-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, IVfhE0Vdr9Db+E8mJJqwjVh8H0u6ZYpsLvsZYs/CVfkJ3MDz0oxbStOVQ2chdqBy skZv0+jm1C2BW4kApHmm4g== 0000923118-00-000017.txt : 20000523 0000923118-00-000017.hdr.sgml : 20000523 ACCESSION NUMBER: 0000923118-00-000017 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20000522 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 20000522 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HOME PROPERTIES OF NEW YORK INC CENTRAL INDEX KEY: 0000923118 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 161455126 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 001-13136 FILM NUMBER: 640990 BUSINESS ADDRESS: STREET 1: 850 CLINTON SQ CITY: ROCHESTER STATE: NY ZIP: 14604 BUSINESS PHONE: 7162464105 MAIL ADDRESS: STREET 1: 850 CLINTON SQUARE CITY: ROCHESTER STATE: NY ZIP: 14604 8-K 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K Current Report Pursuant to Section 13 or 15(d) of The Securities Act of 1934 Date of Report (Date of earliest event reported): May 22, 2000 HOME PROPERTIES OF NEW YORK, INC. ------------------------------------------------------- (Exact name of registrant as specified in its charter) Maryland 1-13136 16-1455126 - ---------------- ------------ ------------- (State or other jurisdiction (Commission (IRS Employer of incorporation) File No.) Identification No.) 850 Clinton Square, Rochester, New York 14604 ------------------------------------------------------------------ (Address of principal executive offices) (Zip code) Registrant's telephone number, including area code: (716)546-4900 Not Applicable ------------------------------------------------------------------ (Former name or former address, if changed since last report.) Item 5. OTHER EVENTS On May 22, 2000, the Registrant entered into a Purchase Agreement with The Prudential Insurance Company of America and Teachers Insurance and Annuity Association of America (the "Purchasers") whereby the Registrant agreed to sell to each of the Purchasers 200,000 shares of Series C Convertible Cumulative Preferred Stock. The related press release is attached hereto as Exhibit 99.1. The Purchase Agreement is attached hereto as Exhibit 10.1 and the related Articles Supplementary are attached hereto as Exhibit 3.1. Item 7. FINANCIAL STATEMENTS AND EXHIBITS c. Exhibits Exhibit 3.1 Articles Supplementary Exhibit 10.1 Purchase Agreement between Home Properties of New York, Inc., The Prudential Insurance Company of America and Teachers Insurance and Annuity Association of America. Exhibit 99.1 Press Release SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Dated: May 22, 2000 HOME PROPERTIES OF NEW YORK, INC. (Registrant) By: /s/ Amy L. Tait ------------------------- Amy L. Tait, Executive Vice President EX-3 2 EXHIBIT 3.1 Series C Convertible Cumulative Preferred Stock ARTICLES SUPPLEMENTARY HOME PROPERTIES OF NEW YORK, INC. Articles Supplementary Classifying and Designating a Series of Preferred Stock as Series C Convertible Cumulative Preferred Stock and Fixing Distribution and Other Preferences and Rights of Such Series Dated as of May 19, 2000 HOME PROPERTIES OF NEW YORK, INC. Articles Supplementary Classifying and Designating a Series of Preferred Stock as Series C Convertible Cumulative Preferred Stock and Fixing Distribution and Other Preferences and Rights of Such Series Home Properties of New York, Inc., a Maryland corporation (the "CORPORATION"), hereby certifies to the State Department of Assessments and Taxation of Maryland pursuant to section 2-602(b) of the Annotated Code of Maryland that: FIRST: Pursuant to authority granted by the Amended and Restated Articles of Incorporation of the Corporation, the Board of Directors adopted a resolution at a meeting held on April 25, 2000 designating and classifying 600,000 unissued and undesignated shares of preferred stock as Series C Convertible Cumulative Preferred Stock. SECOND: The following is a description of the Series C Convertible Cumulative Preferred Stock, including the preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends, qualifications, and terms and conditions of redemption thereof: Section 1. NUMBER OF SHARES AND DESIGNATION. This class of preferred stock shall be designated as Series C Convertible Cumulative Preferred Stock and the number of shares which shall constitute such series shall not be more than 600,000 shares, par value $0.01 per share, which number may be decreased (but not below the number thereof then outstanding) from time to time by the Board of Directors, or increased by the Board of Directors with the consent of the holders of two-thirds of the Series C Preferred Stock outstanding at that time. Section 2. DEFINITIONS. For purposes of the Series C Preferred Stock, the following terms shall have the meanings indicated: "BOARD OF DIRECTORS" shall mean the Board of Directors of the Corporation or any committee authorized by such Board of Directors to perform any of its responsibilities with respect to the Series C Preferred Stock. "BUSINESS DAY" shall mean any day other than a Saturday, Sunday or a day on which state or federally chartered banking institutions in New York City, New York are not required to be open. "CALL DATE" shall mean the date specified in the notice to holders required under Section 5(e) as the Call Date. "CHANGE OF CONTROL" shall mean each occurrence of any of the following: (i) the acquisition, directly or indirectly, by any individual or entity or group (as such term is used in Section 13(d)(3) of the Exchange Act) of beneficial ownership (as defined in Rule 13d-3 under the Exchange Act, except that such individual or entity shall be deemed to have beneficial ownership of all shares that any such individual or entity has the right to acquire, whether such right is exercisable immediately or only after passage of time) of more than 25% of the voting power, under ordinary circumstances, to elect directors of the Corporation or more than 25% of the equity interests in the Operating Partnership; (ii)(A) the Corporation consolidates with or merges into another entity or conveys, transfers, or leases outside the ordinary course of business all or substantially all of its assets (including, but not limited to, real property investments) to any individual or entity, or (B) any entity consolidates with or merges into the Corporation which, in the case of a merger or consolidation under (A) or (B) is pursuant to a transaction in which the outstanding Common Stock is reclassified or changed into or exchanged for cash, securities or other property; PROVIDED, HOWEVER, that the events described in this clause (ii) shall not be deemed to be a Change of Control if the sole purpose and effect of such event is that the Corporation is seeking to change its domicile or to change its form of organization from a corporation to a statutory business trust; or (iii) other than with respect to the election, resignation or replacement of any director designated, appointed or elected by the holders of the Series A Preferred Stock or any other series of preferred stock of the Corporation (each a "PREFERRED DIRECTOR"), during any period of two consecutive years, individuals who at the beginning of such period constituted the Board of Directors of the Corporation (together with any new directors whose election by such Board of Directors or whose nomination for election by the stockholders of the Corporation was approved by a vote of a majority of the directors of the Corporation (excluding Preferred Directors) then still in office who were either directors at the beginning of such period, or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the Board of Directors then in office. "CHANGE OF CONTROL PRICE" shall mean: (i) from and after the first anniversary of the Issue Date through the day preceding the fifth anniversary of the Issue Date, an amount per share of Series C Preferred Stock equal to the Stated Value plus an amount equal to a 15% annual return thereon from the Issue Date until the date of redemption of such share of Series C Preferred Stock, compounded annually, less an amount equal to the sum of the aggregate amount of cash dividends theretofore paid or payable concurrently with such redemption on such share of Series C Preferred Stock, plus an amount equal to a 15% annual return on such cash dividends from the date of payment until the date of redemption of such share of Series C Preferred Stock and (ii) beginning on the fifth anniversary of the Issue Date, an amount equal to 100% of the Liquidation Preference. "CHANGE OF CONTROL RATE" shall have the meaning set forth in Section 3(d). "COMMON STOCK" shall mean the shares of Common Stock, par value $0.01 per share, of the Corporation. "CONSTITUENT PERSON" shall have the meaning set forth in Section 7(e). "CONVERSION ADJUSTMENT PRICE" shall mean the price per share of Common Stock which is the lesser of: (i) $29.95 (which shall be adjusted in the case of any combination, (by reverse stock split or otherwise), of its outstanding shares of Common Stock into a smaller number of shares); or (ii) the Conversion Price. "CONVERSION PRICE" shall mean the conversion price per share of Common Stock into which the shares of Series C Preferred Stock are convertible, as such Conversion Price may be adjusted pursuant to Section 7. The initial conversion price shall be $ 30.25 (equivalent to a conversion rate of 3.30579 shares of Common Stock for each share of Series C Preferred Stock). "CURRENT MARKET PRICE" of publicly traded shares of Common Stock or any other class of shares of capital stock or other security of the Corporation or any other issuer for any day shall mean the last reported sales price, regular way on such day, or, if no sale takes place on such day, the average of the reported closing bid and asked prices on such day, regular way, in either case as reported on the New York Stock Exchange ("NYSE") or, if such security is not listed or admitted for trading on the NYSE, on the principal national securities exchange on which such security is listed or admitted for trading or, if not listed or admitted for trading on any national securities exchange, on the NASDAQ Stock Market ("NASDAQ") National Market System or, if such security is not quoted on such National Market System, the average of the closing bid and asked prices on such day in the over-the-counter market as reported by NASDAQ or, if bid and asked prices for such security on such day shall not have been reported through NASDAQ, the average of the bid and asked prices on such day as furnished by any NYSE member firm regularly making a market in such security selected for such purpose by the Board of Directors. "DIVIDEND PAYMENT DATE" shall mean (i) for any Dividend Period with respect to which the Corporation pays a dividend on the Common Stock, the date on which such dividend is paid, or (ii) for any Dividend Period with respect to which the Corporation does not pay a dividend on the Common Stock, the last day of each month of February, May, August and November or, if such date is not a Business Day, the next succeeding Business Day. "DIVIDEND PAYMENT RECORD DATE" shall mean the date on which record is to be taken for purposes of any dividend payment to be made on the Series C Preferred Stock, which shall be the same date on which record is to be taken for purposes of any dividend payment to be made on the Common Stock, or if a dividend is not to be paid on the Common Stock on a date selected by the Board of Directors. "DIVIDEND PERIODS" shall mean quarterly dividend periods commencing on January 1, April 1, July 1 and October 1 of each year and ending on and including the day preceding the first day of the next succeeding Dividend Period (other than the initial Dividend Period, which shall commence on the Issue Date and end on and include the last calendar day of the calendar quarter containing the Issue Date, and other than the Dividend Period during which any shares of Series C Preferred Stock shall be redeemed pursuant to Section 5 or repurchased pursuant to Section 6, which shall end on and include the Call Date with respect to the shares of Series C Preferred Stock being redeemed or the Repurchase Date for the shares being repurchased, as the case may be). "EFFECTIVE DATE" shall have the meaning set forth in Section 7(f). "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as amended. "EXPIRATION TIME" shall have the meaning set forth in Section 7(d)(iv). "FULLY JUNIOR STOCK" shall mean the Common Stock and any other class or series of shares of capital stock of the Corporation now or hereafter issued and outstanding over which the Series C Preferred Stock has preference or priority in both (i) the payment of dividends and (ii) the distribution of assets on any liquidation, dissolution or winding up of the Corporation. "FUNDAMENTAL CHANGE" shall mean each occurrence of any of the following: (i) the acquisition, directly or indirectly, by any Person of Beneficial Ownership (as defined in the Amended and Restated Articles of Incorporation of the Corporation) of more than 25% of the Corporation's outstanding capital stock or more than 25% of the voting power, under ordinary circumstances, to elect directors of the Corporation or more than 25% of the equity interests in the Operating Partnership; (ii) other than with respect to the election, resignation or replacement of any Preferred Director or the election of a new director in replacement of any director who has died or resigned (each a "Replacement Director"), during any period of two consecutive years, the Board of Directors fails to nominate for election by the stockholders of the Corporation a majority of the individuals who at the beginning of such period constitute the Board of Directors (together with any new directors whose election by such Board of Directors or whose nomination for election by the stockholders of the Corporation was approved by a vote of a majority of the directors of the Corporation (excluding Preferred Directors and Replacement Directors) then still in office who were either directors at the beginning of such period, or whose election or nomination for election was previously so approved); (iii) the Corporation or one of its wholly-owned Subsidiaries is not the sole general partner of the Operating Partnership; (iv) the Corporation or any direct or indirect subsidiary of the Corporation, in one transaction or a series of related transactions, sells all or substantially all of the assets of the Corporation and the Operating Partnership; acquires from any individual or entity, whether by way of merger, consolidation, purchase of stock or assets, lease or other form of business combination, any entity, assets or business for aggregate consideration payable in cash, securities, other property or any combination of the foregoing, with a fair market value (as determined in good faith by the Board of Directors of the Corporation) exceeding 50% of Total Market Capitalization determined prior to giving effect to the transaction or series of related transactions described in this clause (iv) or in exchange for a number of shares of Common Stock or common equity interests of the Operating Partnership (or securities convertible into, exercisable for or exchangeable for such securities) representing, in the aggregate, more than 40% of the combined sum of the shares outstanding immediately prior to such transaction or series of related transactions of Common Stock and the common equity interests in the Operating Partnership not held by the Corporation or any direct or indirect subsidiary immediately prior to such transaction or series of related transactions; (v) the Corporation effects any recapitalization or restructuring as a result of which more than 25% of the Common Stock is reclassified into shares of preferred stock or changed into or exchanged for cash, preferred stock, evidences of indebtedness, other property (other than Common Stock of the Corporation) or any combination of the foregoing; (vi) the Corporation shall have incurred or suffered to exist Indebtedness (as defined in the Purchase Agreement) exceeding 65% of Total Value and such condition continues to exist 30 days; or (vii) the de-listing by the Corporation or failure by the Corporation to take reasonable actions within its control to not maintain the listing of its Common Stock on the New York Stock Exchange. "FUNDS FROM OPERATIONS" shall mean net income (loss) (computed in accordance with generally accepted accounting principles) excluding gains (or losses) from debt restructuring, and distributions in excess of earnings allocated to other Operating Partnership interests or minority interests (as reflected in the financial statements of the Corporation) plus depreciation/amortization of assets unique to the real estate industry, all computed in a manner consistent with the revised definition of Funds From Operations adopted by the National Association of Real Estate Investment Trusts (NAREIT), in its White Paper dated October, 1999, as such definitions may be modified from time to time, as determined by the Corporation in good faith. "ISSUE DATE" shall mean the date on which the shares of Series C Preferred Stock are issued. "JUNIOR STOCK" shall mean the Common Stock and any other class or series of capital stock of the Corporation now or hereafter issued and outstanding over which the Series C Preferred Stock has preference or priority in the payment of dividends or in the distribution of assets on any liquidation, dissolution or winding up of the Corporation. "LIQUIDATION PREFERENCE" shall have the meaning set forth in Section 4(a). "NON-ELECTING SHARE" shall have the meaning set forth in Section 7(e). "OPERATING PARTNERSHIP" shall mean Home Properties of New York, L.P., and a New York limited partnership. "PARITY STOCK" shall have the meaning set forth in Section 9(b). "PERSON" shall mean any individual, firm, partnership, corporation, limited liability company or other entity, and shall include any successor (by merger or otherwise) of such entity. "PURCHASED SHARES" shall have the meaning set forth in Section 7(d)(iv). "PURCHASE AGREEMENT" shall mean the Purchase Agreement dated as of May ___, 2000 by and among the Corporation, the Operating Partnership and The Prudential Insurance Company of America and Teachers Insurance and Annuity Association of America. "RECORD DATE" shall have the meaning set forth in Section 7(f). "REDEMPTION PRICE" shall have the meaning set forth in Section 5(a). "REIT TERMINATION EVENT" shall mean the earliest to occur of: (i) the filing of a federal income tax return by the Corporation for any taxable year on which the Corporation does not elect to be taxed as a real estate investment trust; (ii) the approval by the stockholders of the Corporation of a proposal for the Corporation to cease to qualify as a real estate investment trust; (iii) the public announcement by the Corporation that it has ceased to qualify as a real estate investment trust; (iv) a determination by the Board of Directors of the Corporation, based on the advice of counsel, that the Corporation has ceased to qualify as a real estate investment trust; or (v) the Corporation or its duly authorized representatives shall receive a determination or conclusion, whether in proposed or final form, from the Internal Revenue Service or one of its representatives that the Corporation has failed to meet the requirements for REIT qualification and taxation as a REIT under Sections 856-860 of the Internal Revenue Code of 1986, as amended, for one or more taxable years, occurring from and after January 1, 1994, including, without limitation, a statutory notice of deficiency, a notice of proposed deficiency, a proposed or final revenue agent's report, a Field Service Advice, Technical Advice Memorandum, or similar conclusion; PROVIDED, HOWEVER, that if the determination or conclusion is in proposed or draft form, such receipt shall not constitute a "REIT Termination Event" unless such determination or conclusion is not withdrawn or otherwise terminated within 270 days following such receipt, or if the Corporation receives an opinion of its independent counsel or accountants that the Corporation's REIT status should be upheld. "REPURCHASE DATE" shall mean the date of repurchase of the shares of Series C Preferred Stock or the date such payment is made available as provided in Section 6(a)(iii). "REPURCHASE OFFER" shall have the meaning set forth in Section 6(a)(ii). "REPURCHASE PRICE" shall have the meaning set forth in Section 6(a)(i). "SECURITIES" and "SECURITY" shall have the meanings set forth in Section 7(d)(iii). "SECURITIES ACT" shall mean the Securities Act of 1933, as amended. "SENIOR STOCK" shall mean any class or series of capital stock of the Corporation hereafter issued and outstanding which has preference or priority over the Series C Preferred Stock in the payment of dividends or in the distribution of assets on any liquidation, dissolution or winding up of the Corporation. "SERIES C PREFERRED STOCK" shall mean the shares of Series C Convertible Cumulative Preferred Stock. "SET APART FOR PAYMENT" shall be deemed to include, without any action other than the following, the recording by the Corporation in its accounting ledgers of any accounting or bookkeeping entry which indicates, pursuant to a declaration of dividends or other distribution by the Board of Directors, the allocation of funds to be so paid on any series or class of shares of capital stock of the Corporation; PROVIDED, HOWEVER, that if any funds for any class or series of Junior Stock or any class or series of shares of capital stock ranking on a parity with the Series C Preferred Stock as to the payment of dividends are placed in a separate account of the Corporation or delivered to a disbursing, paying or other similar agent, then "set apart for payment" with respect to the Series C Preferred Stock shall mean placing such funds in a separate account or delivering such funds to a disbursing, paying or other similar agent. "STATED VALUE" shall mean $100.00 per share of Series C Preferred Stock. "TOTAL VALUE" shall mean as of any date the sum