, may terminate this Agreement. Upon the
termination of this Agreement as provided herein, no party shall have any
further rights or obligations hereunder and no party shall take any action
to file the Certificate of Merger.
ARTICLE VIII
TITLE MATTERS
8.1 TITLE POLICIES AND SURVEYS. The Merged Partnership has, prior to the
date of this Agreement, furnished and delivered to the Surviving
Partnership a copy of the most recent title policy issued with respect to
the Property and a copy of the most recent survey of the Property.
8.2 OBJECTIONS TO TITLE.
(a) The obligation of the Surviving Partnership to execute or file the
Certificate of Merger is conditioned upon the ability of the Surviving
Partnership to obtain title insurance with respect to the Property
insuring that, as of the Effective Date, title to the Property is not
subject to any liens, encumbrances or other title objections other than the
lien of the mortgage securing the Existing Loan, any apartment leases for
tenants of the Property and the title exceptions identified in EXHIBIT H
attached hereto.
(b) The Merged Partnership agrees that, upon the request of the Surviving
Partnership, it will provide an affidavit in such customary form as shall
allow the Surviving Partnership to obtain a non-imputation endorsement to
the title policy purchased by the Surviving Partnership.
ARTICLE IX
MISCELLANEOUS
9.1 AMENDMENT. This Agreement may be amended only by a writing executed by
the Surviving Partnership, ▇▇▇▇▇ and the Merged Partnership.
9.2 WAIVER OF COMPLIANCE. Except as otherwise provided in this Agreement,
any failure of any party to comply with any obligation, covenant, agreement
or condition herein may be waived by the party entitled to the benefits
thereof only by a written instrument signed by the party granting such
waiver, but such waiver or failure to insist upon strict compliance with
such obligation, covenant, agreement or condition shall not operate as a
waiver of, or estoppel with respect to, any subsequent or other failure.
9.3 ENTIRE AGREEMENT. This Agreement, including the documents, schedules,
certificates and instruments referred to herein, embody the entire
agreement and understanding of the parties hereto in respect of the
transactions contemplated by this Agreement. There are no restrictions,
promises, representations, warranties, covenants or undertakings, other
than those expressly set forth or referred to herein or therein. This
Agreement supersedes all prior agreements and understandings between the
parties with respect to such transactions.
9.4 ASSIGNMENT. This Agreement and all obligations and rights of the
parties hereunder may not be assigned by either party. Commencing with the
Effective Time, the General Partner and the former partners of the Merged
Partnership shall be third-party beneficiaries of this Agreement.
9.5 GOVERNING LAW. This Agreement shall be governed by the laws of the
Commonwealth of Pennsylvania, without reference to its principles of
conflicts of law.
9.6 INTERPRETATION. The article and section headings contained in this
Agreement are solely for the purpose of reference, are not part of the
agreement of the parties and shall not in any way affect the meaning or
interpretation of this Agreement. Article and Section references which do
not otherwise specify, are to the designated Article or Section of this
Agreement.
9.7 SEVERABILITY. The invalidity or unenforceability of any particular
provision of this Agreement shall be construed in all respects as if such
invalid or unenforceable provision were omitted. All provisions of this
Agreement shall be enforced to the full extent permitted by law.
9.8 NOTICES. All notices given pursuant to any provision of this Agreement
shall be in writing and shall be effective only if delivered personally, or
sent by registered or certified mail, postage prepaid or sent by nationally
recognized overnight carrier, to the addresses set forth below:
To Home Properties:
Home Properties of New York, L.P.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
With a copy to ▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
at the same address
To the Merged Partnership and ▇▇▇▇▇
General Partner:
▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
With a copy to:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
▇▇▇▇, Block, ▇▇▇▇▇▇ and ▇▇▇▇▇-▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Building 640
Blue ▇▇▇▇, Pennsylvania 19422
And a copy to:
▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇., Esq.
▇▇▇▇, Block ▇▇▇▇▇▇ and ▇▇▇▇▇-▇▇▇▇▇
Twelfth Floor, Packard Building
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
9.9 CONFIDENTIALITY. By execution of this Agreement and except as otherwise
provided herein, prior to the Effective Time the Surviving Partnership
agrees to keep any and all information obtained in or in connection with
the due diligence process with respect to the Merged Partnership, its
operations, the Real Property and Other Items strictly confidential, and
will not disclose any such information without the Merged Partnership's
prior written consent, except to the extent required by law.
