EXHIBIT 10.2
CONTRIBUTION AGREEMENT
This Contribution Agreement ("Agreement"), made as of the 30th day of April,
2001 by and among
HOME PROPERTIES OF NEW YORK, L.P., a New York limited partnership, having its
principal office at ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ("Home
Properties"); and
LINCOLNIA LIMITED PARTNERSHIP, a Virginia limited partnership (the
"Partnership"), having its principal office c/o ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇.
W I T N E S S E T H:
WHEREAS, the Partnership owns a certain apartment complex and adjacent
land located in the State of Virginia, all as more particularly described on
Exhibit A;
WHEREAS, the Partnership desires to cause each of its partners (the
"Partners") to contribute each of the partnership interests in the Partnership
(the "Interests") to Home Properties in exchange for limited partnership
interests in Home Properties (the "Units") or cash, to be allocated among the
Partners in accordance with Schedule 1 attached hereto;
WHEREAS, Home Properties desires to obtain 100% of the Interests in the
Partnership and thus a 100% of the interests in the entity that owns fee simple
title to the Property (as hereinafter defined), together with the related Other
Items (as hereinafter defined), in exchange for Units or cash, all as more
particularly described herein;
NOW, THEREFORE, in consideration, of the mutual covenants herein
contained, and for other good and valuable consideration, the receipt and
sufficiency whereof being hereby acknowledged, the parties hereby agree as
follows:
1. REAL PROPERTY DESCRIPTION. The Real Property owned by the
Partnership consists of an apartment complex commonly known as Virginia Village
Apartments, which includes 344 apartments (the "Project"), located in Fairfax
Co., Virginia, on land more particularly described on Exhibit A attached hereto,
together and including all buildings and other improvements thereon, including
but not limited to, the 344 apartment units and all rights in and to any and all
streets, roads, highways, alleys, driveways, easements and rights of way
appurtenant thereto (the foregoing are hereafter collectively referred to as the
"Property").
2. OTHER ITEMS. The transfer, exchange, conveyance and
acquisition of the Interests shall include all of the right, title and interest
of the Partnership in and to the following items now or at the Closing
(hereinafter defined) in or on the Property and owned by the Partnership:
A. all heating, air-conditioning, plumbing and lighting fixtures,
B. ranges, refrigerators and disposals (one of each for each
apartment unit),
C. water heaters,
D. any and all pools and pool equipment, bathroom fixtures,
exhaust fans, hoods, signs, screens,
maintenance building, fences, cabinets, mirrors, shelving,
mail boxes, office furniture and
equipment, including but not limited to computers, and any
and all related equipment in connection with the Property,
E. any fixtures appurtenant to the Property and any other
furniture or equipment used in connection
with the operation and maintenance of the Property, including
any vehicles used in connection
with the operation and maintenance of the Property,
F. all tenant security deposits (and interest thereon if required
by law or contract to be earned
thereon) (hereinafter with the items listed in A through E
above, collectively, the "Other Items").
At Closing, the Other Items will be free and clear of all liens and
encumbrances, subject only to the Existing Loan and Permitted Exceptions (as
each such terms are hereinafter defined).
Notwithstanding anything set forth herein to the contrary, the
transfer, exchange, conveyance and acquisition of the Interests shall
specifically exclude any right, title or interest of the Partnership in or to:
(i) any tax, insurance or other escrows held by any Existing Lender (hereinafter
defined) ("Existing Loan Escrows") and (ii) any working capital, capital
reserves or any other cash accounts held or maintained by the Partnership (other
than tenant security deposits described in subparagraph F. hereinabove) (the
"Excluded Cash"). Subject to the obligation to establish and fund the Reserve
Amount (hereinafter defined), on or before the Closing, the Excluded Cash shall
be transferred by the Partnership to its General Partner (hereinafter defined)
to be held for distribution to the Partners. The Partnership shall receive a
credit in the amount of the Existing Loan Escrows at Closing in accordance with
Paragraph 7(I) below.
3. EXCHANGE.
A. Promptly after the expiration of the Due Diligence Period (if
this Agreement has not been previously terminated), Home
Properties shall make an offer (the "Offer") to each of the
Partners to exchange the Partners' Interests in the
Partnership for: (i) cash or (ii) Units as
each such Partner may, subject to Paragraph 3.C., elect to
receive, and having a value, in each
instance, equal to the Exchange Price (hereinafter defined).
The Partnership agrees that it will
use its reasonable efforts to solicit acceptance from the
Partners of the Offer, whether in exchange for cash or Units.
Upon and subject to the terms and conditions set forth in this
Agreement, Home Properties agrees that on the Closing Date
(as hereinafter defined), it shall
accept an assignment of the Interests from the Partners and
will issue Units or pay cash, to the Partners, as each such
Partner shall have elected, and as more particularly provided
herein.
B. Subject to the satisfaction or waiver of the closing
conditions to the Partnership's obligations to close the
transaction contemplated by this Agreement ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ (the
"General Partner") hereby agrees that he will accept the Offer
with respect to all of its Interests.
4. CONSIDERATION AND MANNER OF PAYMENT.
A. The aggregate consideration payable by Home Properties for
100% of the Interests shall be Twenty-Six Million Seven
Hundred Fifty-Six Thousand Three Hundred Thirty-Three and
No/100 Dollars ($26,756,333) (the "Consideration").
B. On the Closing Date, each of the Partners who has accepted the
Offer shall assign their Interests to Home Properties in
exchange for the Exchange Price. As used herein, the term
"Exchange Price" means the Consideration less the principal
amount on the Closing Date of the Existing Loan (as
hereinafter defined), subject to closing adjustments and
closing costs,, multiplied by the percentage interest of the
relevant Partner's Interest in the Partnership as set forth on
Schedule 1.
C. At Closing, the General Partner shall establish from
Partnership funds otherwise distributable
to the Partners a "Reserve Amount". As used herein, the term
"Reserve Amount" means the sum of:
(a) an amount equal to the current accrued and unpaid monetary
liabilities of the Partnership on the Closing Date (other than
the principal amount of the Existing Loan), together with such
other amounts as the General Partner may reasonably determine
are necessary or prudent to retain
to satisfy any Partnership Claims (hereinafter defined) (the
"Liabilities Reserve") and (b) the
sum of $100,000 (the "Indemnity Reserve"). The Reserve Amount
shall be held and disbursed by the Disbursing Agent (as
defined in Paragraph D of this Section 4) as described in
Paragraph D of this Section 4 and in Paragraphs A and B of
Section 5. The Reserve Amount shall initially be
used to pay all amounts required to satisfy the accrued and
unpaid monetary liabilities of the Partnership on the Closing
Date (other than the principal amount of the Existing Loan)
and any liabilities of or claims against the Partnership
accrued before the Closing Date (other than the principal
amount of the Existing Loan) that Home Properties has not
specifically agreed to assume as provided herein ("Liabilities
Claims") and any amounts paid or subject to claims of
Home Properties by reason of a material breach or material
misrepresentation of any representations, warranties,
covenants or agreements of the Partnership which survive
Closing (but only during the period of such survival)
("Indemnity Claims", together with Liabilities
Claims herein referred to collectively as "Partnership
Claims"). Notwithstanding the above, if the Partnership can
establish to Home Properties' reasonable satisfaction that
after Closing, the General Partner or its agents will have
retained sufficient Partnership funds to pay all
Liabilities Claims, then no Liabilities Reserve will be
required to be established.