of: (i) the Undepreciated Real Estate Assets; and (ii) all other assets of the Corporation and its subsidiaries on a consolidated basis determined in accordance with GAAP (but excluding intangibles and accounts receivable). "TRADING DAY" shall mean any day on which the securities in question are traded on the NYSE, or if such securities are not listed or admitted for trading on the NYSE, on the principal national securities exchange on which such securities are listed or admitted, or if not listed or admitted for trading on any national securities exchange, on the National Market System of NASDAQ, or if such securities are not quoted on such National Market System, in the securities market in which the securities are traded. "TRANSACTION" shall have the meaning set forth in Section 7(e). "TRANSFER AGENT" shall mean Chase Mellon Shareholder Services or such other agent or agents of the Corporation as may be designated by the Board of Directors or their designee as the transfer agent, registrar and dividend disbursing agent for the Series C Preferred Stock. "UNDEPRECIATED REAL ESTATE ASSETS" shall mean as of any date the cost (original cost plus capital improvements) of real estate assets of the Corporation and its subsidiaries on such date, before depreciation, amortization, or other market value adjustments (as such market value adjustments would otherwise be required by GAAP) determined on a consolidated basis in accordance with GAAP. "UNITS" shall mean Partnership Units as that term is defined in the Second Amended and Restated Agreement of Limited Partnership of the Operating Partnership, as amended. "VOTING PREFERRED STOCK" shall have the meaning set forth in Section 10. Section 3. DIVIDENDS. (a) The holders of shares of Series C Preferred Stock shall be entitled to receive, when, as and if declared by the Board of Directors, out of funds legally available for the payment of dividends accrued, cumulative preferential dividends payable in arrears in cash in an amount per share equal to the greatest of: (i) 8.75% of the Stated Value per annum (equivalent to $ 8.75 per share of Series C Preferred Stock), (ii) the ordinary cash dividends (determined on each Dividend Payment Date) on the shares of Common Stock, or portion thereof, into which a share of Series C Preferred Stock is convertible; or (iii) 9.25% if Section 3(c) is applicable, 11.25% if either Sections 5(f) or 6(d) is applicable, 11.75% if both Section 3(c) and either of Sections 5(f) or 6(d) is applicable and the Change of Control Rate if Section 3(d) is applicable. The dividends referred to in clause (ii) of the preceding sentence shall equal the number of shares of Common Stock, or portion thereof, into which a share of Series C Preferred Stock is convertible, multiplied by the most current quarterly dividend on a share of Common Stock declared on or before the applicable Dividend Payment Date. If the Corporation declares and pays an ordinary cash dividend on the Common Stock with respect to a Dividend Period after a Dividend Payment Date is determined pursuant to clause (ii) of the definition of Dividend Payment Date and the dividend calculated pursuant to clause (ii) of this paragraph (a) with respect to such Dividend Period is greater than the dividend previously declared on the Series C Preferred Stock with respect to such Dividend Period, the Corporation shall pay an additional dividend to the holders of the Series C Preferred Stock on the date on which the dividend on the Common Stock is paid, in an amount equal to the difference between (y) the dividend calculated pursuant to clause (ii) of this paragraph (a) and (z) the amount of dividends previously declared on the Series C Preferred Stock with respect to such Dividend Period. The dividends shall begin to accrue and shall be fully cumulative from the first day of the applicable Dividend Period, whether or not in any Dividend Period or Periods there shall be funds of the Corporation legally available for the payment of such dividends, and shall be payable quarterly in arrears, when, as and if declared by the Board of Directors, on Dividend Payment Dates. Each such dividend shall be payable in arrears to the holders of record of shares of Series C Preferred Stock as they appear in the records of the Corporation at the close of business on such record dates, not fewer than five (5) nor more than 50 days preceding such Dividend Payment Dates thereof, as shall be fixed by the Board of Directors. To the extent that a dividend required by this Section 3 is not paid on any Dividend Payment Date, the amount not paid shall accumulate and accrue interest at the annual rate of 8.75%, or if Section 3(c) is applicable, 9.25%, or if either Section 5(f) or 6(d) is applicable, 11.25%, or if both Section 3(c) and either of Sections 5(f) or 6(d) is applicable, 11.75%, or if Section 3(d) is applicable, the Change of Control Rate, compounded quarterly on each Dividend Payment Date that it remains unpaid. Accrued and unpaid dividends (and any interest thereon) for any past Dividend Periods may be declared and paid at any time and for such interim periods, without reference to any regular Dividend Payment Date, to holders of record on such date, not fewer than five (5) nor more than 50 days preceding the payment date thereof, as may be fixed by the Board of Directors. Any dividend payment made on Series C Preferred Stock shall first be credited against the earliest accrued but unpaid dividend due with respect to Series C Preferred Stock which remains payable. (b) The amount of dividends referred to in clause (i) and (iii) of Section 3(a) payable for each full Dividend Period on the Series C Preferred Stock shall be computed by dividing the annual dividend rate by four. The initial Dividend Period will include a partial dividend for the period from the Issue Date until the last calendar day of the calendar quarter containing the Issue Date. The amount of dividends payable either under clause (i), clause (ii) or clause (iii) for such period, or any other period shorter than a full Dividend Period, on the Series C Preferred Stock shall be computed on the basis of a 360-day year of twelve 30-day months and the amount of such dividend shall equal the dividend payable with respect to the Dividend Period multiplied by a fraction (x) the numerator of which is (i) the number of days from the Issue Date to the end of the Dividend Period, or (ii) the number of days from the beginning of the Dividend Period to the Call Date or the Repurchase Date, as the case may be, and (y) the denominator of which is 90. Holders of shares of Series C Preferred Stock shall not be entitled to any dividends, whether payable in cash, property or shares, in excess of cumulative dividends, as herein provided, on the Series C Preferred Stock. (c) If at any time the Corporation shall have breached the covenants set forth in Section 5.07, Section 5.08 or Section 5.13 of the Purchase Agreement, the dividend rate payable upon the shares of Series C Preferred Stock pursuant to paragraph (a) (i) of this Section 3 shall be increased to 9.25% per annum, from the date of such breach until the date such breach shall have been cured and shall no longer be continuing, subject to revesting in the event of any subsequent breach of such covenant which continues as aforesaid. For purposes of this Section 3(c), the date of breach shall be deemed to mean the first day on which such breach occurs. If the existence of such breach is determined after the dividend record date for the quarter in which the breach occurred (the "Default Quarter"), then the dividend for the next quarter shall equal the sum of the dividend as computed in accordance with this Section 3 plus an amount equal to the difference between the dividend actually paid in the Default Quarter and the dividend that would have been paid for the Default Quarter if the breach had been known by the Corporation on the record date of the Default Quarter. (d) If at any time a Change of Control shall occur, the dividend rate payable upon the shares of Series C Preferred Stock shall be increased from and after the date of such Change of Control to a per annum rate equal to 8.00% above the then published (in the Wall Street Journal) U.S. Treasury maturing on the date closest to the five year anniversary of the date the Change of Control occurs, such rate to be fixed as of the date such Change of Control occurs (the "CHANGE OF CONTROL RATE"). (e) So long as any shares of Series C Preferred Stock are outstanding, no dividends, except as described in the immediately following sentence, shall be declared or paid or set apart for payment on any class or series of Parity Stock for any period unless full cumulative dividends have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment thereof set apart for such payment on the Series C Preferred Stock for all Dividend Periods terminating on or prior to the dividend payment date on such class or series of Parity Stock. When dividends are not paid in full or a sum sufficient for such payment is not set apart, as aforesaid, all dividends declared upon Series C Preferred Stock and all dividends declared upon any other class or series of Parity Stock (having cumulative dividend rights) shall be declared ratably in proportion to the respective amounts of dividends accumulated and unpaid on the Series C Preferred Stock and accumulated and unpaid on such Parity Stock. (f) So long as any shares of Series C Preferred Stock are outstanding, no dividends (other than dividends or distributions paid solely in shares of, or options, warrants or rights to subscribe for or purchase shares of, Fully Junior Stock) shall be declared or paid or set apart for payment or other distribution shall be declared or made or set apart for payment upon Junior Stock, nor shall any Junior Stock be redeemed, purchased or otherwise acquired (other than a redemption, purchase or other acquisition of Common Stock made for purposes of an employee incentive or benefit plan of the Corporation or any subsidiary) for any consideration (or any moneys be paid to or made available for a sinking fund for the redemption of any Junior Stock) by the Corporation, directly or indirectly (except by conversion into or exchange for Fully Junior Stock), unless in each case (i) the full cumulative dividends (and interest thereon) on all outstanding Senior Stock, Series C Preferred Stock and any other Parity Stock of the Corporation shall have been or contemporaneously are declared and paid or declared and set apart for payment for all dividend periods with respect to the Senior Stock, all past Dividend Periods with respect to the Series C Preferred Stock and all past dividend periods with respect to such Parity Stock, (ii) sufficient funds shall have been or contemporaneously are set apart for the payment in full of the dividend for the current dividend period with respect to the Senior Stock, the current Dividend Period with respect to the Series C Preferred Stock and the current dividend period with respect to such Parity Stock and (iii) sufficient funds shall have been or contemporaneously are set apart for payment in full of any obligations of the Corporation in respect of Series C Preferred Stock called for redemption by the Corporation pursuant to Section 5 or required to be repurchased by any Holder pursuant to Section 6. (g) No distributions on Series C Preferred Stock shall be declared by the Board of Directors or paid or set apart for payment by the Corporation at such time as the terms and provisions of any agreement of the Corporation, including any agreement relating to its indebtedness, prohibits such declaration, payment or setting apart for payment or provides that such declaration, payment or setting apart for payment would constitute a breach thereof or a default thereunder, or if such declaration or payment shall be restricted or prohibited by law. Section 4. LIQUIDATION PREFERENCE. (a) In the event of any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, before any payment or distribution of the assets of the Corporation (whether capital or surplus) shall be made to or set apart for the holders of Junior Stock, the holders of shares of the Series C Preferred Stock shall be entitled to receive the greater of (x) One Hundred Dollars ($100.00) per share of Series C Preferred Stock plus an amount equal to all dividends (whether or not declared) accumulated, accrued and unpaid thereon (and any interest thereon as calculated pursuant to Section 3(a)) to the date of final distribution to such holders or (y) the amount per share a holder would receive if such holder converted his or her Series C Preferred Stock into Common Stock immediately prior to such liquidation, dissolution or winding-up, (the "LIQUIDATION PREFERENCE"); but such holders shall not be entitled to any further payment; PROVIDED, that the dividend payable with respect to the Dividend Period containing the date of final distribution shall be equal to the greater of (i) the dividend provided in Section 3(a)(i) or (iii) as applicable or (ii) the dividend determined pursuant to Section 3(a)(ii) for the preceding Dividend Period. If, upon any liquidation, dissolution or winding up of the Corporation, the assets of the Corporation, or proceeds thereof, distributable among the holders of the shares of Series C Preferred Stock shall be insufficient to pay in full the preferential amount aforesaid and liquidating payments on any other shares of any class or series of Parity Stock, then such assets, or the proceeds thereof, shall be distributed among the holders of Series C Preferred Stock and any such other Parity Stock ratably in accordance with the respective amounts that would be payable on such Series C Preferred Stock and any such other Parity Stock if all amounts payable thereon were paid in full. For the purposes of this Section 4, (i) a consolidation or merger of the Corporation with one or more corporations, real estate investment trusts or other entities, (ii) a sale, lease or conveyance of all or substantially all of the Corporation's property or business, or (iii) a statutory share exchange shall not be deemed to be a liquidation, dissolution or winding up, voluntary or involuntary, of the Corporation. (b) Subject to the rights of the holders of shares of any series or class or classes of shares of capital stock ranking on a parity with or prior to the Series C Preferred Stock upon liquidation, dissolution or winding up, upon any liquidation, dissolution or winding up of the Corporation, after payment shall have been made in full to the holders of the Series C Preferred Stock, as provided in this Section 4, any other series or class or classes of Junior Stock shall, subject to the respective terms and provisions (if any) applying thereto, be entitled to receive any and all assets remaining to be paid or distributed, and the holders of the Series C Preferred Stock shall not be entitled to share therein. (c) Notwithstanding subclause (a) above, at any time prior to the payment of the Liquidation Preference, the holders of the Series C Preferred Stock may exercise their conversion rights pursuant to Section 7 hereof. Section 5. REDEMPTION AT THE OPTION OF THE CORPORATION. (a) Except as provided in paragraph (b) below, the Series C Preferred Stock shall not be redeemable by the Corporation prior to the fifth anniversary of the Issue Date. The Series C Preferred Stock may be redeemed, in whole, but not in part, at the option of the Corporation at any time on or after the fifth anniversary of the Issue Date out of funds legally available therefor at a redemption price payable in cash equal to the Stated Value per share of Series C Preferred Stock (the "REDEMPTION PRICE"). (b) If a Change of Control shall occur on or after the first anniversary of the Issue Date, the Corporation shall have the right, to the extent that the Corporation shall have funds legally available therefor, to redeem, in whole, but not in part, the outstanding shares of Series C Preferred Stock at a redemption price payable in cash in an amount equal to the Change of Control Price, by notice in writing to the holders of Series C Preferred Stock no later than 30 days following the occurrence of such Change of Control. (c) Upon any redemption of shares of Series C Preferred Stock pursuant to this Section 5, and except for dividends paid pursuant to the next sentence, the Corporation shall pay all dividends (whether or not declared) accumulated, accrued and unpaid thereon (and any interest thereon), if any, to the Call Date. If the Call Date falls after a Dividend Payment Record Date and prior to the corresponding Dividend Payment Date, then each holder of shares of Series C Preferred Stock at the close of business on such Dividend Payment Record Date shall be entitled to the dividend payable on such shares on the corresponding Dividend Payment Date notwithstanding any redemption of such shares before such Dividend Payment Date. (d) If full cumulative dividends on the Series C Preferred Stock and any other class or series of Parity Stock of the Corporation have not been declared and paid or declared and set apart for payment, the Series C Preferred Stock may not be redeemed under paragraph (a) or (b) of this Section 5 and, except as provided in Section 6(b) of the Purchase Agreement, the Corporation may not purchase or acquire shares of Series C Preferred Stock, otherwise than pursuant to a purchase or exchange offer made on the same terms to all holders of Series C Preferred Stock. The Corporation may not exercise its redemption rights pursuant to Section 5 (a) or (b) above unless there are sufficient legally available funds to redeem all shares of Series C Preferred Stock. Notwithstanding anything contained in this Section 5 to the contrary, at any time prior to the Call Date, the holders of the Series C Preferred Stock may exercise their conversion rights pursuant to Section 7 hereof. (e) Notice of the redemption of any shares of Series C Preferred Stock under this Section 5 shall be mailed by overnight courier or registered U.S. mail to each holder of record of shares of Series C Preferred Stock to be redeemed at the address of each such holder as shown on the Corporation's records, not fewer than 30 nor more than 60 days prior to the Call Date. Neither the failure to mail any notice required by this paragraph (e), nor any defect therein or in the mailing thereof, to any particular holder, shall affect the sufficiency of the notice or the validity of the proceedings for redemption with respect to the other holders. Any notice which was mailed in the manner herein provided shall be conclusively presumed to have been duly given on the date mailed whether or not the holder receives the notice. Each such mailed notice shall state, as appropriate: (1) the Call Date; (2) the redemption price; (3) the place or places at which certificates for such shares are to be surrendered; (4) the then-current Conversion Price; and (5) that dividends on the shares to be redeemed shall cease to accrue on such Call Date except as otherwise provided herein. Notice having been mailed as aforesaid, from and after the Call Date (unless the Corporation shall fail to make available an amount of cash necessary to effect such redemption), (i) except as otherwise provided herein, dividends on the shares of Series C Preferred Stock so called for redemption shall cease to accrue, (ii) such shares shall no longer be deemed to be outstanding, and (iii) all rights of the holders thereof as holders of shares of Series C Preferred Stock of the Corporation shall cease (except the rights to convert or to receive the redemption price, without interest thereon, upon surrender and endorsement of their certificates if so required and to receive any dividends accrued and payable thereon to the Call Date). The Corporation's obligation to provide cash in accordance with the preceding sentence shall be deemed fulfilled if, on or before the Call Date, the Corporation shall deposit with a bank or trust company (which may be an affiliate of the Corporation) that has an office in the Borough of Manhattan, City of New York, and that has, or is an affiliate of a bank or trust company that has, capital and surplus of at least $500,000,000, the funds in cash necessary for such redemption, in trust, with irrevocable instructions that such cash be applied to the redemption of the shares of Series C Preferred Stock so called for redemption. No interest shall accrue for the benefit of the holders of shares of Series C Preferred Stock to be redeemed on any cash so set aside by the Corporation. Subject to applicable escheat laws, any such cash unclaimed at the end of six (6) months from the Call Date shall revert to the general funds of the Corporation, after which reversion the holders of such shares so called for redemption shall look only to the general funds of the Corporation for the payment of such cash. Immediately after the surrender in accordance with such notice of the certificates for any such shares so redeemed (properly endorsed or assigned for transfer, if the Corporation shall so require and if the notice shall so state), such shares shall be exchanged for the Redemption Price or Change of Control Price, as applicable, (without interest thereon) for which such shares have been redeemed. (f) If the Corporation does not pay the full Redemption Price, in accordance with this Section 5 (in circumstances where the Redemption Price is not the Change of Control Price), the dividend rate payable upon the shares of Series C Preferred Stock pursuant to Section 3(a) of these Articles Supplementary shall be increased to 11.25% per annum, from the date of such failure until the full Redemption Price has been paid. Section 6. REPURCHASE UPON FUNDAMENTAL CHANGE OR REIT TERMINATION EVENT. (a) If a Fundamental Change or REIT Termination Event shall occur: (i) Each holder of shares of Series C Preferred Stock shall have the right to require the Corporation, to the extent that the Corporation shall have funds legally available therefor, to repurchase, in whole or in part, such holder's shares of Series