9.10 BROKER'S COMMISSION. ▇▇▇▇▇ and the Merged Partnership represent to the
Surviving Partnership that they did not employ any broker in connection
with this sale other than Mill Creek Realty Co., and they hereby agree
that, pursuant to Section 3.11 hereof, they will cause the Surviving
Partnership to pay any fees or commissions payable to Mill Creek Realty Co.
in connection with the transaction described in this Agreement. The
Surviving Partnership represents that it employed ▇.▇. ▇▇▇▇ & Associates as
broker and agrees that it will pay any fees or commissions due as a result
of the Surviving Partnership's employment of that broker. The parties each
agree to indemnify the other for any and all claims and expenses, including
legal fees if any other fees or commission is determined to be due by
reason of the employment of any other broker by the indemnifying party.
9.11 CONDITION OF PROPERTY AND OTHER ITEMS
(a)The entire agreement between the parties hereto with respect to the
Property and the Other Items and the sale thereof is expressly set forth in
this Agreement, and the parties are not bound by any agreement,
understandings, provisions, conditions, representations or warranties other
than as are expressly set forth and stipulated herein. Without in any
manner limiting the generality of the foregoing, the Surviving Partnership
acknowledges that and its representatives will have fully inspected the
Property and the Other Items, and will be fully familiar with the physical
and financial condition thereof, and that the Property and the Other Items
will be accepted by the Surviving Partnership pursuant to the Merger in an
"as is" and "where is" condition as a result of such inspection and
investigations and not in reliance on any agreement, understanding,
condition, warranty or representation made by the General Partner, the
Merged Partnership or any agent or employee of the Merged Partnership
(except as expressly elsewhere provided in this Agreement) as to the
condition thereof, as to any permitted use thereof, or as to the income or
expense in connection therewith, or as to any other matter in connection
therewith; and the Surviving Partnership further acknowledges that none of
the Merged Partnership, ▇▇▇▇▇ or any party acting on their behalf has made
or shall be deemed to have made any such agreement, condition,
representation or warranty (except as expressly elsewhere provided in this
Agreement).
(b) The Surviving Partnership shall accept the Property and the Other Items
at the time of Closing in the same condition as the same are as of the date
of this Agreement as such condition shall have changed by reason of wear
and tear, damage by fire or other casualty and vandalism.
(c) If the Merger occurs, ▇▇▇▇▇ and the Merged Partnership shall assign to
the Surviving Partnership any net insurance and/or condemnation proceeds
received by the Merged Partnership with respect to the Property, less any
amount expended by the Merged Partnership for collection, repair,
restoration or related expenses.
9.12 DEFAULT.
(a) If the Surviving Partnership defaults hereunder at or prior to the
Effective Date by failing to complete Closing in accordance with the terms
of this Agreement or in any other respect, then on the Effective Date (or
sooner in the event of an anticipatory breach) the Surviving Partnership
shall pay to ▇▇▇▇▇ and the Merged Partnership the aggregate sum of $70,000.
(the "Liquidated Damages Amount") as liquidated damages. Notwithstanding
anything to the contrary contained in this Agreement, the failure to
satisfy any of the conditions to the Merger contained in Article VI hereof
shall not, in and of itself, be deemed to be a failure of the Surviving
Partnership to complete Closing or a default by the Surviving Partnership
under this Agreement. If the Surviving Partnership pays ▇▇▇▇▇ and the
Merged Partnership the Liquidated Damages Amount as liquidated damages, the
payment of such sum shall be ▇▇▇▇▇'▇ and the Merged Partnership's only
remedy in the event of the Surviving Partnership's default at or prior to
the Effective Date, and ▇▇▇▇▇ and the Merged Partnership in such event
hereby waives any right, unless Closing is completed, to recover the
balance of the Consideration. If ▇▇▇▇▇ and the Merged Partnership shall be
paid the Liquidated Damages Amount as liquidated damages, this Agreement
shall be and become null and void and all copies will be surrendered to the
Merged Partnership for cancellation. Nothing in this Section shall limit
▇▇▇▇▇'▇ and the Merged Partnership's rights against the Surviving
Partnership and the Surviving Partnership's liability to ▇▇▇▇▇ and the
Merged Partnership by reason of a default by the Surviving Partnership
under this Agreement which survives Closing.