D. At Closing, the General Partner shall deliver in immediately
available funds from monies otherwise distributable to the
partners of the Partnership (but not from proceeds of
Consideration) to the Title Company as "Disbursing Agent" the
Reserve Amount. The Reserve Amount shall be held and disbursed
pursuant to the terms of an escrow agreement that shall be in
form and substance substantially similar to that attached
hereto as Exhibit B.
E. Home Properties shall pay the Partners who are Non-Accredited
Investors or Accredited Cash
Payees their Exchange Price in cash at the Closing.
F. Partners who are accredited under applicable securities laws
and who have elected to receive Units in exchange for their
Interests (each a "Unit Partner" and collectively the "Unit
Partners") shall be paid their Exchange Price by the issuance
of Units. The number of Units to be issued to each Unit
Partner shall be the Exchange Price divided by the "Designated
Value" of a Unit. The Designated Value of a Unit shall be
equal to $28.50.
G. The initial distribution payable with respect to Units issued
hereunder shall be made on the date on which HME pays the
dividend to the holders of its common stock that relates to
the earnings for the calendar quarter in which the Units were
issued and shall be pro-rated such that the Unit Partners
shall receive a pro-rata distribution for the period from the
date on which the Units were issued to and including the last
day of the calendar quarter in which the Units were issued.
H. Subject to the terms of a Registration Rights and Lock-Up
Agreement, in the form of Exhibit C
attached hereto, to be dated as of the Closing Date and
entered into between HME and each Unit
Partner, and to the terms of that certain Second Amended and
Restated Agreement of Limited Partnership of the Operating
Partnership, as amended (the "Operating Partnership
Agreement"), the Units will be convertible into HME common
stock, on a one-to-one basis, after the elapse of
one (1) year from and after the Closing Date (the "Lock-Up
Period"), during which time the Unit
Partners will be restricted, to the extent provided in the
Registration Rights and Lock-Up Agreement and the Operating
Partnership Agreement, from converting, or transferring, any
of the Units. From and after the expiration of the Lock-Up
Period, the Unit Partners shall have all of
the transfer, exchange and conversion rights with regard to
the Units as are set forth in the
Operating Partnership Agreement and the Registration Rights
and Lock-Up Agreement.
I. Upon execution of this Agreement by all parties, Home
Properties shall deposit the sum of
$100,000 with Commercial Settlements (the "Title Company") as
a good faith deposit hereunder
("Initial Deposit"). Upon the expiration of the Due Diligence
Period (as hereinafter defined) and provided Home Properties
has not exercised its right to terminate this Agreement, Home
Properties shall deposit the additional sum of $400,000 with
the Title Company (the "Additional Deposit"). (The Initial
Deposit and, if made, the Additional Deposit, shall be
(collectively) referred to hereunder as the "Deposit.")
The Title Company shall invest the Deposit in an FDIC
or FSLIC insured money market account and shall be held and
disbursed as provided in the Escrow Agreement attached hereto
as Exhibit D. Any interest earned on such investment shall be
reported to Home Properties Federal tax identification
number. The Deposit shall be refunded to Home Properties
at Closing in the event Home Properties consummates the
transaction contemplated hereby, upon termination of this
Agreement by Home Properties expressly permitted hereunder,
or upon the Partnership's default and resulting termination
of this Agreement by Home Properties expressly permitted
hereunder. In the event Home Properties fails to acquire the
Interests other than by reason of a termination by Home
Properties expressly permitted hereunder or the
Partnership's default, the Deposit shall be forfeited to the
Partnership as liquidated damages.
Any and all sums deposited hereunder shall be applied or
refunded as provided herein. (All references to "Deposit"
shall be deemed to include all accrued interest thereon).
5. RELEASE OF RESERVES.
A. On the 180th day after the Closing Date, the parties hereto
shall jointly instruct the Disbursing Agent to disburse to the
General Partner that portion of the Reserve Amount that has
not been paid, disbursed or otherwise required to be paid on
account of Liability Claims or Indemnity Claims. The General
Partner may then elect: (i) to continue to hold such disbursed
amounts for up to 360 days after the Closing Date, in trust
for the benefit of the Partnership and the Partners, as a fund
against which to pay unanticipated Partnership Claims (the
"Contingency Reserve"); or (ii) to distribute such sums pro
rata to the Partners.
B. At any time, and from time to time, after the 180th day after
the Closing Date that there is a Final Determination (as
defined in Exhibit C) that any remaining portion, if any,
of the Reserve Amount is no longer subject to Liability Claims
or Indemnity Claims, the parties hereto shall
instruct the Disbursing Agent to distribute such remaining
portion of the Reserve Amount to the General Partner. The
General Partner may then elect: (i) to continue to hold such
disbursed amounts for up to 360 days after the Closing Date,
in trust for the benefit of the Partners, as
a Contingency Reserve; or (ii) to distribute such sums pro
rata to the Partners in accordance
with their percentage interests.
C. Not later than 360 days after the Closing Date (provided that
there have been no unanticipated Partnership Claims), the
General Partner shall distribute any balance remaining in the
Contingency Reserve pro rata to the Partners in accordance
with their percentage interests. In the event that at the end
of the 360 day period following Closing there are
unanticipated Partnership Claims pending or asserted, or the
General Partner has reason to believe that such
unanticipated Partnership Claims may be asserted, the General
Partner may continue to hold the Contingency Reserve until
such time as the General Partner deems prudent, after which
time any undisbursed amount remaining in the Contingency
Reserve shall be disbursed by the General Partner pro rata to
the Partners in accordance with their percentage interests.
6. EXISTING LOAN. Home Properties acknowledges that the Property is
currently subject to mortgage financing having a principal balance as of April
1, 2001 of approximately $9,646,333 (the "Existing Loan") and held by First
Union National Bank, Master Servicer for ▇▇▇▇▇▇▇ ▇▇▇▇▇ Mortgage Investors, Inc.,
Mortgage Pass-Through Certificates, Series 1998-C2 Real Estate Mortgage
Investment Conduit (REMIC) Trust (the "Existing Lender"). Subject to the consent
of the Existing Lender, Home Properties agrees that at the time it acquires the
Interests, the Property will remain subject to the Existing Loan. The costs
involved in connection with obtaining the Existing Lender's consent to that
transaction (the "Assumption"), including up to a one percent (1%) assumption
fee, shall be paid by Home Properties.
7. ADJUSTMENTS AT CLOSING. The following shall be adjusted and prorated
between Home Properties and the Partnership at Closing as if Home Properties was
the owner of the Property as of the Closing Date (the Closing Date being a day
of income and expense to Home Properties). All such adjustments and prorations
between Home Properties and the Partnership shall be settled in cash and shall
not increase or decrease the Consideration, as the case may be.
A. All ad valorem real estate and personal property taxes with
respect to the Property for the calendar year or other
applicable tax period in which the Closing is consummated. If
the amount of such taxes is not known at Closing, proration of
such taxes will be made upon the basis of the most recently
ascertainable taxes. In such event, Home Properties and the
General Partner on behalf of the former partners of the
Partnership agree to re-prorate/adjust the taxes between
themselves after the Closing, based upon the full amount of
the actual taxes for the Property when the actual amount of
such taxes is known.
B. Water charges.
C. Sewer charges.
D. Fuel, electricity and other utilities.
E. All tenant security deposits (and interest thereon if required
by law or contract to be earned thereon) shall remain in the
Partnership whose Interests are conveyed to Home Properties at
Closing. At Closing, Home Properties shall assume the
Partnership's obligations related to tenant security deposits
to the extent they remain part of the Other Items.