C Preferred Stock held on the date that such holder receives the notice described in subsection 6(a)(ii) at a repurchase price (the "REPURCHASE PRICE") payable in cash in an amount equal to 105% of the Stated Value plus an amount equal to all dividends (whether or not declared), accumulated, accrued and unpaid thereon (and any interest thereon) to the date of the repurchase in each case as described below; PROVIDED, HOWEVER, that if a REIT Termination Event or Fundamental Change occurs subsequent to five (5) years following the Issue Date, the Repurchase Price shall equal 100% of the Stated Value plus an amount equal to all dividends (whether or not declared), accumulated, accrued and unpaid thereon (and any interest thereon) to the date of the repurchase. (ii) Within ten (10) days following the Corporation becoming aware that a Fundamental Change or REIT Termination Event has occurred, the Corporation shall mail by overnight courier or registered U.S. mail a notice (the "REPURCHASE OFFER") to each holder of shares of Series C Preferred Stock stating (A) that a Fundamental Change or REIT Termination Event has occurred, describing in general terms the nature of such event, and that such holder has the right to require the Corporation to repurchase all shares of Series C Preferred Stock then held by such holder in cash; (B) the Repurchase Date (which shall be a Business Day, no earlier than 30 days and no later than 60 days from the date such notice is mailed, or such later date as may be necessary to comply with the requirements of the Exchange Act); (C) the Repurchase Price; (D) the place or places at which certificates for such shares are to be surrendered; (E) that dividends on the shares to be repurchased shall cease to accrue on such Repurchase Date except as otherwise provided herein; and (F) the instructions determined by the Corporation, consistent with this subsection, that such holder must follow in connection with the repurchase of its shares of Series C Preferred Stock. (iii) On the Repurchase Date, the Corporation shall, to the extent lawful (and to the extent any payment is unlawful, promptly after the date on which such payment thereafter becomes lawful), accept for payment the shares of Series C Preferred Stock tendered pursuant to the Repurchase Offer described in Subsection 6(a)(ii). The Corporation's obligation to provide cash in accordance with Subsection 6(a)(ii) shall be deemed fulfilled if, on or before the Repurchase Date, the Corporation shall deposit with a bank or trust company (which may be an affiliate of the Corporation) that has an office in the Borough of Manhattan, City of New York, and that has, or is an affiliate of a bank or trust company that has, capital and surplus of at least $500,000,000, the funds necessary for such repurchase of all shares of Series C Preferred Stock so tendered, in trust, with irrevocable instructions that such funds be applied to the repurchase of the shares of Series C Preferred Stock so tendered for repurchase. No interest shall accrue for the benefit of the holders of shares of Series C Preferred Stock to be repurchased on any funds so set aside by the Corporation. Subject to applicable escheat laws, any such funds unclaimed at the end of six months from the Repurchase Date shall revert to the general funds of the Corporation, after which reversion the holders of such shares so called for repurchase shall look only to the general funds of the Corporation for the payment of such funds. (iv) Immediately after the surrender in accordance with such notice of the certificates for any such shares so repurchased (properly endorsed or assigned for transfer, if the Corporation shall so require and if the notice shall so state), such shares shall be exchanged for any cash (without interest thereon) for which such shares have been repurchased. (b) Notwithstanding anything else herein, to the extent they are applicable to any such repurchase, the Corporation will comply with any federal and state securities laws, rules and regulations and all time periods and requirements shall be adjusted accordingly. (c) The Corporation may, upon ten (10) Business Days' advance notice to each holder of the Series C Preferred Stock of a Fundamental Change, request a waiver of such holder's rights under this Section 6; PROVIDED, HOWEVER, that the failure of any holder to respond to or otherwise act upon such request shall not be deemed to create or imply a waiver or otherwise affect any holder's rights under this Section 6. (d) If the Corporation does not pay the full Repurchase Price in accordance with this Section 6, the dividend rate payable upon the shares of Series C Preferred Stock pursuant to Section 3(a) of these Articles Supplementary shall be increased to 11.25% per annum, from the date of such failure until the full Repurchase Price has been paid. Section 7. CONVERSION. Holders of shares of Series C Preferred Stock shall have the right to convert all or a portion of such shares into shares of Common Stock, as follows: (a) Subject to and upon compliance with the provisions of this Section 7 and the provisions of Article VII of the Corporation's Articles of Incorporation, a holder of shares of Series C Preferred Stock shall have the right, at any time, at his or her option, to convert such shares into the number of fully paid and non-assessable shares of Common Stock obtained by dividing the aggregate Stated Value of such shares plus any accumulated, accrued and unpaid dividends (except for the quarter in which the conversion occurred, whether or not declared) (and any interest thereon through the date of conversion) by the Conversion Price (as in effect at the time and on the date provided for in the last paragraph of paragraph (b) of this Section 7). (b) In order to exercise the conversion right, the holder of each share of Series C Preferred Stock to be converted shall surrender the certificate representing such share, duly endorsed or assigned to the Corporation or in blank, at the office of the Transfer Agent, accompanied by written notice to the Corporation that the holder thereof elects to convert such share of Series C Preferred Stock. Unless the shares issuable on conversion are to be issued in the same name as the name in which such Series C Preferred Stock is registered, each share surrendered for conversion shall be accompanied by instruments of transfer, in form reasonably satisfactory to the Corporation, duly executed by the holder or such holder's duly authorized attorney and an amount sufficient to pay any transfer or similar tax (or evidence reasonably satisfactory to the Corporation demonstrating that such taxes have been paid). Holders of shares of Series C Preferred Stock at the close of business on a Dividend Payment Record Date shall be entitled to receive the dividend payable on such shares on the corresponding Dividend Payment Date notwithstanding the conversion thereof following such Dividend Payment Record Date and prior to such Dividend Payment Date. The Corporation shall make no payment or allowance for undeclared dividends on the shares of Series C Preferred Stock that would have accrued otherwise in the quarter in which the conversion occurred. As promptly as practicable after the surrender of certificates for shares of Series C Preferred Stock as aforesaid (and in any event within three (3) business days following such surrender), the Corporation shall issue and shall deliver at such office to such holder, or on his or her written order, a certificate or certificates for the number of full shares of Common Stock issuable upon the conversion of such shares in accordance with provisions of this Section 7, and any fractional interest in respect of a share of Common Stock arising upon such conversion shall be settled as provided in paragraph (c) of this Section 7. In addition, the Corporation shall issue and deliver to such a holder a certificate or certificates evidencing any shares of Series C Preferred Stock that were evidenced by the certificate or certificates delivered to the Corporation in connection with such conversion but that were not converted. Each conversion shall be deemed to have been effected immediately prior to the close of business on the date on which the certificates for the shares of Series C Preferred Stock to be converted shall have been surrendered and such notice shall have been received by the Corporation as aforesaid, and the person or persons in whose name or names any certificate or certificates for shares of Common Stock shall be issuable upon such conversion shall be deemed to have become the holder or holders of record of the shares represented thereby at such time on such date and such conversion shall be at the Conversion Price in effect at such time on such date unless the share transfer books of the Corporation shall be closed on that date, in which event such person or persons shall be deemed to have become such holder or holders of record at the close of business on the next succeeding day on which such share transfer books are open, but such conversion shall be at the Conversion Price in effect on the date on which such surrendered shares shall have been surrendered and such notice is received by the Corporation. (c) No fractional shares or scrip representing fractions of shares of Common Stock shall be issued upon conversion of the shares of Series C Preferred Stock. Instead of any fractional interest in a share of Common Stock that would otherwise be deliverable upon the conversion of a share of Series C Preferred Stock, the Corporation shall pay to the holder of such share an amount in cash based upon the Current Market Price of the Common Stock on the Trading Day immediately preceding the date of conversion. If more than one share shall be surrendered for conversion at one time by the same holder, the number of full shares of Common Stock issuable upon conversion thereof shall be computed on the basis of the aggregate number of Series C Preferred Stock so surrendered. (d) The Conversion Price shall be adjusted from time to time as follows: (i) If the Corporation shall, after the Issue Date: (A) pay a dividend or make a distribution on its capital shares in shares of Common Stock, (B) subdivide (by any share split, share dividend, recapitalization or otherwise) its outstanding shares of Common Stock into a greater number of shares, (C) combine (by reverse stock split or otherwise) its outstanding shares of Common Stock into a smaller number of shares or (D) issue any shares of capital stock by reclassification of its shares of Common Stock, the Conversion Price in effect at the opening of business on the day following the date fixed for the determination of stockholders entitled to receive such dividend or distribution or at the opening of business on the Business Day next following the day on which such subdivision, combination or reclassification becomes effective, as the case may be, shall be adjusted so that the holder of any shares of Series C Preferred Stock thereafter surrendered for conversion shall be entitled to receive the number of shares of Common Stock that such holder would have owned or have been entitled to receive after the happening of any of the events described above as if such shares of Series C Preferred Stock had been converted immediately prior to the record date in the case of a dividend or distribution or the effective date in the case of a subdivision, combination or reclassification. An adjustment made pursuant to this subparagraph (i) shall become effective immediately after the opening of business on the Business Day next following the record date (except as provided in paragraph (h) below) in the case of a dividend or distribution and shall become effective immediately after the opening of business on the Business Day next following the effective date in the case of a subdivision, combination or reclassification. (ii) If the Corporation shall issue after the Issue Date rights, options or warrants to all holders of Common Stock entitling them (for a period expiring within 45 days after the record date mentioned below) to subscribe for or purchase shares of Common Stock at a price per share less than the Conversion Adjustment Price per share of Common Stock on the record date for the determination of stockholders entitled to receive such rights, options or warrants, then the Conversion Price in effect at the opening of business on the Business Day next following such record date shall be adjusted to equal the price determined by dividing: (a) the sum of (1) the product derived by multiplying (i) the Conversion Price in effect immediately prior to such issuance or sale times (ii) the outstanding shares of Common Stock immediately prior to such issuance or sale, plus (2) the gross proceeds, if any, received by the Corporation upon such issuance or sale (including any gross consideration payable upon exercise of such rights, options or warrants; by (b) the outstanding shares of Common Stock (including the number of additional shares of Common Stock offered for subscription or purchase pursuant to such rights, options or warrants) immediately after such issuance or sale. Such adjustment shall become effective immediately after the opening of business on the day next following such record date (except as provided in paragraph (h) below). In determining whether any rights, options or warrants entitle the holders of shares of Common Stock to subscribe for or purchase shares of Common Stock at less than the Conversion Adjustment Price, there shall be taken into account any consideration received by the Corporation upon issuance and upon exercise of such rights, options or warrants, the value of such consideration, if other than cash, to be determined in good faith by the Board of Directors. (iii) If the Corporation shall distribute to all holders of Common Stock any securities of the Corporation (other than shares of Common Stock) or evidence of its indebtedness or assets (excluding cumulative cash dividends or distributions paid with respect to the shares of Common Stock after December 31, 1999 which are not in excess of the following: the sum of (A) the Corporation's cumulative undistributed Funds from Operations at December 31, 1999, plus (B) the cumulative amount of Funds from Operations, as determined by the Board of Directors, after December 31, 1999, minus (C) the cumulative amount of dividends accrued or paid in respect of the Series C Preferred Stock or any other class or series of preferred stock of the Corporation after the Issue Date) or rights, options or warrants to subscribe for or purchase any of its securities (excluding those rights, options and warrants issued to all holders of shares of Common Stock entitling them for a period expiring within 45 days after the record date referred to in subparagraph (ii) above to subscribe for or purchase shares of Common Stock, which rights and warrants are referred to in and treated under subparagraph (ii) above) (any of the foregoing being hereinafter in this subparagraph (iii) collectively called the "SECURITIES" and individually a "SECURITY"), then in each such case the Conversion Price shall be adjusted so that it shall equal the price determined by multiplying (x) the Conversion Price in effect immediately prior to the close of business on the date fixed for the determination of stockholders entitled to receive such distribution by (y) a fraction, the numerator of which shall be the Conversion Price per share of Common Stock on the record date for the determination of stockholders entitled to receive such distribution less the then fair market value (as determined by the Board of Directors, whose determination shall be conclusive), of the portion of the Securities or assets or evidences of indebtedness so distributed or of such rights, options or warrants applicable to one share of Common Stock, and the denominator of which shall be the Conversion Price per share of Common Stock on the record date for the determination of stockholders entitled to receive such distribution. Such adjustment shall become effective immediately at the opening of business on the Business Day next following (except as provided in paragraph (h) below) the record date for the determination of stockholders entitled to receive such distribution. For the purposes of this subparagraph (iii), the distribution of a Security, which is distributed not only to the holders of the shares of Common Stock on the date fixed for the determination of stockholders entitled to such distribution of such Security, but also is distributed with each share of Common Stock delivered to a Person converting a share of Series C Preferred Stock after such determination date, shall not require an adjustment of the Conversion Price pursuant to this subparagraph (iii); PROVIDED that on the date, if any, on which a person converting a share of Series C Preferred Stock would no longer be entitled to receive such Security with a share of Common Stock (other than as a result of the termination of all such Securities), a distribution of such Securities shall be deemed to have occurred and the Conversion Price shall be adjusted as provided in this subparagraph (iii) (and such day shall be deemed to be "the date fixed for the determination of the stockholders entitled to receive such distribution" and "the record date" within the meaning of the two preceding sentences). (iv) In case a tender or exchange offer (which term shall not include open market repurchases by the Corporation) made by the Corporation or any subsidiary of the Corporation for all or any portion of the shares of Common Stock shall expire and such tender or exchange offer shall involve the payment by the Corporation or such subsidiary of consideration per share of Common Stock having a fair market value (as determined in good faith by the Board of Directors, whose determination shall be conclusive and described in a resolution of the Board of Directors), at the last time (the "EXPIRATION TIME") tenders or exchanges may be made pursuant to such tender or exchange offer, that exceeds the Conversion Adjustment Price per share of Common Stock on the Trading Day next succeeding the Expiration Time, the Conversion Price shall be reduced to equal the price determined by multiplying the Conversion Price in effect immediately prior to the effectiveness of the Conversion Price reduction contemplated by this subparagraph, by a fraction of which the numerator shall be the number of shares of Common Stock outstanding (including any tendered or exchanged shares) at the Expiration Time, multiplied by the Conversion Adjustment Price per share of Common Stock on the Trading Day next succeeding the Expiration Time, and the denominator shall be the sum of (A) the fair market value (determined as aforesaid) of the aggregate consideration payable to stockholders based upon the acceptance (up to any maximum specified in the terms of the tender or exchange offer) of all shares validly tendered or exchanged and not withdrawn as of the Expiration Time (the shares deemed so accepted, up to any maximum, being referred to as the "PURCHASED SHARES") and (B) the product of the number of shares of Common Stock outstanding (less any Purchased Shares) at the Expiration Time and the Conversion Adjustment Price per share of Common Stock on the Trading Day next succeeding the Expiration Time, such reduction to become effective immediately prior to the opening of business on the day following the Expiration Time. (v) If the Corporation shall, after the Issue Date, issue or sell shares of its Common Stock or securities convertible or exchangeable into Common Stock ("Convertible Securities") for a gross consideration per share (including any gross consideration payable upon conversion or exchange of the Convertible Securities) less than the Conversion Adjustment Price in effect immediately prior to the time of such issue or sale, then upon such issue or sale, the Conversion Price shall be reduced to an amount determined by dividing (a) the sum of (1) the product derived by multiplying (i) the Conversion Price in effect immediately prior to such issuance or sale times (ii) the outstanding shares of Common Stock immediately prior to such issuance or sale, plus (2) the gross proceeds, if any, received by the Corporation upon such issuance or sale (including any gross consideration payable upon conversion or exchange of the Convertible Securities) , by (b) the outstanding shares of Common Stock (assuming the full conversion or exercise of all such Convertible Securities) immediately after such issuance or sale. (vi) No adjustment in the Conversion Price shall be required unless such adjustment would require a cumulative increase or decrease of at least 1% in such price; PROVIDED, HOWEVER, that any adjustments that by reason of this subparagraph (vi) are not required to be made shall be carried forward and taken into account in any subsequent adjustment until made; and PROVIDED, FURTHER, that any adjustment shall be required and made in accordance with the provisions of this Section 7 (other than this subparagraph (vi)) not later than such time as may be required in order to preserve the tax-free nature of a distribution to the holders of shares of Common Stock. Notwithstanding any other provisions of this Section 7, the Corporation shall not be required to make any adjustment of the Conversion Price: (a) for the issuance of any shares of Common Stock pursuant to any plan providing for the reinvestment of dividends or interest payable on securities of the Corporation and the investment of additional optional amounts of cash in shares of Common Stock under such plan; (b) the issuance of options and the shares of Common Stock issued upon exercise of such options pursuant to an employee or director stock option program approved by the Board of Directors of the Corporation; or (c) the issuance of limited partnership interests in the Operating Partnership, or any other equity or debt securities which are convertible, directly or indirectly, into or exchangeable for Common Stock in connection with the acquisition of property or