(b) The term "Permitted Event" shall mean the occurrence of the following on
the Effective Date: the Surviving Partnership shall be ready, willing and
able to complete Closing in accordance with the Agreement; the Surviving
Partnership, or its authorized representative, shall have appeared at the
place designated for Closing and shall have tendered the Consideration, and
▇▇▇▇▇ and the Merged Partnership, notwithstanding the foregoing, shall have
failed to complete Closing in accordance with this Agreement or are
otherwise in default under this Agreement. Notwithstanding anything to the
contrary contained in this Agreement, the failure to satisfy any of the
conditions to the Merger contained in Article VI hereof shall not, in and
of itself, be deemed to be a failure of ▇▇▇▇▇ or the Merged Partnership to
complete Closing or a default by ▇▇▇▇▇ or the Merged Partnership under this
Agreement. Except upon the occurrence of the Permitted Event, the
Surviving Partnership agrees that it shall not (and hereby waives any right
to) ever file or assert any LIS PENDENS against the Property nor commence
or maintain any action against ▇▇▇▇▇ or the Merged Partnership for specific
performance under this Agreement nor for a declaratory judgment as to the
Surviving Partnership's rights under this Agreement. Except as expressly
provided above and elsewhere in this Agreement, nothing herein shall be
deemed to limit or impair any of the Surviving Partnership's rights and
remedies at law, in equity or by statute.
9.13 INDEMNITY AGREEMENT. On the Effective Date, as an express condition to
the obligation of the Merged Partnership to complete Closing, the Surviving
Partnership shall execute and deliver to ▇▇▇▇▇ and the General Partner an
agreement, in form and substance satisfactory to ▇▇▇▇▇ and the General
Partner and ▇▇▇▇▇'▇ and the General Partner's counsel, whereby the
Surviving Partnership agrees to indemnify and hold harmless (a) the
General Partner, both individually and in his capacity as the general
partner of the Merged Partnership and (b) ▇▇▇▇▇, both individually and as
a general partner of the General Partnership, from and against any and all
liabilities and obligations, including, without limitation, guaranties and
carve-outs from non- recourse, arising in connection with the Existing
Loan.
9.14 NO PERSONAL LIABILITY. Notwithstanding anything to the contrary
contained in this Agreement, none of ▇▇▇▇▇, the General Partner or any
other partners of the Merged Partnership shall have any personal liability,
and no action of any kind shall be maintained against any of them or their
respective assets, with respect to this Agreement and/or the transactions
described in this Agreement, and the Surviving Partnership, its successors
and assigns, shall look solely to the assets of the Merged Partnership and
the General Partnership and the cash or assets held by the Disbursing Agent
pursuant to Section 3.2 above, for the payment of any claim against or the
performance of any obligation of ▇▇▇▇▇ and the Merged Partnership. The
foregoing limitation of liability shall not apply in the case of fraud or
intentional and material misrepresentation; provided, however, that in
connection with any action involving alleged fraud or intentional and
material misrepresentation, if the Surviving Partnership, its successors or
assigns, is not the prevailing party, it shall be responsible for the
payment of all attorneys' fees and expenses of all parties, but if the
Surviving Partnership, its successors or assigns, is the prevailing party,
each party shall bear its own attorneys' fees and expenses.
9.15 NUMBER OF DAYS. In computing the number of days for purposes of this
Agreement, all days shall be counted, including Saturdays, Sundays and
holidays; provided, however, that if the final day of any time period falls
on a Saturday, Sunday or holiday on which federal banks are or may elect to
be closed, then the final day shall be deemed to be the next day which is
not a Saturday, Sunday or such holiday.
9.16 DEPOSIT.
(a) As security for the payment of the Liquidated Damages Amount, upon the
execution of this Agreement, the Surviving Partnership shall deposit with
the Disbursing Agent in escrow the sum of $70,000.(the "Deposit"). If the
Surviving Partnership shall become obligated to pay to ▇▇▇▇▇ and the Merged
Partnership the Liquidated Damages Amount, ▇▇▇▇▇ and the Merged Partnership
shall have the right to be paid the Deposit on account of the Liquidated
Damages Amount. If Closing is completed hereunder or if this Agreement is
terminated as provided in Section 7.1 hereof, the Disbursing Agent shall
refund the Deposit to the Surviving Partnership.