Alternatively, in lieu of the assumption of the security
deposit accounts at Closing, Home Properties may elect to
receive a credit at Closing of an amount equal to the
aggregate amount of the security deposits with interest as
required by law. Home Properties agrees that it will
indemnify, defend, hold the Partnership harmless and will
indemnify the Partnership against all demands, claims, losses,
costs, damages, expenses or liabilities, including, but not
limited to, attorneys' fees, arising out of or in connection
with the transfer or disposition of such security deposits if
and to the extent such demands, claims, losses, costs,
damages, expenses or liabilities relate to the
period after the Closing Date.
F. Charges under the service contracts assumed by Home
Properties, including a pro rata credit to Home Properties for
any signing bonus or other sum paid by a service company in
connection with any service or laundry contract.
G. Laundry income.
H. Any other charges incurred with respect to the Property which
the Partnership or the Partners are obligated to pay.
I. Accrued and unpaid interest on the Existing Loan and reserves
and escrows held in connection with the Existing Loan.
J. Rents.
(1) All rent payments collected as of the Closing Date
for the month of Closing shall be prorated as between
the parties as of the Closing Date.
(2) All rent collected after Closing for any period prior
to Closing shall belong to the Partnership and, if
paid to Home Properties, Home Properties shall
promptly send such rent to the General Partner for
distribution to the Partners.
(3) All rent collected by the Partnership prior to the
Closing for rental periods subsequent to Closing
shall be paid to Home Properties at Closing.
(4) All rent collected by Partnership or Home Properties
for rental periods after the Closing shall belong to
Home Properties and, if paid to the Partnership, the
Partnership shall promptly send such rent to Home
Properties.
(5) Home Properties will make reasonable efforts to
collect all rents due for the month of the Closing
and any past due rents, but shall not be required to
bring suit to collect such rents. Any rent received
from any tenant after Closing shall first be applied
to pay any rent owing by that tenant for the month of
the Closing and then to pay rent owing for the then
current month and thereafter in reverse order of
delinquency. Any rents due for the month of Closing
(and accruing prior to the Closing Date) and past due
rents not collected by Home Properties within the
period of 180 days following the Closing Date shall
be assigned to the General Partner without recourse
who may pursue such remedies for collection thereof
for its own account.
Any error in the calculation of adjustments shall be corrected
subsequent to Closing with appropriate credits to be given based upon corrected
adjustments, provided, however, that the adjustments (except if errors are
caused by misrepresentations and except for actual taxes) shall be final upon
expiration of ninety (90) days after Closing.
8. COSTS. Home Properties shall pay all recording fees, its attorneys'
fees, any applicable recordation taxes owed by the grantee, if any, the costs of
obtaining any title commitment and title policy, one-half of the closing charges
of the Title Company, and all other incidental costs and expenses, if any,
incurred in connection with closing this transaction customarily paid for by the
transferee of similar property. The Partnership shall pay any Virginia grantor's
tax, if any, attorneys' fees incurred by it in connection with this transaction,
one-half of the closing charges of the Title Company and all other incidental
costs and expenses, if any, incurred in connection with closing this transaction
customarily paid for by the transferor of similar property.
9. EVIDENCE OF TITLE. The Partnership shall furnish to Home Properties,
at the Partnership's expense, and within ten (10) days from the execution
hereof, a copy of the most recent title policy relating to the Property along
with the most recent instrument survey of the Property, in each case, to the
extent in its possession or control. At the time of the Closing, as a condition
to Home Properties' obligation to close, the Property shall be subject only to:
(i) all zoning and building laws, ordinances, resolutions and regulations of all
governmental authorities having jurisdiction which affect the Property and the
use and improvement thereof; (ii) all leases identified in the Rent Roll
(hereinafter defined); (iii) ad valorem real estate taxes for the current year
and subsequent years which are not yet due and payable; and (iv) easements,
covenants, restrictions, agreements and/or reservations of record, so long as
they do not interfere with the use of the Property as a rental apartment
complex, if any, (v) private, public and utility easements and roads and
highways, if any, (vi) the documents evidencing or securing the Existing Loan;
and (vii) and any other exceptions not objected to or waived by Home Properties
under Section 12 herein (collectively, the "Permitted Exceptions").
10. CLOSING DOCUMENTS.
A. At the time of Closing, the Partnership shall deliver to Home
Properties the following:
(1) Properly executed Assignments to Home Properties of
no less than 100% of the Interests;
(2) A current rent roll ("Rent Roll") certified, as of
the date of Closing, which shall include a correct
list of all tenants, all rental obligations of each
tenant with respect to the Property and all security
deposits along with a copy of all leases shown on the
Rent Roll;
(3) A certificate of title and any other documentation
necessary to transfer title to any vehicles, if any;
(4) Copies of the personnel files of all employees
employed at the Property by the
Partnership, if any, and remaining in the employment
of Home Properties after the Closing;
(5) An executed original of the Registration Rights and
Lock-Up Agreement in the form attached hereto as
Exhibit C;
(6) An estoppel certificate from the Existing Lender
confirming that there is no default under the
Existing Loan, and that there exists no event that
with the passage of time or the giving of notice, or
both, would constitute such a default;
(7) Any and all affidavits, certificates or other
documents reasonably and customarily required by the
Title Company in order to cause it to issue the title
policy regarding the Property in the form and
condition required by this Agreement and any
affidavits as may be necessary in order for Home
Properties to obtain a non-imputation endorsement;
(8) All keys to the Property in the possession of the
Partnership, which shall remain at the rental office
and need not be brought to Closing;
(9) A certified copy of the Certificate of Limited
Partnership of the Partnership, and such other
evidence of the Partnership's power and authority as
the Title Company may reasonably request;
(10) A signed counterpart of the Escrow Agreement-Reserve
Amount in form substantially similar to Exhibit B;
and,
(11) A termination of any management agreement affecting
the Property, signed by the manager, effective as of
(or prior to) the Closing Date;
(12) Any additional funds, documents and or instruments as
may be necessary for the proper performance by the
Partnership of its obligations contemplated by this
Agreement.
B. At the time of Closing, Home Properties shall deliver to the
Partnership the following:
(1) Evidence of organization, existence and authority of
Home Properties and HME and the authority of each
person executing documents on behalf of each,
reasonably satisfactory to the Partnership;
(2) Such cash as may be required of Home Properties to
pay closing costs or charges properly allocable to
Home Properties;
(3) An Amendment to the Home Properties' Partnership
Agreement in the form necessary to admit the Unit
Partners as limited partners of Home Properties and
evidencing the issuance of the Units required
pursuant to this Agreement;
(4) Subject to the limitation set forth in Section 3.C.
herein, cash in an amount sufficient to pay Partners
required to be paid, or electing to be paid their
share of the Exchange Value in cash;
(5) An executed original of the Registration Rights and
Lock-Up Agreement in the form attached hereto as
Exhibit C; and,
(6) Any additional funds, documents and or instruments as
may be necessary for the proper performance by Home
Properties of its obligations contemplated by this
Agreement.
11. INTENTIONALLY OMITTED.
12. TITLE; TITLE EXAMINATION; OBJECTIONS TO TITLE. Home Properties
has received Commonwealth Land Title Insurance Company Title Commitment No.
01-0064 dated January 16, 2001 ("Title Commitment"). Home Properties
accepts the exceptions listed in Schedule B, Section 2 of the Title Commitment
as Permitted Exceptions hereunder.
13. CLOSING DATE. Unless this Agreement is terminated as provided
herein, the closing ("Closing") shall occur upon the later of: (a) May 31, 2001;
and (b) ten (10) days after receipt of the consent of the Existing Lender to the
Assumption ("Closing Date"). In the event that the consent of the Existing
Lender is not received on or before July 13, 2001, either Home Properties or the
Partnership may terminate this Contribution Agreement in which event this
Agreement shall be null and void and neither party shall have any further rights
or obligations under this Agreement, other than the obligations expressly
surviving any such termination, and Home Properties shall be entitled to a
return of the Deposit.
