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 between Home Properties of New
York, L.P., a limited partnership formed under the laws of New York (the
"Surviving Partnership"), and Curren 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, 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 (the "Merger").
1.2 CERTIFICATE OF MERGER. Subject to the satisfaction of the
Merger Conditions, 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.
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-
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 subparagraph (b)(i) of Section 3.1 and Section 3.2 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 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 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 that the Surviving Partnership has
not specifically agreed to assume as provided herein.
-2-
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 shall be $12,715,000, 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 INTERESTS. At the Effective Time
each of the outstanding interests in the Merged Partnership (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 loan (the "Existing Loan") covering
the Merged Partnership's property in favor of GMAC Commercial Mortgage -
FannieMae Delegated Underwriting (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
Merged Partnership. "Reserve Amount" means the sum of: (a) an amount
equal to the current liabilities of the Merged Partnership at the Effective
Time (other than the principal amount of the Existing Loan) (the
"Liabilities Reserve") and (b) $240,000 (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 Interest means the
right to receive the Reserve Amount less all amounts used to satisfy the
current liabilities of the Merged 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 which survive Closing (but only during the period of such
survival) ("Indemnity Claims") multiplied by the percentage interest of the
Interest 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 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
-3-
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 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 wh-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
-4-
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 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
-5-
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 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 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 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 and the Merged Partnership
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.
-6-
(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 shall pay its attorneys' fees, one-half of any Pennsylvania
state and local transfer tax, and all other costs and expenses incidental
to or in connection with closing this transaction customarily paid for by
the seller of similar property.
(c) The amounts payable pursuant to Sections 3.10(a) and/or
(b) by the Merged Partnership 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 the
Merged Partnership and to satisfy certain liabilities of the Merged
Partnership.
3.12 CASH HELD BY MERGED PARTNERSHIP. Subject to Section 3.13
below, on, or at any time prior to, the Effective Time, the General Partner
shall have the right to spend on behalf of the Merged Partnership and/or
distribute to the partners of the Merged Partnership any and all cash held
by 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 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 the former partners of the Merged Partnership.
-7-
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 Merged
Partnership and to become the property of the Surviving Partnership at the
Effective Time consists of one or more parcels of land known as Curren
Terrace Apartments which includes 318 apartments (the "Project"), located
in the Borough of Norristown 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 318 apartment units, and all rights of the Merged
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 Merged 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").
-8-
(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 Merged 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;
-9-
(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 Merged Partnership has no 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
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 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 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 Merged 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.
-10-
(l) CONDEMNATION. The Merged 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 Merged
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 Merged 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 Merged 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 Merged 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 Merged Partnership prior to Closing, the Surviving Partnership
shall reimburse that to the Merged Partnership at Closing.
(2) Any non-routine repairs or replacements arranged by the Merged
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 Merged 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 Merged 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 Merged Partnership for any amount paid on account of such
repair or replacement prior to Closing.
-11-
(q) APPLIANCES. Except as previously disclosed to the Surviving
Partnership, all of the ranges and refrigerators in the Property are the
property of the Merged 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 Merged 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 Merged 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), the Merged 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 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 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,
-12-
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
-13-
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 each of the partners of the Merged Partnership other than
Cash Conversion Holders and Dissenting Partners whereby the Surviving
Partnership agrees that:
(a) Upon the written request of any such partner, the Surviving
Partnership will purchase any or all of the Units held by 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, 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.
-14-
5.4 ACCESS TO INFORMATION. Between the date of this Agreement and the
Effective Date, the Surviving Partnership, on the one hand, 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; and (iii) no party need supply the other with
any information which it is under a legal obligation not to supply.
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
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. Consequently, the Merged 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 which is necessary to
permit the Merged Partnership to file its tax returns for its taxable year
ended on the Effective Date.
5.6 INTENTIONALLY OMITTED
5.7 NEGATIVE COVENANTS. The Merged Partnership agrees that, prior to
the Effective Date, it will not take any of the following actions without
first obtaining the Surviving Partnership's prior written consent, which
consent shall not be unreasonably withheld or delayed.
-15-
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
Merged Partnership shall terminate any agreements pertaining to the
management of the Property.
5.9 CLOSING DOCUMENTS. At the Effective Time, 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, 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
-16-
Time, 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, the Merged Partnership agrees that the Surviving Partnership and
its authorized representatives shall have the right and privilege to enter
upon the Property and the Merged 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. 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 Merged Partnership's possession or control relating to the
Property and its operation; provided, however, that the Surviving
Partnership agrees to indemnify 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 the Merged Partnership and
its partners that the Effective Date and thereafter for so long as any
Units issued to 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 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 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 the
Merged Partnership.