(b) Notwithstanding anything contained in this Section 9.16, if either party
terminates this Agreement as a result of the other's default or pursuant to
the exercise of any right of termination conferred by this Agreement,
Disbursing Agent shall not disburse the Deposit until the earlier to occur
of (i) receipt by Disbursing Agent of written instructions from ▇▇▇▇▇, the
Merged Partnership and the Surviving Partnership or (ii) entry of a final
and unappealable adjudication determining which party is entitled to
receive the Deposit, as applicable, at which time the Deposit shall be
distributed in accordance with such written instructions or adjudication.
Except to the extent of any dispute among them, ▇▇▇▇▇, the Merged
Partnership and the Surviving Partnership agree to act in good faith to
provide the Disbursing Agent with the instructions described in (i) above
in the event that the Agreement is terminated.
(c) In the event of a dispute among the Surviving Partnership ▇▇▇▇▇
and the Merged Partnership with respect to the Deposit, the Disbursing Agent
may deposit the Deposit with a court of proper jurisdiction and commence an
interpleader action. Upon notifying the Merged Partnership and the
Surviving Partnership of the commencement of such action, Disbursing Agent
shall be released from all liability with respect to the Deposit, except to
the extent of accounting for any moneys previously delivered by Disbursing
Agent out of escrow. Disbursing Agent shall not be liable to either the
Merged Partnership or the Surviving Partnership, other than for performance
of its duties under this Agreement or his gross negligence or intentional
wrongdoing. Disbursing Agent may rely upon the genuineness or authenticity
of any document tendered to it by either the Merged Partnership or the
Surviving Partnership, and shall be under no duty of independent inquiry
with respect to any acts or circumstances recited in such document. ▇▇▇▇▇,
the Merged Partnership and the Surviving Partnership shall indemnify,
defend and hold harmless Disbursing Agent from and against all cost, claims
or liabilities arising from the performance by Disbursing Agent of his
obligations under this Agreement, other than for his failure to comply
herewith, gross negligence or intentional wrongdoing.
(d) As used in this Section 9.16, the term "Deposit" shall refer to the
amount set forth at Section 9.16(a), together with all interest thereon.
The Deposit shall be held by the Disbursing Agent in one or more federally-
insured money market accounts acceptable to both the Merged Partnership and
the Surviving Partnership, or in short-term United States government
obligations having a maturity date which is acceptable to the General
Partner and the Surviving Partnership or in one or more interest-bearing
deposit accounts at a bank or other financial institution acceptable to the
General Partner and the Surviving Partnership. The Merged Partnership's
taxpayer identification number is ▇▇-▇▇▇▇▇▇▇; the Surviving Partnership's
taxpayer identification number is ▇▇-▇▇▇▇▇▇▇.
(e) Although Disbursing Agent is counsel for ▇▇▇▇▇ and the Merged
Partnership, the Disbursing Agent shall not be disqualified or prohibited
from representing Merged Partnership in connection with any matter arising
out of this Agreement by reason of its capacity as Disbursing Agent.
9.17 SURVIVAL.
(a) The representations, warranties, covenants and agreements of HME and the
Surviving Partnership contained in this Agreement will survive Closing (i)
indefinitely with respect to the warranties and representations in Sections
4.2(a) and 10.2(a), (ii) until 60 calendar days after the expiration of all
applicable statutes of limitation (including all periods of extension,
whether automatic or permissive) with respect to matters covered by Section
10.2(f), (iii) until the fifth anniversary of the Effective Date in the
case of all other representations and warranties and any covenant or
agreement to be performed in whole or part prior to Closing and (iv) with
respect to each other covenant or agreement contained in this Agreement,
for five years following the last date on which such covenant or agreement
is to be observed, performed or complied with, or, if no such date is
specified, indefinitely, except that any representation, warranty, covenant
or agreement that would otherwise terminate in accordance with clauses
(ii), (iii) or (iv) above will continue to survive if notice of claim shall
have been timely given on or prior to such termination date until such
claim has been satisfied or otherwise resolved. This Section shall not
limit in any way the survival and enforceability of any covenant or
agreement of the parties hereto which by its terms contemplates, or is of
such nature that it would require, performance, observance or compliance
after the Effective Date.
(b) The representations, warranties, covenants and agreements of ▇▇▇▇▇ and
the Merged Partnership contained in this Agreement will survive Closing for
a period of one hundred eighty (180) days, subject to the limitations on
liability provided in Section 9.14 hereof.