14. POSSESSION. Home Properties shall have possession and
occupancy of the Property from and after the Closing Date subject only to the
Permitted Exceptions and to the rights of tenants shown on the Rent Roll
delivered to Home Properties at Closing.
15. BROKER'S COMMISSION. Home Properties and the Partnership each
represent to the other that there are no fees or commissions due as a result of
their employment of any Broker in connection with the transactions described
herein. Home Properties agrees to pay a consulting fee of $150,000 to ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇ Realty, Inc. at the time of, and in conjunction with, Closing pursuant to
this Agreement. Home Properties and the Partnership each agree to indemnify the
other for any and all claims and expenses, including legal fees, if any other
fees or commission is determined to be due by reason of the employment of any
broker by the indemnifying party. The representations and provisions of this
Section 15 shall survive indefinitely any termination or Closing of this
Agreement.
16. RISK OF LOSS. Risk of loss resulting from any eminent domain
proceeding which is commenced prior to Closing, and risk of loss to the Property
due to fire or any other casualty prior to Closing shall remain with the
Partnership. If prior to the Closing the Property or any portion thereof is
destroyed or damaged in excess of $250,000, or if the Property or any portion
thereof shall is subjected to a bona fide threat of condemnation or becomes the
subject of any proceedings, judicial, administrative or otherwise, with respect
to the taking by eminent domain or condemnation, the Partnership shall notify
Home Properties thereof within a reasonable time after receipt of actual notice
thereof by the Partnership, but in any event prior to Closing, and, at its
option, Home Properties may, within 5 days after receipt of such notice, elect
to cancel this Agreement in which event this Agreement shall terminate and the
Deposit shall be returned to Home Properties. If the Closing Date is within the
aforesaid 5-day period, then Closing shall be extended to the next business day
following the end of said 5-day period. If no such election is made, and in any
event if the destruction or damage is not in excess of $250,000, this Agreement
shall remain in full force and effect and the contribution contemplated herein,
less any interest taken by eminent domain or condemnation, shall be effected
with no further adjustment, and upon the Closing of this contribution, the
Partnership shall assign, transfer and set over to Home Properties all of the
right, title and interest of the Partnership in and to any awards that have been
or that may thereafter be made for such taking, and the Partnership shall
assign, transfer and set over to Home Properties any insurance proceeds that may
have been or that may thereafter be made for such damage or destruction giving
Home Properties a credit at Closing for any deductible under such policies. The
Partnership hereby agrees that it shall keep all insurance policies presently
existing which relate to the Property in effect through the Closing Date.
17. CONDITIONS PRECEDENT TO HOME PROPERTIES' OBLIGATION TO CLOSE.
A. It shall be a condition to Home Properties' obligation to
consummate the Closing that there are
at Closing 344 apartment units in rentable condition and with
respect to all of which the
Partnership has received no notice from any governmental
authority or agency having jurisdiction
over the Partnership, the Property and the Other Items stating
that the Partnership, the
Property or the Other Items are in violation of any federal,
state, county or local laws,
ordinances, rules and regulations. In the event that the
Partnership has received any such
notice, then at its election, the Partnership shall, for up to
sixty (60) days after the receipt
of such notice, have the right, but not the obligation, to
cure any violation set forth therein
and the Closing Date shall be extended to that date which is
five days after the violation has
been cured, but such extension is not to be for more than 65
days. If the Partnership fails to
notify Home Properties that it has elected to cure any such
violation within 10 days of the
receipt of any such notice, then the Partnership shall be
deemed to have elected not to cure any
such violation.
B. It shall be a condition to Home Properties' obligation to
consummate the Closing that Home
Properties has not exercised its right to terminate this
Agreement as provided herein.
C. It shall be a condition to Home Properties' obligation to
consummate the Closing that on the Closing Date the Title
Company is prepared to issue a title policy insuring the
Partnership's fee interest in the Property in the amount of
the Consideration subject only to the Permitted Exceptions.
D. It shall be a condition to Home Properties' obligation to
close that, as at the Closing Date, the Existing Loan shall be
in full force and effect and no default or right to accelerate
shall be occurring under the Existing Loan.
E. It shall be a condition to Home Properties' obligation to
close that the General Partner shall have executed an
agreement whereby it agrees that it will be responsible for
making all final distributions to the former Partners of the
Partnership from: (i) any amounts remaining in the Reserve
Amount and/or Contingency Account (as the case may be) at the
time of expiration of such Accounts; and (ii) and from any
other Partnership funds that the General Partner holds, and
shall indemnify Home Properties for all claims relating
thereto.
F. The Existing Lender shall have consented to or approved the
transfer of interests in the Partnership to Home Properties
and the Existing Lender's counsel shall have prepared the
necessary assumption documents and shall otherwise be ready to
close.
It is understood that the conditions set forth Paragraphs A through F
in this Section 17 are for Home Properties' benefit and may be waived by Home
Properties at any time. If any of the above conditions are not satisfied or
waived by Home Properties, Home Properties shall have the right to terminate
this Agreement by written notice to the Partnership. In the event of such a
termination, this Agreement shall be null and void and neither party shall have
any further rights or obligations under this Agreement, other than the
obligations expressly surviving any such termination, and Home Properties shall
have the right to the return of its Deposit.
18. CONDITIONS TO THE PARTIES' OBLIGATIONS TO CLOSE. In addition
to all other conditions set forth herein, the obligation of Home Properties, on
the one hand, and Partnership, on the other hand, to consummate the
Closing contemplated hereunder shall be contingent upon the following:
A. The other party's representations and warranties contained
herein shall be true and correct as of the date of this Agreement and the
Closing Date.
B. As of the Closing Date, the other party shall have performed
its obligations hereunder and all deliveries to be made at Closing have been
tendered;
C. There shall exist no pending or threatened actions, suits,
arbitrations, claims, attachments, proceedings, assignments
for the benefit of creditors, insolvency, bankruptcy,
reorganization or other proceedings, against the other party
that would materially and adversely affect the other party's
ability to perform its obligations under this Agreement;
D. There shall exist no pending or threatened action, suit or
proceeding with respect to the other party before or by any
court or administrative agency which seeks to restrain or
prohibit, or to obtain damages or a discovery order with
respect to, this Agreement or the consummation of the
transactions contemplated hereby;
E. Partners owning not less than 100% of the Partnership
Interests shall have agreed in writing on or before the
Closing Date to exchange their Interests in the Partnership
for cash or Units, and assignments for such interests shall
have been received by Closing.
F. All of the provisions of the partnership agreement of the
Partnership shall have been complied with or properly waived
by the necessary parties in order for Home Properties to
acquire the Interests and be substituted as a partner of the
Partnership.
G. The Existing Lender shall have consented to or approved the
transfer of interests in the Partnership to Home Properties
and the Existing Lender's counsel shall have prepared the
necessary assumption documents and shall otherwise be ready to
close.