real estate operating businesses or equity interests in such businesses and the Common Stock issued upon conversion thereof. All calculations under this Section 7 shall be made to the nearest cent (with $.005 being rounded upward) or to the nearest one-tenth of a share (with .05 of a share being rounded upward), as the case may be. Anything in this paragraph (d) to the contrary notwithstanding, the Corporation shall be entitled, to the extent permitted by law, to make such reductions in the Conversion Price, in addition to those required by this paragraph (d), as it in its discretion shall determine to be advisable in order that any share dividends, subdivision of shares, reclassification or combination of shares, distribution of rights or warrants to purchase shares or securities, or distribution of other assets (other than cash dividends) hereafter made by the Corporation to its stockholders shall not be taxable. (e) If the Corporation shall be a party to any transaction (including without limitation a merger, consolidation, statutory share exchange, self tender offer for all or substantially all of its Common Stock, sale of all or substantially all of the Corporation's assets or recapitalization of the shares of Common Stock and excluding any transaction as to which subparagraph (d)(i) of this Section 7 applies) (each of the foregoing being referred to herein as a "TRANSACTION"), in each case as a result of which all or substantially all of the shares of Common Stock are converted into the right to receive shares, securities or other property (including cash or any combination thereof), each share of Series C Preferred Stock which is not redeemed or converted into the right to receive shares, securities or other property prior to such Transaction shall thereafter be convertible into the kind and amount of shares, securities and other property (including cash or any combination thereof) receivable upon the consummation of such Transaction by a holder of that number of shares of Common Stock into which one share of Series C Preferred Stock was convertible immediately prior to such Transaction, assuming such holder of Common Stock (i) is not a Person with which the Corporation consolidated or into which the Corporation merged or which merged into the Corporation or to which such sale or transfer was made, as the case may be ("CONSTITUENT PERSON"), or an affiliate of a Constituent Person and (ii) failed to exercise his rights of election, if any, as to the kind or amount of shares, securities and other property (including cash) receivable upon such Transaction (provided that if the kind or amount of shares, securities and other property (including cash) receivable upon such Transaction is not the same for each share of Common Stock held immediately prior to such Transaction by other than a Constituent Person or an affiliate thereof and in respect of which such rights of election shall not have been exercised ("NON-ELECTING SHARE"), then for the purpose of this paragraph (e) the kind and amount of shares, securities and other property (including cash) receivable upon such Transaction by each Non-Electing Share shall be deemed to be the kind and amount so receivable per share by a plurality of the Non-Electing Shares). The Corporation shall not be a party to any Transaction unless the terms of such Transaction are consistent with the provisions of this paragraph (e), and it shall not consent or agree to the occurrence of any Transaction until the Corporation has entered into an agreement with the successor or purchasing entity, as the case may be, for the benefit of the holders of the shares of Series C Preferred Stock that will contain provisions enabling the holders of the shares of Series C Preferred Stock that remain outstanding after such Transaction to convert into the consideration received by holders of shares of Common Stock at the Conversion Price in effect immediately prior to such Transaction. The provisions of this paragraph (e) shall similarly apply to successive Transactions. (f) If: (i) the Corporation shall declare a dividend (or any other distribution) on its Common Stock (other than cash dividends or distributions paid with respect to the shares of Common Stock after December 31, 1999 not in excess of the sum of the Corporation's cumulative undistributed Funds from Operations at December 31, 1999, plus the cumulative amount of Funds from Operations, as determined by the Board of Directors, after December 31, 1999, minus the cumulative amount of dividends accrued or paid in respect of the shares of Series C Preferred Stock or any other class or series of preferred stock of the Corporation after the Issue Date); or (ii) the Corporation shall authorize the granting to all holders of shares of Common Stock of rights, options or warrants to subscribe for or purchase any shares of any class or any other rights, options or warrants; or (iii) there shall be any reclassification of the shares of Common Stock (other than an event to which subparagraph (d)(i) of this Section 7 applies) or any consolidation or merger to which the Corporation is a party and for which approval of any stockholders of the Corporation is required, or a statutory share exchange, or a self tender offer by the Corporation for all or substantially all of its outstanding shares of Common Stock or the sale or transfer of all or substantially all of the assets of the Corporation as an entirety; (iv) there shall occur the voluntary or involuntary liquidation, dissolution or winding up of the Corporation; or (v) there shall be any other event which would require an adjustment to the Conversion Price pursuant to this Section 7; then the Corporation shall cause to be filed with the Transfer Agent and shall cause to be mailed to the holders of shares of Series C Preferred Stock at their addresses as shown on the records of the Corporation a notice stating (A) the date on which a record is to be taken (the "RECORD DATE") for the purpose of such dividend, distribution or granting of rights, options or warrants, or, if a record is not to be taken, the date as of which the holders of shares of Common Stock of record to be entitled to such dividend, distribution or rights, options or warrants are to be determined or (B) the date on which such reclassification, consolidation, merger, statutory share exchange, self tender offer, sale, transfer, liquidation, dissolution or winding up is expected to become effective (the "EFFECTIVE DATE"), and the date as of which it is expected that holders of shares of Common Stock of record shall be entitled to exchange their shares of Common Stock for securities or other property, if any, deliverable upon such reclassification, consolidation, merger, statutory share exchange, sale, self tender offer, transfer, liquidation, dissolution or winding up. Such notice shall be given to the holders of shares of Series C Preferred Stock as promptly as possible, but in all cases at least ten (10) days prior to the Record Date for purposes of clause (A) above and the Effective Date for purposes of clause (B) above, as the case may be. Failure to give or receive such notice or any defect therein shall not affect the legality or validity of the proceedings described in this Section 7. (g) Whenever the Conversion Price is adjusted as herein provided, the Corporation shall promptly file with the Transfer Agent an officer's certificate setting forth the Conversion Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment which certificate shall be conclusive evidence of the correctness of such adjustment absent manifest error. Promptly after delivery of such certificate, the Corporation shall prepare a notice of such adjustment of the Conversion Price setting forth the adjusted Conversion Price and the effective date of such adjustment and shall mail such notice of such adjustment of the Conversion Price to the holder of each share of Series C Preferred Stock at such holder's last address as shown on the records of the Corporation. (h) In any case in which paragraph (d) of this Section 7 provides that an adjustment shall become effective on the day next following the record date for an event, the Corporation may defer until the occurrence of such event (A) issuing to the holder of any share of Series C Preferred Stock converted after such record date and before the occurrence of such event the additional shares of Common Stock issuable upon such conversion by reason of the adjustment required by such event over and above the shares of Common Stock issuable upon such conversion before giving effect to such adjustment and (B) paying to such holder any amount of cash in lieu of any fraction pursuant to paragraph (c) of this Section 7. (i) There shall be no adjustment of the Conversion Price in case of the issuance of any shares of capital stock of the Corporation in a reorganization, acquisition or other similar transaction except as specifically set forth in this Section 7. If any action or transaction would require adjustment of the Conversion Price pursuant to more than one paragraph of this Section 7, only one adjustment shall be made and such adjustment shall be the amount of adjustment that has the highest absolute value. (j) If the Corporation shall take any action affecting the shares of Common Stock, other than actions described in this Section 7, that in the opinion of the Board of Directors would materially and adversely affect the conversion rights of the holders of the shares of Series C Preferred Stock, the Conversion Price for the shares of Series C Preferred Stock may be adjusted, to the extent permitted by law, in such manner, if any, and at such time, as the Board of Directors, in its sole discretion, may determine to be equitable in the circumstances. (k) The Corporation covenants that it will at all times reserve and keep available, free from preemptive rights, out of the aggregate of its authorized but unissued shares of Common Stock, for the purpose of effecting conversion of the shares of Series C Preferred Stock, the full number of shares of Common Stock deliverable upon the conversion of all outstanding shares of Series C Preferred Stock not theretofore converted. For purposes of this paragraph (k), the number of shares of Common Stock that shall be deliverable upon the conversion of all outstanding shares of Series C Preferred Stock shall be computed as if at the time of computation all such outstanding shares were held by a single holder. The Corporation covenants that any shares of Common Stock issued upon conversion of the shares of Series C Preferred Stock shall be validly issued, fully paid and non-assessable. Before taking any action that would cause an adjustment reducing the Conversion Price below the then-par value of the shares of Common Stock deliverable upon conversion of the shares of Series C Preferred Stock, the Corporation will take any action that, in the opinion of its counsel, may be necessary in order that the Corporation may validly and legally issue fully paid and (subject to any customary qualification based upon the nature of a real estate investment trust) non-assessable shares of Common Stock at such adjusted Conversion Price. The Corporation shall endeavor to list the shares of Common Stock required to be delivered upon conversion of the shares of Series C Preferred Stock, prior to such delivery, upon each national securities exchange, if any, upon which the outstanding shares of Common Stock are listed at the time of such delivery. The Corporation shall endeavor to comply with all federal and state securities laws and regulations thereunder in connection with the issuance of any securities that the Corporation shall be obligated to deliver upon conversion of the shares of Series C Preferred Stock. The certificates evidencing such securities shall bear such legends restricting transfer thereof in the absence of registration under applicable securities laws or an exemption therefrom as the Corporation may in good faith deem appropriate. (l) The Corporation will pay any and all documentary stamp or similar issue or transfer taxes payable in respect of the issue or delivery of shares of Common Stock or other securities or property on conversion of the shares of Series C Preferred Stock pursuant hereto; PROVIDED, HOWEVER, that the Corporation shall not be required to pay any tax that may be payable in respect of any transfer involved in the issue or delivery of shares of Common Stock or other securities or property in a name other than that of the holder of the shares of Series C Preferred Stock to be converted, and no such issue or delivery shall be made unless and until the person requesting such issue or delivery has paid to the Corporation the amount of any such tax or established, to the reasonable satisfaction of the Corporation, that such tax has been paid. Section 8. SHARES TO BE RETIRED. All shares of Series C Preferred Stock which shall have been issued and reacquired in any manner by the Corporation shall be restored to the status of authorized but unissued shares of capital stock of the Corporation, without designation as to class or series. Section 9. RANKING. Any class or series of shares of capital stock of the Corporation shall be deemed to rank: (a) prior to the shares of Series C Preferred Stock, as to the payment of dividends and as to distribution of assets upon liquidation, dissolution or winding up, if the holders of such class or series shall be entitled to the receipt of dividends or of amounts distributable upon liquidation, dissolution or winding up, as the case may be, in preference or priority to the holders of shares of Series C Preferred Stock; (b) on a parity with the shares of Series C Preferred Stock, as to the payment of dividends and as to distribution of assets upon liquidation, dissolution or winding up, whether or not the dividend rates, dividend payment dates or redemption or liquidation prices per share thereof shall be different from those of the shares of Series C Preferred Stock, if the holders of such class or series and the shares of Series C Preferred Stock shall be entitled to the receipt of dividends and of amounts distributable upon liquidation, dissolution or winding up in proportion to their respective amounts of accrued and unpaid dividends (and any interest thereon) per share or liquidation preferences, without preference or priority one over the other ("PARITY STOCK"); (c) junior to the shares of Series C Preferred Stock, as to the payment of dividends or as to the distribution of assets upon liquidation, dissolution or winding up, if such class or series shall be Junior Stock; and (d) junior to the shares of Series C Preferred Stock, as to the payment of dividends and as to the distribution of assets upon liquidation, dissolution or winding up, if such class or series shall be Fully Junior Stock. Section 10. VOTING. If and whenever six (6) quarterly dividends (whether or not consecutive) payable on the shares of Series C Preferred Stock or any series or class of Parity Stock shall be in arrears (which shall, with respect to any such quarterly dividend, mean that any such dividend has not been paid in full), whether or not declared, the number of directors then constituting the Board of Directors shall be increased by two (2) and the holders of Series C Preferred Stock, together with the holders of shares of every other series of Parity Stock (any such other series, the "VOTING PREFERRED STOCK"), voting as a single class regardless of series, shall be entitled to elect the two (2) additional directors to serve on the Board of Directors at any annual meeting of stockholders or special meeting held in place thereof, or at a special meeting of the holders of the shares of Series C Preferred Stock and the Voting Preferred Stock called as hereinafter provided. Whenever all arrears in dividends on the shares of Series C Preferred Stock and the Voting Preferred Stock then outstanding shall have been paid and dividends thereon for the current quarterly dividend period shall have been paid or declared and set apart for payment, then the right of the holders of the shares of Series C Preferred Stock and the Voting Preferred Stock to elect such additional two (2) directors shall cease (but subject always to the same provision for the vesting of such voting rights in the case of any similar future arrearage in quarterly dividends), and the terms of office of all persons elected as directors by the holders of the shares of Series C Preferred Stock and the Voting Preferred Stock shall forthwith terminate and the number of the Board of Directors shall be reduced accordingly. At any time after such voting power shall have been so vested in the holders of shares of Series C Preferred Stock and the Voting Preferred Stock, the Secretary of the Corporation may, and upon the written request of any holder of shares of Series C Preferred Stock (addressed to the Secretary at the principal office of the Corporation) shall, call a special meeting of the holders of the shares of Series C Preferred Stock and of the Voting Preferred Stock for the election of the directors to be elected by them as herein provided, such call to be made by notice similar to that provided in the Bylaws of the Corporation for a special meeting of the stockholders or as required by law. If any such special meeting required to be called as above provided shall not be called by the Secretary within 20 days after receipt of any such request, then any holder of shares of Series C Preferred Stock may call such meeting, upon the notice above provided, and for that purpose shall have access to the records of the Corporation. The directors elected at any such special meeting shall hold office until the next annual meeting of the stockholders or special meeting held in lieu thereof if such office shall not have previously terminated as above provided. If any vacancy shall occur among the directors elected by the holders of the shares of Series C Preferred Stock and the Voting Preferred Stock, a successor shall be elected by the Board of Directors, upon the nomination of the then-remaining director elected by the holders of the shares of Series C Preferred Stock and the Voting Preferred Stock or the successor of such remaining director, to serve until the next annual meeting of the stockholders or special meeting held in place thereof if such office shall not have previously terminated as provided above. So long as any shares of Series C Preferred Stock are outstanding, in addition to any other vote or consent of stockholders required by law or by the Corporation's Articles of Incorporation, the affirmative vote of at least 66- 2/3% of the votes entitled to be cast by the holders of the shares of Series C Preferred Stock given in person or by proxy, either in writing without a meeting or by vote at any meeting called for the purpose, shall be necessary for effecting or validating: (a) Any amendment, alteration or repeal of any of the provisions of the Corporation's Amended and Restated Articles of Incorporation, as amended, the Corporation's By-Laws, as amended, or these Articles Supplementary, as amended, that materially and adversely affects the voting powers, rights or preferences of the holders of the shares of Series C Preferred Stock; PROVIDED, HOWEVER, that the amendment of the provisions of the Corporation's Amended and Restated Articles of Incorporation so as to authorize or create or increase the authorized amount of any shares of Fully Junior Stock, any shares of Junior Stock that are not senior in any respect to the Series C Preferred Stock, or any shares of Parity Stock shall not be deemed to materially adversely affect the voting powers, rights or preferences of the holders of shares of Series C Preferred Stock; or (b) A share exchange that affects the shares of Series C Preferred Stock, a consolidation with or merger of the Corporation into another entity, or a consolidation with or merger of another entity into the Corporation, unless in each such case each share of Series C Preferred Stock (i) shall remain outstanding without a material and adverse change to its terms and rights or (ii) shall be converted into or exchanged for convertible preferred stock of the surviving entity having preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends, qualifications and terms or conditions of redemption thereof identical to that of a share of Series C Preferred Stock (except for changes that do not materially and adversely affect the holders of the shares of Series C Preferred Stock); or (c) The authorization, reclassification or creation of, or the increase in the authorized amount of, any shares of any class or series or any security convertible into shares of any class ranking prior to the shares of Series C Preferred Stock in the distribution of assets on any liquidation, dissolution or winding up of the Corporation or in the payment of dividends; or (d) Any increase in the authorized amount of shares of Series C Preferred Stock or decrease in the authorized amount of shares of Series C Preferred Stock below the number of shares then issued and outstanding; PROVIDED, HOWEVER, that no such vote of the holders of shares of Series C Preferred Stock shall be required if, at or prior to the time when such amendment, alteration or repeal is to take effect, or when the issuance of any such prior shares or convertible security is to be made, as the case may be, provision is made for the redemption or repurchase of all shares of Series C Preferred Stock at the time outstanding to the extent such redemption or repurchase is authorized by Sections 5 or 6 of these Articles Supplementary. For purposes of the foregoing provisions of this Section 10, each share of Series C Preferred Stock shall have one (1) vote per share, except that when any other series of Preferred Stock shall have the right to vote with the shares of Series C Preferred Stock as a single class on any matter, then the shares of Series C Preferred Stock and such other series shall have with respect to such matters one (1) vote per $100.00 of stated Liquidation Preference. Except as