9.18 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original for all
purposes and all of which, when taken together, shall constitute one and
the same instrument.
ARTICLE X
ADDITIONAL REPRESENTATIONS AND WARRANTIES
BY THE SURVIVING PARTNERSHIP
10.1 DEFINITIONS. As used in this Article X, the following defined terms
shall be the meanings indicated below:
"AFFILIATE" means any Person that directly, or indirectly through one or
more intermediaries, controls or is controlled by or is under common
control with the Person specified. For purposes of this definition, control
of a Person means the power, direct or indirect, to direct or cause the
direction of the management and policies of such Person whether by Contract
or otherwise and, in any event and without limitation of the previous
sentence, any Person owning 10% or more of the voting securities of a
second Person shall be deemed to control that second Person.
"BENEFIT PLAN" means any Plan entered into, established, maintained,
contributed to or required to be contributed to, by HME or any Company
ERISA Affiliate providing benefits to employees, former employees,
independent contractors, former independent contractors of the Company or
any Company ERISA Affiliate, or their dependents or beneficiaries.
"CODE" means the Internal Revenue Code of 1986, as amended, and the rules
and regulations promulgated thereunder.
"COMMON STOCK" means shares of Common Stock of HME.
"COMPANY ERISA AFFILIATE" means an entity required (at any relevant time)
to be aggregated with HME under Sections 414(b), (c), (m) or (o) of the
Code or Section 4001 of ERISA.
"COMPANY FINANCIAL STATEMENTS" shall have the meaning set forth at Section
10.2(c) below.
"COMPANY SEC REPORTS" shall have the meaning set forth at Section 10.2(c)
below.
"CONTRACTS" means any agreement or obligation of any kind to which HME or
any of its Subsidiaries is a party or by which HME or any of its
Subsidiaries or any of their respective assets or properties is bound.
"GAAP" means generally accepted accounting principles, consistently applied
throughout the specified period and in the immediately prior comparable
period.
"PERSON" means any natural person, corporation, limited liability company,
general partnership, limited partnership, proprietorship, other business
organization, trust, union, association or Governmental or Regulatory
Authority.
"PLAN" means any employment, bonus, incentive compensation, deferred
compensation, pension, profit sharing, retirement, stock purchase, stock
option, stock ownership, stock appreciation rights, phantom stock, leave of
absence, layoff, vacation, day or dependent care, legal services,
cafeteria, life, health, medical, accident, disability worker's
compensation or other insurance, severance, separation, termination, change
of control or other benefit plan, agreement, practice, policy or
arrangement of any kind, whether written or oral, including, but not
limited to, any "employee benefit plan" within the meaning of Section 3(3)
of ERISA.
"SEC" means the Securities and Exchange Commission.
"SECURITIES" means the shares of Common Stock and the Units to be issued
and sold to partners in the Merged Partnership, including shares of Common
Stock issuable upon conversion of Units to be issued and sold, pursuant to
this Agreement and the Transaction Agreements.
"SUBSIDIARY" means with respect to any party, a corporation, partnership or
other organization, whether incorporated or unincorporated, of which more
than 50% of either the equity interests in, or the voting control of, such
corporation, partnership or other organization is, directly or indirectly
through Subsidiaries or otherwise, beneficially owned by such party.
Notwithstanding the foregoing, "Subsidiary," when used with respect to HME,
includes, without limitation, the Surviving Partnership.
"TRANSACTION AGREEMENTS" means all agreements and documents to be delivered
by HME and the Surviving Partnership in connection with the transactions
contemplated by this Agreement and the Transaction Agreements.