So long as a party is not in default hereunder, if any condition to such party's
obligation to proceed with the Closing hereunder has not been satisfied as of
the Closing Date, such party may, in its sole discretion, (i) terminate the
Agreement by delivering written notice of termination to the other party on or
before the Closing Date specifying the unsatisfied condition entitling the
non-defaulting party to terminate this Agreement and provided the other party
fails to satisfy the condition specified in the notice within five days after
receipt of the notice; (ii) elect to extend the Closing for up to 60 days until
such condition is satisfied, and (iii) elect to consummate the transaction,
notwithstanding the non-satisfaction of such condition, in which event such
party shall be deemed to have waived any such condition. In the event such party
elects to close, notwithstanding the non-satisfaction of such condition, there
shall be no liability on the part of any other party hereto for breaches of
representations and warranties of which the party electing to close had actual
knowledge at the Closing. Notwithstanding the foregoing, the failure of a
condition due to the breach of a party shall not relieve such breaching party
from any liability it would otherwise have hereunder. So long as Home Properties
is not in default hereunder, upon termination of this Agreement as provided
above, Home Properties shall have the right to the return of its Deposit.
19. REPRESENTATIONS AND WARRANTIES OF THE PARTNERSHIP. The
Partnership makes the following representations and warranties to Home
Properties as of the date hereof and as of Closing:
A. To the best of the Partnership's knowledge, the leases (the
"Leases") listed on the rent roll attached hereto as Exhibit E
and the contracts listed on the attached Exhibit F (the
"Contracts") comprise all of the leases and rights to the
property and all of the contracts to which Home Properties
will be subject on the Closing Date.
B. All of the Partnership's obligations under the Leases and
Contracts are fully performed and, to the best of the
Partnership's knowledge, except as set forth on the attached
Exhibits and except for delinquencies in the payment of rent
for the current month, there is no default under any of the
Leases and Contracts by any party thereto or no event which,
with the giving of notice or passage of time, or both, would
constitute a default thereunder. There are no other security
deposits (the "Security Deposits") except as identified on
Exhibit E.
C. Other than to the Existing Lender, the Partnership has made
no prior assignment or conveyance of
the Leases, Security Deposits and Contracts and the
Partnership is the valid holder of
landlord's interest in the Leases.
D. To the best of the Partnership's knowledge, there is no
litigation, proceeding or investigation pending, or to the
knowledge of the Partnership threatened, against or affecting
the Partnership that might affect or relate to the validity of
this Agreement, any action taken or to be taken pursuant
hereto, or the Property or the Other Items or any part or the
operation thereof, whether or not fully covered by insurance.
E. To the best of the Partnership's knowledge, there are no
uncorrected written notices from any
governmental authority or agency having jurisdiction over the
Partnership or the Property that
the Partnership, the Property or the Other Items are in
violation of, any law, ordinance, rule,
regulation or code or condition in any approval or permit
pursuant thereto (including without
limitation, any zoning, sign, environmental, labor, safety,
health or price or wage control,
ordinance, rule, regulation or order of) applicable to the
ownership, development, operation or
maintenance of the Property or the Other Items. Promptly upon
receipt of any such notice, the
Partnership shall provide Home Properties with a copy.
F. The Partnership will be at Closing a limited partnership, duly
organized, validly existing, and in good standing under the
laws of the State of Virginia, and, subject to consent of the
Partners and the consent of the Existing Lender, the
Partnership has full power and authority to enter into, and to
fully perform and comply with the terms of this Agreement and
to own, lease and operate its properties and to carry on its
business as it is now being conducted.
G. Subject to consent of the Partners and the consent of Existing
Lender, the execution and delivery of this Agreement, and its
performance by the Partnership, will not conflict with, or
result in the breach of, any contract, agreement, law, rule or
regulation to which the Partnership is a party, or by which
the Partnership is bound.
H. Subject to consent of the Partners and consent of Existing
Lender, to the best knowledge of the Partnership this
Agreement is valid and enforceable against the Partnership in
accordance with its terms, and each instrument to be executed
by the Partnership pursuant to this Agreement, or in
connection herewith, will, when executed and delivered, be
valid and enforceable against the Partnership in accordance
with its terms, except as such enforcement may be limited by
bankruptcy and other laws affecting creditors' rights
generally.
I. To the best knowledge of the Partnership, the tax-related
information set forth on Schedule 2 attached hereto is true,
complete and accurate in all material aspects as at the date
set forth therein. The obligations of Home Properties
contained in Paragraph (A) 1 and 2 of Section 29 are based
upon and limited to, the information set forth on Schedule 2.
J. Schedule 1 hereto accurately lists the current holders of all
outstanding Partner Interests of the Partnership together with
the percentage Interest held by each Partner. In the event
that any Partner listed on Schedule 1 transfers any Interests
prior to the Closing Date, the Partnership shall use good
faith reasonable efforts to promptly provide written notice to
Home Properties of such transfer, and such notice shall
include the names of the transferor and the transferee, the
address of the transferee and the percentage of Interests
transferred.
K. To the best knowledge of the Partnership, except: (i) as
disclosed in Schedule 3 attached hereto; (ii) for liabilities
and obligations incurred in the normal course of business of
the Partnership; and (iii) as otherwise disclosed in this
Agreement, the Partnership has no material liability or
obligation of any nature which in any way materially affects
the Partnership, the Property or the Other Items whether now
due or to become due, absolute, contingent or otherwise,
including liabilities for taxes (or any interest or penalties
thereto).
L. To the best knowledge of the Partnership, the Partnership has
filed or will file when due all
notices, reports and returns of Taxes (as defined below)
required to be filed before the Closing
Date and has paid or, if due and payable between the date
hereof and the Closing Date, will pay,
all Taxes and other charges for the periods shown to be due
on such notices, reports and
returns. "Taxes" shall mean all taxes, charges, fees, levies
or other assessments, including,
without limitation, income, excise, property, sale, gross
receipts, employment and franchise
taxes imposed by the United States, or any state, country,
local or foreign government, or
subdivision or agency thereof with respect to the assets or
the business of the Partnership, and
including any interest, penalties or additions attributable
thereto.
Home Properties acknowledges, understands and agrees that, except as
provided in this Agreement to the contrary, Home Properties' acquisition of the
Property and Other Items and any other rights and interests to be contributed,
conveyed, transferred and/or assigned is on an "AS IS" "WHERE IS" PHYSICAL
BASIS, WITHOUT REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, WITH REGARD TO
PHYSICAL CONDITION OR COMPLIANCE WITH ANY LEGAL REQUIREMENTS OR TITLE EXCEPTIONS
OF THE PROPERTY, INCLUDING WITHOUT LIMITATION ANY LATENT OR PATENT DEFECTS,
CONDITION OF SOILS (INCLUDING SURFACE AND SUBSURFACE CONDITIONS), EXISTENCE OR
NON EXISTENCE OF HAZARDOUS SUBSTANCES OR POLLUTANTS, QUALITY OF CONSTRUCTION,
STATE OF REPAIR, WORKMANSHIP, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR
PURPOSE OR AS TO THE PHYSICAL MEASUREMENTS OR USABLE SPACE THEREOF, TITLE TO THE
PROPERTY, THE ASSIGNABILITY, ASSUMABILITY OR TRANSFERABILITY OR VALIDITY OF ANY
LICENSES, PERMITS, GOVERNMENT APPROVALS, WARRANTIES OR GUARANTIES RELATING TO
THE PROPERTY OR THE USE OR OPERATION THEREOF, ZONING, BUILDING CODE, ACCESS,
ENVIRONMENTAL, FIRE OR LIFE SAFETY, SUBDIVISION OR OTHER ORDINANCES, LAWS, CODES
OR REGULATIONS, OF ANY KIND, PRIOR OR CURRENT OPERATIONS CONDUCTED ON THE
PROPERTY AND SURROUNDING PROPERTY, OR ANY COVENANTS, CONDITIONS, RESTRICTIONS OR
DECLARATIONS OF RECORD AND ALL OTHER MATTERS OR THINGS AFFECTING OR RELATING TO
THE PROPERTY. THE PROVISIONS OF THIS PARAGRAPH SHALL SURVIVE INDEFINITELY ANY
CLOSING OR TERMINATION OF THIS AGREEMENT AND SHALL NOT BE MERGED INTO THE
CLOSING DOCUMENTS.