otherwise required by applicable law or as set forth herein, the shares of Series C Preferred Stock shall not have any relative, participating, optional or other special voting rights and powers other than as set forth herein, and the consent of the holders thereof shall not be required for the taking of any Corporation action. Section 11. RECORD HOLDERS. The Corporation and the Transfer Agent may deem and treat the record holder of any shares of Series C Preferred Stock as the true and lawful owner thereof for all purposes, and neither the Corporation nor the Transfer Agent shall be affected by any notice to the contrary. Section 12. LOST, ETC. CERTIFICATES. Upon receipt of evidence satisfactory to the Corporation of the loss, theft, destruction or mutilation of any certificate representing any of the shares of Series C Preferred Stock and, in case of any such loss, theft or destruction, upon delivery of indemnity satisfactory to the Corporation, or in case of any such mutilation, upon surrender and cancellation of such certificate, the Corporation will at its expense make and deliver a new certificate, of like tenor, in lieu of such lost, stolen, destroyed or mutilated certificate. Upon surrender of any certificate representing any of the shares of Series C Preferred Stock to the Corporation at its principal office, the Corporation at its expense will issue in exchange thereof and deliver to the holder of the surrendered certificate a new certificate or certificates, in such denomination or denominations as may be requested by such holder. IN WITNESS WHEREOF, the Corporation has caused these Articles Supplementary to be signed its name and on its behalf by its authorized officers who acknowledge that these Articles Supplementary are the act of the Corporation, that to the best of their knowledge, information and belief, all matters and facts set forth herein relating to the authorization and approval of this document are true in all material respects and this statement is made under penalties of perjury. May 19, 2000 HOME PROPERTIES OF NEW YORK, INC. By: /S/ Amy L. Tait Name: Amy L. Tait Its: Executive Vice President I, Ann M. McCormick, Secretary, hereby acknowledge on behalf of Home Properties of New York, Inc. that the foregoing Articles Supplementary are the corporate act of said corporation under penalties of perjury. Attest: /s/ Ann M. McCormick NAME Ann M. McCormick Secretary EX-10 3 EXHIBIT 10.1 HOME PROPERTIES OF NEW YORK, INC., HOME PROPERTIES OF NEW YORK, L.P., AND THE PRUDENTIAL INSURANCE COMPANY OF AMERICA AND TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA SERIES C CONVERTIBLE CUMULATIVE PREFERRED STOCK PURCHASE AGREEMENT Dated as of May 22, 2000 PURCHASE AGREEMENT PURCHASE AGREEMENT, dated as of May 22, 2000, by and among HOME PROPERTIES OF NEW YORK, INC., a Maryland corporation (the "COMPANY"), HOME PROPERTIES OF NEW YORK, L.P., a New York limited partnership (the "OPERATING PARTNERSHIP"), and The Prudential Insurance Company of America, a New Jersey mutual insurance company ("PRUDENTIAL") and Teachers Insurance and Annuity Association of America, a New York insurance company ("TIAA") (each of Prudential and TIAA, a "Purchaser", and, collectively, the "Purchasers"). W I T N E S S E T H : WHEREAS, the Company desires to issue and sell to the Purchasers, and the Purchasers desire to severally purchase from the Company, 400,000 shares of Series C Convertible Cumulative Preferred Stock, par value $0.01 per share (the "SHARES"), of the Company, having the terms and conditions set forth in the Articles Supplementary to the Amended and Restated Articles of Incorporation (the "ARTICLES") of the Company, in the form set forth in EXHIBIT A hereto (the "SERIES C ARTICLES SUPPLEMENTARY"), in accordance with and subject to the terms and conditions set forth herein. NOW, THEREFORE, in consideration of the representations, warranties and agreements herein contained, the parties hereto agree as follows: Section 1. SALE AND PURCHASE. In reliance upon the representations and warranties contained herein and subject to the terms and conditions hereof, on the Closing Date (which is the date hereof), the Company agrees to sell to the Purchasers, and each Purchaser severally agrees to purchase, the Shares, in the amount of 200,000 Shares for each of Prudential and TIAA . The Company has adopted and filed with the State Department of Assessments and Taxation of Maryland (the "SDAT"), and the SDAT has accepted for filing, on or before the Closing the Series C Articles Supplementary. Section 2. CLOSING. 2.01 PLACE AND DATE. The closing of the sale and purchase of the Shares (the "CLOSING") is taking place on the date hereof at the offices of Clifford Chance Rogers & Wells, LLP, 200 Park Avenue, New York, New York 10166 concurrently with the execution and delivery of this Agreement. 2.02. PURCHASE OF SHARES; PAYMENT OF PURCHASE PRICE. At the Closing, the Purchasers will severally purchase, and the Company will sell to the Purchasers, the Shares, at a per Share cash price of $100.00, resulting in an aggregate cash purchase price of $40,000,000 (the "PURCHASE PRICE"). At the Closing, each Purchaser will deliver cash in an amount of $20,000,000 by wire transfer in immediately available funds in full payment for the 200,000 Shares being purchased by such Purchaser, and the Company will deliver to each such Purchaser certificates representing the Shares in the names and in the denominations requested by each Purchaser. The obligation of each Purchaser to purchase Shares under this Agreement is several and not joint, and no Purchaser shall have any obligation or liability under this Agreement for any other Purchaser or for the performance or non-performance by any other Purchaser under this Agreement. 2.03. CLOSING DELIVERIES. At the Closing the following conditions are to be performed to the satisfaction of each Purchaser (unless waived by each Purchaser in its sole and absolute discretion) prior to the Purchasers becoming severally obligated hereunder to fund their allocable portion of the Purchase Price: (a) the Company is delivering Shares which have been fully registered under the Securities Act of 1933 (the "SECURITIES ACT") and under such state securities laws which require such registration (together with the Securities Act, "SECURITIES LAWS"), and which will be convertible into shares of Common Stock which have been fully registered under the Securities Laws, which Shares and Common Stock will be freely transferable upon acquisition by any Holder; (b) Nixon Peabody, LLP, counsel for the Company, is delivering to each of the Purchasers an opinion with respect to the Company's status as a real estate investment trust in the form of EXHIBIT B hereto; (c) Nixon Peabody, LLP, counsel for the Company, is delivering to each of the Purchasers an opinion in the form of EXHIBIT C hereto; (d) the general counsel of the Company is delivering to each of the Purchasers an opinion in the form of EXHIBIT D hereto; (e) the Company is delivering to each of the Purchasers a waiver of the ownership limitations set forth in the Articles in the form of EXHIBIT E hereto; (the "OWNERSHIP WAIVER"); and (f) the Operating Partnership is delivering to the Company an amendment to the Operating Partnership's Second Amended and Restated Agreement of Limited Partnership (the "L.P. AGREEMENT") establishing a series of preferred units (the "UNITS") of the Operating Partnership in the form of EXHIBIT F hereto (the "OP AMENDMENT"); (g) The Company is causing to be delivered to the Purchasers a letter from Duff & Phelps Credit Rating Co. confirming the rating of the Shares as not less than BBB- (the "RATING LETTER") in the form of EXHIBIT G hereto; (h) The Company is delivering to each of the Purchasers an officers' certificate in the form of EXHIBIT H hereto with appropriate schedules (the "OFFICERS' CERTIFICATE") and such other documents, certificates and opinions as the Purchasers may reasonably request; (i) The Company and Prudential Investment Management Services LLC ("PIMS") are entering into and delivering an agreement (the "AGENCY FEE AND WARRANT AGREEMENT") in the form of EXHIBIT I hereto, and the Company shall have performed all obligations required thereunder in connection with the issuance of the Shares, including the payment of a placement fee and the issuance of certain warrants as set forth in the Agency Fee and Warrant Agreement; and (j) Each party indicated in the Agency Fee and Warrant Agreement is receiving Warrants in the form of EXHIBIT J hereto from the Company ("WARRANTS") to purchase shares of Common Stock. (k) On the date of the Closing, the purchase of the Shares by each Purchaser shall: (i) be permitted by the laws and regulations of each jurisdiction to which the applicable Purchaser is subject, without recourse to provisions (such as Section 1405(a)(8) of the New York Insurance Law) permitting limited investments by insurance companies without restriction as to the character of the particular investment; (ii) not violate any applicable law or regulation; and (iii) not subject the applicable Purchaser to any tax, penalty or liability under or pursuant to any applicable law or regulation, which law or regulation was not in effect prior to the date hereof. If requested by the Purchasers, the Purchasers shall have received an Officer's Certificate certifying as to such matters of fact as the Purchasers may reasonably specify to enable the Purchasers to determine whether such purchase is so permitted. 2.04. EXPENSES. At the Closing, the Company shall pay or cause to be paid all of the Purchasers' actual third party due diligence expenses and outside legal and consulting fees in connection with the transaction contemplated hereby, not to exceed $75,000 in the aggregate. Prudential shall furnish the Company with supporting documentation, in reasonable detail, for such expenses. Section 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE OPERATING Partnership. The Company and the Operating Partnership, jointly and severally, represent, warrant and covenant to each Purchaser as follows: 3.01. STATUS; POWER AND AUTHORITY. (a) Each of the Company and the Operating Partnership is a corporation or partnership duly organized, validly existing and (in the case of the Company) in good standing under the laws of its state of organization and has all requisite power and authority to enter into and perform its obligations under each of the Transaction Documents (as defined below) to which it is a party and to consummate the transactions contemplated hereby and thereby, including the issuance of the Shares, and to own, lease and operate its properties and conduct its business as now being conducted or proposed to be conducted as described in the Exchange Act Reports (as defined below), and is duly qualified or registered to transact business and is in good standing under the laws of each other jurisdiction in which its owns or leases properties, or conducts any business, so as to require such qualification or registration, except where the failure to do so would not reasonably be expected to have a Material Adverse Effect (as defined below). (b) The Subsidiaries (as defined below) are listed on SCHEDULE 3.1(B) and have each been duly organized and are validly existing and in good standing under the laws of their respective jurisdictions of incorporation or formation and have all requisite power and authority to own, lease and operate their properties and to conduct their businesses as now being conducted or proposed to be conducted as described in the Exchange Act Reports, and each Subsidiary is duly qualified or registered to transact business and is in good standing under the laws of each other jurisdiction in which it owns or leases properties, or conducts any business, so as to require such qualification or registration, except where the failure to be in good standing or to so qualify or register would not reasonably be expected to have a Material Adverse Effect. (c) As used in this Agreement, "SUBSIDIARIES" means any entities that would be treated as consolidated subsidiaries of the Company or the Operating Partnership for financial accounting purposes under generally accepted accounting principles ("GAAP") as applied in the United States including, without limitation, the entities listed on SCHEDULE 3.1(B). (d) As used in this Agreement, "MATERIAL ADVERSE EFFECT" means any event, circumstance or condition that has or is reasonably expected to have a material adverse effect on the business, assets, liabilities, results of operations, condition (financial or otherwise) or prospects of the Company, the Operating Partnership and the Subsidiaries taken as a whole or that would materially impair the Company's or the Operating Partnership's ability to perform its obligations under, or otherwise affect the enforceability or validity of, the Transaction Documents. (e) As used in this Agreement, "TRANSACTION DOCUMENTS" means each of this Agreement, the Agency Fee and Warrant Agreement, the Series C Articles Supplementary, the OP Amendment, the Warrants and the Ownership Waiver. 3.02. NO MATERIAL VIOLATION OR CONFLICT. The execution and delivery by the Company and the Operating Partnership of each of the Transaction Documents to which it is a party and the consummation of the transactions contemplated herein and therein (including the sale and delivery of the Shares and the issuance of the Warrants) will not conflict with or result in a breach or violation by the Company or the Operating Partnership of, or constitute a default, or an event which with notice or passage of time or both could become a default, by the Company or the Operating Partnership under or result in the creation of any lien, security interest or encumbrance upon the stock or assets of the Company, the Operating Partnership or any of the Subsidiaries or, as to clause (ii) below, impose any additional monetary obligations on the Company, the Operating Partnership, or any Subsidiary under, or modify the contractual obligations of any party under, or give rise to any right of termination, amendment, acceleration or cancellation under, (i) the Articles or the by-laws of the Company or the L.P. Agreement, (ii) any contract, agreement or instrument to which the Company, the Operating Partnership or any of the Subsidiaries is a party or by which the Company, the Operating Partnership or any of the Subsidiaries is bound or to which any of their properties are subject or (iii) any existing applicable law, rule, published regulation, judgment, order or decree of any government, governmental instrumentality or court having jurisdiction over the Company, the Operating Partnership or any of the Subsidiaries or any of their properties or assets, except, in the case of clauses (ii) and (iii), for such conflicts, breaches, defaults, liens, security interests or encumbrances upon the stock or assets of the Company, the Operating Partnership or any of the Subsidiaries, or imposition of additional monetary obligations which, in the aggregate, would not reasonably be expected to have a Material Adverse Effect. 3.03. NO MATERIAL DEFAULT. (a) None of the Company, the Operating Partnership or the Subsidiaries is in default in the performance, observance or fulfillment of any obligation, covenant or condition contained in any agreement, contract, commitment, instrument, plan or undertaking (including, without limitation, any and all leases, mortgages, and other contractual arrangements with respect to real property) material to the business of the Company, the Operating Partnership and the Subsidiaries taken as a whole (collectively, the "CONTRACTS") and (b) no event has occurred which, with or without the giving of notice or lapse of time or both, would constitute or result in a default thereunder except, in the case of each of (a) and (b), for such defaults or events as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. Each of the Contracts is valid and enforceable in accordance with its terms except to the extent that enforcement thereof may be limited by (i) bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer or other similar laws now or hereafter in effect relating to creditors' rights generally and (ii) general principles of equity (regardless of whether enforceability is considered in a proceeding at law or in equity) and except for those failures of Contracts (or provisions thereof) to be valid or enforceable which would not, in the aggregate, reasonably be expected to have a Material Adverse Effect. None of the Company's bonds, debentures, notes or other evidences of indebtedness are in default as to principal or interest, as of the date hereof. 3.04. SHARES. The Company has all requisite corporate right, power and authority to issue, sell, and deliver the Shares and the Warrants as contemplated by this Agreement; the Shares and the issuance of the Warrants have been duly authorized, and upon such issuance, sale and delivery, and payment of the Purchase Price therefor as contemplated by this Agreement and the Warrants, the Purchasers will receive good and valid title to the Shares and the recipients of Warrants will receive good title to the Warrants, free and clear of any pledge, lien, security interest, charge, claim, equity or encumbrance of any kind and such Shares and the Warrants will be fully paid and non-assessable, not subject to any preemptive rights and will have been issued and sold in compliance with all applicable Federal, State and local laws. The shares of Common Stock, par value $.01, of the Company (the "COMMON STOCK") issuable upon conversion of the Shares and the exercise of the Warrants have been duly authorized and have been reserved for such purpose. Upon such conversion or exercise, the Purchasers, with respect to the Shares, and recipients of the Warrants, with respect to the Warrants, will receive the appropriate number of shares of Common Stock free and clear of any pledge, lien, security interest, charge, claim, equity or encumbrance of any kind created or permitted to exist by the Company and such shares of Common Stock will be fully paid and nonassessable, not subject to any preemptive rights and will have been issued and sold in compliance with all applicable Federal, State and local laws. The form of certificates evidencing the Shares and the Warrants, and upon conversion or exercise thereof, the Common Stock, will comply with all applicable legal requirements and the rules of the New York Stock Exchange ("NYSE") and with all applicable requirements of the Articles and By-laws of the Company (the "BYLAWS"). 3.05. OBLIGATIONS BINDING The execution and delivery of each of the Transaction Documents by the Company and the Operating Partnership, the issuance of the Shares and the Warrants, and the issuance of the Common Stock upon the conversion or exercise thereof and the consummation of the transactions contemplated thereby have been duly authorized by the Company's Board of Directors, and no further consent or authorization of the Company, its Board of Directors, Shareholders, the Operating Partnership, its limited partners, any governmental authority (except with respect to the filing of the Series C Articles Supplementary) or any other third party is required for such execution, delivery, issuance or consummation. Each of the Transaction Documents to which it is a party has been duly executed and delivered by the Company or the Operating Partnership, as the case may be, and constitutes the legal, valid and binding obligation of the Company or the Operating Partnership, as the case may be, enforceable against it in accordance with its terms, except as may be limited by (i) applicable bankruptcy, insolvency, reorganization, moratorium, and other laws of general application affecting enforcement of creditors' rights generally, and (ii) equitable principles of general applicability relating to the availability of specific performance, injunctive relief or other equitable remedies. 3.06. INVESTMENT COMPANY. Neither the Company nor the Operating Partnership is required to register as an "investment company" and, to the knowledge of the Company and the Operating Partnership, neither is directly nor indirectly controlled by any person which is required to register as an "investment company," within the meaning of and under the Investment Company Act of 1940 as amended, (the "1940 ACT"), and the transactions contemplated by the Transaction Documents will not cause the Company or the Operating Partnership to become an "investment company" subject to registration under the 1940 Act. 3.07. REIT STATUS. The Company is and has been, commencing with the Company's taxable year ended 1994, and upon the sale of the Shares and Warrants will continue to be, organized and operated in conformity with the requirements for qualification and taxation as a real estate investment trust ("REIT") under Sections 856 through 860 of the U.S. Internal Revenue Code of 1986, as amended (the "CODE"), and the present and contemplated method of operation, assets and income of the Company, the Operating Partnership and the Subsidiaries do and will enable the Company to meet the requirements for qualification and taxation as a REIT under the Code for the taxable year ending December 31, 2000, and in the future. The Company is not currently a "pension - -held REIT" within the meaning of Code Section 856(h)(3)(D) and the Treasury Regulations promulgated thereunder. 