10.2 REPRESENTATIONS AND WARRANTIES. The Surviving Partnership and HME
hereby make the following representations and warranties to ▇▇▇▇▇ and the
Merged Partnership, their liability with respect to such representations
and warranties being joint and several:
(a) CAPITAL STOCK. The authorized capital stock of HME consists solely of
(i) 10 million shares of preferred stock, par value $.01 per share, none of
which are issued and outstanding, (ii) 10 million shares of excess stock,
par value $.01 per share, none of which is issued, and (iii) 30 million
shares of Common Stock, 7,166,458.397 of which are issued and outstanding
as of the date hereof and 4,189,824 of which are reserved for issuance upon
exercise of stock options or exchange of Units in the Surviving Partnership
as of the date hereof. SCHEDULE 10.2(A) hereto sets forth a true and
correct list of the number of Units of the Surviving Partnership that are
issued and outstanding and the holders thereof. All of the outstanding
shares of Common Stock have been duly authorized and validly issued and are
fully paid and nonassessable (except, in the case of Units, as contemplated
by the New York Revised Uniform Limited Partnership Act) and have been
offered and sold in compliance with all applicable laws including, without
limitation, federal and state securities laws and none of them was issued
in violation of any preemptive or other similar right. The Securities, when
issued and sold pursuant to this Agreement and the Transaction Agreements,
will be duly authorized and validly issued, fully paid and nonassessable
(except, in the case of Units, as contemplated by the New York Revised
Uniform Limited Partnership Act) and none of them will be issued in
violation of any preemptive or other similar right. Except as identified
on SCHEDULE 10.2(A) attached hereto, there is no outstanding option,
warrant or other right calling for the issuance of, and there is no
commitment, plan or arrangement to issue, any shares of capital stock of
HME or any security convertible into or exercisable or exchangeable for,
such capital stock. The Common Stock and the Securities conform in all
material respects to all statements relating thereto contained in the
Company SEC Reports.
(b) NO VIOLATIONS OR DEFAULTS. Neither HME nor any of its Subsidiaries is
in violation of its certificate or articles of incorporation, bylaws,
certificates of partnership, partnership agreements, limited liability
company agreements or other similar governing documents, as the case may
be, and none of HME or any of its Subsidiaries is in default in the
performance or observance of any obligation, agreement, covenant or
condition contained in any Contracts to which such entity is a party or by
which such entity may be bound, or to which any of its properties or assets
may be bound or subject, except for such violations or defaults that
individually or in the aggregate would not have a Material Adverse Effect.
(c) SEC REPORTS AND FINANCIAL STATEMENTS; PARTNERSHIP AGREEMENT. HME has
filed all forms, reports, schedules, registration statements, and other
documents required to be filed by it with the SEC since the date of its
formation (as such documents have since the time of their filing been
amended or supplemented, the "Company SEC Reports"). As of their
respective dates, the Company SEC Reports (i) compiled as to form in all
material respects with the requirements of the Securities Act, or the
Securities Exchange Act of 1934, as amended, as the case may be, and (ii)
did not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading. The audited consolidated financial statements and
the interim consolidated financial statements (including, in each case, the
notes, if any, thereto) included in the Company SEC Reports (the "Company
Financial Statements") (A) were compiled as to form in all material
respects with the published rules and regulations of the SEC with respect
thereto, (B) were prepared in accordance with GAAP applied on a consistent
basis during the periods involved (except as may be indicated therein or in
the notes thereto and except with respect to unaudited statements as
permitted by Forms 10-Q and 8-K of the SEC) and (C) fairly present in all
material respects (subject, in the case of the unaudited interim financial
statements, to normal, recurring year- end audit adjustments which are not
expected to be, individually or in the aggregate, materially adverse to HME
and its Subsidiaries taken as a whole) the consolidated financial position
of HME and its consolidated subsidiaries as at the respective dates thereof
and the consolidated results of their operations and cash flows for the
respective periods then ended. Except for the Subsidiaries identified on
SCHEDULE 10.2(C) attached hereto, each Subsidiary of HME is treated as a
consolidated subsidiary of HME in the Company Financial Statements for all
periods covered thereby.
(d) ABSENCE OF CHANGES
(1) Except for the execution and delivery of this Agreement and the
Transaction Agreements, and the transactions to take place pursuant hereto
and thereto on the Effective Date, since March 31, 1997 there has not been
any change, event or development having, or that could reasonably be
expected to have, individually or in the aggregate, a Material Adverse
Effect. Without limiting the foregoing, between March 31, 1997 and the
date hereof (A) except with respect to the activities described in the
press releases attached hereto as EXHIBIT I, HME and its Subsidiaries have
conducted their respective businesses only in the ordinary course
consistent with past practice and (B) neither HME nor any of its
Subsidiaries have taken any action which, if taken after the date hereof,
would constitute a breach of any provision of clause (2) of this Section
10.2(d).