Notwithstanding the foregoing Paragraphs A. through L. of this Section
19, if Home Properties or its representatives has actual knowledge on the
Closing Date that any of the Partnership's representations or warranties in this
Contribution Agreement are not true as of the Closing Date and Home Properties
elects nonetheless to close, Home Properties shall be deemed to have waived any
claim for breach of such representation or warranty, to the extent that
Purchaser or its representatives had actual knowledge that the same was not
true.
The representations and warranties contained herein shall survive the
Closing and shall not be deemed to have merged in any document delivered at
Closing, but each such representation and warranty shall terminate on, and be of
no further force after the 180th day following the Closing Date. Notwithstanding
the foregoing sentence, any claim relating to any intentional, material breach
of a representation and warranty shall survive indefinitely. Any claim based
upon a misrepresentation or a breach of a representation or warranty contained
in this Contribution Agreement shall be actionable or enforceable only if the
amount of damages or losses as a result of such claim suffered exceeds $25,000.
20. REPRESENTATIONS AND WARRANTIES OF HOME PROPERTIES. Home
Properties represents and warrants to the Partnership as of the date hereof and
as of the Closing as follows:
A. Home Properties is and will be as of the date of Closing duly
organized, validly existing and in good standing under the
laws of the State of New York and has all the requisite power
and authority to enter into and carry out this Agreement
according to its terms.
B. This Agreement has been duly authorized, executed and
delivered and constitutes a legal and binding obligation of
Home Properties, enforceable in accordance with its terms,
except as may be limited by bankruptcy and other laws
affecting creditors' rights generally.
C. To the best of its knowledge after due inquiry, there is no
litigation, proceeding or investigation pending, or to the
knowledge of Home Properties threatened, against or affecting
Home Properties or the partners of Home Properties that might
affect or relate to the validity of this Agreement or any
action taken or to be taken pursuant hereto, or that might
have a material adverse effect on the business or operations
of Home Properties.
D. HME has been organized in conformity with the requirements for
qualification as a real estate investment trust under the
Internal Revenue Code of 1986 (the "Code") and its method of
operation is expected to enable it to continue to satisfy the
requirements for taxation as a real estate investment trust
under the Code for the fiscal year ending December 31, 2001
and in the future.
E. Home Properties is classified as a partnership and not as an
association or publicly traded partnership taxable as a
corporation for federal income tax purposes.
F. (i) HME, Home Properties, each subsidiary of HME or Home
Properties and each partnership or limited liability company
in which HME or Home Properties owns an interest (any such
subsidiary, partnership or limited liability company being
herein referred to as a "Subsidiary") have filed
or caused to be filed all federal, state, local, foreign and
other tax returns, reports,
information returns and statements required to be filed by
them; (ii) HME, Home Properties and each Subsidiary have paid
or caused to be paid all taxes (including interest and
penalties) that are shown as due and payable on such returns
or claimed by any taxing authority to be due and
payable with respect to such returns, except those which are
being contested by them in good faith by appropriate
proceedings and in respect of which adequate reserves are
being maintained on their books in accordance with generally
accepted accounting principles consistently applied;
(iii) HME, Home Properties and each Subsidiary do not have
any material liabilities for taxes other than those incurred
in the ordinary course of business and in respect of which
adequate reserves are being maintained by them in accordance
with generally accepted accounting principles consistently
applied; (iv) as of the date of this Agreement, Federal and
state income tax returns for HME and Home Properties have not
been audited by the Internal Revenue Service or
state authorities; (v) as of the date of this Agreement, no
deficiency, assessment with respect
to, or proposed adjustment of, HME's or Home Properties'
federal, state, local, foreign or other
tax returns is pending or, to the best of Home Properties'
knowledge, threatened; and (vi) as of
the date of this Agreement, there is no tax lien, whether
imposed by any federal, state, local
or other tax authority, outstanding against the assets,
properties or business of HME, Home
Properties or any Subsidiary.
G. Home Properties has delivered to the Partnership a complete
and correct copy of: (i) the Articles of Incorporation and
by-laws of HME; and (ii) the Second Amended and Restated
Agreement of Limited Partnership of Home Properties, in each
case, as amended.
H. Home Properties has previously made available to the
Partnership as requested in writing by the
Partnership complete and correct copies of: (i) the annual
report on Form 10-K for HME for the
period ending December 31, 2000; (ii) definitive proxy
statement for HME for the 2001
Shareholders' Meeting; (iii) any current reports on Form 8-K
filed by HME since December 31, 2000; and (iv) any other form,
report, schedule and statement filed by HME with the
Securities and Exchange Commission ("SEC") under the Exchange
Act, since January 1, 2001 (collectively, the "SEC
Documents"). As of their respective dates, each of the SEC
Documents complied in all material respects with the
requirements of the Exchange Act to the extent applicable to
such SEC Documents, and none of such SEC Documents (as of
their respective dates) contained an untrue
statement of a material fact required to be stated therein or
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading,
except as the same was corrected or superseded in a subsequent
document duly filed with the SEC. HME is not aware of any
reports or filings required to be filed under the Exchange Act
with the SEC under the rules and regulations of the SEC that
have not been filed.
I. Home Properties is receiving the Interests delivered pursuant
to this Agreement for investment purposes for its own account,
and not with the view to or in connection with any
distribution thereof. Home Properties understands that the
Interests may not be sold, assigned, offered for sale, pledged
or otherwise transferred unless such transaction is registered
under the Securities Act of 1933, as amended, and applicable
state securities laws, or exemptions from such registration
requirements.
The representations and warranties of Home Properties contained in this
Agreement, the statements in any Exhibit or Schedules attached to this
Agreement, or other instruments furnished to the Partnership at or prior to
Closing pursuant to this Agreement, or in connection with the transactions
contemplated pursuant to this Agreement, do not contain any untrue statements or
a material fact, or fail to state a material fact necessary to make it not
misleading.
The representations and warranties contained herein shall survive the
Closing and shall not be deemed to have merged in any document delivered at
Closing.
21. ASSIGNMENT. This Agreement, and all or any portion of the rights of
Home Properties hereunder, may not be assigned by Home Properties without the
prior written consent of the Partnership, which may be granted or withheld in
its sole discretion. Notwithstanding the foregoing, if necessary in order to
preserve the existence of the Partnership upon acquisition of the Interests by
Home Properties, Home Properties may require that up to 5% of the Interests be
assigned to an entity in which Home Properties, directly or indirectly, holds
100% of the equity interests, provided such entity is either disregarded as a
separate entity for Federal income tax purposes or treated as a partnership for
such purposes.
22. NOTICE. All notices given pursuant to any provisions of this
Agreement shall be in writing and shall be effective upon receipt and then only
if delivered personally, or sent by registered or certified mail, postage
prepaid or sent by a national over-night carrier, or by telecopy with
confirmation of receipt to the addresses set forth below:
To the Partnership: LINCOLNIA LIMITED PARTNERSHIP
c/o ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, General Partner
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
with a copy to: C. ▇▇▇▇▇▇▇ ▇▇▇▇▇, Esq.
Grossberg, Yochelson, Fox & ▇▇▇▇▇,
LLP
▇▇▇▇ ▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇-▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
To Home Properties: HOME PROPERTIES OF NEW YORK, L.P.