3.08. CAPITALIZATION. (a) The authorized capital stock of the Company as of the date of this Agreement prior to the adoption of the Series C Articles Supplementary consists of 80,000,000 shares of Common Stock, of which, as of the date of this Agreement, 20,256,753 shares were issued and outstanding, 10,000,000 shares of excess stock, par value $0.01 per share, none of which is outstanding, and 10,000,000 shares of Preferred Stock, par value $0.01 per share, 1,666,667 shares of which are issued and outstanding as the Company's Series A Senior Convertible Preferred Stock and 2,000,000 of which are issued and outstanding as the Company's Series B Convertible Cumulative Preferred Stock. All of the issued and outstanding shares of capital stock of the Company have been duly and validly authorized and issued, are fully paid and nonassessable and are free from preemptive rights assessable, and have been issued and sold in compliance with all applicable Federal, State and local laws. (b) As of March 31, 2000, the outstanding partnership interests in the Operating Partnership consist of a general partnership interest held by the Company representing a 1.00% interest in the Operating Partnership, 19,679,433 common units held by Home Properties Trust, a Maryland real estate investment trust and a wholly owned subsidiary of the Company, representing in the aggregate a 50.2% interest in the Operating Partnership, 15,461,880 common units representing in the aggregate a 39.4% interest in the Operating Partnership, one Class A Limited Partnership Interest with a stated value of $35,000,000 (the "CLASS A INTEREST") and 2,000,000 units of Class B limited partnership interests (the "CLASS B INTEREST"). (c) Except as set forth on SCHEDULE 3.8, there are no outstanding options, warrants, rights or other securities exercisable for, exchangeable for or convertible into equity securities of the Company or the Operating Partnership. (d) There are no antidilution or price adjustment provisions contained in any security issued by the Company or the Operating Partnership (or in any agreement providing rights to any security holder of the Company or Operating Partnership) that will be triggered by the issuance of the Shares or the Warrants or the exercise of any conversion privilege in respect thereto. The Company and the Operating Partnership are not parties to and do not have any knowledge of, any agreement with respect to voting of either of their securities. 3.09. REGISTRATION. The Shares, the Warrants and the shares of Common Stock issuable upon the conversion or exercise of the foregoing have been registered under the Securities Act of 1933, as amended (the "SECURITIES ACT") and any applicable state securities and local law, and are freely tradable. No further registration or qualification of such Shares, Warrants or shares of Common Stock under any securities laws is required in connection with the offer, sale and delivery of the Shares, Warrants or shares of Common Stock in the manner contemplated in this Agreement. 3.10. FINANCIAL STATEMENTS. The financial statements and supporting schedules included in the Company's periodic filings filed pursuant to the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), are complete and correct in all material respects, are materially consistent with the books and records of the Company, the Operating Partnership and the Subsidiaries, comply as to form in all material respects with applicable accounting requirements and to the rules and regulations of the Securities and Exchange Commission with respect thereto, and present fairly in all material respects the consolidated financial position of the Company, the Operating Partnership and the Subsidiaries as of the dates specified (subject to normal year-end audit adjustments in the case of unaudited interim financial statements) and the consolidated results of their operations and cash flows for the periods specified (subject to normal year-end audit adjustments in the case of unaudited interim financial statements); such financial statements, including the related schedules and notes thereto, were prepared in conformity with GAAP on a consistent basis during the periods involved, except as indicated therein or in the notes thereto. The historical financial information and property information provided by the Company to the Purchasers and the information contained in the Company's press release, dated April 27, 2000 with respect to its first quarter financial results is true and correct, in all material respects, and accurately sets forth the financial results of the properties set forth therein. Such information, together with the Company's and the Operating Partnership's periodic filings pursuant to the Exchange Act, which filings include but are not limited to the Company's Annual Report on Form 10-K filed on March 30, 2000, Registration Statement on Form S-3 filed on January 18, 2000, Current Report on Form 8-K dated April 5, 2000, and Proxy Statement on form DEF 14A dated March 29, 2000 (collectively, the "EXCHANGE ACT REPORTS"), do not contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading. Neither the Company, the Operating Partnership nor any of the Subsidiaries has any material liability (whether accrued, absolute, contingent, unliquidated or otherwise, whether due or to become due), other than: (i) liabilities disclosed in the Exchange Act Reports , (ii) liabilities which have arisen after the date of the last Exchange Act Report in the ordinary course of business, including those set forth on SCHEDULE 3.10, and (iii) liabilities which could not reasonably be expected to have a Material Adverse Effect. The Prospectus Supplement filed by the Company to effect the registration of the Shares and Warrants and the Common Stock issuable upon the exercise or conversion thereof does not contain an untrue statement of fact or omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading. 3.11. EXCHANGE ACT COMPLIANCE. The Company has timely filed all documents required to be filed with the Securities and Exchange Commission pursuant to the Exchange Act and the rules and regulations thereunder. All such documents, when so filed, complied in form and substance in all material respects with the Exchange Act and did not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. 3.12. NO MATERIAL ADVERSE CHANGES. Since December 31, 1999, except as or as disclosed herein pursuant to SCHEDULE 3.10 to the Disclosure Schedule: (i) there has been no event, circumstance or condition relating to or affecting the business, assets, liabilities, results of operations, condition (financial or otherwise) of the Company, the Operating Partnership and the Subsidiaries taken as a whole, or the earnings or the ability to continue to conduct business in the usual and ordinary course of the Company, the Operating Partnership and the Subsidiaries taken as a whole, whether or not arising in the ordinary course of business, which would reasonably be expected to have a Material Adverse Effect; and (ii) except for the transactions contemplated by the Transaction Documents or as set forth in the Exchange Act Reports, there has been no material transaction entered into by the Company, the Operating Partnership or any of the Subsidiaries other than (a) transactions in the ordinary course of business or (b) transactions which would not reasonably be expected to have a Material Adverse Effect; and (iii) there have not been any changes in the capital stock or any material increases in the Indebtedness of the Company, the Operating Partnership or any of the Subsidiaries or any increase in the regular dividend or the declaration or payment of a special dividend on any security or interest of the Company, the Operating Partnership or any of the Subsidiaries. 3.13. LITIGATION. There is no action, suit, investigation or proceeding (whether or not purportedly on behalf of the Company, the Operating Partnership or any of the Subsidiaries) before or by any court or governmental agency or body, domestic or foreign, now pending or, to the best knowledge of the Company or the Operating Partnership, threatened against or affecting the Company, the Operating Partnership or any of the Subsidiaries, which in the aggregate, could reasonably be expected to have a Material Adverse Effect. SCHEDULE 3.13 to the Disclosure Schedule hereto contains a complete list of each action presently pending against the Company, the Operating Partnership or any Subsidiary that is not covered by insurance procured by the Company, the Operating Partnership or any Subsidiary, and a list of any judgment or settlement made on behalf of any of the foregoing during the preceding 12 months other than under such insurance policies. 3.14. TITLE TO PROPERTIES; LEASEHOLD INTERESTS. (a) Except for matters which individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect: (i) the Company, the Operating Partnership or one or more of the Subsidiaries, has good and marketable title to all real properties it owns free from easements, liens, pledges, claims, charges, options, defects, preferential purchase rights, rights of first refusal or other encumbrances and has good title or an enforceable leasehold interest, license or other lawful right to use all other assets that are used in the Company's, the Operating Partnership's or one or more of the Subsidiaries' business substantially in the manner in which they currently are operated, in each case, subject only to Permitted Exceptions (as herein defined) and no notice has been issued alleging any default in compliance with the terms and provisions of any of the covenants, conditions, restrictions, rights-of-way or easements constituting one or more of the Permitted Exceptions or alleging a violation of any zoning, building, fire, health code or other applicable laws or regulations with respect to the properties; (ii) all leases under which the Company, the Operating Partnership or any of the Subsidiaries leases any property are in full force and effect, and neither the Company, the Operating Partnership nor any such Subsidiary is in default in any material respect of any of the terms or provisions of any of such leases and to the Company's and the Operating Partnership's knowledge no claim has been asserted by anyone adverse to any such entity's rights as lessee under any of such leases, or affecting or questioning any such entity's right to the continued possession or use of the properties under any such leases or asserting a default under any such leases, (iii) all liens, charges or encumbrances on or affecting any of the property and assets of the Company, the Operating Partnership and the Subsidiaries which are required to be disclosed in the Company's Exchange Act Reports are disclosed therein; and (iv) there is no judicial, municipal or administrative action, suit, arbitration, proceeding or investigation pending or threatened against, relating to or affecting the Company, the Operating Partnership or any Subsidiary, their assets or properties, before any court or Governmental Authority (as defined below), including, without limitation, proceedings for or involving collections, , alleged building code or environmental or zoning violation, alleged to have occurred at any of the properties or by reason of the condition, use of, or operations on any of the properties. While there may be actions, suits and other proceedings pending or threatened against, relating to or affecting the Company, the Operating Partnership or any Subsidiary involving condemnation, eminent domain, personal injuries or property damage, such matters are not reasonably expected to have a Material Adverse Effect. (b) As used in this Agreement, "PERMITTED EXCEPTIONS" means: (i) real estate taxes and assessments not yet due and payable; (ii) covenants, restrictions, easements and other similar agreements, PROVIDED that the same are not violated by existing improvements or the current or proposed use and operation of the Company's, the Operating Partnership's or any Subsidiary's property; (iii) zoning laws, ordinances and regulations, building codes, rules and other governmental laws, regulations, rules and orders affecting any of the Company's, the Operating Partnership's or any Subsidiary's property, PROVIDED that the same are not violated by existing improvements or the current or proposed use and operation of such property; (iv) any imperfection of title which does not materially and adversely affect the current or proposed use, operation or enjoyment of any of the Company's, the Operating Partnership's or any Subsidiary's real property and does not render title to such real property unmarketable or uninsurable and does not materially impair the value of such property; and (v) mortgage financings which are disclosed in the Exchange Act Reports or on Schedule 3.10 to the Disclosure Schedule. 3.15. ENVIRONMENTAL COMPLIANCE. (a) Except for such matters which individually or in the aggregate would not reasonably be expected to have a Material Adverse Effect, the Company, the Operating Partnership and each of the Subsidiaries has complied and is in compliance with all Environmental Laws (as hereinafter defined). (b) Except for such notices relating to matters which individually or in the aggregate could not reasonably be expected to have a Material Adverse Effect, notice of violation or other written communication has been received by the Company, the Operating Partnership or any of their Subsidiaries from any Governmental Authority or any other entity or person, alleging or suggesting an Environmental Law violation in respect of any property owned by any of them. (c) Neither the Company, the Operating Partnership nor any of the Subsidiaries, nor any of their agents, licensees, invitees, tenants or any other person or entity has used, will use or will permit to be used any real property owned, leased or occupied by any such party for the purpose of handling, storing, burying, retaining, refining, transporting, processing, manufacturing, generating, producing, spilling, seeping, leaking, escaping, leaching, pumping, pouring, emitting, emptying, discharging, injecting, dumping, transferring or otherwise disposing of or dealing with Hazardous Materials. Neither the Company, the Operating Partnership nor any of the Subsidiaries will be deemed to be in breach of the foregoing with respect to (i) maintenance and use of underground heating fuel oil tanks, provided such maintenance and use is in full compliance with all applicable Environmental Laws, and (ii) storage and use of cleaning solvents and other chemicals used in the routine maintenance of the properties, provided such storage and use is in full compliance with all applicable Environmental Laws. (d) Except as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, neither the Company, the Operating Partnership nor any of the Subsidiaries is aware of (i) any seepage, leak, escape, leach, discharge, injection, release, emission, spill, pumping, pouring, emptying or dumping of Hazardous Materials into waters on or adjacent to any real property owned, leased or occupied by any such party, or onto lands from which Hazardous Materials might seep, flow or drain into such waters; or (ii) the use of any nearby or adjacent property which would likely create any liability on the part of the Company, the Operating Partnership or any of their Subsidiaries under the Environmental Laws or that would require reporting to or notification by the Company, the Operating Partnership, or any of their Subsidiaries to any Governmental Authority (e) Except as disclosed on Schedule 3.13 to the Disclosure Schedule, and such matters as would not reasonably be expected to have a Material Adverse Effect, the Company and the Operating Partnership and the Subsidiaries have no knowledge of any occurrence or circumstance that, with notice or passage of time or both, would be likely to give rise to a claim under or pursuant to any federal, state or local Environmental Law pertaining to Hazardous Materials on or originating from any real property owned or occupied by the Company, the Operating Partnership or any of the Subsidiaries. (f) No land owned by the Company, the Operating Partnership or any of the Subsidiaries is included or, to the actual knowledge of the Company, proposed for inclusion on the National Priorities List issued pursuant to CERCLA (as hereinafter defined) by the United States Environmental Protection Agency (the "EPA") or on the inventory of other potential "Problem" sites issued by the EPA and has not otherwise been publicly identified by the EPA as a potential CERCLA site or included or proposed for inclusion on any list or inventory issued pursuant to any other Environmental Law or issued by any other Governmental Authority . (g) As used herein, "HAZARDOUS MATERIALS" shall include without limitation any flammable explosives, radioactive materials, hazardous materials, hazardous wastes, toxic substances or related materials, asbestos or any hazardous material as defined by any federal, state or local environmental law, ordinance, rule or regulation, including without limitation the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C. Section 9601 ET SEQ. ("CERCLA"), the Hazardous Materials Transportation Act, as amended, 49 U.S.C. Section 1801 ET SEQ., the Resource Conservation and Recovery Act, as amended, 42 U.S.C. Section 9601 ET SEQ., the Emergency Planning and Community Right-to- Know Act of 1986, 42 U.S.C. Section 11001 ET SEQ., the Toxic Substances Control Act, 15 U.S.C. Section 2601 ET SEQ., the Federal Insecticide, Fungicide and Rodenticide Act, 7 U.S.C. Section 136 ET SEQ., the Clean Air Act, 42 U.S.C.Section 7401 ET SEQ., the Clean Water Act (Federal Water Pollution Control Act), 33 U.S.C. Section 1251 ET SEQ., the Safe Drinking Water Act, 42 U.S.C. Section 300F to 300j-11, and the Occupational Safety and Health Act, 29 U.S.C. Section 651 ET SEQ., as any of the above statutes may be amended from time to time, and in the regulations adopted and publications promulgated pursuant to each of the foregoing and any other rules, ordinances, codes, licenses, statutes, regulations, permits, orders, approvals, plans, authorizations, concessions and similar items of all Governmental Authorities and all applicable, judicial, administrative and regulatory decrees, judgments and orders, any of which relate to the protection of human health or the environment from the effects of Hazardous Materials (collectively, "ENVIRONMENTAL LAWS") or by any federal, state or local governmental authority having or claiming jurisdiction over the properties and assets of the Company, the Operating Partnership and the Subsidiaries (a "GOVERNMENTAL AUTHORITY"). 3.16 TAXES. The Company, the Operating Partnership and the Subsidiaries have timely filed or filed for extensions of the filing period and filed within such extended period all federal, state, local, foreign and other tax returns, reports, information returns and statements (except for returns, reports, information returns and statements the failure of which to timely file would not reasonably be expected to result in any Material Adverse Effect) required to be filed by them. The Company, the Operating Partnership and the Subsidiaries have paid or caused to be paid all material taxes (including interest and penalties) that are due and payable by the Company, the Operating Partnership and the Subsidiaries (whether or not shown on such tax returns), except those taxes which are being contested by the Company, the Operating Partnership and the Subsidiaries in good faith by appropriate proceedings and in respect of which adequate reserves are being maintained on the Company's, the Operating Partnership's and the Subsidiaries' books in accordance with GAAP consistently applied. The Company, the Operating Partnership and the Subsidiaries do not have any material liabilities for taxes other than those incurred in the ordinary course of business and in respect of which adequate reserves are being maintained by the Company, the Operating Partnership and the Subsidiaries in accordance with GAAP consistently applied. Except as set forth on SCHEDULE 3.16 hereto, no federal, state, foreign, local or other tax returns for the Company, the Operating Partnership and the Subsidiaries have been audited by the Internal Revenue Service or other taxing authority. No deficiency or assessment with respect to, or proposed adjustment of, the Company's, the Operating Partnership's or any of the Subsidiaries' federal, state, local, foreign or other tax returns is pending or, to the best of the Company's and the Operating Partnership's knowledge, threatened. There is no tax lien, whether imposed by any federal, state, local or other tax authority, outstanding against the assets, properties or business of the Company, the Operating Partnership, or any Subsidiary. There are no applicable taxes, fees or other governmental charges payable by the Company, the Operating Partnership or any of the Subsidiaries in connection with the execution and delivery of Transaction Documents or the issuance to the Purchasers by the Company of the Shares, the Warrants, or the shares of Common Stock issuable upon conversion or exercise thereof other than filing fees and/or taxes related to the filing of the Series C Articles Supplementary and any fees and charges in connection with the registration of the Shares, the Warrants and the Common Stock. 3.17 INSURANCE. The Company, the Operating Partnership and the Subsidiaries each carry or are entitled to the benefits of insurance from financially sound and reputable insurers in such amounts and covering such risks as is reasonably sufficient under the circumstances or is customary in the industry and all such insurance is in full force and effect. Schedule 3.17 to the Disclosed Schedule sets forth a summary of all such insurance coverage. 