(2) Prior to the Effective Date, HME and its Subsidiaries shall use all
commercially reasonable efforts to preserve intact in all material respects
their present business organizations and reputation, to keep available the
services of their key officers and employees, to maintain their assets and
properties in good working order and condition, ordinary wear and tear
excepted, to maintain insurance on their tangible assets and businesses in
at least such amounts and against such risks and losses as are currently in
effect, to preserve their relationships with customers and suppliers and
others having significant business dealings with them and to comply in all
material respects with any statute, law, rule, regulation or ordinance or
any judgment, decree, order, writ, permit or license, of any court,
tribunal, arbitrator, authority, agency, commission, official or other
instrumentality of the United States or any domestic, state, county, city
or other political subdivision, applicable to HME or any of its
Subsidiaries.
(e) ABSENCE OF UNDISCLOSED LIABILITIES. Except for matters reflected in the
consolidated balance sheet of HME as of March 31, 1997 (or the footnotes
thereto) included in the Company Financial Statements and the press
releases attached hereto as EXHIBIT I, neither HME nor any of its
Subsidiaries had at such date, or has incurred since that date, any
liabilities or obligations (whether absolute, accrued, contingent, fixed or
otherwise, or whether due or to become due) of any nature, except
liabilities or obligations (i) which were incurred in the ordinary course
of business consistent with past practice since such date, and (ii) which
have not had, and could not be reasonably expected to have, individually or
in the aggregate, a Material Adverse Effect.
(f) REIT QUALIFICATION. At all times since its taxable year ended December
31, 1996, HME has been, and upon each issuance of any of the Securities,
HME will continue to be, organized and operated in conformity with the
requirements for qualification as a real estate investment trust under the
Code, and its proposed method of operation will enable it to continue to
meet the requirements for taxation as a real estate investment trust under
the Code.
ARTICLE XI
OPTION TO CONTRIBUTE PARTNERSHIP INTERESTS
11.1 OPTION TO CONTRIBUTE PARTNERSHIP INTERESTS. Notwithstanding anything
to the contrary contained in this Agreement, provided that the General
Partner obtains the consent of the holders of eighty percent (80%) or more
of the Interests in the Merged Partnership to contribute their Interests in
the Merged Partnership to the Surviving Partnership, the General Partner
shall have the right to effect the Merger by such contributions of
Interests in the Merged Partnership rather than a merger of the Merged
Partnership into the Surviving Partnership. In such event, ▇▇▇▇▇, the
Merged Partnership and the Surviving Partnership shall enter into an
amendment to this Agreement to reflect the changes in the structure of the
transaction.
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
executed by a duly executed general partner as of the date first above
written.
PK PARTNERSHIP
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇, General Partner
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇
HOME PROPERTIES OF NEW YORK, L.P.
By:Home Properties of New York, Inc.
General Partner
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
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▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Chairman
For purposes of acknowledging and agreeing
to the provisions of Sections 1.4, 5.5 and
6.3(e)
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
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▇▇▇▇▇ ▇. ▇▇▇▇▇
JOINDER
Home Properties of New York, Inc. joins in this Agreement for the purpose
of making in its individual capacity, the same representations and
warranties as are made by the Surviving Partnership in Article X of this
Agreement.
HOME PROPERTIES OF NEW YORK, INC.
By:/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
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▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Chairman
SCHEDULE 3.13
RESERVE FUNDS CLAIMS PROCEDURE
PROCEDURES WITH RESPECT TO CLAIMS
(a)If any claim (a "Claim") is made by the Surviving Partnership for
payment out of the Reserve Amount of a Liabilities Claim or an Indemnity
Claim, the Surviving Partnership shall thereafter notify the General
Partner and the Disbursing Agent of such Claim. At such time as there is a
Final Determination (as hereinafter defined) with respect to a Claim, the
Surviving Partnership shall notify the Disbursing Agent (with a copy to the
General Partner) of such Final Determination. A Final Determination with
respect to a Claim shall occur when (1) the Surviving Partnership and the
General Partner agree in writing to a payment from a Reserve with respect
to a Claim and each so advises the Disbursing Agent, or (2) the arbitrator
determining the disposition of a Claim pursuant to Section (d) below
renders a final decision with respect to a Claim determining that a payment
is to be made from a Reserve to the Surviving Partnership or (3) provided
that the General Partner (on behalf of all of the former Partners of the
Merged Partnership) shall have been given a reasonable opportunity to
participate in the defense of such third-party claim throughout the course
of such third-party claim, the Claim is made on account of a judgment
rendered by a court of competent jurisdiction requiring, on a third-party's
claim that is an Indemnity Claim, a specified payment on account of such an
Indemnity Claim to the third-party claimant and such judgment has become
final and not subject to further appeal. Upon receipt of a Final
Determination, the Disbursing Agent shall pay the amount of the Claim as
set forth in the Final Determination to the Surviving Partnership.