-17-
(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 the former partners of the
Merged Partnership who shall have received Units in the Surviving
Partnership (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
represents 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 $12,715,000 as of the
date of the Merger; (ii) the amount of nonrecourse debt encumbering the
Property is $9,855,334; (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. Neither the Surviving Partnership nor the
Merged Partnership shall have any obligation to execute or file the
Certificate of Merger as described in Section 2.1 unless, on or before
September 30, 1997:
-18-
(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 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. The general partner of the Merged Partnership shall have no
obligation to execute and deliver the Certificate of Merger 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. 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.
-19-
(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. 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, 318
apartment units in rentable condition and, except as disclosed in Schedule
4.1(j), 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.
-20-
(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 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, either party, at its option and upon notice to the other
party, may terminate this Agreement. If the conditions of Section 6.2 of
this Agreement are not satisfied, the 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 the Merged Partnership, may terminate this Agreement. Upon the
termination of this Agreement as provided herein, neither party shall have
any further rights or obligations hereunder and neither 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.
-21-
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:
-22-
To Home Properties: Home Properties of New York, L.P.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
With a copy to ▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
at the same address
To the Merged Partnership
General Partner: ▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
With a copy to: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Wolf, Block, ▇▇▇▇▇▇ and ▇▇▇▇▇-▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Building 640
Blue ▇▇▇▇, Pennsylvania 19422
And a copy to: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇., Esq.
Wolf, 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. The Merged Partnership represents to the
Surviving Partnership that it did not employ any broker in connection with
this sale other than Mill Creek Realty Co., and the Merged Partnership
hereby agrees that, pursuant to Section 3.11 hereof, it 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
-23-
(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 it and its representatives have
fully inspected the Property and the Other Items, and are fully familiar
with the physical and financial condition thereof, and that the Property
and the Other Items will be accepted by the 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 neither the Merged Partnership nor any party acting on behalf of the
Merged Partnership 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, 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 the Merged Partnership the sum of
$200,000 (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 the
Merged Partnership the Liquidated Damages Amount as liquidated damages, the
payment of such sum shall be the Merged Partnership's only remedy in the
event of the Surviving Partnership's default at or prior to the Effective
Date, and the Merged Partnership in such event hereby waives any right,
unless Closing is completed, to recover the balance of the Consideration.
If 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
-24-
cancellation. Nothing in this Section shall limit the Merged Partnership's
rights against the Surviving Partnership and the Surviving Partnership's
liability to 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 the Merged Partnership, notwithstanding the
foregoing, shall have failed to complete Closing in accordance with this
Agreement or is 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 the Merged
Partnership to complete Closing or a default by 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 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 the General Partner
an agreement, in form and substance satisfactory to the General Partner and
the General Partner's counsel, whereby the Surviving Partnership agrees to
indemnify and hold harmless the General Partner, both individually and in
his capacity as the general partner of the Merged 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, neither the General Partner nor 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 cash or assets held by the Disbursing Agent pursuant to Section 3.2
above, for the payment of any claim against or the performance of any
obligation of the 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.
-25-
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 $200,000 (the "Deposit").
If the Surviving Partnership shall become obligated to pay to the Merged
Partnership the Liquidated Damages Amount, 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 between 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 between 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 rDisbursing 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.
-26-
(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 of 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 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 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 constit
-27-
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 i
-28-
"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 10.2
REPRESENTATIONS AND WARRANTIES. The Surviving Partnership and HME hereby
make the following representations and warranties to 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
-29-
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 able 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 aEC 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
-30-
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.
-31-
(f) REIT QUALIFICATION. At all times since its taxable year ended
December 31, 1996, HME has been, and upon each issuance of any of the
Securities, HME will continue to be, organized and operated in conformity
with the requirements for qualification as a real estate investment trust
under the Code, and its proposed method of operation will enable it to
continue to meet the requirements for taxation as a real estate investment
trust under the Code.
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
executed by a duly executed general partner as of the date first above
written.
CURREN PARTNERSHIP
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
-------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇, General Partner
HOME PROPERTIES OF NEW YORK, L.P.
By: Home Properties of New York, Inc.
General Partner
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
----------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Chairman
For purposes of acknowledging and agreeing
to the provisions of Sections 1.4, 5.5 and
6.3(e)
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇
-32-
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/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
-----------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Chairman
-33-
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.
SCHEDULE 4.1(J)
Inspection fees claimed to be due to the Borough of Norristown, which
are being contested and have not been paid.