3.18. EMPLOYEES, ERISA. The Company, the Operating Partnership and the Subsidiaries have good relationships with their employees and have not had any substantial labor problems that would reasonably be expected to have a Material Adverse Effect. There is no strike or work stoppage existing or, to the knowledge of the Company and the Operating Partnership, threatened against the Company, the Operating Partnership or the Subsidiaries. The Company and the Operating Partnership do not have any knowledge as to any intentions of any key employee or any group of employees to leave the employ of the Company, the Operating Partnership or any Subsidiary where such departure would reasonably be expected to have a Material Adverse Effect. Other than as disclosed in any Exchange Act Report and on SCHEDULE 3.18 to the Disclosure Schedule, the Company, the Operating Partnership and the Subsidiaries have not established, sponsored, maintained, made any contributions to or been obligated by law to establish, maintain, sponsor or make any contributions to any "employee pension benefit plan" or any material "employee welfare benefit plan" (as such terms are defined in the Employee Retirement Income Security Act of 1974, as amended ("ERISA")), including, without limitation, any "multi-employer plan," or any other program, plan, or policy which provided payouts, benefits or reimbursements to employees (collectively, "BENEFIT PLANS") except where the liabilities associated with such Benefit Plan or Plans would not reasonably be expected to have a Material Adverse Effect. The Company, the Operating Partnership, the Subsidiaries and each Benefit Plan are in compliance with all applicable laws relating to the employment of labor, including bargaining and the payment of social security and other taxes, and with ERISA, except where the failure to so comply would not reasonably be expected to have a Material Adverse Effect. There is no material suit, action, dispute, claim, arbitration, or legal, administrative or other proceeding or governmental investigation pending, or threatened, alleging any breach of the terms of any Benefit Plan or of any fiduciary duties thereunder or violation of any applicable statute, law, rule or regulation with respect to any Benefit Plan. No Benefit Plan is or has ever been subject to Title IV of ERISA or Section 412 of the Code. 3.19. GOVERNMENTAL AND OTHER CONSENTS. Other than such consents as have been obtained and filings under applicable federal and state securities laws , which the Company has obtained, and the filing of the Series C Articles Supplementary, no consent, approval or authorization of, or declaration or filing with, any Governmental Authority or third party on the part of the Company or the Operating Partnership is required for the valid execution, delivery or performance of any of the Transaction Documents or the valid offer, issuance, sale and delivery of the Shares and the Warrants (or shares of Common Stock issuable upon conversion or exercise thereof). 3.20. LEGAL COMPLIANCE. Except as disclosed in any Exchange Act Reports, the Company, the Operating Partnership and the Subsidiaries are in compliance with all applicable laws, rules, regulations, orders, licenses, judgments, writs, injunctions, decrees or demands, except to the extent that failure to comply would not reasonably be expected to have a Material Adverse Effect. The properties are being used (and the improvements thereon have been constructed) in accordance with all applicable zoning and building codes and ordinances. The Company, the Operating Partnership and the Subsidiaries have all necessary permits, licenses and other authorizations required to conduct their businesses as currently conducted, and as proposed to be conducted, except where a failure to have such permits, licenses or other authorizations would not reasonably be expected to have a Material Adverse Effect. Neither the Company, the Operating Partnership nor any Subsidiary has violated any domestic or foreign law or any regulation or requirement, which violation has or could be reasonably likely to have a Material Adverse Effect, and neither the Company, the Operating Partnership nor any Subsidiary has received notice of any such violation. There are no adverse orders, judgments, writs, injunctions, decrees or demands of any court or administrative body, domestic or foreign, or of any other governmental agency or instrumentality, domestic or foreign, outstanding against the Company, the Operating Partnership or the Subsidiaries which could reasonably be expected to have a Material Adverse Effect. 3.21 BROKERS FEES; EXPENSES. Other than PIMS and Mercury Partners, the Company has not dealt with any broker, finder, commission agent or other person in connection with the placement of the Shares or the Warrants, and is not obligated to pay any broker's fee or commission in connection therewith, except as set forth in the Agency Fee and Warrant Agreement. Except for Mercury Partners and as set forth in Section 2.04 or in respect of paying its own legal expenses in connection with the issuance of the Shares or the Warrants, the Company is not obligated to pay any fees or reimburse any expenses to any other party. 3.22. AFFILIATE TRANSACTIONS. Except as set forth on Schedule 3.22 to the Disclosure Schedule or as disclosed in the Exchange Act Reports, neither the Company nor the Operating Partnership has any transactions required to be disclosed pursuant to Item 404 of Regulation S-K promulgated by the Securities and Exchange Commission with any director or executive officers of the Company. 3.23. DISCLOSURE. The Company has provided the Purchasers with the information attached hereto as SCHEDULE 3.23 to the Disclosure Schedule (the "Investment Summary"). Neither this Agreement, the Transaction Documents, the Investment Summary, or any exhibit or schedule hereto or thereto nor any other statements made or certificates delivered in connection with the issuance of the Shares or the Warrants, contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements herein or therein, in light of the circumstances under which they were made, not misleading, provided that any forward looking information contained in the Investment Summary is based on the reasonable assumptions of the Company's management and the Company is not hereby making any representation that its expectations will be achieved. 3.24. DIVIDENDS. Other than the dividend payment priorities established in connection with the issuance of the Company's Series A Senior Convertible Preferred Stock, the Series B Cumulative Preferred Stock and as set forth in the Series C Articles Supplementary and in the Credit Agreement between the Operating Partnership and Manufacturers and Traders Trust Company, there are no agreements that restrict the right of the Company to declare and pay dividends on its capital stock. Section 4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. Section Each Purchaser represents, warrants and covenants to the Company and the Operating Partnership as of the date hereof as follows: 4.01. OWNERSHIP LIMITATIONS. Such Purchaser has received a copy of the Articles, and understands and is and will be in compliance with the restrictions on transfer and ownership of the Company's capital stock included therein as modified by the Ownership Waiver. 4.02 AGREEMENT. This Agreement has been duly authorized by all necessary action on the part of such Purchaser, and this Agreement has been duly executed and delivered by such Purchaser and constitute the legal, valid and binding obligation of such Purchaser, enforceable against such Purchaser in accordance with its terms, except as such enforceability may be limited by: (i) bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer or other similar laws now or hereafter in effect relating to creditors' rights generally; and (ii) general principles of equity (regardless of whether enforceability is considered in a proceeding at law or in equity). Section 5. COVENANTS OF THE COMPANY. 5.01. FILING OF EXCHANGE ACT REPORTS. After the date of this Agreement, the Company will timely file all documents required to be filed with the Securities and Exchange Commission pursuant to Section 13 or 15 of the Exchange Act and will use its best efforts to maintain its eligibility to use Form S-3 under the Securities Act. 5.02. MAINTENANCE OF REIT STATUS. The Company will use its best efforts to continue to qualify and be taxed as a real estate investment trust pursuant to Sections 856 through 860 of the Code. The Company (i) will not voluntarily terminate its status as a real estate investment trust, and (ii) will promptly provide to each Purchaser all notices, correspondence or other written communications received by the Company from the Internal Revenue Service relating to the Company's and the Operating Partnership's status as a real estate investment trust, subject to appropriate confidentiality agreements. 5.03. NO PUBLIC DISCLOSURE. Neither the Company, the Operating Partnership nor any affiliate of the Company or the Operating Partnership will make any public disclosure concerning the transactions contemplated by this Agreement unless such disclosure has been provided to each Purchaser at least two (2) business days prior to such disclosure. Unless in the reasonable opinion of counsel to the Company such disclosure is required by applicable law, neither the Company, the Operating Partnership nor any affiliate of the Company or the Operating Partnership will make any such public disclosure without the prior written consent of Purchasers owning a majority of the Shares. Attached to this Agreement as EXHIBIT K is a copy of a press release issued by the Company in connection with a prior issuance of preferred stock. The Purchasers acknowledge and agree that the Company may issue a press release containing similar information after the Closing provided that the Purchasers shall have the right to approve the accuracy of the information contained in that press release prior to its issuance. Once the Purchasers' prior consent has been obtained with respect to a public disclosure, the same (or substantially identical) disclosure may subsequently be disclosed by the Company or the Operating Partnership without further approval by the Purchasers. 5.04. SUBSEQUENT OPINIONS OF INDEPENDENT PUBLIC ACCOUNTANTS OR INDEPENDENT COUNSEL. So long as any of the Shares remain issued and outstanding, the Company shall provide the Purchasers with any opinions regarding the Company's status as a real estate investment trust received from the Company's independent public accountants or a nationally recognized law firm in connection with any subsequent financings. 5.05. COMMON STOCK. The Company covenants and agrees that it shall at all times reserve and keep available, free from preemptive rights, out of the aggregate of its authorized but unissued shares of Common Stock solely for the purpose of effecting conversion of the Shares or exercise of the Warrants, the full number of shares of Common Stock as shall then be deliverable upon the conversion of all outstanding Shares or exercise of all Warrants not theretofore converted or exercised into Common Stock. Such shares of Common Stock shall, when issued or delivered, be validly issued and fully paid and non-assessable, registered under the Securities Act, not be subject to any preemptive rights, be free and clear of all pledges, liens, security interests charges, claims or other encumbrances of any kind and will have been issued in compliance with all applicable laws. 5.06. LISTING. The Company covenants and agrees that it shall cause the shares of Common Stock deliverable upon the conversion of the Shares or exercise of the Warrants to be listed on the NYSE. 5.07. LIMITATIONS ON INDEBTEDNESS. The Company covenants and agrees that, so long as any Shares remain outstanding, neither the Company, the Operating Partnership nor any Subsidiary shall incur or suffer to exist any Indebtedness that would result in the Company's ratio of consolidated Indebtedness to Total Market Capitalization exceeding 70%. The Company will provide each of the Purchasers with a certificate of its Chief Financial Officer certifying the Company's, the Operating Partnership's and the Subsidiaries' compliance with this Section 5.07 within forty-five (45) days after each calendar quarter. For the purposes of this Agreement: (a) "INDEBTEDNESS" shall mean, without duplication on a consolidated basis (i) all obligations of the Company, the Operating Partnership or any Subsidiary for borrowed money, (ii) all obligations of the Company, the Operating Partnership or any Subsidiary evidenced by bonds, debentures, notes or similar instruments, (iii) all obligations of the Company, the Operating Partnership or any Subsidiary under conditional sale or other title retention agreements relating to property purchased by the Company, the Operating Partnership or any Subsidiary, (iv) all obligations of the Company, the Operating Partnership or any Subsidiary issued or assumed as the deferred purchase price of property or services (other than accounts payable to suppliers and similar accrued liabilities incurred in the ordinary course of business and paid in a manner consistent with industry practice), (v) all other obligations, contingent or otherwise, which, in accordance with GAAP, should be classified on the Company's, the Operating Partnership's or any Subsidiary's balance sheets as liabilities, whether or not so classified, (vi) all liabilities secured by any mortgage, pledge, security interest, lien charge or other encumbrance existing on any property or asset now owned by, or acquired by, the Company, the Operating Partnership, or any Subsidiary, (vii) all Indebtedness of others secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any lien or security interest on property owned or acquired by the Company, the Operating Partnership or any Subsidiary whether or not the obligations secured thereby have been assumed, (viii) all Capitalized Lease Obligations of the Company, the Operating Partnership or any Subsidiary, (ix) all Guarantees of the Company, the Operating Partnership or any Subsidiary, (x) all obligations (including but not limited to reimbursement obligations) relating to the issuance of letters of credit for the account of the Company, the Operating Partnership or any Subsidiary, (xi) all obligations arising out of foreign exchange contracts, and (xii) all obligations arising out of interest rate and currency swap agreements, cap, floor and collar agreements, interest rate insurance, currency spot and forward contracts and other agreements or arrangements designed to provide protection against fluctuations in interest or currency exchange rates, as valued in accordance with GAAP consistently applied. (b) "GUARANTEES" of the Company, the Operating Partnership or any Subsidiary shall mean (without duplication on a consolidated basis) all obligations (other than endorsements in the ordinary course of business of negotiable instruments for deposit or collection) of the Company, the Operating Partnership or any Subsidiary guaranteeing, any Indebtedness, dividend or other obligation of any other person (the "primary obligor") in any manner, whether directly or indirectly, including, without limitation, all obligations incurred through an agreement, contingent or otherwise, by the Company, the Operating Partnership or any Subsidiary : (i) to purchase such Indebtedness or obligation or any property or assets constituting security therefor, (ii) to advance or supply funds: (x) for the purchase or payment of such Indebtedness or obligation, (y) to maintain working capital or other balance sheet condition or otherwise to advance or make available funds for the purchase or payment of such Indebtedness or obligation, (iii) to lease property or to purchase securities or other property or services primarily for the purpose of assuring the owner of such Indebtedness or obligation of the ability of the primary obligor to make payment of such Indebtedness or obligation, or (iv) otherwise to assure the owner of the Indebtedness or obligation of the primary obligor against loss in respect thereof, PROVIDED, HOWEVER, that the term "Guarantees" shall not include (y) guarantees of completion unless and until a claim for payment has been made thereunder, at which time such completion guarantee shall be deemed Indebtedness to the extent of the claim, and (z) Low Income Housing Credit Guarantees, unless and until a claim for payment is made thereunder. For the purposes of any computations made under this Agreement, a Guarantee in respect of any Indebtedness for borrowed money shall be deemed to be Indebtedness equal to the principal amount of the Indebtedness for borrowed money which has been guaranteed, and a Guarantee in respect of any other obligation or liability or any dividend shall be deemed to be Indebtedness equal to the maximum aggregate amount of such obligation, liability or dividend. (c) "CAPITALIZED LEASE OBLIGATIONS" shall mean all obligations of the Company, the Operating Partnership or any Subsidiary under any capital lease which under GAAP are required to be reflected as a liability on a consolidated balance sheet of the Company. (d) "LOW INCOME HOUSING CREDIT GUARANTEES" means assurances by the Company or the Operating Partnership to limited partners of certain affiliates of the Company that the properties developed and operated by such affiliates will be kept in compliance with applicable provisions of the Code to avoid loss or recapture of low income housing tax credits. (e) "CURRENT MARKET PRICE" of the Common Stock as of any date shall mean the average, for the 20 consecutive Trading Days preceding the date of determination, of the last reported sales price, regular way on such day, or, if no sale takes place on such day, the average of the reported closing bid and asked prices on such day, regular way, in either case as reported on the NYSE or, if such security is not listed or admitted for trading on the NYSE, on the principal national securities exchange on which such security is listed or admitted for trading or, if not listed or admitted for trading on any national securities exchange, on the NASDAQ Stock Market ("NASDAQ") National Market System or, if such security is not quoted on such National Market System, the average of the closing bid and asked prices on such day in the over-the-counter market as reported by NASDAQ or, if bid and asked prices for such security on such day shall not have been reported through NASDAQ, the average of the bid and asked prices on such day as furnished by any NYSE member firm regularly making a market in such security selected for such purpose by the Board of Directors. (f) "Total Market Capitalization" as of any date shall mean the sum of (1)(x) the Current Market Price multiplied by (y) the sum of (i) the aggregate number of shares of Common Stock outstanding as of such date, plus (ii) the aggregate number of common units of the Operating Partnership outstanding as of such date not owned by the Company or any of its Subsidiaries, plus (2)(x) the aggregate liquidation preference of all shares of preferred stock of the Company outstanding as of such date, plus (y) the aggregate liquidation preference of any preferred units of the Operating Partnership outstanding as of such date not owned by the Company or any of its Subsidiaries, plus (3) the aggregate of the items of outstanding indebtedness of the Company set forth in items (i) through (iv), and (vi) of the definition of "Indebtedness" above. 5.08. INCURRENCE COVENANT. The Company covenants and agrees that, so long as any Shares remain outstanding, the ratio of EBITDA to Fixed Charges in each calendar quarter shall be greater than 1.75 to 1.0. The Company will provide each Purchaser with a certificate of its Chief Financial Officer certifying the Company's compliance with this Section 5.08 within thirty (30) days after each calendar quarter. For the purpose of this Agreement: (a) "EBITDA" means, for any period, the Consolidated Businesses' earnings before giving effect to expenses for interest, taxes, depreciation and amortization. (b) "FIXED CHARGES" means with respect to any fixed period, the sum of (1) Total Interest Expense; and (2) the aggregate of all dividends paid or accrued on the Company's preferred stock. (c) "CONSOLIDATED BUSINESSES" means the Company, the Operating Partnership, and their Subsidiaries. (d) "TOTAL INTEREST EXPENSE" means, for any period, the sum of: (i) interest expense of the Consolidated Businesses paid during such period; and (ii) interest expense of the Consolidated Businesses accrued and/or capitalized for such period in each case including participating interest expense, the amortization of loan fees, original issue discount, non-cash interest payment, the interest component of Capitalized Lease Obligations and hedging costs but excluding extraordinary interest expense, and net of amortization of deferred costs associated with new financings or refinancings of existing Indebtedness. 5.09. OPERATING PARTNERSHIP SECURITIES. Concurrent with the Closing, the Company shall cause the Operating Partnership to issue to the Company or one of its wholly owned Subsidiaries 400,000 Units with the designations, preferences and other rights, terms and provisions set forth in the OP Amendment attached as EXHIBIT F hereto, and the Company shall cause the Operating Partnership to keep such Units outstanding and the Company (or its Subsidiaries) shall continue to own such Units, for so long as the Shares are outstanding, subject to redemption or conversion as provided for in the OP Amendment. So long as any Units are outstanding, the Company shall not permit the Operating Partnership to authorize, reclassify or create any securities of any class or series or any security convertible into securities of any class or series ranking prior to the Units in the distribution of assets upon any liquidation, dissolution or winding up of the Operating Partnership or in the payment of distributions except for the Class A Interest. 5.10. COMPANY TRANSACTIONS. Except as otherwise provided in paragraph (b) of Section 6, the Company agrees that it shall not repurchase any of the Shares except pursuant to an offer made on the same terms to the holders of all outstanding Shares. 5.11 COMPLIANCE WITH LAWS. The Company shall comply and shall cause each Subsidiary to comply with all applicable laws, rules, regulations and orders, including, without limitation, the Occupational Safety and Health Act of 1970, as amended, ERISA, the Americans with Disabilities Act of 1990, as amended, and all Environmental Laws, noncompliance with which could reasonably be expected to have a Material Adverse Effect. 