(b)On each of 90 days from and after the Effective Time and 180 days from
and after the Effective Time, and thereafter, at any time and from time to
time, within 10 days after the written request of the General Partner, the
Surviving Partnership shall send a notice (the "Anniversary Notice") to the
Disbursing Agent and to the General Partner describing each then
outstanding Claim with respect to which a Final Determination has not
theretofore been made and specifying what the Surviving Partnership
believes, acting reasonably and in good faith, to be the aggregate amount
of damages that have been incurred theretofore or are likely to be incurred
thereafter as a result of or arising out of each such Claim (the "Damage
Amount").
(c)If the General Partner believes, acting reasonably and in good faith,
that the Surviving Partnership's estimate of the Damage Amount with respect
to one or more of the Claims as set forth in the Anniversary Notice is
unreasonable (a "Disputed Amount"), the General Partner shall send a notice
(the "Dispute Notice") to the Surviving Partnership and the Disbursing
Agent, within 10 days after receipt of the Anniversary Notice, specifying
the amount that the General Partner believes, acting reasonably and in good
faith, to be the proper Damage Amount with respect to any Claim described
in the Anniversary Notice. Upon the issuance of a Dispute Notice, the
General Partner and representatives of the Surviving Partnership shall
immediately meet and shall use all necessary diligence in a concerted, good
faith effort to resolve all Disputed Amounts within 10 days after issuance
of the Dispute Notice. If the General Partner and the Surviving
Partnership resolve such dispute within the 10-day period as aforesaid,
they shall jointly notify the Disbursing Agent of the agreed-upon Damage
Amount with respect to each Claim, and such joint notice shall constitute a
Final Determination with respect to the relevant Claims.
(d)If the General Partner and the Surviving Partnership do not so agree,
the determination of the Damage Amount with respect to all disputed Claims
shall be immediately submitted to prompt and binding arbitration before an
arbitrator appointed by the Philadelphia, Pennsylvania office of the
American Arbitration Association in accordance with its rules, and acting
in accordance with its rules. If any such Disputed Amount relates to a
third-party claim that is then in litigation or is otherwise unresolved,
the standard to be applied by the arbitrator in determining the Damage
Amount shall be the aggregate amount of damages that have been or are
likely thereafter to be incurred by the Surviving Partnership, including
the Surviving Partnerships' attorneys' fees, court costs and other costs of
defense, arising out of such claim. The award of the arbitrator shall be
communicated to the parties and the Disbursing Agent and shall constitute a
Final Determination, which shall be final, binding and not subject to
appeal, with respect to all the Claims that are the subject of such award,
notwithstanding that an underlying third-party claim still remains
unresolved or is subsequently resolved in a manner inconsistent with the
arbitrator's award.
(e)If the Disbursing Agent in his capacity as such is threatened with
litigation or is sued, he shall have the right to interplead all interested
parties in any court of competent jurisdiction and to deposit the Reserves
(or any portion thereof) with the clerk of that court.
(f)The Disbursing Agent shall not be liable to either the General Partner,
the former Partners of the Merged Partnership or the Surviving
Partnership, other than for performance of his duties under the Reserves
Escrow agreement or his gross negligence or intentional wrongdoing. The
Disbursing Agent may rely upon the genuineness or authenticity of any
document tendered to him by either the General Partner or the Surviving
Partnership, and shall be under no duty of independent inquiry with respect
to any acts or circumstances recited in such document.
(g)As used in this Schedule 3.13, the term "Reserves" shall refer to the
respective amounts set forth at the beginning of this Section 3.13,
together with all interest thereon. The Reserves, which are held in Cash,
shall be held by the Disbursing Agent in one or more federally- insured
money market accounts acceptable to both the General Partner and the
Surviving Partnership, or in short-term United States government
obligations having a maturity date which is acceptable to the General
Partner and the Surviving Partnership or in one or more interest-bearing
deposit accounts at a bank or other financial institution acceptable to the
General Partner and the Surviving Partnership.
(h)All Claims must be made within 180 days of the Effective Time.
(i)No Claim shall be made, other than Liabilities Claims to be paid from
the Liabilities Reserve, until total Claims exceed $25,000.00.