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Chairman and
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
23. PLANS. The Partnership agrees to provide Home Properties with all
plans and architectural drawings in their possession for the improvements
completed at the Property, including, without limitation, all "as built" plans
in their possession and the Partnership further agrees that it will endeavor to
turn over the same to Home Properties at the Property during the Due Diligence
Period.
24. APPLICABLE LAW. The corporate laws of the State of Maryland will
govern all questions concerning the relative rights and obligations of the
parties with respect to any HME Common Shares acquired or acquirable by the
holders of Units on account of their Units. Except as limited by the Operating
Partnership Agreement, the laws of the State of New York will govern all other
questions concerning the relative rights and obligations of the holders of Units
as limited partners in Home Properties, or otherwise with respect to the Units.
This Agreement shall, otherwise, be governed, construed and interpreted in
accordance with the laws of the State of Virginia applicable to contracts made
and to be performed wholly within the State of Virginia without giving effect to
the conflicts-of-laws principles thereof.
25. ENTIRE AGREEMENT. This Agreement shall constitute the entire
agreement between the parties, and any and all prior understandings or
agreements, whether written or oral, are hereby merged into this Agreement.
This Agreement cannot be modified except by a written instrument signed by the
parties hereto.
26. BINDING AGREEMENT. This Agreement shall not be binding or
effective until properly executed by the Partnership and Home Properties.
27. CONFIDENTIALITY. By execution of this Agreement and except as
otherwise provided herein, prior to the Closing Home Properties and the
Partnership agree to keep any and all information with respect to the
transactions contemplated by this Agreement strictly confidential, and will not
disclose any such information, without the other's prior written consent, unless
such disclosure is required by, or appropriate under, applicable law or judicial
process. Home Properties may disclose the existence of this Agreement to the
extent necessary to conduct its due diligence with respect to the Property and
the Partnership may disclose the existence and terms of this Agreement to the
extent necessary to consummate the transactions contemplated hereby. Home
Properties agrees that it will obtain the consent of the Partnership, which
shall not be unreasonably withheld or delayed, with respect to the content of
any press releases to be issued by Home Properties relating to the transaction
described herein. The provisions of this Section 27 shall survive indefinitely
any termination of this Agreement.
28. PARTNERSHIP COVENANTS.
A. Upon the request of Home Properties, the Partnership will
provide, or cause to be provided, a signed representation
letter substantially in the form attached hereto as Exhibit G.
The Partnership will provide access by Home Properties'
representatives, to all financial and other information
relating to the Property as is sufficient to enable them to
prepare audited financial statements, at Home Properties'
expense, in conformity with Regulation S-X of the Securities
and Exchange Commission (the "Commission") and any
registration statement, report or disclosure statement
required to be filed with the Commission.
B. Prior to the Closing Date, the Partnership shall continue to
fulfill all of its obligations under the terms of the leases
encumbering the Property and under the service contracts and
the Partnership shall operate, maintain and repair all
landscaping, buildings, fixtures and facilities in accordance
with its current practices, except as otherwise set forth in
Section 36 below.
C. The Partnership will cease to market the Property during the
term and pendency of the Contribution Agreement. In that
regard, the Partnership will refrain from soliciting or
accepting any offer from any third party, or initiating any
discussions with any third party concerning the sale,
refinancing or recapitalization of the Property, until such
time as either Home Properties or the Partnership shall have
terminated this Contribution Agreement.
D. The General Partner hereby covenants to cause the tax returns
to be prepared for the Partnership
for the period up to the Closing Date. Home Properties shall
make available to the General Partner (and its
representatives) promptly upon request, all financial and
other information relating to the Partnership which is
necessary to permit the General Partner to file any tax
returns on behalf of the Partnership for its taxable year
ended on the Closing Date, and for such other purposes as may
be requested by the General Partner in order to wind up
business affairs for the entity and the Partners, and shall
otherwise cooperate reasonably with the
General Partner with respect to any pre-Closing tax matters.
E. The General Partner shall cause tax returns for the
Partnership for the period up to the Closing
Date to be completed within one hundred twenty (120) days of
the Closing Date. A copy of such
final tax returns shall be submitted to Home Properties
promptly upon their filing with the
relevant governmental authority. Within one hundred twenty
(120) days of the Closing Date, the
General Partner shall also provide Home Properties with a
schedule showing: (i) the net book
value of the Property and the Other Items owned by the
Partnership as of the Closing Date; and
(ii) an updated Schedule 2 providing the actual information
which was estimated in such Schedule. The obligation of Home
Properties contained in Section 29.A.(2) is limited by the
estimated information originally provided in Schedule 2.
The information on the Schedule shall
be calculated in a manner consistent with the calculations
made for federal income tax depreciation purposes.
29. HOME PROPERTIES' COVENANTS.
A. Home Properties hereby covenants to the Partnership and the
Unit Partners as follows:
(1) For a period of ten (10) years from and after the
Closing Date, Home Properties shall not sell,
exchange, transfer or otherwise dispose of the
Property unless such transaction occurs in a manner
as to be tax free to the Partners receiving Units. In
the event that Home Properties breaches any of its
obligations set forth in this Section 29(A)(I), Home
Properties shall indemnify, defend and hold harmless
each of the Partners receiving Units and their
respective successors and assigns (each an
"Indemnified Party" and collectively the "Indemnified
Parties") from and against the aggregate federal,
state and local income taxes incurred by such
Indemnified Party as a result thereof (collectively,
"Taxes") plus the Taxes incurred by such Indemnified
Party as a result of the receipt of the Indemnity
Payment (the "Tax Indemnity Amount"). Any such Taxes
shall be deemed to be the amount of gain or income
recognized by the relevant Indemnified Party
multiplied by the highest actual rate or rates
imposed upon such Indemnified Party for such gain or
income (assuming it is the last dollar of income or
gain) for the year in which such gain or income is
recognized. In determining the Tax Indemnity Amount,
no effect shall be given to the Indemnified Parties'
tax deductions, tax credits, tax carry forwards nor
to any other of their tax benefits or tax attributes.
The Tax Indemnity Amount shall be payable by Home
Properties to each Indemnified Party not later than
thirty (30) days following the filing of tax returns
for the Indemnified Party for the year in question.
(2) For a period of ten (10) years from and after the
Closing Date, Home Properties shall allocate to the
Partners receiving Units, for federal income tax
purposes, pursuant to Section 752 of the Code,
nonrecourse liabilities of Home Properties in an
aggregate amount necessary to prevent gain
recognition under Section 731(a)(1) of the Internal
Revenue Code (the "Code") by the Partners receiving
Units with negative capital accounts as a result of a
deemed distribution of money to such persons pursuant
to Section 752(b) of the Code.
(3) Home Properties shall utilize the "traditional
method" under Section 704(c) of the Code without
curative allocations in accordance with Treasury
Regulation Section 1.7043(b)(1) to adjust for
discrepancies between the agreed-upon value of the
various components of the contributed Property (or
for any property received in exchange for any
contributed Property in a like-kind exchange) and the
adjusted tax basis of such components.
(4) Home Properties covenants and agrees that it shall
use its reasonable commercial efforts to cause HME to
continue to be taxed as a real estate investment
trust under the Code unless the Board of Directors of
HME determines that it is in the best interests of
shareholders of HME to be taxed otherwise.
(5) Home Properties shall cooperate fully, as and to the
extent reasonably requested by the General Partner,
in connection with the filing of any tax return,
statement, report or form, and any audit litigation
or other proceeding with respect to Taxes. Such
cooperation shall include, without limitation, the
retention and (upon request) the provision of records
and information which are reasonably relevant to any
such audit, litigation or other proceeding. Home
Properties agrees to retain all books and records
with respect to Tax matters pertinent to the
Partnership relating to any pre-Closing tax period
until the expiration of the applicable statute of
limitations (taking into account waivers or
extensions) or, if sooner, such time as a final
determination shall have been made with respect to
such Taxes for such period, and to abide by all
record retention agreements entered into with any
taxing authority.