5.12 RESTRICTIVE AGREEMENTS PROHIBITED. (a) Except as described in Section 3.24, the Company will not enter into, become a party to, allow to exist or adopt any contract, indenture, agreement or instrument, or any note, debenture, bond or other security or enter into any amendment of any provision of the Articles or Bylaws, containing provisions which would by its terms restrict or limit the ability of the Company to pay the full amount of the dividends on the Shares at the rates and on the dates fixed in the Series C Articles Supplementary or which otherwise restrict the Company's performance of this Agreement, the terms of the Shares or the Warrants; provided that covenants or other provisions requiring the maintenance of reasonable minimum levels of shareholders' equity or net worth, cash flow, current assets and similar items and agreements relating to the future issuance of preferred stock on a parity with the Shares shall not be deemed to limit, impair or otherwise modify the obligations of the Company to declare and pay dividends on the Shares as and when the same are due and payable. (b) Except as could not be reasonably expected to have a Material Adverse Effect, the Company will not permit any Subsidiary to be a party to or bound by any contract, indenture, agreement, instrument or any note, debenture, bond or other security under the terms of which such Subsidiary's right to declare and pay dividends or make other distributions on or in respect of its capital stock is restricted; provided that covenants or other provisions requiring the maintenance of reasonable minimum levels of shareholders' equity or net worth, cash flow, current assets and similar items shall not be deemed to limit, impair or otherwise modify the obligations of the Subsidiaries to declare and pay dividends on capital stock as and when the same are due and payable or to redeem shares of capital stock. 5.13 MAINTENANCE OF RATING OF THE SHARES. The Company covenants and agrees that, so long as any Shares remain outstanding, the Company shall maintain a rating on the Shares by at least one nationally recognized statistical rating organization, including but not limited to Duff & Phelps Credit Rating Co. 5.14 INVESTMENT COMPANY STATUS. The Company covenants and agrees that it will take no action which would require it to be registered as an "investment company" within the meaning of the 1940 Act. 5.15 Notices. The Company agrees that it shall promptly notify each of the Purchasers of: (i) the occurrence of any event or condition that could reasonably be expected to have a Material Adverse Effect; (ii) any material default under any material debt instrument or other material document; and (iii) any additional rating or removal, cancellation or termination of the rating on the Shares obtained by the Company. Section 6. RESTRICTIONS ON TRANSFER. (a) The Purchasers agrees not to transfer, convey, assign, pledge or hypothecate any of the Shares or the shares of Common Stock obtained upon conversion of the Shares except in a transaction in compliance with applicable securities laws. (b) The Purchasers agrees that they shall not sell more than 200,000 of the Shares to any purchaser or group of affiliated purchasers (excluding sales to persons who are Purchasers or affiliates of the Purchasers) without first offering to sell such Shares to the Company. Such offer (the "OFFER") shall: (i) be in writing (the "OFFER NOTICE"); (ii) specify the number of Shares proposed to be transferred; and (iii) specify the proposed sale price for the Shares proposed to be sold. Within ten (10) business days after the Company receives the Offer Notice from the Purchaser(s), the Company shall notify the Purchaser(s) in writing whether it irrevocably elects to purchase all, but not less than all, such Shares on the terms of the Offer. If the Company shall have exercised its right to purchase such Shares pursuant to this paragraph, then, within ten (10) business days after delivery of notice of acceptance of the Offer by the Company, at the offices of the Company or such other place as may be mutually agreed upon, the Company shall pay the aggregate purchase price for the Shares by wire transfer of immediately available funds to the account designated by the Purchaser(s) and the Purchaser(s) shall deliver to the Company the certificates representing such Shares free and clear of any liens, charges and encumbrances, duly endorsed in blank, or accompanied by stock powers duly executed in blank. If the Company does not give the Purchaser(s) such notice of acceptance within such ten (10) business day period, then the Offer shall be deemed to be rejected. If the Company rejects (or is deemed to reject) the Offer, then during the next 90 days the Purchaser(s) shall be free to consummate the transaction described in the Offer Notice at 95% of the price set forth therein or a higher price; provided that if the Purchaser(s) do not consummate such transaction within 90 days after the Company has (or is deemed to have) rejected the Offer, then the provisions of this Section 6(b) shall again apply to any sale, transfer or other disposition of any Shares. As a condition to any sale, transfer or other disposition pursuant to this Section 6, the Purchasers will obtain a representation from the transferee that such transfer will not cause the transferee to exceed the Company's Ownership Limit, as defined in the Articles. Section 7. COMPANY REQUESTS FOR AN INCREASE IN SERIES C SHARES. The Company may at any time request that the Purchasers approve an increase in the number of Shares for purposes of selling such additional Shares to third parties; PROVIDED, HOWEVER, that the Purchasers shall have no obligation, express or implied, to approve such request. Section 8. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations and warranties of the parties hereto contained in this Agreement or otherwise made in writing in connection with the transactions contemplated herein shall survive the making of this Agreement and sale of the Shares, through and until the expiration of the applicable statute of limitations with respect thereto. Section 9. NOTICES. All notices and other communications hereunder shall be in writing and shall be delivered by hand or overnight courier or sent by first-class mail, postage pre-paid, or by telecopy, as follows: Section If to the Purchaser(s): The Prudential Insurance Company of America c/o Prudential Real Estate Investors 8 Campus Drive, 4{th} Floor Parsippany, New Jersey 07090 Attention: Merchant Banking Group Fax: (973) 734-1475 and Teachers Insurance and Annuity Association of America 730 Third Avenue 8th Floor New York, New York 10017 Attn: Andrew A. Duffy, Director Fax: (212) 916-6960 with a copy to: Clifford Chance Rogers & Wells, LLP 200 Park Avenue New York, New York 10160 Attention: Jay L. Bernstein, Esq. Fax: (212) 878-8375 If to the Company, at: Home Properties of New York, Inc. 850 Clinton Square Rochester, New York 14604 Attention: Amy L. Tait, Executive Vice President Facsimile: (716) 546-5433 and Home Properties of New York, Inc. 850 Clinton Square Rochester, New York 14604 Attention: Ann M. McCormick, General Counsel Facsimile: (716) 232-3147 or, in each case, at such address and to the attention of such person as either party shall have furnished to the other by notice. Section 10. ENTIRE AGREEMENT; AMENDMENTS. This Agreement and the other Transaction Documents constitute the entire understanding between the parties hereto with respect to the subject matter hereof and supersede all prior agreements and understandings of the parties, whether oral or written. This Agreement may be modified or terminated only by an instrument in writing signed by the Company and the Purchasers holding 70% of the Shares then outstanding. Section 11. SUCCESSORS AND ASSIGNS. This Agreement shall be binding on and shall inure to the benefit of the successors and assigns of the parties hereto and any assign and/or successor of each Purchaser shall succeed to (and have the right to enforce) all of such Purchaser's rights hereunder, except for the Ownership Waiver. Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and permitted assigns any rights, remedies, obligations, or liabilities under or by reason of this Agreement. Section 12. HEADINGS. The headings of the sections of this Agreement are solely for convenience of reference and shall not affect the meaning of any of the provisions hereof. Section 13. GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of New York, including, without limitation, Section 5- 1401 of the New York General Obligations Law, without giving effect to the principles of conflicts of law; PROVIDED, HOWEVER, that matters relating to the issuance of the Shares, the terms of the Shares and other internal corporate matters relating to the Company shall be governed by the laws of the State of Maryland. Each of the parties hereto irrevocably and unconditionally consents to submit to the exclusive jurisdiction of the courts of the State of New York and of the United States of America, in each case located in the County of New York, for any action, proceeding or investigation in any court or before any governmental authority ("LITIGATION") arising out of or relating to the Transaction Documents and the transactions contemplated hereby and thereby, and further agrees that service of any process, summons, notice or document by U.S. Registered Mail to its respective address set forth in the Transaction Documents shall be effective service of process for any Litigation brought against it in any such court. Each of the parties hereto hereby irrevocably and unconditionally waives any objection to the laying of venue of any Litigation arising out of the Transaction Documents or the transactions contemplated hereby and thereby in the courts of the State of New York or the United States of America, in each case located in the County of New York, and hereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such Litigation brought in any such court has been brought in an inconvenient forum. Each of the parties irrevocably and unconditionally waives, to the fullest extent permitted by applicable law, any and all rights to trial by jury in connection with any Litigation arising out of or relating to the Transaction Documents or the transactions contemplated hereby and thereby. Section 14. COUNTERPARTS. This Agreement may be executed in one or more separate counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. Section 15. ISSUANCE AND OTHER TAXES. The Company shall pay or cause to be paid all stamp, stamp duty, stamp duty reserve, documentary, registration, transfer or similar taxes required to be paid in connection with the issuance and sale to the Purchasers of the Shares and the issuance of the Warrants, and shall cause all appropriate stock transfer tax stamps to be affixed to the certificates representing the Shares and Warrants so sold and delivered. The Company shall file, independently or jointly with each Purchaser, as the law requires, all transfer tax filings required to be filed by it in connection with the sale and delivery to such Purchaser of the Shares and Warrants. Section 16. NO DELAY, WAIVER. No delay on the part of any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any waiver on the part of any party of any such right, power or privilege, preclude any further exercise thereof or the exercise of any other such right, power or privilege. Any waiver or consent by the Purchasers that can be given hereunder shall require the consent of the Purchasers holding 70% of the Shares then outstanding. Section 17. SEVERABILITY. If any provision of this Agreement, or the application of any such provision to any person or circumstance, shall be held invalid by a court of competent jurisdiction, the remainder of this Agreement, or the application of such provision to persons or circumstances other than those as to which it is held invalid, shall not be affected thereby. Section 18. LOST, ETC. CERTIFICATES. Upon receipt of evidence satisfactory to the Company of the loss, theft, destruction or mutilation of any certificate representing any of the Shares and, in case of any such loss, theft or destruction, upon delivery of indemnity satisfactory to the Company, or in case of any such mutilation, upon surrender and cancellation of such certificate, the Company will at its expense make and deliver a new certificate, of like tenor, in lieu of such lost, stolen, destroyed or mutilated certificate. Upon surrender of any certificate representing any of the Shares to the Company at its principal office, the Company at its expense will issue in exchange therefor and deliver to the holder of the surrendered certificate a new certificate or certificates, in such denomination or denominations as may be requested by such holder. IN WITNESS WHEREOF, the parties hereto have signed this Agreement as of the date first above-written. HOME PROPERTIES OF NEW YORK, INC. By: /s/ Amy L. Tait Name: Amy L. Tait Title: Executive Vice President HOME PROPERTIES OF NEW YORK, L.P. By: Home Properties of New York, Inc., its General Partner /s/ Amy L. Tait Name: Amy L. Tait Title: Executive Vice President THE PRUDENTIAL INSURANCE COMPANY OF AMERICA By: ________________________________ Name: ________________________________ Title: ________________________________ TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA By: ________________________________ Name: ________________________________ Title: ________________________________ Section 1. ..........................................Sale and Purchase 1 Section 2. ....................................................Closing 1 2.01. .............................................Place and Date 1 2.02. ..............Purchase of Shares; Payment of Purchase Price 1 2.03. .........................................Closing Deliveries 1 2.04. ...................................................Expenses 2 Section 3. Representations and Warranties of the Company and the Operating Partnership 3 3.01. ................................Status; Power and Authority 3 3.02. ..........................No Material Violation or Conflict 3 3.03. ........................................No Material Default 4 3.04. .....................................................Shares 4 3.05. ........................................Obligations Binding 5 3.06. .........................................Investment Company 5 3.07. ................................................REIT Status 5 3.08. .............................................Capitalization 5 3.09. ...............................................Registration 6 3.10. .......................................Financial Statements 6 3.11. ....................................Exchange Act Compliance 7 3.12. ................................No Material Adverse Changes 7 3.13. .................................................Litigation 7 3.14. ...................Title to Properties; Leasehold Interests 7 3.15. ...................................Environmental Compliance 8 3.16. ......................................................Taxes 9 3.17. ..................................................Insurance 10 3.18. ...........................................Employees, ERISA 10 3.19. ............................Governmental and Other Consents 11 3.20. ...........................................Legal Compliance 11 3.21. .....................................Brokers Fees; Expenses 11 3.22. .....................................Affiliate Transactions 11 3.23. .................................................Disclosure 11 3.24. ..................................................Dividends 11 Section 4. Representations and Warranties of the Purchaser 12 4.01. ......................................Ownership Limitations 12 4.02. ..................................................Agreement 12 Section 5. ...................................Covenants of the Company 12 5.01. .............................Filing of Exchange Act Reports 12 5.02. .................................Maintenance of REIT Status 12 5.03. .......................................No Public Disclosure 12 5.04. Subsequent Opinions of Independent Public Accountants or Independent Counsel 13 5.05. ...............................................Common Stock 13 5.06. ....................................................Listing 13 5.07. ................................Limitations on Indebtedness 13 5.08. ........................................Incurrence Covenant 15 5.09. ...........................Operating Partnership Securities 15 5.10. .......................................Company Transactions 16 5.11. .......................................Compliance with Laws 16 5.12. ..........................Restrictive Agreements Prohibited 16 5.13. ........................Maintenance of Rating of the Shares 16 5.14. ..................................Investment Company Status 16 5.15. ....................................................Notices 16 Section 6. ...................................Restrictions on Transfer 16 Section 7. ........Company Requests for an Increase in Series C Shares 16 Section 8. .................Survival of Representations and Warranties 17 Section 9. ....................................................Notices 17 Section 10. Entire Agreement; Amendments 17 Section 11. Successors and Assigns 18 Section 12. Headings 18 Section 13. Governing Law 18 Section 14. Counterparts 18 Section 15. Issuance and Other Taxes 18 Section 16. No Delay, Waiver 19 Section 17. Severability 19 Section 18. Lost, etc. Certificates 19 Exhibits Exhibit A Form of Series C Articles Supplementary Exhibit B Form of Tax Counsel Opinion Exhibit C Form of Legal Counsel Opinion Exhibit D Form of General Counsel Opinion Exhibit E Form of Ownership Waiver Exhibit F Form of Amendment to the Second Amended and Restated Agreement of Limited Partnership Exhibit G Form of Duff & Phelps Rating Letter Exhibit H Form of Officers Certificate Exhibit I Form of Agency Fee and Warrant Agreement Exhibit J Form of Warrants Exhibit K Form of Press Release SCHEDULES Schedule 3.1(b Schedule of Subsidiaries Schedule 3.8 Schedule of Outstanding Options, Warrants, Rights or Other Securities of the Company or the Operating Partnership Schedule 3.10 Schedule of Certain Liabilities Schedule 3.13 Schedule of Litigation Schedule 3.16 Schedule of Federal and State Income Tax Audits Schedule 3.17 Schedule of Insurance Schedule 3.18 Schedule of Benefit Plans Schedule 3.22 Schedule of Affiliate Transactions Schedule 3.23 Schedule of Disclosure Documents EX-99 4 HOME PROPERTIES ISSUES INVESTMENT GRADE CONVERTIBLE PREFERRED EQUITY FOR IMMEDIATE RELEASE: Monday, May 22, 2000 Rochester, New York/ PR Newswire/ -- Home Properties (NYSE:HME) has completed the sale of $40 million of Series C Cumulative Convertible Preferred Stock ("Series C Preferred Stock") through a private transaction with affiliates of Prudential Real Estate Investors ("Prudential") and Teachers Insurance and Annuity Association of America ("Teachers"). Duff & Phelps Credit Rating Co. ("DCR") has assigned an initial corporate credit rating of 'BBB' (Triple-B) to Home Properties, with a rating of 'BBB-' (Triple-B Minus) for its convertible preferred shares. The Series C Cumulative Convertible Preferred Stock carries an annual dividend rate equal to the greater of 8.75% or the actual dividend paid on the number of the Company's common shares into which the Series C Preferred Stock is convertible. The Series C Preferred Stock has a conversion price of $30.25 per share and can be redeemed at the Company's option after five years. In addition, the Company issued warrants to purchase 160,000 common shares at a price of $30.25 per share, expiring in five years. Proceeds will initially be used to fully repay the Company's unsecured revolving credit facility [under its unsecured line of credit] , thereby freeing up resources to fund potential acquisitions and property upgrades. This transaction reduces the Company's debt-to-total-market capitalization ratio to 39% and virtually eliminates its exposure to floating rate debt. Mercury Partners LLC acted as financial advisor to Home Properties in connection with the transaction. According to Amy L. Tait, Executive Vice President of Home Properties, "We are delighted to have Prudential and Teachers invest with us, and we look forward to expanding these relationships in the future. In addition, our new investment grade public rating may provide improved access to alternative sources of capital to support our continued expansion." Marc R. Halle, Vice President of Prudential Real Estate Investors, said, "We are pleased to be able to provide capital to Home Properties, which has a unique strategy and a successful track record of buying and repositioning apartment communities in supply-constrained markets. We have confidence in the management team's ability to deliver continued favorable results." PRUDENTIAL ACTED AS LEAD INVESTOR IN NEGOTIATING THE TRANSACTION ON BEHALF OF PRUDENTIAL AND TEACHERS. PRUDENTIAL REAL ESTATE INVESTORS IS THE REAL ESTATE MONEY MANAGEMENT AND ADVISORY ARM OF THE PRUDENTIAL INSURANCE COMPANY OF AMERICA. PRUDENTIAL REAL ESTATE INVESTORS MANAGES MORE THAN $14 BILLION ON BEHALF OF 300 INSTITUTIONAL CLIENTS IN THE UNITED STATES, EUROPE, AND ASIA. Home Properties, the 11{th} largest apartment company in the United States, is a fully integrated, self-administered, and self-managed real estate investment trust ("REIT"). With operations in select Northeast, Midwest, and Mid-Atlantic markets, the Company owns, operates, acquires, rehabilitates, and develops apartment communities. Currently, Home Properties operates 297 communities containing 47,155 apartment units. Of these, 36,331 units in 135 communities are owned directly by the Company, 7,690 units are partially owned and managed by the Company as general partner, and 3,134 units are managed for other owners. The Company also manages 1.7 million square feet of commercial space. Home Properties' common stock is traded on the New York Stock Exchange under the symbol "HME" and on the Berlin Stock Exchange under the symbol "HMP GR." For more information, please visit Home Properties' new Web site at WWW.HOMEPROPERTIES.COM. ***** FOR FURTHER INFORMATION: Amy L. Tait, Executive Vice President, 716-246-4108 David Gardner, Chief Financial Officer, 716-246-4113 Home Properties of New York, Inc. -----END PRIVACY-ENHANCED MESSAGE-----