30. DEFAULT. In the event that Home Properties fails to acquire the
Interests pursuant to this Agreement other than by reason of a termination by
Home Properties expressly permitted hereunder or the Partnership's default, the
Partnership agrees that the Partnership's sole remedies shall be (i) to have the
Title Company deliver the Deposit to the Partnership as liquidated damages to
recompense the Partnership for time spent, labor and services performed, and
loss of its bargain and to terminate this Agreement; or (ii) to seek specific
performance. Home Properties acknowledges that in the event of such a failure by
Home Properties, the damages suffered by the Partnership will be difficult to
ascertain with certainty. Therefore, Home Properties and the Partnership agree
that in the event of such a failure by Home Properties, and if the Partnership
does not elect to seek specific performance, then the sum of $500,000 is a good
faith estimate of the Partnership's damages and at the Partnership's election
said sum shall be promptly paid to the Partnership in the form of the Deposit.
In such event the Partnership agrees to accept the Deposit as the Partnership's
total damages and relief hereunder in the event of Home Properties' default
hereunder. In the event that Home Properties does so default and this Agreement
is terminated, Home Properties shall have no further right, title, or interest
in the Property or the Interests. In the event the Partnership fails to sell the
Property to Home Properties pursuant to this Agreement other than by reason of a
termination by the Partnership expressly permitted hereunder or Home Properties'
default, Home Properties' sole remedies shall be (i) cancellation of this
Agreement in which event Home Properties shall be entitled to the return by the
Title Company to Home Properties of the Deposit, or (ii) to seek specific
performance. In no event shall either party be entitled to any remedies or
damages for breach of this Agreement, except as set forth hereinabove. And in no
event shall any party be entitled to punitive or consequential damages for the
breach of this Agreement.
31. RECORDATION. Neither party may record this Contribution
Agreement; and any recordation shall render the contract void. Also, neither
party may file a lis pendens against the Property.
32. ARBITRATION. Except for any action for specific performance, any
controversy or claim arising out of or relating to this Agreement, or the breach
or the validity thereof shall be settled by final and binding arbitration in
accordance with the most current Commercial Arbitration Rules (the "Rules") of
the American Arbitration Association ("AAA"). The arbitration shall be conducted
by a tribunal of three (3) arbitrators (the "Tribunal"). Each party shall
appoint an arbitrator within ten (10) days from the filing of the Demand and
Submission in accordance with Paragraph 7 of the Rules and the two (2)
arbitrators shall jointly appoint the third arbitrator, within fifteen (15) days
from their appointment, in accordance with Paragraph 7 of the Rules. If the two
(2) appointed arbitrators fail to agree upon a third arbitrator within said
fifteen (15) days and fail to agree to an extension of such period, the third
arbitrator shall be appointed by the AAA in accordance with Paragraph 15 of the
Rules. The place of arbitration shall be Alexandria, Virginia and the Award
shall be issued at the place of arbitration. The Tribunal may, however, call and
conduct hearings and meetings at such other places as the parties may agree. The
law applicable to the arbitration procedure shall be the Federal Arbitration Act
(the "Act") as supplemented by any law of the place of arbitration which is not
inconsistent with the Act.
The decision of the Tribunal (the "Award") shall be made within ninety
(90) days of the appointment of the Tribunal pursuant to the provisions hereof,
and the parties hereby agree that any such decision need not be accompanied by a
reasoned opinion. The Award may, except as limited by Section 30 of this
Agreement, include (i) recovery of actual damages for violation of any
obligations under this Agreement or of governing law, including the recovery of
attorneys' fees to the prevailing party (ii) injunctive relief against
threatened or actual violations of any obligation under the Agreement or of
governing law or (iii), if and to the extent permitted under the terms of the
Agreement, the remedy of specific performance. The Award shall be final and
binding on the parties. Judgment upon the Award may be entered in any court
having jurisdiction thereof or having jurisdiction over one or more of the
parties or their assets. The parties specifically waive any right they may enjoy
to apply to any court for relief from the provisions of this Agreement or from
any decision of the Tribunal made prior to the Award.
33. EXECUTION IN COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original as
against any party whose signature appears thereon, and all of which shall
together constitute one and the same instrument. This Agreement shall become
binding when one or more counterparts hereof, individually or taken together,
shall bear the signatures of all of the parties reflected thereon as the
signatories.
34. SIGNATURE BY FACSIMILE. The parties may execute and deliver this
Agreement by forwarding signed facsimile copies of their signature page to this
Agreement and delivering an original of the same by overnight courier. Such
facsimile signatures shall have the same binding effect as original signatures,
and the parties hereby waive any defense to validity based on any such copies or
signatures.
35. EMPLOYEES/MANAGEMENT FEES. The Partnership shall be responsible
for, and shall make arrangements for payment of, all amounts due, up to the
Closing Date, as management fees under any management agreement relating to the
Project as well as for salaries, accrued vacation pay and withholding and
payroll taxes, if any, accruing prior to the Closing Date to the employees of
the Partnership. The Partners hereby indemnify Home Properties for any and all
expenses and costs Home Properties may incur relating to claims by employees of
the Partnership for payment of any salaries or other benefits due to such
employees and/or any management fees for periods prior to the Closing Date. Any
such claims shall be deemed to be Indemnity Claims as described in Section 4C
above.
36. RENOVATIONS. Notwithstanding anything to the contrary set forth
herein, the parties agree as follows with respect to renovations of vacant
units. The Partnership shall complete at its cost any renovations to vacant
units which shall have been commenced prior to the date of this Agreement. The
Partnership shall renovate all apartment units which become vacant after the
date of this Agreement in accordance with a schedule listing the renovations and
costs thereof as agreed to in writing by the parties ("Renovation Schedule").
Such renovations shall be completed in good and workmanlike fashion and in a
timely manner. Provided the conditions set forth in this Section have been met,
Home Properties shall reimburse the Partnership at Closing for its costs
incurred in renovating vacant units after the date of this Agreement, as
reasonably documented by the Partnership and in accordance with the Renovation
Schedule. The Partnership shall charge residents moving into the newly-renovated
apartment units premium rent in accordance with a schedule to be agreed upon in
writing between Home Properties and the Partnership ("Rent Schedule"). Home
Properties shall have the right to inspect the renovated apartment units prior
to Closing and to review a recent rent roll or other evidence to verify that
rents for the newly-renovated units have been charged in accordance with the
Rent Schedule.
IN WITNESS WHEREOF, the parties hereto have caused this Instrument to
be executed as of the day and date first above written.
HOME PROPERTIES OF NEW YORK, L.P.
By: Home Properties of New York, Inc.,
General Partner
By: __________________________
Title: _________________________
LINCOLNIA LIMITED PARTNERSHIP
By: __________________________
▇▇▇▇▇▇ ▇▇▇▇▇▇▇, General Partner
LIST OF EXHIBITS AND SCHEDULES
EXHIBIT A Legal Description
EXHIBIT B Escrow Agreement Reserve Amount
EXHIBIT C Registration Rights and Lock-Up Agreement
EXHIBIT D Escrow Agreement Deposit
EXHIBIT E Rent Roll
EXHIBIT F List of Contracts
EXHIBIT G Representation Letter
Schedule 1 List of Partners
Schedule 2 Tax-Related Information
Schedule 3 Liabilities